Transcript No Slide Title

5th Edition
PPT 11-1
Chapter 11
Customer Relationship
Management
McGraw-Hill/Irwin
PPT
11-2 Retailing Management, 5/e
Levy/Weitz:
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
Retailing Strategy
Retail Market Strategy
Financial Strategy
Site Location
Customer Relationship
Management
Retail Locations
Organizational Structure and
HR Management
Information Systems
PPT 11-3
Customer Relationship Management
A business philosophy and set of strategies,
programs, and systems that focus on identifying
and building loyalty with a retailer’s most
valuable customers.
What is loyalty? Is it the same thing as liking a
retailer or frequently patronizing a retailer?
PPT 11-4
Customer Loyalty
• Committed to purchasing merchandise and
services from a retailer
• Resist efforts of competitors to attract the loyal
customer
• Emotional attachment to retailer
– Personal attention
– Memorable positive experiences
– Brand building communications programs
PPT 11-5
CRM Process
PPT 11-6
Collecting Customer Data
• Types of Information in the Customer
Database
• Approaches for Collecting Information
• Privacy Concerns
PPT 11-7
Information About Each Customer in the
Data Base
• History of purchases
– Purchase date, price paid, SKUs bought, whether or
not the purchase was stimulated by a promotion
• Customer contacts by retailer (touch points)
– Visits to web site, inquires to call center, direct mail
sent to customer
• Customer preferences
• Descriptive information about customer
• Customer’s responses to promotions
PPT 11-8
Approaches for Collecting
Customer Information
Need to connection contacts with a specific
customer identifier
• Ask for identifying information
– Telephone number, name and address
• Encourage use of frequent shopper cards
• Link checking account number and/or third
party credit cards to customer
PPT 11-9
Privacy Concerns
Control over Collection
• Do customers know what information is being
collected?
• Do customers feel they can decide on the amount
and type of information collected by retailers?
Control over Use
• Do customers know how the information will be used
by the retailer?
• Will the retailer share the information with third
parties?
PPT 11-10
Heighten Concerns When Using
Electronic Channel
• Information collected without the
awareness of customers
• Collecting click stream data using
cookies
– Similar to an invisible person
videotaping a customer as they
walk through a store
PPT 11-11
Customer’s Decision to
Offer Information
Balance benefits and risks
Disclosure of Information
Unwanted Sales Contacts
Discounts
Special Treatment
Personal Attention
PPT 11-12
Consumer Protection Differences
United States
European Union
• Limited protection in specific
areas
• Information only can only be
collected for specific purposes
– Credit reporting
– Video rentals
– Banking
– Medical records
PPT 11-13
• Purpose must be disclosed to
customer
• Information can only be used
for specific purpose
• Information can not be
exported to countries with less
stringent regulations
FTC Guideline for Fair Information Practices
• Notice and awareness
– comprehensive statement about information storage, manipulation,
and dissemination
• Choice/consent
– Opt-in and opt-out options
• Access/participation
– Customer able to confirm accuracy
• Integrity/security
– Controls for theft and tampering
• Enforcement/redress
– Mechanism to insure compliance
PPT 11-14
GAP Security and Privacy Policy
PPT 11-15
Analyzing Customer Data
Data Mining – technique used to identify
patterns in data. Expl :DVD Player
Market Basket Analysis
Identifying Market Segments
Identifying Best Customers
PPT 11-16
Market Basket Analysis
Data analysis focusing on
the composition of the
customer’s market basket
– what items are bought at
the same time.
Uses:
-Adjacencies for displaying merchandise
-Joint promotions
PPT 11-17
Identifying Best Customers
• Estimating Lifetime Value
• Classifying Customers by recency, frequency, and
monetary value of purchases (RFM Analysis)
PPT 11-18
Which Customer Probably Has the Greatest
Lifetime Value
Purchases Over Last 10 Weeks
1 2 3 4 5 6 7 8 9 10
Jack $20 $20 $20 $20 $20 $20 $20 $20 $20 $20
Jill $210 $0 $0 $0 $0 $0 $0 $0 $0 $0
PPT 11-19
Customer Pyramid
Platinum
Best
Most loyal
Least price sensitive
PPT 11-20
Customer Pyramid
Gold
Next best
Not as loyal
PPT 11-21
Customer Pyramid
Iron
Doesn’t deserve
much attention
PPT 11-22
Customer Pyramid
Lead
Demands attention
May have
negative value
PPT 11-23
RFM Analysis
PPT 11-24
RFM Target Strategies
PPT 11-25
Illustration of RFM Application
A catalog retailer is deciding which group of
customers to send a catalog.. Based on experience
and an RFM analysis of customer database:
•Average order size for customers in cell - $40
•Contribution margin – 50%
•Response rate – 5%
•Cost of catalog and mailing -$.75
Will the retailer make a profit mailing to this RFM
segment?
PPT 11-26
Illustration of RFM Application
A catalog retailer is deciding which group of
customers to send a catalog.. Based on
experience and an RFM analysis of customer
database:
•Average order size for customers in cell - $40
•Contribution margin – 50%
•Response rate – 5%
•Cost of catalog and mailing -$.75
Will the retailer make a profit mailing to this RFM
segment?
$20.00 contribution x .05 response rate - $.75 cost
PPT 11-27
= $.25 profit per catalog mailed
CRM Programs
Retailing Best Customers
Converting Good
Customers to Best
Customers
Getting Rid of
Unprofitable
Customers
PPT 11-28
Customer Retention Programs
• Frequent Shopper
Programs
• Special Customer Services
• Personalization
– 1-to1 Retailing
• Community
PPT 11-29
Even Small Retailers Use Frequent
Shopper Programs
PPT 11-30
Elements in Effective
Frequent Shopper Programs
• Tier Based on Customer Value
• Offer Choices of Rewards
– Non-monetary incentives
• Reward all Transactions
• Transparent and Simple
PPT 11-31
Issues with Effective
Frequent Shopper Programs
• Expense
• Difficulty in Making Changes
• Impact on Loyalty Questionable
• Easily Duplicated – Difficult to Gain Competitive
Advantage
– Need to offer “invisible” benefits
PPT 11-32
Personalization
Hello, Barton Weitz
PPT 11-33
Converting Good Customers to Best
Customers
• Cross-selling
• Add-on selling
PPT 11-34
Dealing with
Unprofitable Customers
• Offer less approaches
for dealing with these
customers
• Charge customers for
extra services
demanded
PPT 11-35
Implementing CRM Programs
• Need systems, databases
+
• Close coordination between departments –
marketing, MIS, store operations, HR
• Shift in orientation
Product Centric
PPT 11-36
Customer Centric