The document discusses key concepts in customer relationship management (CRM) including acquiring, retaining, and selling more to customers. It emphasizes the importance of customer retention over acquisition, noting that retaining customers costs less and increases spending and loyalty over time. The document also covers customer segmentation, differentiation, interaction, and customization as important aspects of CRM strategy and implementation.

1. Workshop : CUSTOMER RELATIONSHIP MANAGEMENT

2. CONCEPT AND THINKING BEHIND CRM

3. THERE ARE ONLY 3 MARKETING FUNCTIONS Acquiring customers Retaining or reactivating them Selling them more products Everything else is a modification of one of these three functions Increasing the value of customer base :

4. DISCUSS Identify the percentage of your company’s current and future effort to grow :

5. PROFIT IMPACT OF 5% INCREASE IN RETENTION RATE

6. A LOYAL CUSTOMER IS ONE WHO … 1. Shows Behavioral Commitment : ~ Buys from only one supplier, even though other options exist ~ Increasingly buys more and more from a particular supplier ~ Provides constructive feedback/suggestions 2. Exhibits Psychological Commitment : ~ Wouldn’t consider terminating the relationship ~ Has a positive attitude about the provider ~ Says good things about the provider

7. CUSTOMER RETENTION (LOYALTY) PAYS OFF Retaining old customer costs less money Customers spend more, increased “share of wallet” They get comfortable dealing with us They spread positive word of mouth They cost less to serve They are less price sensitive They are more forgiving when something goes wrong They make our marketing program more efficient

8. MARKET SHARE VS. SHARE OF CUSTOMER

9. SATISFACTION VS. LOYALTY Satisfied Customers Loyal Customers Churn/Defector Customers SATISFIED NOT SATISFIED Reason : Variety seeking behavior Low attachment Low exit barrier Alternative access Competitors create churn event

10. CRM REVOLUTION/EVOLUTION IN INDONESIA Priority customer in banking industry Increased call – center Frequent flier programs Community / clubbing development Point reward offering Membership program Increased below the line activities

11. LOYALTY IN THE CRM PROCESS Transaction Product Relation Share of Wallet Dialog Share of Life Customer Acquisition (1) Customer Retention (2) Customer Relationship (3)

12. QUOTES FOR CRM CRM is not a software package . It is not a database . It is not a call center . It is not a loyalty program , a customer service program. CRM is a philosophy in its entirety . CRM is more than just an out growth of direct marketing and the event of new technology. The objective of CRM is to focus more on customer retention and growth faster than pursue all types of customers at great expense only to lose them.

13. CRM DEFINITION, ITS FACTS & OTHER LABELS Customer Relationship Management is an enterprise strategy in understanding and influencing customer behavior through meaningful communication in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability . CRM facts : CRM is easy for small companies CRM is not easy for large companies CRM is a process not a project CRM & other labels : One–to–one relationship management Customer intimacy Integrated Marketing Communication (IMC)

14. EVOLUTION OF CUSTOMER METRICS CRM Metrics Improve Market & Campaign Metrics Companies Mature into CRM Metrics

15. STRATEGIC AND TACTICAL GOALS OF CRM CRM’s goal is to increase the opportunity by improving the process to communicate with the right customer , providing the right offer (product and price), through the right channel , at the right time . Right Customer : Manage customer relationships throughout their life cycle Realize customer potential by increasing “Share of Wallet” Right Offer : Efficiently introduce customer and prospects to your company and its products and services Customize your offering for each customer Right Channel : Coordinate communications across every customer touch point Ability to communicate to customer’s channel preference Capture and analyze channel information for continuous learning Right Time : Efficiently communicate to customers based on time relevance Ability to communicate with real/near-real time or traditional marketing

16. CRM DIMENSIONS (1)

17. CRM DIMENSIONS (2) Strategic CRM : Customer value Competitive differentiation Market segmentation and targeting Strategic positioning Operational CRM : Customer service Customer data capture Customer database Analytical CRM : Software and hardware for CRM Pareto analysis, profitability analysis, etc Data mining and statistical analysis

18. Steps of Managing CRM : CUSTOMER PROFILING IDENTIFICATION

19. FOUR CRITICAL TASKS FOR CRM Identify customers Differentiate customers Interact with customers Customize treatment Analysis Strategy Implementation Implementation

20. IDENTIFYING CUSTOMER (1) STEP 1 – How Much Customer Identification … Take any inventory of all of the customer data already available in any kind of electronic format Find customer identifying info that is “on file” but not electronically compiled STEP 2 – Get Customers To Identify Themselves … Define : Decide what information will comprise the actual customer’s identity (Is it name and address? Home phone number? Account number?) Collect : Arrange to collect these customer identities Link : Once a customer’s identity is fixed, it must be linked to all transactions and interactions with that customer, at all point of contact, and within all the enterprise’s different operating units and divisions Integrate : The customer’s identity must be integrated into the information system the enterprise uses to run its business Recognize : The customer who returns to a different part of the organization needs to be recognized as the same customer Store : Identifying information about individual customers must be stored and maintained in one or several electronic databases

21. IDENTIFYING CUSTOMER (2) STEP 2 – Get Customers To Identify Themselves … (Cont’d) Update : All customer data is subject to change and must be regularly verified, updated, improved, or revised Analyze : Customer identity must serve as the key inputs for analyzing individual customer difference Make available : The customers data must be made available to people and functions within the enterprise that need access to it Secure : Because individual customer identities are both competitively sensitive and threatening to individual customer privacy, it is critical to secure this information to prevent its unauthorized use

22. THREE TYPES OF DATA

23. Steps of Managing CRM : DIFFERENTIATION & SEGMENTATION

24. THE LOGIC OF SEGMENTATION STRATEGY Not all buyers are a like Sub groups of people with similar behavior, value, and backgrounds may be identified The sub groups will be smaller and more homogeneous than the market as a whole It should be easier to deal with smaller group of similar customers than with large groups of dissimilar customers. Segmentation alternatives : 1. Segmentation by customer needs : ~ Geographic ~ Demographic ~ Psychographic ~ Behavioral 2. Segmentation by economic perspectives : Customer Lifetime Value (CLV)

25. SEGMENTATION ALTERNATIVES (1) CUSTOMER NEEDS Bases for Segmentation of Consumer Markets Geographic : 1. Political boundaries 2. Climatic regions 3. Population boundaries Demographic : 1. Age 2. Sex 3. Race 4. Marital status 3. Family size 4. Family life cycle Socio – economic : 1. Occupation 2. Education 3. Income 4. Social class Psycho – graphic / Lifestyle : 1. Activities 2. Interest 3. Opinion 4. Values Behavior Patterns : 1. Type of store 2. Time of purchase 3. Number of units purchased 4. Shopping frequency 5. Media habit Consumption Patterns : 1.Heavy usage vs light usage 2. Occasion 3. Loyalty to brand 4. Ownership of other product

26. SEGMENTATION ALTERNATIVES (2) Differentiating based on Needs : Customer needs are dynamic Customer needs often correlate with customer value There is not single best way to differentiate customers by their needs Psychological is more important than demographic in determining customer needs. Profitability Measures : Short Term : ~ Profit per transaction ~ Periodical profit per customer Long Term : ~ Customer Lifetime Value (CLV) ~ Proxy – based variables ~ RFM (Recency Frequency Monetary)

27. SEGMENTATION ALTERNATIVES (3) Differentiating based on CLV : CLV is a measure of the net profit that a firm will receive from a given customer during his/her future lifetime as the firm’s customer. As a general rule, the highest customer lifetime value are those : Spend the most each year Use product/service most frequently each month Have lower processing cost Have the lowest rates defection The value of customer : CLV = Customer Lifetime Value m = Margin per customer per period r = Retention rate i = Discount rate

28. Steps of Managing CRM : INTERACTION

29. INTERACTING WITH CUSTOMER

30. A-PLUS INFORMATION Definition : Information is needed by people to get the full benefit of virtually all products or services. The special demands of E-Commerce : A-plus information is more timely, clearer, or more useful than the customer anticipates. How to produce A-plus information? Provide informational hand holding Select informational media carefully Constantly strive for message clarity : ~ Consider an audit of your company’s writing ~ Use repetition

31. Steps of Managing CRM : CUSTOMIZATION

32. CRM BONDING LEVEL 1 The customer is tied to the firm primarily through financial incentives, lower prices for greater volume purchases or lower prices for customers who have been with the company a long time. Examples : Volume and frequency reward Bundling or cross-selling Fair pricing FINANCIAL BOND

33. CRM BONDING LEVEL 2 The customer is bound through long-term relationship. Social bond includes : Continuous relationship Personal relationship Social bonds among customers SOCIAL BOND

34. CRM BONDING LEVEL 3 The customer is tied by providing business solution. Business bond includes : Customization Innovation & anticipation Customer intimacy BUSINESS BOND

35. CRM BONDING LEVEL 4 The customer is tied by providing customized services that are designed right into the service delivery system for that client. In most cases, customized services are technology based and make the customer more productive. Examples are : Integrated information system Shared processed & equipment STRUCTURAL BOND

36. LOYALTY PROGRAM WITH POINT REWARD Customers are not equal Behavior follow reward Response varies with the degree of reward attractiveness Key success factor of point reward : 1. Commitment 2. Differentiation 3. Flexibility 4. Simplicity 5. Appropriateness of reward

37. Steps of Managing CRM : TOOLS & ANALYSIS

38. DATA MINING Known as Knowledge Discovery in Databases (KDD). Receiving increasing attention in the business, has been growing more than 20% every year over the last five years. Definition : Data mining is a process of extracting & presenting actionable, implicit, and novel information from data to solve a business problem. Process : is not just a technique, but a series of interrelated steps Extracting : some effort in finding information that may be hidden and can also be used to confirm known or suspected information Presenting : outputting the discovered information in forms such as reports, models, or rules Actionable : information is of the form that decisions and actions can be taken Implicit : information can be discovered using various data mining techniques Novel : information will be new and useful Information is distinct from data in that it embodies knowledge of a pattern that give meaning to the data. (R. SWIFT)

39. THE ROLE OF DATA MINING Convert data into information and knowledge, such that the right decisions can be made. Provide the mechanisms to deploy knowledge into operational systems, such that the right actions occur. Data Information Knowledge Decisions & Actions

40. TECHNOLOGY AND TOOL Campaign Management Software Customer Service & Support Solution Contact Center Management Reporting & Analytical Tool

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