Hello, Goodbye. The New Spin on Customer Loyalty. From Customer Acquisition to Customer Loyalty. Definition of CRM.

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1 Hello, Goodbye. The New Spin on Customer Loyalty The so-called typical customer no longer exists. Companies were focused on selling as many products as possible, without regard to who was buying them. Nowadays, consumers have more choices than ever before. Deregulation increases competition As a result, companies were forced to invent new methods of interacting with customers to reduce costs and gain market share. 1 2 The Cost of Acquiring Customers The competition is just a mouse click away. It costs a company six times more to sell a product to a new customer than to an existing one. Businesses try to maximize existing customer relationships know who the best customers are motivate them to stay that way From Customer Acquisition to Customer Loyalty Visit searchcrm.techtarget.com (select Learning Center - Customer Loyalty) and find Customer Loyalty Learning Guide. How to build customer loyalty? How to increase customer satisfaction? Make notes for yourself and we ll discuss the ideas all together. 3 4 Definition of CRM The infrastructure that enables the delineating of and increase in customer value, and the correct means by which to motivate valuable customers to remain loyal, to buy more. CRM is more than just managing customers and monitoring their behaviour, it s a business philosophy that affects the company-at-large. CRM-Related Terms ecrm CRM that is Web-based ECRM Enterprise CRM PRM Partner relationship management ccrm Collaborative CRM, customers can interact directly with the organization. SRM Supplier relationship management mcrm Mobile CRM xcrm More hybrids to come 5 6 1

2 CRM Implementation Strategies Operational CRM Also known as front-office CRM Involves the areas where direct customer contacts occur. Two types of touch points; inbound and outbound. Analytical CRM Also known as back office CRM or strategic CRM Involves understanding the customer activities that occurred in the front office. Operational CRM Enables and streamlines communications to and from the customer. Touchpoints Media Physical Mail Phone Fax Web Personal 7 8 Analytical CRM Involves understanding the customer activities that occurred in the front office. Analytical CRM Analytical Tools Ad Hoc Query Report ANALYZE DATA CAPTURE Extract, Transform, Load Processes Operational CRM Inbound Touchpoints Web Call Center OLAP Store Back-Office CRM Requires technology to compile and process customer data and New business processes to refine customer-facing practices to increase loyalty and profitability. Data Mining Analytical Applications Campaign Mgmt Churn Analysis Propensity PLAN Scoring Customer Profitability Analysis Data Warehouse ATM Operational Data Store Outbound Touchpoints INTERACT Direct Mail Telemar - keting Implement Plans Mobile Device EXECUTE 9 Source: Goodhue, Wixom, Watson. Realizing Business Benefits through CRM: Hitting the Right Target the Right Way 10 CRM and Business Intelligence (Analytical CRM) Business Intelligence is a practice of using data warehouses to analyze business performance. Data Warehouse Repository of corporate data Data Mining Three Eras in the History of Marketing Production Era A good product will sell itself. Sales Era Creative advertising and selling will overcome consumer resistance and convince them to buy. Marketing Era The consumer is king! Find a need and fill it

3 Profitability of Long-Life Customers 65 % of the average company s business comes from its present, satisfied customers (American Management Association) 13 Profitability of Long-Life Customers A business that each day for one year loses one customer who customarily spends $50/week would suffer a sales decline of $1,000,000 the next year Reichheld (as cited in Swift, 2001) found that companies could boost profits by 100 percent by retaining just 5 percent more of their customers. 14 Relationship marketing involves long-term, value-added relationships developed over time with customers and suppliers. Relationship marketing recognizes the critical importance of internal marketing to the success of external marketing plans (Boone and Kurtz, 2001) Morgan and Hunt (1994) proposed the following definition of relationship marketing: Relationship marketing refers to all marketing activities directed toward establishing, developing, and maintaining successful relationship exchanges Morgan and Hunt (1994) theorized that successful relationship marketing requires relationship commitment and trust. The authors proposed that relationship commitment was central to relationship marketing and that trust was central to all relational exchanges. Database Marketing The development of database marketing has had a tremendous effect on the improvement of marketing strategy. Utilized initially by catalogs, record clubs, and credit-card companies to manage customer information, databases are more widely accepted as a result of improved technology. The growth in database marketing together with the switch from mass marketing to one-toone marketing has changed the face of relationship marketing

4 The Changing Role of The role of technology has assisted in relationship marketing and has grown to represent a new form of competitive advantage. Both marketing researchers and business practitioners have identified the implementation of technology as an essential component of relationship marketing 19 Management Era According to Stewart Deck (2001), customer relationship management (CRM) is a strategy used to learn more about customers needs and behaviors in order to develop stronger relationships with them. It can be thought of as a process that will bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends 20 Management Era Customer relationship management is an attempt to modify customer behavior over time and strengthen the bond between the customer and the company. The key to CRM is identifying what creates value for the customer and then delivering it (Newell, 2000). Defining CRM Dr. Robert Shaw (as cited in Management, 2001) provides a more thorough definition of CRM. Customer relationship management is an interactive process for achieving the optimum balance between corporate investments and the satisfaction of customer needs to generate the maximum profit CRM involves Defining CRM Measuring both inputs across all functions including marketing, sales and service costs and outputs in terms of customer revenue, profit and value. Acquiring and continuously updating knowledge and customer needs, motivation and behavior over the lifetime of the relationship. Applying customer knowledge to continuously improve performance through a process of learning from successes and failures. Integrating the activities of marketing, sales and service to achieve a common goal

5 Defining CRM The implementation of appropriate systems to support customer knowledge acquisition, sharing and the measurement of CRM effectiveness. Constantly flexing the balance between marketing, sales and service inputs against changing customer needs to maximize profits. and Management The basic tenet of relationship marketing and customer relationship management is that firms benefit more from maintaining long-term customer relationships than short-term customer relationships (Reinartz & Kumar, 2000) Business is becoming more customercentric every day. Customers demand highly personalized products, personalized services and immediate delivery Why CRM? CRM Marketing Initiatives The surge of interest in CRM can be explained in part by the tremendous growth of the Internet and electronic commerce. Internet growth and online retail revenue are projected to continue over the next decade. Cross-Selling and Up-Selling Customer Retention Behaviour Prediction Customer Profitability and Value Modeling Customer Interaction Channel Optimization Personalization CRM technologies will help to find answers for How do we focus our marketing campaigns on customers with whom we d like to repeat business? How do we migrate customers to lowercost channels? How do other organizations in the company see customers differently than we do and how does that influence our campaign messages? How can we anticipate which products and services a customer might want? CRM technologies will help to find answers for (cont.) What is the best means of communicating with customers on an ongoing basis? What tactics do we use to entice prospects to become customers? How do we tie what we ve learned about customers to improving overall customer satisfaction? What keeps out most loyal customers coming back?

6 The Goal of CRM According to Stewart Deck s October 15, 2001 article in CIO Magazine, the primary goal of CRM is to help businesses use technology and human resources to gain insight into the behaviors of customers and the value of those customers. The Goal of CRM If this goal is met, a business can: Provide better customer service; Make call centers more efficient; Cross sell products more effectively; Help sales staff close deals faster; Simplify marketing and sales processes; Discover new customer and ultimately Increase customer revenues What is CRM? First and foremost it s a business strategy It s a business philosophy It s not one, but many visions. 33 6