session 5 - ut · 2 paradigms •transactional marketing –characterized by 4ps –no focus on...

Relationship marketing using the Internet

Session 5

Georg Singer

georg.singer ät ut . ee

Why?

• Customer acquisition online is expensive (20-30% more expensive than offline)

• Retaining 5% more customers, profit boost of 25-95% (Reichheld and Sasser)

• Under tough competition 5 times more costly to attract new customers than to retain current customers

3/16/2011Internet Marketing - UT Spring Semester

20112/28

Why?

• engaged customers generate 1.7 times more revenue

• engaged employees and engaged customers, revenue gain of 3.4 times (Asplund)

• cost of acquisition occurs only at the beginning of a relationship, the longer the relationship, the lower the amortized cost.

• customers less inclined to switch, less price sensitive.


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Why?

• free word of mouth promotions and referrals.

• more likely to purchase ancillary products and high margin supplemental stuff

• less expensive to service, familiar with the process, require less "education”

• makes the employees' jobs easier, feed back into better customer satisfaction


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http://en.wikipedia.org/wiki/Word_of_mouth

CRM and related approaches

© Pearson Education Limited 2009

5/28Internet Marketing - UT Spring Semester

2011

Was - Is


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Definition CRM

• In theory Relationships on individual basis

• In practice CRM, automatically develop relationships with groups or segments

• Messages delivered via e-mail, recommendations and promotion on websites

• Long term relationship needed with each customer

– What is Amazon doing here?


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2 Paradigms

• Transactional marketing

– characterized by 4ps

– No focus on customer retention

– passive, reactive and short term customer relationships

• CRM

– Relatively expensive

– Improves ROI


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Differences between relational and transactional marketing

Transactional paradigm Relational paradigm

Market segment Individual customer

Transaction duration Lifetime

Margin Lifetime value

Market share Most valued customers

and customer share

Mass market broadcast Dialogue and tailored

communications

Passive consumers Empowered clients



2011

CRM applications

1. Sales force automation

2. Customer service management

3. Campaign management

4. Analysis



2011

CRM data

• Personal and profile data– Contact details

– Preferences

• Transaction data– Sales history

• Communications data– Campaign history

– Research / Feedback / Support queries

– Contact reports (B2B)



2011

Customer Value Concept

Focus limited resources andmarketing activities on themost valuable customers


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Categorising customers according to value



2011

Independent feedback for Charles Tyrwhitt (www.ctshirts.co.uk), a shirts retailer



2011

Concept of Customer lifecycle management (CLM)


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Customer lifecycle management



2011

5Is

• Identification

• Individualization

• Interaction

• Integration

• Integrity



2011

Permission marketing (Seth Godin)

• Key concepts

– Not interruption marketing

– Not SPAM

– Requires opt-in (online to e-mail)

– Opt-out

– Learning about the customer

– Initial and continued relationship is based on incentives



2011


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Example – Permission marketing

• Goal: Market SMS banking system at First Direct– Use mobile marketing with short codes

– Win a prize, SMS with email address and receive welcome package (answer to question, post code

• Objectives (results)– Capture 5000 mobile phone numbers (200%)

– Acquire 3000 email addresses (176%)

– Raise awareness about the new service (31 000 customers viewed demonstration)

– Create 1000 new registrations (576% of plan)


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A summary of an effective process of permission-based online relationship building



2011

Matrix of customer touch points for collecting and updating customere-mail contact and other profile information



2011

Concept of Lifetime value modeling

• Key to theory and practice of customer relationship management

• Total net benefit a customer will provide a company over the total relationship with the company


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Example LTV – 50$ to acquire a customer too much even if first

purchase is much less?• subscription service, remain a customer for 3

years, $20.00 per month • $20.00 X 12 months = $240.00 per year;

$240.00 x 3 years = $720.00 potential revenue • costs over the those 3 years are approximately

$100.00• $720.00 - $100.00 (expenses) = $620.00;

$620.00 - $50.00 (cost to acquire customer) = $580.00 profit.

• A fairly healthy return on your initial $50.00 investment!


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An example of an LTV-based segmentation plan



2011

Loyalty Schemes

• Encourage customer extension and retention• Examples: Selver Card, Miles and More, Hilton

Bonus card• Used for CRM purposed as follows:

– Initial bonus points for sign-up to online services or initial registration

– Points for customer development and extension – Additional points to encourage reactivation of online

services– Popular products are offered for a relatively low

number of points, encourage repeat purchases


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Social Networks

• Provide many of the attributes for effective relationship marketing

• Communities of – Purpose

• Autotrader.co.uk

– Position• 50connect.co.uk, www.mumsnet.com

– Interest• Thefootballforum.net, unitedcats.com, uniteddogs.com

– Profession– ……more in the case study!


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Cu next week

• Homework

• Case study about social media as a marketing tool

• MOLSON CANADA SOCIAL MEDIA MARKETING

• 1 presentation (3-4 slides, 5-6 mins) per group


201128/28

session 5 - ut · 2 paradigms •transactional marketing –characterized by 4ps –no focus on...

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