Lec 1.6 CRM[1]

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CRM

Keeran Jamil

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A customer service approach that focuseson building long-term and sustainablecustomer relationships that add value both

for the customer and the company

Customer Relationship Management

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Information stored on existing customers (andpotential customers) is analysed and used to thisend.

Automated CRM processes are often used to

generate automatic personalised marketingbased on the customer information stored in thesystem.

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According to a 2007 series of IBM surveysthat polled nearly 20,000 consumersshowed that those retailers that integrate

customer-focused initiatives throughout theirbusinesses have a greater number of

Advocates and often out-perform theircompetitors.

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Advocates are 3 types of customers:

who recommend their retailer to their friends and

family, who would increase their purchase amount if

their retailer offered products found at other

stores, who would stay with their retailer even if another

retailer offered a competitive product.

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If you can keep customers loyal, their profitabilityaccelerates much faster than in traditional

businesses.

Acquiring online customers is 20-30% more

expensive than for traditional businesses; thisexplains why start-ups remain unprofitable for 2-3 years.

Building long-term relationships with customersis essential for any business. Failure to do thiscaused failure of many dot.coms.

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Learning about Consumer Behavior Online

Model of consumer behavior online

independent(or uncontrollable) variables

interveningormoderatingvariables

decision-making process

dependent variables

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Learning about ConsumerBehavior Online (cont.)

Prentice Hall 2004

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Learning about Consumer Behavior Online(cont.)

Independent variables

Personal characteristics

Environmental variables

Social variables

Cultural/community variables

Other environmental variables

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Learning about Consumer Behavior Online(cont.)

Intervening (moderating) variables

variables are those that can be controlled by vendors

Dependent variables: the buying decisions

customer makes several decisions

to buy or not to buy?

what to buy?

where, when, and how much to buy?

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Retailers can deliver a satisfying shoppingexperience by understanding who their corecustomers are and what customers expect from

the brand experience.

Customer behavioural data, allows the analyticaltechniques to segment and predict andultimately lead to an increase in customerretention.

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Prentice Hall 2004 12

Consumer Decision Making Process

5 phases of the generic purchasedecision model:

1. need identification

2. information search

3. evaluation of alternatives

4. purchase and delivery

5. after-purchase evaluation

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Prentice Hall 200413

Consumer Decision Making Process (cont.)

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CRM and Its Relationship with EC

Extent of service

1. Customer acquisition (prepurchase support)

2. Customer support during purchase

3. Customer fulfillment (purchase dispatch)

4. Customer continuance support(postpurchase)

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CRM Approach

A useful method of acquiring repeat customers

Identification: building a customer profile usuallyduring acquisition

Differentiation: segmenting and classifyingcustomers usually during retention

Interaction: dealing with customers during the

buying phase usually during retention Communications: with customers for follow-on

dealings usually during extension

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THREE STAGES

3 Stages for Obtaining Repeat Visits

Magnetic: acquisition: obtaining visitors by

promotion and attractive marketing Sticky: retention: keeping customers on-

site and engaging in revenue-generating

activities Elastic: extension: persuading customers

to engage in further activities and to return

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Stage 1

ACQUISITION

Marketing: a strategy for traffic building

which results in first-time visits by potentialcustomers.

From this it is important to glean as much

information as possible on who thecustomer is, why they visited, and whetherthey may be contacted again.

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One-to-One Marketing and Personalisation in EC

One-to-one marketing: Marketing that treatseach customer in a unique way

Personalization: The matching of services,

products, and advertising content to individualconsumers

User profile: The requirements, preferences,behaviors, and demographic traits of a particularcustomer

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One-to-One Marketing and Personalisation in EC(cont.)

Major strategies used to compile userprofiles

Solicit information directly from the user

Observe what people are doing online

Build from previous purchase patterns

Perform marketing research

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Stage 2

RETENTION Stage two is primarily concerned with

giving the customer a satisfactoryexperience whilst on the site such thatthey will wish to return.

There are two goals :

retain as customers of the organisation

and retain as a community of loyal online

customers

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Customer loyalty Customer loyalty: Degree to which a customer will

stay with a specific vendor or brand

Increased customer loyalty produces cost savings

through: lower marketing costs

lower transaction costs

lower customer turnover expenses

lower failure costs

E-loyalty: Customer loyalty to an e-tailer (electronicretailer)

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Online networking and other applications

Forums

Chat rooms

Usenet groups

E-mail newsletters

Discussion lists

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Stage 3

EXTENSION

So how do we getcustomers to comeback?

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Trust in EC

Trust: The psychological status of involvedparties who are willing to pursue further

interaction to achieve a planned goal Trust is influenced by many variables

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How to increase EC trust between buyers and sellers trust is

determined by:

degree of initial success that each partyexperienced with EC and with each other

well-defined roles and procedures for all partiesinvolved

realistic expectations as to outcomes from EC

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Issues in personalisation

brand recognition

security mechanisms help solidify trust

disclose and update latest business status andpractices to potential customers and to buildtransaction integrity into the system

guarantee information and protection privacy throughvarious communication channels

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Collaborative filtering:A personalisation method thatuses customer data to predict, based on formulasderived from behavioral sciences, what other products orservices a customer may enjoy; predictions can be

extended to other customers with similar profiles.

Legal and ethical issues in collaborative filtering

Invasion-of-privacy issues

Permission-basedpersonalisation tools to requestcustomer permission

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Interaction and Communications

Interaction Interaction: on-site interactions e.g FAQs,

creating a personal product

FAQs : should be easy to submit a FAQ,rank FAQs by popularity

Communications

Personalisation or customisation of emailcontent according to customer profile,

Direct Email : Opt-in/Opt-out

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opt-in policy/permission-based marketing

An opt-in policy requires a potential customerto self-select theservices they wish to subscribe to, and how any information they

provide may be used. Also referred to aspermission-basedmarketing.

In practise, an opt-in policy involves creating forms where servicessuch as email newsletter subscriptions are unchecked by default.

The benefit of this approach is that a user who has activelyconsidered the offering before signing-up, is a more qualifiedpotential customer.

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opt-out policy

An opt-out policy is where an existing customerreceives electroniccommunicationsusually on the basis of a prior relationship

without providing express permission.

The European Union Privacy and Electronics CommunicationDirective (introduced in 2003), makes provision for electroniccommunications (both email and text/SMS) to be initiated with

existing customers on the conditions that: the communication relates to products or services similar to

those originally provided, and

the customer is provided with a means of opting-out of furthercommunication.

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Privacy and Electronic Communications

(EC Directive) Regulations 2003

Opt-in: consent to receive marketing emails Opt-out: ask not to receive marketing emails

All e-mail marketing messages regardless of recipient: sender must not conceal their identity

sender must provide a valid address for opt-out requests.

For unsolicited e-mail marketing messages to individuals: Can only send if:-1. Recipients email address collected during a sale or negotiations for a sale

2. Sender only sends promotions relating to similar products and services3. When details collected, recipient given option to opt-out which not taken

OR1. Receiver has given prior consent

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To engage a customer in an online relationship

A customer profile is needed showing a minimum of how to contact customer, their product interests their demographics.

On subsequent visits customer can be identified as havingvisited before. Can be achieved by a) asking customer to logon (register) to the site or b) using cookies.

NB records may need compliance with Data Protection law asking customer to register too early can be detrimental. EU is taking a negative view of the use of cookies.

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Cookies

A data (text) file that is placed on a usershard drive by a Web server, frequentlywithout disclosure or the users consent,

that collects information about the usersactivities at a site

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Each file is a text file, there is usually one file for each Web site youhave visited - the server of the website has placed cookies on yourmachine.

For example, a Web site might generate a unique ID number foreach visitor and store the ID number on each user's machine usinga cookie file.

You can see all of the cookies that are stored on your machine. Themost common place for them to reside could be in the c drive.

You can see which Web site placed the file on your machine by

looking at the file name (the information is also stored inside thefile).

Cookies

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Benefits of CRM

Provides:

choices of products and services

fast problem resolution and response

easy and quick access to information

Limitations of CRM

Requires integration with a companys other

information systems which is costly

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CRM implementation issues

Steps in building EC strategy focused oncustomer:

1. focus on the end customer2. systems and business processes that are

designed for ease of use and from the endcustomers point of view

3. efforts to foster customer loyalty

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Five factors required to implement aCRM program effectively:

1. Customer-centric strategy

2. Commitments from people

3. Improved or redesigned processes

4. Software technology

5. Infrastructure

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Web-related metrics a company uses to determine

the appropriate level of customer support:

Response time

Site availability

Download time

Timeliness

Security and privacy

On-time order fulfillment

Return policy

Navigability

Ri h D i L

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Ritchey Design Learnsabout Customers

The Problem Ritchey Design, Inc. is a relatively small

designer and manufacturer of mountain bike

components Sells its products to distributors and/orretailers, who then sell them to individualconsumers

Its 2005 Web site was more a status symbolthan a business tool

http://www.ritcheylogic.com/

Rit h D i L
http://www.ritcheylogic.com/http://www.ritcheylogic.com/http://www.ritcheylogic.com/

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Ritchey Design Learnsabout Customers (cont.)

Visitors could get information where Ritcheyproducts were sold

It did not give customers all the information

they wanted It did not enable the company to gain insight

into its customers wants and needs

Rit h D i L

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The Solution In late 2005, Ritchey reworked the Web site

so that the company could hear from its

customers directly set up customer surveys on the site offered visitors who answer the surveys a chance

to win free Ritchey products

visitors enter their names and addresses and thenanswer questions about the companys products

Rit h D i L

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Web Trader software automatically organisesand saves the answers in a database and isused to help make marketing and advertising

decisions Questions are changed to learn customers

opinions about any new products Ritcheydevelops

Saves $100,000 on product development peryear

Rit h D i L

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An online catalog educates retailers andconsumers about the technologicaladvantages of Ritcheys high-end

components over competitors parts Visitors browse the product catalog that

includes detailed descriptions and graphics ofRitcheys products

Rit h D i L

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The Results ritcheylogic.com sells only team items such as

t-shirts, bags, water bottles, and other gear

directly to individuals online The company does not sell bike parts toindividuals directly online because it wants tomaintain its existing distribution system

Dealers can place orders on the site

http://www.ritcheylogic.com/

Rit h D i L
http://www.ritcheylogic.com/http://www.ritcheylogic.com/

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The site is basically used in B2C EC only forthe basic activities in Internet marketing:

communicating with customers

conducting market research delivering advertising

Rit h D i L

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What we can learn

Illustrates the benefits a company can derivefrom changing its Web site from a passive

one to one with interactivity Interactive Web site allows the company to: learn more about its customers

educate customers

use the site for customer service

Lec 1.6 CRM[1]

Documents

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