2. Learning Objectives
Customer Relationship Management in Retailing
Reasons for Adopting CRM
Components and Goals of CRM
Principles of CRM
Customer Relationship Management Process
Relationship Based CRM
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It is:
The approach of businesses to build
And maintain one-to-one life-long relationship
with their large number of customers
According to Parvatiyar and Seth (2001), "CRM is a comprehensive strategy and process of
acquiring, retaining, and partnering with selective customers to create superior value for the
company and the customer.“
According to Greenleaf and Winer (2002), "Customer Relationship Management is a
business strategy to select and manage customers to optimize long-term value.
Customer Relationship Management
4. By Pareto’s Principle, it is assumed that 20% of a company's customers generate 80% of its
profits.
In industrial sales, it takes an average of 8 to 10 physical calls in person to sell to a new
customer, 2 to 3 calls to sell to an existing customer.
It is 5 to 10 times more expensive to acquire a new customer than obtain repeat business from
an existing customer.
A typical dissatisfied customer tells 8 to 10 people about his or her experience.
A 5% increase in retaining existing customers translates into 25% or more increase in
profitability.
Statistics describing need of CRM
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Customer: A customer is the entity that
receives of consumes products (goods /
services) and has the ability to choose
between different products / services
Components of CRM
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Relationship
Two communication process between a company and its customers
Can be:
Short-term or long-term
Continuous or discrete
Repeat or one-time
Management
The customer information collected is analyzed by the corporate team
And such activities are developed
That take advantage of the information and of market opportunities available
Components of CRM
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Cost Goals of CRM
Reduce Sales
& Distribution
Costs
Reduce
Customer
Support Costs
Increase
Revenue
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CUSTOMER RETENTION STRATEGIES / PRINCIPLES
OF CRM
Know your Target
Group
Principle of
Personalization
Acquire and retain
customer loyalty
Delivers high quality
goods and services
Offers excellent
service
Reward the loyal
customers
Frequent change of
displayed goods
Understand the
‘Customer First,
Profit Next’ concept
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CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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1) COLLECTING CUSTOMER DATA
Collect various relevant details for the customer such as:
a) Personal details of the customer
Name, contact number and address, Geography, age, gender, or the tastes, etc.
b) Past Purchase pattern
Frequency of buying a particular product
c) Mode of Buying
Personal visit/ telephone/ website, etc.
d) Response to a marketing / sales promotion campaign
How a customer responds to a certain type of sales promotion campaign
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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IDENTIFYING CUSTOMER INFORMATION
When the customer’s information is not received automatically, the retailer uses
the following:
a) Ask for the information personally from the customer
b) Offering a frequent Shopping Card / Gift vouchers
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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IDENTIFYING CUSTOMER INFORMATION
Privacy of the Information
The customer should be notified their personal information is collected and
will be used for specific purposes.
The customer should be able to decline to be tracked.
The customer should be allowed to access their information and correct it.
Customer data should be protected from unauthorized usage.
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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2) ANALYZING CUSTOMER DATA AND IDENTIFYING
TARGET CUSTOMERS
Two techniques used for this analysis are as follows:
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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2) ANALYZING CUSTOMER DATA AND IDENTIFYING
TARGET CUSTOMERS...
Data Mining:
Technique that results in discovery of relationship in already existing data sets.
Determines such patterns in data which the analyst is not aware of prior to searching
the data.
Market Basket Analysis:
Data analysis technique which focus on composition of the bundle of products
purchased by a household during one shopping session.
Helps the retailer to identify which all products can be kept in one section
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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IDENTIFYING TARGET CUSTOMERS...
This identification is done using the following
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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IDENTIFYING TARGET CUSTOMERS...
Lifetime Value (LTV)
The measure of the profits which a customer would give to the retailer over his entire
lifetime relationship with the retailer.
Customer Pyramis
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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IDENTIFYING TARGET CUSTOMERS...
RFM Analysis
This method segments the customers on the basis of:
How recently have they made the purchase
How frequently they purchase the products
The value of their purchase in monetary terms
This is the typical way of analyzing the customers in LTV terms.
The customers here are classified into three categories:
First Time customers
Early repeat customers
High value customers
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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3) DEVELOPING CRM PROGRAMS
The retailer has to formulate such strategies that:
The high LTV (best) customers are retained and carried along with
The medium LTV customers are encouraged to be brought to the level of
high LTV
The low LTV customers are to be kept away in order to avoid the
unnecessary profits
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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4) IMPLEMENTING CRM PROGRAMS
Step 1: Process Data Analysis
Step 2: CRM Process Pre Planning
Step 3: Customization of the existing system as per CRM
Step 4: Prototype Testing
Step 5: Quality Assurance Testing
Step 6: Final Implementation
Step 7: Continuous Support
CUSTOMER RELATIONSHIP MANAGEMENT
PROCESS
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Essentials to be considered:
The customer base
Level of customer service
Customer satisfaction
Customer loyalty
RELATIONSHIP BASED CRM
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a) The customer base:
Consider which target segment the retailer is serving
Analyze how that group is evolving over time
Focus both on:
Existing
New customers
in order to sustain the business
RELATIONSHIP BASED CRM
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b) Level of customer service:
Better customer service can:
Beat the competitors
Builds brand loyalty
Generates less complaints and builds satisfied customers
Customers get value for their money
Customer’s offer suggestions to improve the store service level (if any)
Reducing expenses on Advertisements
Drives profits and improves financial performance
Enhances word of mouth advertising
RELATIONSHIP BASED CRM
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c) Customer satisfaction:
Main success factor of any retail business
Customer if lost, also spread negative worth of mouth among others
Customer of becomes loyal, brings huge business for the retailer.
d) Customer Loyalty:
To reward the best customers in terms of their loyalty
Develops long term relationship with the retailer.
RELATIONSHIP BASED CRM
