CUSTOMER RELATIONSHIP MANAGEMENT (CRM) CII Institute of Logistics

Transcription

1 CUSTOMER RELATIONSHIP MANAGEMENT (CRM) CII Institute of Logistics

2 Session map Session1 Session 2 Introduction The new focus on customer loyalty CRM and Business Intelligence CRM Marketing initiatives Session 3 Session 4 Understanding and integratingcrm with the business process Tools for CRM Choosing the CRM tool Putting the CRM to work CRM in e-business Partner relationship management Planning CRM programme Preparing CRM business plan CRM through new product development Channel management and CRM Catalytic measures to improve CRM Best practices in outsourcing CRM

3 Session 2 1. Recap session 1 2. Preparing CRM business plan 3. Shift in focus Marketing to Customering 4. Customer segmentation What, Why and How? 5. Product and customer strategies 6. CRM maturity levels 7. Customer satisfaction and behavior type 8. Customer loyalty framework and characteristics 9. Rewards types 10. Summary

4 Preparing CRM business plan Define objectives (measurable) Increase customer satisfaction by 10% Increase repeat customers by 20% Increase word of mouth score by 30% Increase high value customers by 5% Increase market share by 10% Establish the CRM framework (Purpose, Processes, Technology, People and Programme) Never forget budget (Finance team has a say always)

5 How business is done - Now Loyalty & Life time Quality, Service, Value Awareness & purchase Promotion & Repurchase Products & Services * Refer lifetime value excel sheet

6 Traditional marketing focus

7 Marketing the past 7 Rewrite Plan. Set >Goals New Marketing Campaign 6 8 Reward/ Punish 1 Market Segment Corporate / Departmental Objectives 5 Quarterly Promotional Push - to meet no s 2 Research Existing Product/ Service 4 Deliver into Market Sell to meet BP Goals 3

8 The competitive enterprise of the future Customers Clustered by Value & Needs P P Products & Processes Designed to serve each Cluster Uniquely Underlying Technology Infrastructure Mix to support unique deliverables, business rules, communications, by Cluster

9 Today s segmentation Today, most firms categorize their customers into groupings (Segments) based on the types and volume of products they consume. Neither margin of profit, LTV, nor needs and wants are tracked. The future combines tracking Micro segments and Individual customers based on Value and Needs.

10 Customer experience focus

11 Customering the future (now) 7 Learn 8 Redesign 1 Micro Segment Customer 2 Research How 3 Redesign Delivery 6 Customize 5 Listen 4 Sell

12 Assess by (emotional) needs FAMILY CONSCIOUS MONEY CONSCIOUS SECURITY CONSCIOUS ADVENTURE SEEKING

13 Fit product / service to needs group Different Portfolio Different Portfolio FAMILY CONSCIOUS MONEY CONSCIOUS A Different P/S Portfolio ADVENTURE SEEKING SECURITY CONSCIOUS A Unique Product/Service Portfolio

14 Further rank/valuate in quintiles/ deciles Strategic Another Customer Needs Cluster Major Provider Diversified/Sustaining Niche/Component Transactional/Cost One Customer Needs Cluster Another Customer Needs Cluster

15 And then you will know 1. Most Valuable Customers who s needs you can continue to meet 2. Most Growable Customers who s needs you can meet, plus cross-sell, up-sell 3. Below Zero Customers Retain the customers who will continue to buy Manage - asset-allocation on a profit potential basis

16 Segmentation Matrix SWEET SPOT Reinvent Low Cost Value Propositions Deliver Killer Value Propositions Focus Elsewhere Needs Subsegmentation LOW Profitability/Value HIGH

17 The Goal - To Reach the Optimal Number of Segments for maximum return on profitability with minimum effort O Optimum Greater Refinement Opportunity Diminishing Returns FEW Number of Customer Segments MANY

18 Superior customer segmentation is 5 step process 1. Group all customers into quintiles (deciles) by profitability 2. Study customer behavior within profitability deciles to understand why some custs are more profitable than others 3. Use this understanding to define needs-based segments 4. Divide each of these segments into profitability deciles 5. Based on experience over time, redefine or subdivide segments again and again

19 Product and customer strategies Product-centric strategies Customer-centric strategies Mission Reduce cost, cycle time Organization Competition Increase customer profitability Environment

20 The strategies of CRM Acquire new customers e.g., differentiation innovation Retain customers e.g., listening adaptability new products customer service loyalty program Increase customer profitability e.g., bundling cross-selling, up-selling maximizing high-value /low-cost customers

21 Determining the CRM "maturity levels" Characterize product and customer centricity and then map the intermediate steps PRODUCT mass or niche markets competitive advantage derived from cost, quality, cycle time CUSTOMER competitive focus on building lasting customer relationships management of customer knowledge, data mining The evolutionary path to CRM maturity is defined arbitrarily into four levels

22 PRODUCT -CENTRIC Evolving business processes to customer centricity Select markets Perform product-centric business functions MASS MARKET FULLY PRODUCT FOCUSED PRODUCT VERSIONS LARGELY PRODUCT FOCUSED CUSTOMER NICHE LARGELY CUSTOMER FOCUSED MARKET OF ONE FULLY CUSTOMER FOCUSED Customer value creation Customer-centric business functions CUSTOMER -CENTRIC Deliver product or service STANDARD VARIATIONS BY FEATURE VARIATIONS BY CUSTOMER ESTABLISH HIGH VALUE CUSTOMERS Customer knowledge management

23 The inter-related aspects of CRM People Programmes Customer Applications Process Infrastructure Technology

24 The core CRM areas PROCESS AREAS PROCESS activities dedicated to the running of the business PEOPLE organizational enablers to the CRM processes CORE CRM AREAS Sales Marketing Service & Support Organization Human resources TECHNOLOGY technological enablers to the CRM processes Infrastructure Applications RELATIONSHIPS relationship and customer value management Specific CRM processes

25 Developing the Maturity Model

26 The Pareto rule Profit in business comes from repeat customers, customers that boast about your product and service, and that bring friends with them ( cited in Lowernstein, 1995) Relationship Marketing Relationship Marketing Focuses on getting and keeping customers Concerned with customer loyalty Aimed at developing long-term, cost-effective links between an organization and its customers All customer relationships are worth keeping Customer retention Impact on profitability and past research has claimed that it can be 5 times more expensive to obtain a new customer.

27 Customer satisfaction and Behaviour type Proliferation of Loyalists Promoters Possibility of Loyalist (expectation < experience) Who ve had Bad Experiences with the Company & The Company didn t respond to them. Detractors Passive (Expensive to Acquire, Quick to Depart) Competitors discounts offering or benefits (10~50%) Strong dissatisfaction so so Strong satisfaction Source :Keki R. Bhote, Beyond Customer Satisfaction to Customer Loyalty, 1996

28 Why customers leave even they are satisfied? In US, survey of CS about Cars, Almost 90% of answers are satisfied. Repurchase rate of same brand car company is below 30%. Hard for finding rule of relationship between CS and customer break away. CS does not guarantee repurchase of customers Customer loyalty is needed.

29 CS strategy Step #1 Issue Discovery Customer DB analysis/ Define marketing issues Step #2 Value Identification Customer investigation/analysis Step #3 Needs Differentiation Customer Segmentation Customer s needs finding / customer value segmentation Step #4 Customization Product/service, channel, reward strategy

30 What is loyalty? In a business context loyalty has come to describe a customer s commitment to do business with a particular organization, purchasing their goods and services repeatedly, and recommending the services and products to friends and associates. (Barnett,2000) Loyal Customer can mean a consistent source of revenue over a period of many years. However, this loyalty cannot be taken for granted. It will continue only as long as the customer feels they are receiving better value than they would obtain from another supplier.

31 How to build customer loyalty? Framework of building Loyalty Drivers Phased Elements Degree of Relationship Improving Core Products/Service Innovation of Channel Mgmt. Customer Satisf action Attitude, not Action CRM Reward Program /Continuing Campaign Repurchase / Cross-selling Action, not Affinity (Artif icial Loyalty) Customer Loyalty (CR Strategy) Trust/ Intimacy Recognition of Relationship, Ref erral

32 Loyalty program: Reward The plan objectives for this program are: 1. Effectiveness, cost savings, profitability, etc. 2. Develop a greater sense of concern and loyalty about the company or brand 3. Strengthen communications between customers and companies. 4. Provide financial rewards to customers who have demonstrated performance or contribution 5. Enhance the Company s ability to meet or exceed its target goals. Campaign and Reward Discrete Communication Model Individual Approach Loyalty Continuous Communication Model Mass Approach

33 Reward types Type of reward Directly Supports Value Proposition Promotion (Price) Airline Mileage, Coupon Other Lotteries indirect Types (Instant Scratchies) of reward Immediate Delayed Multi-product Frequent-buyer Continuity Reward Timing of Reward Dowling.,Mark Uncles, 1997

34 4 characters to differentiate 4 Attributes (Accomplishment) (Continuity) (Attraction) (Acquisition) Points acquisition Reward offering cycle and Getting Reward gifts Not for short term events Induce repurchase Based on customer needs for offering rewards Offering diverse Reward options For acquiring new customer For acquiring customers from competitors

35 Session summary To become customer centric, firms should shift focus from product to customer Customer segmentation helps in identifying profitable segments and deliver high value Enterprises can gradually move up in CRM maturity levels Customer satisfaction does not guarantee loyalty Continuous efforts a necessary to refocus on customer needs to be successful and profitable in competitive market