Chapter 21: Customer Relationship
Management (CRM)
Prepared by Amit Shah, Frostburg State University
Designed by Eric Brengle, B-books, Ltd.
Copyright 2010 by Cengage Learning Inc. All Rights Reserved
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Learning Outcomes
LO1
Define customer relationship management
LO2
Explain how to identify customer relationships
with the organization
LO3
Understand interactions with the current
customer base
LO4
Outline the process of capturing customer data
Copyright 2010 by Cengage Learning Inc. All Rights Reserved
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Learning Outcomes
LO5
Describe the use of technology to store
and integrate customer data
LO6
Describe how to identify the best customers
LO7
Explain the process of leveraging customer
information throughout the organization
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What is Customer
Relationship Management?
LO1
Define customer
relationship management.
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Customer Relationship Management
A company-wide business
strategy designed to optimize
profitability, revenue, and customer
satisfaction by focusing on highly
defined and precise customer
groups.
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Customer Relationship Management Cycle
Identify customer relationships
Leverage customer
information
Understand interactions
with current customer base
Identify best customers
Capture customer data
based on interactions
Store and integrate
customer data using IT
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Implementing a CRM System
Key Points:
1. Customers take center stage
2. The business must manage the
customer relationship across all
points of customer contact
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LO1
Review Learning Outcome
Customer Relationship Management
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Identify Customer Relationships
LO2
Explain how to identify
customer relationships
with the organization.
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Identify Customer Relationships
Customer-Centric - The company
customizes its product
and service offering based
on data generated through
interactions between the
customer and the company.
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Learning
An informal process of
collecting customer
data through customer
comments and feedback on
product or service performance.
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Knowledge Management
The process by which learned
information from customers is
centralized and shared in
order to enhance the relationship
between customers and
the organization.
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Knowledge Management
Experiential
observations
Comments
Collected
Information
Includes:
Customer actions
Qualitative facts
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Interaction
The point at which a customer
and a company
representative exchange
information and develop
learning relationships.
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LO2
Review Learning Outcome
Identifying Customer Relationships
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Interactions of the
Current Customer Base
LO3
Understand interactions
with the current
customer base.
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Interactions of the
Current Customer Base
Current
transaction
Past
Relationship
Channel
Customer
Requested
Service
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Interactions of the
Current Customer Base
Touch-Points - All possible areas
of a business where customers
communicate with that
business.
Point-Of-Sale Interactions Communications between
customers and organizations that
occur at the same point of sale,
normally in a store.
http://www.bestbuy.com
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Online
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LO3
Review Learning Outcome
Interactions with Current Customer Base
Web
Point of Sale
Kiosk
Customer
Customer Service
Delivery, Installation
Survey
Product Registration
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Capture Customer Data
LO4
Outline the process of
capturing customer data.
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Capture Customer Data
Store visits
Conversations with salespeople
Interactions via the Web
Traditional phone conversations
Wireless communications
http://www.geico.com
Online
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LO4
Review Learning Outcome
Capturing Customer Data
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Store and Integrate Customer Data
LO5
Describe the use of
technology to store and
integrate customer data.
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Customer Data
Data Warehouse - A central
repository for data from various
functional areas of the organization
that are stored and inventoried on a
centralized computer system.
Database - A collection of data, especially one
that can be accessed and manipulated by
software.
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LO5
Review Learning Outcome
Store and Integrate Customer Data
Response list
Compiled list
::::::::::::::::::::::::::::::::::::::::::
::::::::::::::::::::::::::::::::::::::::::
Database
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
///////////////////////////////////////////////////////////
~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~
Data Warehouse
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Identifying the Best Customers
LO6
Describe how to identify
the best customers.
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Data Mining
A data analysis procedure
that identifies significant
patterns of variables and
characteristics that pertain to
particular customers or
customer groups.
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Data Analysis
Customer segmentation
Recency-frequency-monetary analysis
Lifetime value analysis
Predictive modeling
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Customer Segmentation
• The process of breaking large groups of
customers into smaller, more homogeneous
groups
• Generates a “profile” or picture of the customers’
similar demographic, geographic, and
psychographic traits
• Focuses on best customers
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Recency-Frequency-Monetary
Analysis
1. Identifies customers mostly like to
purchase again
2. Identifies and ranks “best customers”
3. Identifies most profitable customers
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Data Manipulation Techniques
Lifetime
Value Analysis
A data manipulation technique
that projects the future value of
the customer over a period of
years.
Predictive
Modeling
A data manipulation technique
in which marketers try to
determine what the odds are
that some other occurrence will
take place in the future.
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LO6
Review Learning Outcome
Identify the Best Customers
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Leverage Customer Information
LO7
Explain the process of
leveraging customer
information throughout
the organization.
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CRM Marketing Database Applications
Campaign management
Reinforcing customer
purchase decisions
Retain loyal
customers
Inducing product trial
by new customers
Cross-selling other
products and services
Increasing effectiveness
of distribution channel
marketing
Designing targeted
marketing communications
Improving
customer service
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Campaign Management
Developing product or service
offerings customized
for the appropriate customer
segment and then pricing and
communicating these offerings
for the purpose of enhancing
customer relationships.
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Campaign Management
Developing customized
offerings for appropriate segment
Pricing these offerings
attractively
Communicating offerings in a way
that enhances customer relationships
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Retaining Loyal Customers
Retaining an additional 5 percent of customers
increases profits by as much as 25 percent
Improving customer retention by 2 percent can
decrease costs by as much as 10 percent
Loyalty programs reward loyal customers for
making multiple purchases
Loyalty programs provide information
about customers and trends
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Cross–Selling Other
Products and Services
• CRM provides opportunities to cross-sell
related products
•Cross-sell to customers with demographic,
lifestyle, or behavioral characteristic matches
•Internet companies use product and
customer profiling to reveal cross-selling
opportunities
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Targeted Marketing Communications
Infrequent
Users
• Offer direct incentives,
such as a price
discount
Moderate
Users
• Offer more
reinforcement of past
purchase decisions
Heavy
Users
• Design around loyalty
and reinforcement
of purchase
39
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Reinforcing Customer Purchase Decisions
•Cognitive dissonance is the feeling consumers
experience when they recognize inconsistency
between values and opinions and their
purchase behavior
•Thanking customers help cement a long-term,
profitable relationship
•Update customers periodically on the status
of their order
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Increasing Effectiveness of
Distribution Channel Marketing
RFID technology
Multichannel Marketing
CRM Databases
http://www.kidsdadsmoms.com
Online
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Improving Customer Service
•Level of customer service is influential in
customer retention
•Customer retention – the percentage of
customers that repeatedly purchase products
from a company
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LO7
Review Learning Outcome
Leveraging Customer Information
Marketing Information
 Campaign management
 Retaining loyal customers
CRM Database
 Cross-selling other products
 Designing targeted marketing
communications
Applications
 Reinforcing purchase decisions
 Inducing product trial by new customers
 Increasing effectiveness of distribution
channel marketing
 Improving customer service
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