Customer Relationship MANAGING BUSINESS RELATIONSHIPS WEEK 7, LECTURE 1.

Transcription

1 Customer Relationship Management MANAGING BUSINESS RELATIONSHIPS WEEK 7, LECTURE 1.

2 Lecture Overview CRM and relationship marketing Definition of CRM Benefits of CRM Role of CRM Direct marketing

3 CRM and Relationship Marketing In the academic community, the terms relationship marketing and CRM are often used interchangeably (Parvatiyar and Sheth 2001). However, CRM is more commonly used in the context of technology solutions and has been described as information- enabled relationship marketing (Ryals and Payne 2001, p. 3 Payne and Frow (2005, P.167) G i h h i l l f Going to concentrate on the technical elements of CRM in the second half of the lecture

4 Benefits of CRM Acquiring new a customer can cost 5 times more than retaining a customer (Kotler & Keller, 2006) Churn in some industries i very high h e.g., 40% per year in mobile phone industry (Benjamin, 2008), UK average is 22% (The Knowledge: Stat watch, 2008) A 5% decrease in churn can cause profits to increase by 25 85% depending on industry sector (Kotler & Keller, 2006) As relationship progresses, customers become more profitable (Kotler & Keller, 2006) Can aid cross selling (Tapp, 2005)

5 Defining CRM Defining i CRM is problematic, there is no one accepted definition Big differences between definitions are The association with technology The timescale of the use of CRM The objectives set for the CRM programme Definitions impact on how CRM is applied or what is expected of it Payne and Frow (2005)

6 CRM Continuum Payne and Frow (2005) identified d a continuum of definitions from tactical, technological definitions to more strategic, organisational definitions Payne and Frow (2005)

7 Perspective 1: Tactical CRM Definitions Some definitions iti cited by Payne and Frow (2005) CRM is an e-commerce application (Khanna, 2001) I.e., only concerned with sales CRM is data driven marketing (Kutner and Cripps, 1997) Concentration on the use of data Concerned either with a short term objective or one narrow part of the business Payne and Frow (2005)

8 Perspective 2: Technical CRM Definitions CRM is a term for methodologies, technologies and e-commerce capabilities used by companies to manage customer relationships (Stone and Woodcock, 2001) I.e., CRM is about technology Covers more than just e-commerce, but still excludes the people element of CRM Payne and Frow (2005)

9 Perspective 3: Holistic CRM CRM is about the development and maintenance of long term mutually beneficial relationships with strategically significant customers (Buttle 2001) Less about how CRM is carried out Similar definition to relationship marketing CRM is an enterprisewide initiative that belongs in all areas of an organization (Singh and Agrawal, 2003) Emphasises need for whole organisation to be involved Both definitions broad, but quite light on detail of how this is done Payne and Frow (2005)

10 Perspective 3: Holistic CRM Slightly more detailed d definition iti given by Elmuti, Jia and Gray (2009, citing Liu, 2007) CRM can be defined d as business strategies, processes and information technology which enable a company to optimize i revenue and increase the value through understanding and satisfying the individual id customers s needs Technology still has a role, but it is not the only, or even the most important, element Note, no mention of marketing

11 Perspective 3: Holistic CRM CRM involves the whole organisation working to develop and maintain the relationship with the customer CRM puts the customer into the central focus of multiple organizational activities Ernst, et al (2011) Recognises that everyone in the organisation influences the quality of the customer experience and relationship What Gummesson (1991) calls part-time marketers

12 Definition of CRM CRM is the process of managing detailed d information about individual customers and carefully managing all customer touch points to maximise customer loyalty Kotler & Keller (2006) p 252 A customer touch point refers to any occasion when a customer interacts with the organisation, e.g., an inquiry, a sale, receiving a piece of mail.

13 Relationship Development Remember this? Each act is a customer touch point Holmlund, 1997, cited by Fill, 2009

14 Role of CRM To identify those customers that t are most valuable to the organisation To segment the organisation s customers in the most useful way, e.g., by demographics, needs, value To retain the customers that are most valuable to the organisation Involves thinking about the economic indicators of relationship intensity

15 Relationship Intensity Economic indicators identify best customers Fill (2011, p. 569 citing Bruhn)

16 Identifying Customer Value Recency, frequency and value (RFV) Based on historical data Customer lifetime value Net present value of the future profits expected from the customer Based on predictions of future activity Remember not all customers are worth having a relationship with, e.g., Egg Egg acts on 'risky customers Equally not all customers will want a relationship with ihthe organisation i

17 Leaky Bucket Customers are constantly tl leaving relationships, for various reasons Try to limit leaks, but there needs to be a constant flow of new customers entering relationships Therefore acquisition activity needs to continue However, won t be the only, or the main, focus of the organisation s activities

18 Virgin Media Customer churn now at 1.5% year on year to November 2009 ( The Week, 2009) Added 17,800 new customers in the third quarter of 2009 ( The Week, 2009) Average revenue per user up 5.3% to ( The Week, 2009) Has database of customers of different products Make use of a number of tools and media TV,,press and outdoor ads Website, and text Nature of product range suggests CRM suitability

19 How CRM is Carried Out Relationships are based on (among other things) knowledge of the other party, in this case the customer For organisation this means building and applying a picture of your customers Generally this means using direct marketing CRM is not just direct market, but direct marketing does play a big role Also known as; Database marketing Direct and database marketing Data driven marketing

20 Direct Marketing Direct marketing is a way of acquiring ii and keeping customers by providing a framework for three activities: analysis of individual customer information, strategy formation and implementation such that customers respond directly (Tapp, 2005, P. 9) Central point is information

21 What Data is Needed Organisations collect and use a wide variety of data on consumers Personal / contact data Name Address Telephone number address

22 What Data is Needed Demographic information Gender Age Marital status Location Behavioural data Purchase patterns Usage data Loyalty

23 What Data is Needed Marketing related information Product(s) purchased Repurchase rate Method of payment Preferred contact method Discounts due (if any) Total spend

24 Sources of Customer Data Internal sources Product registration docs Warranty cards Credit card details Subscription details In-store offers Requests for product information Records from events or promotions

25 Sources of Customer Data Specialised research companies e.g. Neilsen Life style houses e.g. Consumer Surveys Competitions / on pack promotions Web site

26 Storing and Using Data Data is stored in a database Used both as a way of understanding and contacting individual customers and detecting trends in the marketplace

27 How CRM is carried out Next Time.