Transcript ELC 310 - SaigonTech - Saigon Institute of Technology

E-Marketing 4/E
Judy Strauss, Adel I. El-Ansary, and Raymond Frost
Chapter 14: Customer Relationship Management
©2006 Prentice Hall
14-1
Chapter 14 Objectives
• After reading Chapter 14 you will be able to:
• Define customer relationship management and
identify the major benefits to e-marketers.
• Outline the three legs of CRM for e-marketing.
• Discuss the eight major components needed for
effective and efficient CRM in e-marketing.
• Differentiate between relationship intensity and
relationship levels.
• Highlight some of the company-side and client-side
tools that e-marketers use to enhance their CRM
processes.
©2006 Prentice Hall
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"A business absolutely devoted to Customer Service
Excellence will have only one worry about profits. They will
be embarrassingly large."
-Sir Henry Ford
"The cost of retention is $180 per customer," he says. "But most
automotive dealerships are set up for customer acquisition - which
is crazy when you consider the average cost of customer
acquisition is $1,000 or more."
-Arthur Hughes, author of several books on using databases to
enhance CRM.
"70 to 90 percent of decisions not to repeat a purchase of
anything are not about product or price. They are about some
dimension of service."
-Barry Gibbons, former CEO, Burger King
"The first rule of any technology used in a business is that
automation applied to an efficient operation will magnify the
efficiency. The second is that automation applied to an inefficient
operation will magnify the inefficiency."
-Bill Gates
©2006 Prentice Hall
The Cisco Story
• Cisco provides Internet networking systems for
corporate, government and education clients.
• The Internet plays a major role in acquiring, retaining
and growing customer business.
• 2.5 million users log onto the Cisco site each month.
• 90% of orders come through the Internet
• 82% of all customer questions handled online
• Cisco has become an expert at online customer
relationship management (CRM).
©2006 Prentice Hall
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The Cisco Story, cont.
• Cisco set a goal to migrate customers to the
online channel.
• In 1996, 5% of their customers placed orders on the
Web site.
• In 2001, 90% of their orders came through the
Internet.
• Cisco saves $340 million a year in customer
service costs due to automation.
• Can you think of other B2B marketers that
utilize the Internet as successfully as Cisco?
©2006 Prentice Hall
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Relationship Marketing Defined
• Relationship marketing (1:1 marketing) is about
establishing, maintaining, enhancing, and
commercializing customer relationships through
promise fulfillment.
• Relationship capital may be the most important
asset a firm can have.
• A firm using relationship marketing focuses
more on wallet share than on market share.
• More $ from each customer instead of more
customers
©2006 Prentice Hall
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Continuum from Mass Marketing to
Relationship Marketing
Mass marketing
Relationship marketing
Discrete transactions
Continuing transactions
Short-term emphasis
Long-term emphasis
One-way
communication
Two-way
communication
and collaboration
Acquisition focus
Retention focus
Share of market
Wallet share
Product differentiation
Customer differentiation
©2006 Prentice Hall
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Stakeholders
• Firms can establish and maintain relationships
with different stakeholder groups through
Internet technologies:
• Employees who need training and access to data
and systems used for relationship management.
• Business customers in the supply chain.
• Lateral partners, such as other businesses, not-forprofit organizations, or governments.
• Consumers who are end users of products and
services.
©2006 Prentice Hall
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Customer Relationship Management
• CRM is the process of acquiring, servicing,
retaining and building long-term relationships
with customers.
• The benefits of CRM include:
• Increased revenue from better targeting.
• Increased wallet share with current customers.
• Retention of customers for longer time periods.
• The cost of acquiring a new customer is
typically 5 times higher than the cost of
retaining a current customer.
©2006 Prentice Hall
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Acquisition Emphasis
Gain 6 new customers
($500 each)
Retain 5 current
customers
($100 each)
Total cost
Total number of customers
Retention Emphasis
$3,000 Gain 3 new customers
($500 each)
$ 500
Retain 20 current customers
($100 each)
$3,500 Total cost
11 Total number of customers
Maximizing Number of Customers
Source: Adapted from Peppers and Rogers (1996)
©2006 Prentice Hall
$1,500
$2,000
$3,500
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Customer Relationship Management,
cont.
• CRM has 3 facets:
• Sales force automation (SFA).
• Marketing automation.
• Customer service.
• Used primarily in the B2B market, SFA helps
salespeople to:
• Build, maintain, and access customer records.
• Manage leads and accounts.
• Manage their schedules.
©2006 Prentice Hall
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1) Customer orders 10
new co mputers.
3) database trends
Sales rep
Where is the
%@#& “on”
switch?
Customer
Database
4) Redesign computer
switch
2) Customer calls
co mpany
Customer service rep
©2006 Prentice Hall
Hmmm, 21% of
customers can’t
find “on” switch.
Customer Relationship
Management, cont.
• Marketing automation software aids marketers
in effective targeting, marketing communication,
and monitoring of customer and market trends.
• Software solutions include e-mail campaign
management, database marketing, and market
segmentation.
• Most customer service occurs post purchase
when customers have questions or complaints.
• E-mail and Web self-service are often used.
©2006 Prentice Hall
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8 Building Blocks for Successful CRM
1. CRM Vision: Leadership, value proposition
2. CRM Strategy: Objectives, target markets
3. Valued Customer Experience
Understand requirements
Monitor expectations
Maintain satisfaction
Collaboration and feedback
Customer interaction
4. Organizational Collaboration
Culture and structure
Customer understanding
People, skills, competencies
Incentives and compensation
Employee communication
Partners and suppliers
5. CRM Processes: Customer life cycle, knowledge management
6. CRM Information: Data, analysis, one view across channels
7. CRM Technology: Applications, architecture, infrastructure
8. CRM Metrics: Value, retention, satisfaction, loyalty, cost to serve
Exhibit 14 - 4 Eight Building Blocks for Successful CRM
Source: Adapted from Gartner Group (www.gartner.com)
©2006 Prentice Hall
1. CRM Vision
• To be successful, the CRM vision must start at
the top and filter throughout the company to
keep the firm customer focused.
• One key aspect of CRM vision is how to guard
customer privacy.
• The benefits of using customer data must be
balanced by the need to satisfy customers and
not anger them.
• TRUSTe provides its seal and logo to any Web
site meeting its privacy philosophies.
©2006 Prentice Hall
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TRUSTe Builds User Trust
©2006 Prentice Hall
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2. CRM Strategy
• E-marketers must determine their objectives and strategies
before buying CRM technology.
• Many CRM goals refer to customer loyalty.
• An important CRM strategy is to move customers up the relationship
intensity pyramid
Highest
intensity
Tell others about the brand
Advocacy
Community
Communicate with each other
Communicate with company
between purchases
Connection
©2006 Prentice Hall
Identity
Display the brand proudly
Awareness
Is on the list of
possibilities
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Three Levels of Relationship Marketing
• Another CRM goal involves building bonds with customers
on 3 levels:
• Financial
• Social
• Structural
Level
Primary Bond
One
Financial
Two
Social
Build 1:1
relationships
Build community
Three
©2006 Prentice Hall
Structural
Potential for
Sustained
Competitive
Advantage
Low
Main Element of Web Example
Marketing Mix
Price
www.southwest.com
Medium
Personal
communications
www.palmpilot.com
High
Service delivery
my.yahoo.com
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3. Valued Customer Experience
• Consumers are constantly bombarded by
marketing communications and unlimited
product choices.
• According to Jagdish Sheth (1995), the basic tenet
of CRM is choice reduction.
• Many consumers are “loyalty prone,” and will stick
with the right product as long as its promises are
fulfilled.
• Synchronous and asynchronous technologies
can provide automated and human services
that solve customer problems.
©2006 Prentice Hall
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Relationships over Multiple
Communication Channels
Automated
Human
Synchronous
Web 1:1 self-service
Online transactions
Telephone routing
Telephone
Online chat
Collaboration tools
Asynchronous
Automated e-mail
Short message services (SMS)
Web forms
Fax on demand
E-mail response
Postal mail
©2006 Prentice Hall
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4. Organizational Collaboration
• Marketers collaborate within and outside the
organization to focus on customer satisfaction.
• CRM, or “front-end” operations, can be linked
with the entire supply chain management
system (SCM), or “back-end” operations.
• Customer service reps have access to inventories.
• Producers and wholesalers constantly receive data
that can be utilized for production and delivery.
• The use of extranets, two or more intranet
networks that share information, allows CRMSCM integration.
©2006 Prentice Hall
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5. CRM Processes
• Firms use specific processes to move
customers through the customer care life cycle.
Target
Acquire
Partners
Transact
Internet
Extranet
Service
Retain
G
row
Custom
er
©2006 Prentice Hall
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CRM Processes, cont.
• CRM processes are used to:
•
•
•
•
Identify customers.
Differentiate customers.
Customize the marketing mix.
Interact with customers.
• Firms can identify high-value customers by
mining customer databases and profiling
customers in terms of: (RFM analysis)
• Recency of purchases.
• Frequency of purchases.
• Monetary value of purchases.
©2006 Prentice Hall
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6. CRM Information
• The more information a firm has, the better
value it can provide to each current or
prospective customer.
• Firms gain much information by tracking
behavior electronically.
• Bar code scanner data.
• Software that tracks online movement, time spent
per page, and purchase behavior.
©2006 Prentice Hall
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7. CRM Technology
• Technology greatly enhances CRM processes.
• Firms use company-side tools to push
customized information to users.
• Client-side tools allow the customer to pull
information that initiates the customized
response from the firm.
©2006 Prentice Hall
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Company-side Tools
Company-Side Tools
(push)
Description
Cookies
Cookies are small files written to the user’s hard drive after visiting a Web site.
When the user returns to the site, the company’s server looks for the cookie
file and uses it to personalize the site.
Web log analysis
Every time a user accesses a Web site, the visit is recorded in the Web server’s
log file. This file keeps track of which pages the user visits, how long he
stays, and whether he purchases or not.
Data mining
Data mining involves the extraction of hidden predictive information in large
databases through statistical analysis.
Real-time profiling
Real-time profiling occurs when special software tracks a user’s movements
through a Web site, then compiles and reports on the data at a moment’s
notice.
Collaborative filtering
Collaborative filtering software gathers opinions of like-minded users and
returns those opinions to the individual in real time.
Outgoing e-mail Distributed e-mail
Marketers use e-mail databases to build relationships by keeping in touch with
useful and timely information. E-mail can be sent to individuals or sent en
masse using a distributed e-mail list.
Chats
Bulletin boards
A firm may listen to users and build community by providing a space for user
conversation on the Web site.
iPOS terminals
Interactive point-of-sale terminals are located on a retailer’s counter and used
to capture data and present targeted communication.
©2006 Prentice Hall
14-23
Client-side Tools
Client-Side Tools
(pull)
Description
Agents
Agents are programs that perform functions on behalf of the user,
such as search engines and shopping agents.
Individualized Web
portals
Personalized Web pages users easily configure at Web sites such as
MyYahoo! and many others.
Wireless data services
Wireless Web portals send data to customer cell phones, pagers, and
PDAs, such as the PalmPilot.
Web forms
Web form (or HTML form) is the technical term for a form on a Web
page that has designated places for the user to type information
for submission.
Fax-on-demand
With fax-on-demand, customers telephone a firm, listen to an
automated voice menu, and select options to request a fax be sent
on a particular topic.
Incoming e-mail
E-mail queries, complaints, or compliments initiated by customers or
prospects comprise incoming e-mail, and is the fodder for
customer service.
©2006 Prentice Hall
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8. CRM Metrics
• E-marketers use numerous metrics to assess
the Internet’s value in delivering CRM
performance.
•
•
•
•
ROI
Cost savings
Revenues
Customer satisfaction
• One study named customer retention, ROI and
customer lift (increased response or transaction
rates) as the most important metrics.
©2006 Prentice Hall
14-25
CRM Metrics, cont.
• One very important CRM metric is customer
lifetime value (LTV).
• The LTV calculation demonstrates the benefits of
retaining customers over time and the need for
building wallet share.
• LTV also illustrates that no matter how good
customer retention is, the firm must still focus on
customer acquisition activities.
• Exhibit 14.21 illustrates Customer LTV.
©2006 Prentice Hall
14-26
Total
Retention
Total
Net
NPV at
10-Year
Year
Customers
Rate
Revenue
Profit
15%
LTV
1
1,000
60%
$35,900
$ 5,900
$ 5,900
$ 66.94
2
600
65%
45,540
27,540
23,948
118.12
3
390
70%
29,601
17,901
13,536
129.15
4
273
75%
20,721
12,531
8,239
138.35
5
205
78%
15,541
9,398
5,373
143.45
6
160
79%
12,122
7,330
3,645
145.55
7
126
80%
9,576
5,791
2,504
146.81
8
101
80%
7,661
4,633
1,742
146.81
9
81
80%
6,129
3,706
1,212
146.81
10
65
80%
4,903
2,965
843
146.81
Customer Lifetime Value (LTV)
Source: Adapted from Peppers and Rogers Group at www.1to1.com
©2006 Prentice Hall