Customer Relationship Management

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Retailing Strategy
Retail Market Strategy
Financial Strategy Site Location

Customer Relationship Management

Retail Locations

Organizational Structure and HR Management

Information Systems

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Customer Relationship Management

A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a retailers most valuable customers. What is loyalty? Is it the same thing as liking a retailer or frequently patronizing a retailer?

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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

Can Offering Discounts Achieve Customer Loyalty?

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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

McGraw-Hill Companies, Inc./Gary He, photographer

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CRM Process

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Information About Each Customer in the Database

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 Customers responses to marketing activities

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Approaches for Collecting Customer Information

Need to connection contacts with a specific customer identifier Ask for identifying information
Telephone number, name and address

Encourage use of frequent shopper cards Link checking account number and/or third party credit cards to customer

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Privacy Concerns
Control over Collection Do customers know what information is being collected? Do customers feel they can decide on 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?

Steve Cole/Getty Images

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Frequent Shopper Cards

Card is often squeezed out of wallet Customers forget to bring it to the store

Might not even show it if in a hurry

(c) image100/PunchStock

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Heighten 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
Stockbyte/Punchstock Images

Customers Decision to Offer Information

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Disclosure of Information Unwanted Sales Contacts

Discounts Special Treatment Personal Attention

Balance benefits and risks

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Analyzing Customer Data

Data Mining technique used to identify patterns in data.

Market Basket Analysis

Identifying Market Segments

Identifying Best Customers

Ryan McVay/Getty Images

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Market Basket Analysis

Data analysis focusing on the composition of the customers market basket what items are bought during a single shopping occasion Uses:
Burke/Triolo Productions/Getty Images

-Adjacencies for displaying merchandise

-Joint promotions

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Market Basket Analysis Taught Wal-Mart to Change!

Product
Bananas Kleenex Measuring spoons Flashlights Little Debbie snack cakes Bug spray

Placed Near
cornflakes, produce paper goods, cold medicine housewares, Crisco shortening hardware, Halloween costumes coffee hunting gear

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Identifying Best Customers

Estimating Lifetime Value
Based on assumptions that the customers future purchase behaviors will be the same as they have been in the past Classifying Customers by recency, frequency, and monetary value of purchases (RFM Analysis)
(c) Brand X Pictures/PunchStock

Which Customer Probably Has the Greatest Lifetime Value

Purchases Over Last 10 Weeks

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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

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Customer Pyramid
Platinum Best Most loyal Least price sensitive

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Customer Pyramid

Gold Next best Not as loyal

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Customer Pyramid

Iron Doesnt deserve much attention

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Customer Pyramid

Lead Demands attention May have negative value

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CRM Programs

Retailing Best Customers Converting Good Customers to Best Customers Getting Rid of Unprofitable Customers

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Customer Retention Programs

Frequent Shopper Programs Special Customer Services Personalization
1-to1 Retailing

Community

Royalty-Free/CORBIS

Elements in Effective Frequent Shopper Programs

Tier Based on Customer Value Offer Choices of Rewards
Non-monetary incentives

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Reward all Transactions Transparent and Simple

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Personalization
Hello, Barton Weitz

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Dealing with Unprofitable Customers

Offer less approaches for dealing with these customers
Charge customers for extra services demanded

Don Farrall/Getty Images

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Implementing CRM Programs

Need systems, databases Close coordination between departments marketing, MIS, store operations, HR Shift in orientation
Product Centric Customer Centric