2. Questions
What is customer relationship management?
Why do retailers want to treat customers differently?
How do retailers determine who their best customers are?
How can retailers build customer loyalty?
What can retailers do to increase their share of wallet?
What can retailers do to alleviate the privacy concerns of their customers?
3. Customer Relationship Management
(CRM)
A business philosophy and set of strategies,
programs, and systems that focus on identifying
and building loyalty with a retailer’s most
valuable customers.
4. CRM
All customers are not equally profitable, and more or less
profitable customers need to be treated differently
Retailers now concentrate on providing more value to
their best customers using targeted promotions and
services to increase their share of wallet – the percentage
of the customers’ purchases made from the retailer
5. Customer Loyalty
Committed to purchasing merchandise and services from a retailer
Resist efforts of competitors to attract the loyal customer
Emotional attachment to retailer
Personal attention
Memorable positive experiences
Brand building communications programs
6. Can Offering Price Discounts Achieve
Customer Loyalty?
No!Retail strategies like these can be copied by competitors
These strategies encourage customers to be always looking
for the best deal rather than developing a relationship with
a retailer
7. The CRM Process
CRM is an iterative process that turns customer data into
customer loyalty through four activities:
1. Collecting customer data
2. Analyzing the customer data and identifying target
customers
3. Developing CRM programs
4. Implementing CRM programs
9. Collecting Customer Data:
Customer Database
Transactions – a complete history of purchases
Purchase date, price paid, SKUs bought, whether or not the purchase was
stimulated by a promotion
Customer contacts by retailer (touch points) --visits to web site, inquires
to call center, direct mail sent to customer
Customer preferences
Descriptive information about customer
Demographic and psychographic data
Customer’s responses to marketing activities
10. Collecting Customer Data: Identifying Information
Approaches that store-based retailers use:
Asking for identifying information
Telephone number, name and address
Offering frequent shopper cards
Loyalty programs that identify and provide rewards to customers
who patronize a retailer
Private label credit card (that has the store’s name on it)
Connecting Internet purchasing data with the stores
11. Privacy Concerns
Control over Collection
Do customers know what information is being collected
Do customers feel they can decide upon the amount and type of information
collected by retailers
Control over Use
Do customers know how the information will be used by the retailer
Will the retailer share the information with third parties
12. Heighten Privacy Concerns When Using
Electronic Channel
Information collected without the awareness of customers
Collecting click stream data using cookies
Similar to an invisible person videotaping a customer as they walk through a
store
13. Customer’s Decision to Offer Information
Balance benefits and risksDiscounts
Special Treatment
Personal Attention
Disclosure of Information
Unwanted Sales Contacts
14. Protecting Customer Privacy:
Differences between U.S. and EU
Limited protection in
specific areas
Credit reporting
Video rentals
Banking
Medical records
Opt out: Consumers must
explicitly tell retailers not to
use their personal
information
Limited protection in
specific areas
Credit reporting
Video rentals
Banking
Medical records
Opt out: Consumers must
explicitly tell retailers not to
use their personal
information
■ Stringent consumer privacy laws
■ Information only can be collected for
specific purposes
■ Purpose must be disclosed to
customer
■ Information can only be used for
specific purpose
■ Information cannot be exported to
countries with less stringent
regulations
■ Opt in: Consumers own their personal
information, and retailers must get
consumers to explicitly agree to share
this personal information
United States European Union
15. FTC Guideline for Fair Information
Practices
Notice and awareness
comprehensive statement about information
storage, manipulation, and dissemination
Choice/consent
Opt-in and opt-out options
Access/participation
Customer able to confirm accuracy
Integrity/security
Controls for theft and tampering
Enforcement/redress
Mechanism to insure compliance
17. Analyzing Customer Data
and Identifying Target Customers
Analyze the customer database and convert
the data into information that will help
retailers develop programs for building
customer loyalty
Data Mining – technique used to identify
patterns in data
Market Basket Analysis
Identifying Market Segments
Identifying Best Customers
18. Market Basket Analysis
Data analysis focusing upon the
composition of the customer’s market
basket – what items are bought during
a single shopping occasion
Uses:
Adjacencies for displaying
merchandise
Joint promotions
Bananas in the cereal aisle as well as in the
produce section
Beer with baby dippers
Tissues with cold medicine
19. Market Basket Analysis Taught
Wal-Mart to Change!
Product Placed Near
Bananas cornflakes, produce
Kleenex paper goods, cold medicine
Measuring spoons housewares, Crisco shortening
Flashlights hardware, Halloween costumes
Little Debbie snack cakes coffee
Bug spray hunting gear
20. Identifying Best Customers
Estimating Lifetime Value (LTV)
The expected contribution from the customer
to the retailer’s profits over his or her entire
relationship with the retailer
Use past behaviors to forecast future
purchases, the gross margin from these
purchases, and the costs associated with
serving the customers
Classifying Customers by recency,
frequency, and monetary value of
purchases (RFM Analysis)
21. Which Customer Probably Has
the Greatest Lifetime Value
Purchases Over Last 10 Weeks
1 2 3 4 5 6 7 8 9 10
Jack $20 $20 $20 $20 $20 $20 $20 $20 $20 $20
Jill $210 $0 $0 $0 $0 $0 $0 $0 $0 $0
26. RFM Analysis
Used by catalog retailers and direct marketers
Recency: how recently customers have made a
purchase
Frequency: how frequently they make purchases
Monetary: how much they have bought
28. Illustration of RFM Application
A catalog retailer is deciding which group of customers to send a catalog. Based
on experience and an RFM analysis of customer database:
Average order size for customers in cell - $40
Contribution margin – 50%
Response rate – 5%
Cost of catalog and mailing -$.75
Will the retailer make a profit mailing to this RFM segment?
29. Illustration of RFM Application
A catalog retailer is deciding which group of customers to send a catalog. Based
on experience and an RFM analysis of customer database:
Average order size for customers in cell - $40
Contribution margin – 50%
Response rate – 5%
Cost of catalog and mailing -$.75
Will the retailer make a profit mailing to this RFM segment?
$20.00 contribution x .05 response rate - $.75 cost
= $.25 profit per catalog mailed
30. Developing CRM Programs
Retaining Best
Customers
Converting Good
Customers into
Best Customers
Getting Rid of
Unprofitable
Customers
31. Customer Retention
Frequent Shopper Programs
Special Customer Services
Personalization
1-to1 Retailing
Community
32. Elements in Effective
Frequent Shopper Programs
Tiered rewards based on customer value
Offer choices of rewards
No all customers value the same rewards
Non-monetary incentives, altruistic rewards
Reward all transactions to ensure the collection of all customer transaction
data and encourage repeat purchases
Transparent and simple so that customers easily understand when they will
receive rewards
33. Issues with Effective
Frequent Shopper Programs
Expense
Difficulty in Making Changes
Impact on Loyalty
Questionable
Easily Duplicated – Difficult
to Gain Competitive
Advantage
Need to offer “invisible”
benefits
35. Converting Good Customers
into Best Customers
Customer alchemy: converting iron
and gold customers into platinum
customers
Add-on selling as a way to achieve
customer alchemy
Involves offering and selling more products
and services to existing customers and
increasing the retailer’s share of wallet with
these customers
The Oprah Winfrey Show to sell books,
movies, and TV specials (Harpo
Productions), a cable channel (Oxygen
Media), a Web site (www.oprah.com),
magazine (O)
Shopping Buddy
44. Problems Faced
Personal Contact Numbers
Policy Less Followed in Small Towns
Common Policy for Reliance Fresh & Mart
Delay in Processing Membership Cards
Long Ques @ Billing Counters
45. Measures Taken
No.Of Billing Counters Increased
Adoption of New Technology
Store(Brand) Specific Strategies
Inform Through SMS
Timings to Call
47. 1. Create A Channel For The Perfect
Customer Experience
Rather than leave its primary customer interaction to random employees of
big box stores, Apple took the risky and expensive step of creating its own
chain of retail stores. By creating the Apple store – a store devoted to selling
Apple’s own products – Apple created an environment that allowed them to
manage every detail of the customer experience and dictate the customer’s
interaction with Apple as a brand.
48. 2. Design An Environment For Customers
To “Hang Out”
Not only did Apple’s retail gambit help them build the most valuable brand in
the world, the Apple stores themselves are the most profitable retail spaces in
the world, generating an average of $5,600 per square foot of retail space.
49. 3. Minimize Customer Service Problems
With Tight Quality Control
If you’re going to be one of the world leaders in customer satisfaction, your customer service
has to grow from the very core of your company’s business model. No matter how well trained
your technical support staff, how friendly your retail staff, no matter how carefully you’ve
selected your customer management outsourcing partners, a company that produces shoddy
products will have problems with customer loyalty and retention.
50. 4. View Customer Management as a Long
Term Investment
While tech companies traditionally viewed customer management as an expense to be ruthlessly
minimized, Apple viewed it as a long term investment in customer loyalty and brand building. Apple
has made important customer-oriented decisions such as refusing to move the heart of its North
American phone support offshore, and maintaining a hassle-free approach to replacing broken
devices. Studies have shown that these decisions have been directly responsible for Apple
consistently placing number one in customer service satisfaction studies. These policy decisions all
stem from viewing customer management as a long term investment towards building customer
loyalty and improving retention
51. 4. Have A Laser Targeted Business Focus
Despite being the richest technology company in the world, Apple only makes a
handful of products. In fact, nearly every customer waiting outside an Apple store
on the eve of a product launch could likely recite Apple’s entire product line by
heart. This is no accident. Steve Jobs understood that the key to great customer
management is to be able to answer the question, “What is our business?”.
Perhaps more importantly, Jobs understood that this question had to be asked
from the perspective of the customer.
Despite the incredible profitability of Apple stores, the majority of customers that enter an Apple store don’t actually make any purchases. Instead, teenagers, young professionals, and middle aged parents all congregate to the Apple store to hang out and play around with Apple’s cool new products. Rather than have their staff pressure customers into sales, customers are greeted by smiling, knowledgeable, passionate employees who encourage customers to experience the product. Apple managed to turn shopping for computers and phones into an enjoyable customer experience.
While high quality standards are a must for any major consumer electronics company, Apple has taken quality control to a new level. Apple is well known for exercising tight control over every aspect of their business, from the famous veil of secrecy that shrouds upcoming products, to their notorious control over the iOS. This has allowed Apple an unprecedented level of control over the user experience and allowed them to stand in a class of its own when it comes to customer satisfaction.
Apple has taken unprecedented steps to ensure that the user experience for their smart phones and tablets are strictly controlled at a scale never before seen in mainstream operating systems. In their App store, Apple vets every piece of software before it can be installed onto an iOS device. Apple was even willing to neglect support for Flash – a piece of multimedia software required to view more than 75% of all video on the web – in their iOS software. Despite initial user uproar, Apple was willing to make this decision for the sake of maintaining a quality environment for users of their iPhone and iPad products. This unprecedented level of quality control has contributed significantly to the famous user-friendliness of Apple’s products, and ensures that Apple’s support staff and customer management outsourcing partners are rarely flooded with support requests
Steve Jobs understood that Apple was delivering more than just computers, phones and portable music players, Apple was delivering cool, elegant, reliable products that stood out from the crowd, and thus allowed its users to stand out from the crowd. By focusing only on delivering this experience to customers, Apple was able to build incredible – nearly fanatical – customer loyalty and user satisfaction.
Whether you’re working with an in house customer management team or a customer management outsourcing partner, it’s crucial that everyone from senior managers to customer facing personnel can answer the question: “What is our business to our customer?”. Knowing the answer to this question is the key to developing a customer management strategy that stands apart from the rest.