2. 7.2.1 Organize the CRM Process
Objectives Of The CRM Process
● Develop loyalty and repeat purchase behavior among a retailer’s best
customers.
Customer loyalty
● Committed to purchasing from the retailer
● Resists competitors
● Emotional connection
● Personal attention and customer service best ways to develop loyalty
3. Overview of the CRM
Process
Developing CRM
programs
Collecting customer
data
Implementing CRM
programs
Analyzing customer
data and identifying
target customers
2 3 4
1
4. a. Collecting Customer Data
Customer
Contacts
Customer
Preference
Transactions
Descriptive
Information
2 3 4
1
5. ● However identifying most customers who are making an in-store transaction is more difficult
because they often pay for the merchandise with cash, a third-party credit card, or their mobile
wallets.
● To overcome this problem, store retailers can use these four approaches:
I. Ask for Identifying Information
II. Connect Internet and Store Purchasing Data
III. Offer Frequent-Shopper Programs /Loyalty program
IV. Place RFID Chips on Merchandise
6. Identifying the Best Customers
• Customer lifetime value (CLV)
• The expected contribution from the customer
to the retailer’s profits over their entire
relationship with the retailer
• Past behaviors used to predict CLV
b. Analyzing Customer Data
and Identifying Target
Customers
7. Retail Analytics – to measure each customer’s CLV
● Is an application of statistical techniques and models to improve retail decisions
Data mining – an information processing method that relies on search techniques to discover
new insights into the buying patterns of customers, using a large database. Three of the most
popular applications of data mining are
I. Market Basket Analysis
II. Targeting promotions
III. Assortment Planning
● Market Basket Analysis
Market basket analysis is a data mining tool that determines which products appear in the
market basket that a customer purchases during a single shopping trip. It is used to suggest
merchandise that should be placed and promoted together.
8. Targeting Promotions
Market basket analysis help provide insights into
assortment decisions and promotions. E.g retailers
might discover that customers typically buy a specific
brand of conditioner and shampoo at the same time ( in
the same market basket). With this info, the retailer
might offer a special promotion on the conditioner,
anticipating the customers will also buy the (higher
margin) shampoo at its full price.
Assortment Planning
Managers have to make decisions about what
merchandise to carry in each category. Customer data
also can be mined to help with this assortment decision.
By analyzing which products the retailer’s most valued
customers purchase, the manager can ensure that they
are available in the store at all times.
9. c. Developing CRM Through Frequent-Shopper Programs
● Frequent shopper or loyalty programs are marketing efforts that reward repeat buying behavior.
● Two objectives of this program are:
I. Build a data warehouse that links customer’s data to their transactions
II. Encourage repeat purchase behavior and loyalty.
● Effectiveness of Frequent-Shopper Programs
i. Not useful for building long-term customer loyalty because the perceived value of these
programs by customers is low because customers perceive little difference among the programs
offered by competing retailers. E.g offer price discounts
ii. Easily adapted by competitors. Competitive advantages based on loyalty programs are rarely
sustainable. The programs are very visible.
iii. Difficult to revise or correct – customers don’t like change, and retailers have to inform
customers about even the smallest changes.
10. Making frequent-shopper
programs more effective :
• Offer tiered rewards
- Cascading tier levels such as silver, gold,
platinum
- The higher the tier, the better the reward
• Treat high CLVs as VIPs
- Treat CLV customers to feel really special
• Incorporate charitable contributions
- Programs linked to charitable causes
11. • Offer choices
Not all customers value the same
rewards, so retailers have to provide
choices
• Reward all transactions
To ensure that retailers collect all
customer transaction data and encourage
repeat purchases
• Make the program transparent and
simple
Easy for customers to keep track of their
spending and available rewards
12. d. Implementing CRM Programs
Customer Pyramid
● 80-20 rule: a small number of
customers account for the
majority of profits
● The customer pyramid divides
into four segments
- Allows retailers to develop
more effective strategies
● Platinum segment
- Top 25 percent CLVs
● Gold segment
- Patronize some of the
competitors
● Iron segment
- Spending levels are not
substantial enough
● Lead segment
- Lowest CLVs
- Demand attention, don’t buy
much
13. ● Personalization
- 1-to-1 retailing
- Involve the best customers in business decisions
● Community
Retail brand community – a group of customers who are bound
together by the loyalty to a retailer and the activities the retailer
sponsors and undertakes
Customer Retention
– 2 approaches
14. ● Add-on selling
- Offer and sell more products to existing customers
- Data warehouse can pinpoint opportunities
- Amazon.com recommends other products
Customer Conversion: Making Good Customers into Best Customers
15. ● Catalog retailers pay more on
returned items
● Some companies flag unreasonable
return patterns
● Ways to “get the lead out”
- Offer less costly services to satisfy the
needs of lead customers
- Charge customers for services they
are abusing
Dealing with Unprofitable Customers
16. CREDITS: This presentation template was created
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THANKS!
