Customer Relationship Management. Chapter 15 Objectives After reading Chapter 15, you will be able...

Customer Relationship Management

Chapter 15 Objectives After reading Chapter 15, you will be able to:

Define customer relationship management (CRM) and identify the major benefits to e-marketers.

Outline the three pillars of CRM for e-marketing. Describe social CRM and how it relates to

traditional CRM. Discuss the nine major components needed for

effective and efficient CRM in e-marketing. Highlight some of the company-side and client-

side tools that e-marketers use to enhance their CRM processes.

Differentiate CRM metrics by customer life cycle stage.

©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL15-2

The Best Buy Story Best Buy is the 11th largest U.S. e-commerce

retailer with 1B online visitors and a multichannel strategy.

In 2008 Best Buy initiated the Best Buy Community online. 600,000 customers a quarter post 20,000

messages and view over 22 million pages of content.

The community has yielded $5M in benefits to Best Buy.

Best Buy also uses Twitter to engage customers (@twelpforce).

http://www.youtube.com/watch?v=RbkS8AnqNGU

©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 15-3

Customer Relationship Management

http://www.youtube.com/watch?v=IdmtJIlkHzw


Building Customer Relationships, 1:1 According to Harvard Business Review authors

Jones and Sasser, “Increased customer loyalty is the single most important driver of long-term performance.”

Many experts believe that relationship capital is the most important asset a firm can have.

This approach represents a major shift in marketing practice From mass marketing and focus on acquiring lots of new

customers To individualized marketing and retaining and building

more business from loyal, high-value customers 1:1 Consumer Services Market

Internet technologies facilitate relationship marketing One key is identifying key Internet tools


Relationship Marketing Defined Marketers named customer focus relationship

marketing (also 1:1 marketing) Relationship Marketing is about “establishing,

maintaining, enhancing, and commercializing customer relationships through promise fulfillment” (Gronroos, 1990)

Promise Fulfillment is making offers in their marketing communications programs; customer expectations would be met through actual brand experiences.

A firm using relationship marketing focuses more on wallet share than on market share. Wallet share is the amount of sales a firm can generate

from one customer over time, rather than on market share.©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

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Stakeholders Relationship marketing can be used to build

mutually supportive bonds with stakeholders other than consumers, such as employees and suppliers. The four stakeholders most affected by Internet technologies are: Employees.

It is difficult for a firm to persuade buyers when employees are not happy

Employees who need training and access to data and systems used for relationship management.

Many relationship management programs fail due to lack of employee training and commitment


Stakeholders, Cont. Business customers in the supply chain.

With partners relationship management (PRM), firms build and maintain relationships with those companies upstream and downstream

Both business customers and suppliers are extremely important

Lateral partners. Such as other businesses, not-for-profit

organizations, or governments join with the firm for some common goals but not for transactions with other.

Consumers. Consumers who are end users of products &

services. Marketers must differentiate between business

customers and final customers©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 15-9

3 Pillars of Relationship Marketing Relationship Marketing is more than

promising fulfillment Two-way communication is vital to the success

of this relationship. Experts believe that relationship

marketing has three pillars that support customer relationships with the company’s products and services: Customer Relationship Management (CRM) Customer experience management (CEM) Customer collaboration management (CCM)


3 Pillars of Relationship Marketing, Cont. Customer Relationship Management (CRM, 1.0)

“The process of targeting, acquiring, transacting, servicing, retaining and building long-term relationships with customer”

Customer experience management (CEM) “Represents the discipline, methodology and / or process

used to comprehensively manage a customer’s cross-channel exposure, interaction and transaction with a company, product, brand or service”

Customer collaboration management (CCM) Also called CRM 2.0 and Social CRM Social CRM is a strategy to engage customer in

relationship-building conversation, often through social media.

Designed to make the company and the customer collaborate to create mutually beneficial results


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Customer Relationship Management (CRM)

Customer experience management(CEM)

Customer collaboration management (CCM) / CRM 2.0 / Social CRM

Definition

• The process of targeting…

• Discipline, methodology and / or process...

• Social CRM is a philosophy and a business strategy

Focus • Internal processes to maximize customer value in the long term

• More on the customer expectations and touch point satisfaction / dissatisfaction (customer value)

• Designed to make the company and the customer collaborate to create mutually beneficial results.

Requires • Requires much data

• Information• Customer insight• Knowledge• Requires

relationship building skills

• Experience • Collaboration• Content, people

& interaction

Controlled by

• Marketer • Marketer • Customers

Customer Relationship Management CRM is the process of targeting, acquiring,

transacting, servicing, retaining, and building long-term relationships with customers.

CRM is a philosophy, strategy, and process (not just software) that includes all 3 pillars.

Firms now focus on the idea that if they do not keep their customers happy, someone else will.


Social Customer Relationship Management (CRM 2.0) Social CRM (CRM 2.0) holds all the principles of CRM

1.0, it adds social media technology and customer collaborative conversations to the process.

Social CRM means that companies must interact with customers on their terms, and not based solely on the company’s data, strategy and desires.

Social CRM extends CRM 1.0, but does not replace it. Adds benefits such as:

Monitoring and improving reputations. Learning more about customer needs, wants, and problems. Improving target market selection and revenue potential. Gathering data for market research on products & customer

service. Decreasing customer service costs. Identifying new revenue opportunities.

The explosion of social media has marketers putting “social” in front of CRM


CRM Benefits Increased revenue from better prospecting

Most companies use customer data and mathematical models to determine who is a “good” customer

Can define prospects that are most likely to respond to promotional offers

Increased wallet share with current customers Current customers will spend more of their disposable

income with the firm Brand loyalty is a must to increase wallet share

Retaining customers for longer periods of time It is five to seven times more expensive to attract new

customers than to retain a current customer. Money would be better spent marketing to current

customer due to the 80/20 principle©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

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CRM Benefits, Cont. More customer leads to more sales Word-of-mouth communication among

customers is the heart of CRM Cost Saving

US businesses saved $155 billion between 1998 and 2000 by using CRM

A 5% increase in customer retention translates to 25% to 125% profitability in the B2B market


Retention vs. Acquisition Retention is less costly than acquisition

because: Reduced promotion costs both for advertising

and discounts. Current customers are likely to have higher

response rates to promotional efforts . Sales teams can be more effective since they

should know their individual customers well. CRM makes sense because they build loyal,

experienced customers. They know who to call in the firm when they have questions. This means loyal customers should cost less to service. They post positive reviews online.



Companyemployee

Customer

CRM 1.0

MEDIAPhoneE-mailIn-personSMSWebsitePaper mailTraditional media

Social CRM (2.0)

MEDIABlogsSocial networksMicroblogsPhoto sharingForumsWikisReviews/RatingsInteractive Web sitesOther social mediaLive chatAll CRM 1.0 mediaCompany

employees

Customers

9 Building Blocks for Successful CRM Businesses understand that CRM is necessary to be

successful, but nearly all firms are currently losing money on the investment of CRM software. Businesses want to use CRM technology, but want to know how to use it effectively and efficiently.

1. CRM vision2. CRM strategy3. Customer experience management (CEM)4. Customer collaboration marketing (CCM)5. Organizational collaboration6. CRM processes7. CRM information8. CRM technology9. CRM metrics


1. CRM Vision Management must start with a vision that fits the

company culture and makes sense for the firm’s brands and value propositions.

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 is a non-profit, independent organization helps web users build and earn trust in companies. TRUSTe: Provides its seal and logo to any website meeting its

privacy philosophies. Will not sponsor or recommend an organization unless

specific requirements are met Offers security to online customers


2. CRM Strategy E-marketers must determine their objectives and

strategies for initiating CRM programs and buying technology or setting up social media accounts.

Relationship Intensity Many CRM goals refer to customer loyalty (e.g.

Harley Davidson and Apple computers) An important CRM strategy is to move to move

customers up the relationship intensity pyramid to advocacy (awareness, identity, connection, community, and advocacy, Ch. 9).

Another CRM goal involves building bonds with customers on 3 levels: financial, social and structural.


2. CRM Strategy, Cont. Relationship Levels1. Marketers build a financial bond

Use pricing strategies Price promotions are easily imitated (the lowest level)

2. Marketers stimulate social interaction with customers Ongoing personal communication Aggressive pricing strategies Customers are more loyal due to the social bond Can also use community building

3. Marketing relies on creating structural solutions to customer problems Firms add value by making structural changes that

facilitate the relationship Customizing Web pages

Social networks combine levels two and three, they create community and structural bonds (e.g. LinkedIn, Facebook).


3. Customer Experience Management Most customers want brand loyalty as much as the

firms want customer loyalty According to Sheth (1995), the basic principle of CRM

is choice reduction. That, consumers want to patronize the same website

Many consumers are “loyalty prone,” and will stick with the right product as long as its promises are fulfilled.

Communication preferences vary by individual Customer Service Fills every stage of customer acquisition, retention, and

development practices. Most often occurs post purchase E-mail and web self-service are emerging trends Synchronous and asynchronous technologies can

provide automated and human communications that solve customer problems.


4. Customer Collaboration Management / Marketing (CCM) CCM recognizes the change from a transaction focus

online to an interaction focus A learning relationship between a customer and an

enterprise gets smarter and smarter with each individual interaction

CCM is content, people, and interaction driven, while traditional CRM is data-driven.

CCM is about managing customer relationships and experiences by creating and monitoring online content

Listening the online chatter using technology such as Google Alerts and social media dashboards is more important than talking when a company is selling.


5. Organizational Collaboration Marketers must collaborate both internally

and externally Internally

Cross-functional teams focus on customer satisfaction to create a CRM culture

Creates a better company culture as well Externally

Companies join forces to create results that would reach beyond what each could have done separately.

Can be in distribution channel or non-transactional type collaboration


5. Organizational Collaboration, Cont. CRM-SCM Integration CRM refers to front-end operations (e.g.

emails, telephone calls…) Working to create satisfying experiences at all

customer levels Can be challenging due to different employees

and computer systems SCM refers to back-end operations (e.g.

inventory & payment) Usually includes the entire supply chain Goal is to seamlessly link all involved

Extranet Two or more intranet networks joined for the

purpose of sharing information (allow CRM-SCM integration).

Proprietary to the organizations involved.©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

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6. CRM Processes


6. CRM Processes, Cont. Firms monitor and attract customers, both

online and offline and they progress through the stages of customer care life cycle (target, acquire, transact, service, retain, and grow).

A customer churn cycle, that works both for retention and for increasing customer value: Hear Now or Gone Tomorrow Build a Dynamic Customer Profile Sales Force Automation (SFA) Marketing Automation


6. CRM Processes, A customer churn cycle: Cont.1. Hear Now or Gone Tomorrow

Describes the importance of listening to customers and gathering interaction data across all marketing channels

Customization occurs when companies tailor their marketing mixes to meet the needs of small target segments even to the individual level, using electronic marketing tools.

Personalization involves ways that marketers individualize in an impersonal computer networked environment

2. Build a Dynamic Customer Profile Gather data to profile each customer as reflected by

his interactions with a brand at many touch points


6. CRM Processes, A customer churn cycle, Cont.

3. Sales Force Automation (SFA) this means “increasing your sales, not the

sales force” Allows salespeople to build, maintain, and

access customer records; manage leads and accounts; manage schedules; and more.

Up-to-date customer and prospect records help build customer relationships.

Salesforce.com also has tools to monitor brand conversations in the social media.


6. CRM Processes, A customer churn cycle, Cont.

4. Marketing Automation Marketing automation activities that aid

marketers in effective targeting, efficient marketing communication and real-time monitoring of customer and market trends.

SAS, a business intelligence and predictive analytics software provider, offers automation benefits to aid CRM, such as:

An integrated customer view Customer life cycle management Customer targeting and analytics


Building a Dynamic Customer Profile


7. CRM Information The more information a firm has, the

better value (more accurate, timely, and relevant information) 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.

Databases can provide a 360° customer view across various channels.


7. CRM Information, Cont. Some factors in facilitating customer

relationship management are:1. Target the right customers2. Own the customer’s total experience3. Streamline business processes that impact

the customer4. Provide a 360 degree view of the customer

relationship5. Let customers help themselves6. Help customers do their jobs7. Deliver personalized service8. Foster community


8. CRM Technology Technology enhances the CRM process

and can be categorized into Company-Side Tools (push information to

users) and Client-side Tools (pull information from

customers)

Cookies, Web site logs, bar code scanners, social media, and other tools help to collect information about consumers and their behaviors.


Company-Side Tools (push)1. Cookies: allow ad-server companies to track

user activities and shopping baskets2. Web Analytics : files to assist companies in

tracking customer’s habits and preferences. Firms use software to help analyze customer behavior to customize the web experience

3. Data Mining: firms use software to find patterns of interest

4. Behavioral Targeting: using customer profiling to offer instant promotions or coupons based on customer behaviors


Company-Side Tools (push), Cont.5. Collaborative Filtering : software that gathers

the recommendations of an entire group of people and presents the results to like-minded customers

6. Outgoing E-Mail: E-mail is used to communicate with individuals in an effort to increase their purchases, satisfaction, and loyalty

7. Social Media: Companies build community and learn about customers and products through blogs, social networks, and bulletin board/newsgroup e-mail postings all over the Web

8. iPOS Terminals: credit card technology used to create instant sales promotions and coupons


Client-Side Tools (pull)

1. Agents: shopping agents and search engines match user input to databases and return customized information

2. Individualized Web Portals: customizable websites – My Yahoo! or My AOL

3. Wireless Data Services: most wireless users only want text due to slow connection speeds and small displays

4. Web Forms: can be used for site registrations or survey research

5. Fax-on-Demand: for documents that are not in digital format


Client-Side Tools (pull), Cont.6. Incoming E-Mail: post transaction customer

service. Companies are careful to adequately staff email addresses, since customers expect a response in a reasonable amount of time

7. RSS Feeds: Really simple syndication (RSS) allows users to subscribe to blogs and Web sites

8. CRM Software: Technology and software are what grease the CRM wheel, allowing companies to gather, interpret, and use masses of customer and prospect data


9. CRM Metrics E-marketers use numerous metrics to assess the

Internet’s value in delivering CRM performance. Experts believe the three most important metrics to

CRM are customer retention rates, ROI, and customer lift (increased response or transaction rates). ROI Cost savings Revenues Customer satisfaction Customer Lifetime Value (LTV)

LTV is the expected profit that you will realize from sales to a particular customer in the future


10 RULES FOR CRM SUCCESS1. Recognize the customer’s role.2. Build a business case.3. Gain buy-in from end users to executives.4. Make every contact count.5. Drive sales effectiveness.6. Measure and manage the marketing return.7. Leverage the loyalty effect.8. Choose the right tools and approach.9. Build the team.10.Seek outside help.


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photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright © 2012 Pearson Education, Inc. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall

©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

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