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

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