E-Marketing 5/E Judy Strauss and Raymond Frost

E-MARKETING 5/EJUDY STRAUSS AND RAYMOND FROST

Chapter 15: Customer Relationship Management

©2009 Pearson Education, Inc.

Publishing as Prentice Hall

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©2009 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Objectives

After reading Chapter 15, 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.

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Cisco, a $34.9 billion B2B marketer, provides internet networking systems for corporate, government, and education clients.

The internet plays a major role in acquiring, retaining, and growing customer business. 3 million users log on to the Cisco site each

month. Cisco has become adept at online customer

relationship management (CRM).

The Cisco Story15-3


Cisco set a goal to migrate customers to the online channel. In 1996, 5% of their customers placed orders

on the Web site. Today 92.2% of their orders come through the

internet. Site user satisfaction is 4.7 on a 5.0 scale. Can you think of other B2B marketers that

utilize the internet as successfully as Cisco?

The Cisco Story, cont.15-4


Relationship Marketing Defined Relationship marketing is about establishing,

maintaining, enhancing, and commercializing customer relationships through promise fulfillment.

Today it also means two-way communication with individual stakeholders, one at a time.

Business 2.0 calls relationship capital the most important asset a firm can have.

A firm using relationship marketing focuses more on wallet share than on market share.

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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

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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-

for-profit organizations, or governments. Consumers who are end users of products and

services.

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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.

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CRM’s Facets

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.

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Marketing automation software aids marketers in effective targeting, marketing communication, and monitoring of customer and market trends. Marketing automation software takes data from Web

sites and databases and turns it into reports for CRM efforts.

Customer service is critical to building long-term customer relationships. Most customer service occurs post purchase when

customers have questions or complaints. Key tools include e-mail, online live chat, Web self-

service, and package tracking using PDAs.

Marketing Automation & Customer Service

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8 Building Blocks for Successful CRM The Gartner Group model of CRM covers

8 building blocks:1. CRM vision2. CRM strategy3. Valued customer experience4. Organizational collaboration5. CRM processes6. CRM information7. CRM technology8. CRM metrics

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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.

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TRUSTe Builds User Trust


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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 (as discussed in Chapter 10).

Another CRM goal involves building bonds with customers on 3 levels: Financial Social Structural

2. CRM Strategy15-14


Three Levels of Relationship Marketing

Level Primary Bond

Potential for Sustained

Competitive Advantage

Main Element of Marketing Mix Web Example

One Financial Low Price www.southwest.com

Two Social Build 1:1

relationshipsBuild community

Medium Personal communications

www.MySpace.com

Three Structural 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.

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Relationships Over Multiple Communication Channels

Automated Human

Synchronous Web 1:1 self-serviceOnline transactionsTelephone routing

TelephoneOnline chatCollaboration tools

Asynchronous Automated e-mailShort message services (SMS)Web formsFax on demand

E-mail responsePostal mailBlog posts/commentsMicromedia sites (e.g. Twitter)

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Marketers collaborate within and outside the organization to focus on customer satisfaction.

Online retailers can seamlessly link the “back-end” (e.g., inventory and payment) with the “front-end” CRM system and the entire supply chain management system (SCM). CRM-SCM integration allows immediate inventory

checking at the wholesaler or manufacturer. Extranets, two or more intranet networks that

share information, allow CRM-SCM integration.

4. Organizational Collaboration

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CRM-SCM Integration

Ex. 15.9


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5. CRM Processes

Firms use specific processes to move customers through the customer care life cycle.

Ta rge t

A cquire

Transac t

Se rvice

R e ta in

Grow

Inte rne t Extrane t

C ustomer

P a rtne rs

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CRM processes are used to: Identify customers. Differentiate customers. Customize the marketing mix. Interact with customers.

CRM Processes, cont.15-21


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.

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7. CRM Technology

Technology, such as toll-free numbers, electronic kiosks, and voice mail, greatly enhance CRM processes.

The internet forms the centerpiece of a firm’s CRM abilities. Cookies, Web logs, bar code scanners help to collect

information about consumers and their behaviors. 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.

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Company-Side ToolsCompany-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.

Data mining Data mining involves the extraction of hidden predictive information in large databases through statistical analysis.

Behavioral targeting Behavioral targeting occurs when software tracks a user’s movements through a Web site, then sends appropriate Web content 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.

ChatsBulletin 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.

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Client-Side Tools

Client-Side Tools(pull) Description

AAgents 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 Palm Pilot.

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.

RSS Feeds Really Simple Syndication feeds are an XML format designed for sharing headlines and other Web content.

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CRM Software

The leading software firms in the large enterprise B2B market include: Siebel Systems SAP Oracle Onyx Software


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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.

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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 15.21 illustrates customer LTV.

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10 Rules for CRM Success


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1. 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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Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

E-Marketing 5/E Judy Strauss and Raymond Frost

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