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  1. 1. Retail CRM (Consumer Relationship Management) Retailing MKTG 3346 Professor Edward Fox Cox School of Business/SMU
  2. 2. Customer Relationship Management <ul><li>Recognizes that the customer, rather than individual purchases or contracts, is the source of value to the firm </li></ul><ul><ul><li>Focuses on customer acquisition and retention </li></ul></ul><ul><ul><li>Highlights repeat purchase and loyalty over time as key goals </li></ul></ul><ul><ul><li>Recognizes the importance of customer satisfaction </li></ul></ul><ul><ul><li>Requires customer data to forecast their response to potential offerings and manage customers over time </li></ul></ul>
  3. 3. Customer Relationship Management <ul><li>Relating with few customers </li></ul><ul><ul><li>Emphasizes sales force </li></ul></ul><ul><ul><li>Usually B-to-B </li></ul></ul><ul><li>Relating with many customers </li></ul><ul><ul><li>Emphasis is on purchase history </li></ul></ul><ul><ul><li>Often, though not always B-to-C </li></ul></ul><ul><li>With retail consumers (i.e., many customers)… </li></ul><ul><li>The retailer must be able to customize the product or price or service offering </li></ul><ul><li>The retailer must be able to address consumers individually </li></ul>
  4. 4. Customer Relationship Management OBJECTIVES <ul><li>Create loyal purchase behavior </li></ul><ul><li>Customize product and price offerings to target customers </li></ul><ul><li>Increase customer lifetime value </li></ul>Mass Marketing Micro-Marketing Consumer Targeting Continuum Segment Marketing Niche Marketing
  5. 5. Customer Relationship Management ORGANIZATIONAL REQUIREMENTS <ul><li>Performance measures </li></ul><ul><li>Internal incentives </li></ul><ul><li>Customer information / data architecture </li></ul>
  6. 6. Customer Relationship Management PROGRAMS <ul><li>Card programs </li></ul><ul><ul><li>Discount </li></ul></ul><ul><ul><li>Credit </li></ul></ul><ul><ul><li>Membership </li></ul></ul><ul><li>Specific examples </li></ul><ul><ul><li>Catalina coupons catalina marketing </li></ul></ul><ul><ul><li>Collaborative filtering (recommenders) amazon.com </li></ul></ul><ul><ul><li>Virtual model landsend .com </li></ul></ul>How can the retailer reward loyalty rather than purchase volume?
  7. 7. Customer Relationship Management LOYALTY PROGRAMS <ul><li>Loyalty programs are set up to reward customers with incentives such as discounts on purchases, free food, gifts, or even cruises or trips in return for their repeated business. </li></ul><ul><li>Retailers use them for three reasons: </li></ul><ul><ul><li>to retain loyal customers </li></ul></ul><ul><ul><li>to increase loyalty of non-loyal customers </li></ul></ul><ul><ul><li>to collect information about them and what they buy </li></ul></ul><ul><li>Loyal customers are the source of most profits </li></ul><ul><li>Less price sensitive </li></ul><ul><li>More purchases per customer – higher share-of-requirements </li></ul>
  8. 8. Customer Relationship Management RETAIL CUSTOMER DATA <ul><li>Customer Relationship Management (CRM) is enabled by the gathering and warehousing of consumer data </li></ul><ul><li>Retailers gather customer data from: </li></ul><ul><ul><li>Frequent shopper or shopper loyalty cards </li></ul></ul><ul><ul><li>Store credit cards </li></ul></ul><ul><ul><li>Identifiable tender </li></ul></ul>
  9. 9. Customer Relationship Management RETAIL CUSTOMER DATA <ul><li>Retail customer databases are organized collections of data about individual consumers including: </li></ul><ul><ul><li>Geographic </li></ul></ul><ul><ul><li>Demographic </li></ul></ul><ul><ul><li>Behavioral data </li></ul></ul><ul><ul><ul><li>Purchase histories </li></ul></ul></ul><ul><ul><ul><li>Appended behaviors </li></ul></ul></ul>Databases may enable retailers to gain a competitive advantage Adapted from Prentice Hall
  10. 10. Customer Relationship Management RETAIL CUSTOMER DATA <ul><li>Most leading retailers use card programs </li></ul><ul><ul><li>89% of retail “leaders” in the practice of CRM use card programs (Progressive Grocer, 2001) </li></ul></ul><ul><li>However, retailers are not using the resulting data effectively </li></ul><ul><ul><li>“ The retailers have collected all of this frequent shopper data, but few, if any, attempts have been made to mine the opportunities that it probably presents.” (Shulman 2003) </li></ul></ul><ul><li>Issues </li></ul><ul><li>How can retailers better exploit consumer data? </li></ul><ul><li>How can it be used for targeted marketing offers? </li></ul>
  11. 11. Customer Relationship Management DATA WAREHOUSING <ul><li>Data warehousing is the coordinated and periodic copying of data from various sources, both inside and outside the enterprise, into an environment ready for analytical and informational processing </li></ul><ul><li>Wal-Mart makes good use of its data warehouse. It should. Experts estimate that it is second in size to that of the U.S. government </li></ul>
  12. 12. Customer Relationship Management DATA MINING <ul><li>Data mining is the process by which insights are derived from vast amounts of data, such as that contained in a data warehouse. </li></ul><ul><li>Statistical algorithms are applied to customer data to identify merchandise buying patterns and relationships. </li></ul>
  13. 13. Customer Relationship Management MARKET BASKET ANALYSIS <ul><li>A market-basket analysis is uses data mining techniques to determine what predominant categories individual consumers are buying. </li></ul><ul><li>Based on these analyses, Wal-Mart has changed the traditional locations of several items: </li></ul><ul><ul><li>Since bananas are the most common item in America’s grocery carts, they sell bananas next to corn flakes (to help sell more cereal) as well as in the produce section. </li></ul></ul><ul><ul><li>Kleenex tissues are in the paper-goods aisle and also positioned among the cough and cold medicines. </li></ul></ul><ul><ul><li>Measuring spoons are in housewares and also hanging next to Crisco shortening. </li></ul></ul>
  14. 14. RETAIL CRM ISSUES <ul><li>How does the retailer respect the shopper’s privacy while gathering information to respond more effectively to that customer? </li></ul><ul><li>What does the retail shopper get out of CRM? Why should (s)he give is the retailer information about (her-)himself? </li></ul><ul><li>Should the retailer offer different levels of price or service? What is the advantage of uniformly high prices or customer service? </li></ul><ul><li>What is the appropriate level of customization? How much does the retailer gain by individual, rather than store-specific offers? At what cost? </li></ul>