ch05 customer relationship management

Customer Relationship Management

Definition

• Retail CRM is “to establish, develop, maintain and optimize long-term, mutually valuable relationships between consumers and retailers, so as to gain incremental value to all the stakeholders”.

Dr. RamKishen Y.

Types of CRM

1. Operational CRM: is the automation of horizontally integrated business processes involving front-office customer touch points across sales, marketing and customer service via multiple interconnected delivery channels.

Tools used are: ERP, SCM, EAI (Enterprise Application Integration), data warehousing and SFA (Sales Force Automation)

Types of CRM

2. Analytical CRM: the analysis of data created on the operational side of CRM and through other relevant operational data sources for the purposes of business performance, management and customer-specific analysis

The data gathered are analyzed to segment customers or to identify the potential for enhancing relationships with customers through RFM (recency, frequency and monetary value, such as platinum, gold, silver and lead) analysis.

Types of CRM

3. Collaborative CRM: refers to coordinating the multi-channel service and support given to the customer by providing the infrastructure for responsive and effective support to customer issues, complains, questions, etc.

Channels: personal, letters, fax, phone, e-mail

CRM Applications in Retailing

• Retail Customers: One can’t please all the customers at the same time, hence CRM program allows the company to identify its best customer.

• Increased Competition: products are easy to copy, services are difficult to copy but the learned relationship the customer has with his or her supplier is nearly impossible to reproduce


• Repeat Purchase: repeat purchase come only through customer satisfaction, hence individual attention should be provided to customers. Exe. Greeting the customers on their special occasions, providing offers on their celebrations etc.


• Upselling and Cross-selling: cross-selling is selling an additional product to existing customers, usually related to what they have already bought. Upselling is selling a better but usually more expensive product to customers, after they have decided on a cheaper product.– CRM encompasses retailers’ effort to become

more familiar with the shopper’s browsing and purchasing habits and drive sales across channels


• Customer Acquisition: the threat of losing customers is an ever-increasing business risk for many retailers. – The growing popularity of retailers offering an

increased variety of product lines can significantly affect a customer’s choice

– A customer can be lured away by a retailer offering more items at the same or lower price

Strategic Framework For CRM in Retail

Challenges1. Powerful Retailers: powerful retailers with big

pockets can implement advanced CRM software, which gives them an edge over the smaller retailers

2. No Customer Information: lack of comprehensive customer knowledge is an impediment for determining profitability from the customer relationship


Challenges3. Dissatisfied customers: customer satisfaction

occurs when the total experience of the customer has been met or exceeded the customer expectations. A dissatisfied customer may express his dissatisfaction, which may cost the company


Challenges4. No Loyalty Program Differentiation: most of

the retailers started loyalty programs to retain their loyal customers. In the race to win customers, retailers did not attempt to differentiate their loyalty programs from that of the others. this resulted in almost all the retailers having more of less the same loyalty programs.


Consequences1. No Effective CRM Implementation: many big

retailers forgot the importance of maintaining customers, hence the consequences can be manifold like losing customers to competition, poor service quality and sometimes even the closure of the stores.


Consequences2. CRM not Functioning up to the Mark: it

happens because customers couldn’t find the differences of the services being offered or the loyalty program that has been implemented from that of the competitors


CRM Vision1. Create New CRM Strategy: Customers and

other stakeholders need to have image of what to expect when they interact with your company and what the enterprise offers in comparison to the offerings of the competition not let to the mercy of market forces and the competition


CRM Vision1. Create New CRM Strategy:CRM initiatives can support the development of marketing strategy by developing the organization’s knowledge in areas such as identifying customer segments, improving customer retention, improving product offerings, and identifying the organization’s most profitable customers.


CRM Vision1. Create New CRM Strategy:CRM is a comprehensive, customer-centric approach to an organization’s philosophy of dealing with its customers, include policies and processes, front-of-house customer service, employee training, marketing, systems and information management


CRM Tools1. Database Marketing:Customer Information

Demography: age, sex, education, etc.Geography: zip code, state, country, etc.Psychographic: lifestyle, personality, etc.Behavioral variables: brand loyalty, benefit

sought, product usage rate and end, etc.Past business history: various business

statistics on customers


CRM Tools1. Database Marketing:Customer InformationRFM Information– Recency: Customers who purchased recently tend to buy

again– Frequency: Customers who purchased frequently tend to

buy again– Monetary value: Customers who purchased the most

monetary value tend to buy again


CRM Tools2. Loyalty Program:– Loyalty Card– Rewards Card– Points Card– Advantage Card– Club Card


CRM Tools3. Retention Strategies:– Membership cards and membership programs– Welcome and thank you communication– Satisfaction surveys followed by phone calls and

letters– Beefed up customer service, empowered to solve

problems– Frequent buyer programs, which permit customers to

build equity


CRM Tools4. Customer Experience Management:– Physical benefits: the merchandise displayed in the

store– Sensing benefits: music in a luxury store, smell or

freshly baked bread in a hypermarket– Emotional and Psychological benefits: lifestyle brands

like Armani, Gucci– Rational benefits: the uses of the staple merchandise

in a retail store

Future of CRM

1. E-CRM: 2. Beyond Relationships (Transformations): to develop

and maintain open dialog between customers and service agents through every channel possible. Exe. Call centers, e-mail, representatives

3. Devise and Deliver Services: by tailoring services to customers at an individual level, a retailer adds value to the shopper’s experience and contributes to their own survival in an intensely competitive market.

Questions for Practice

• Define CRM. Explain the role of CRM in retail• Describe and illustrate the strategic

framework for CRM in retailing. Explain using an example of a retailer of your choice.

ch05 customer relationship management

Documents