Customer Relationship Management and Marketing

1. Customer Relationship Management
Marketing Strategy and CRM

2. Customer Loyalty and Satisfaction

3. Marketing Strategy & CRM
• Understanding relationship between
relationship, loyalty & profitability
• Satisfaction can be broadly characterized as
a post-purchase evaluation of product
quality given pre-purchase expectations
• Satisfaction is the consumer’s response to
and evaluation of the perceived discrepancy
between prior expectations and the actual
performance of the product as perceived
after its consumption.

4. Four Types of Loyalty
Strong
Weak
Repeat Purchase
Strong
Strength Of Affect
Weak
True
Spurious
Latent
None

5. Marketing Strategy & CRM
Three entirely different definitions of loyalty
1.Behavioral
2.Affect loyalty
3.Situation specific loyalty

6. Brands Have Four Levels of Meaning
1. Benefits
– Functional
– Emotional
– Internal
1. Brand personality
2. Brand attributes
3. Brand conveying values

7. What we Know about Customer
Satisfaction
• Satisfied customers may not remain loyal
• Dissatisfied customers tell more people than
satisfied customers
• Only a small percent of customers ever
complain
• Relationships based on satisfaction are, in
fact, weak

8. Confirmation/Disconfirmation
Model of Satisfaction
Satisfaction is the difference between what was expected
and what was experienced.
– “Was our service above, below, or at the same level of what
you expected?”

9. There are three Types of Relationships
Companies Have with Customers
• Acquaintance: Based on satisfaction
• Friendly: Based on trust
• Partner: Based on commitment

10. Factors Intervening between
Satisfaction and Loyalty
• Shear number of competitors’
offerings
• Novelty seeking
• Lack of personal attachment with
brand
• Lack of consistency in performance
• New competitors offering better
value or a greater variety of ancillary
services
• Customer expectation of future use
• Customers may not want a
relationship with your firm

11. Developing a Loyalty Profile
of Your Customers
• Customer loyalty is based on favorable
attitudes and behavioral responses such as
repeat purchase. It is both
– Behavioral
– Attitudinal
• Customers may be emotive
loyalists or deliberative loyalists.

12. Are Loyal Customers Always More
Profitable?
• Five reasons many say yes:
1. Increased number of purchases
2. Tendency to “Trade-Up”
3. Tendency to become less price sensitive because of focus
on convenience and purchase efficiencies
4. Word-of-mouth referrals
5. Lower cost of servicing them

13. New Findings Regarding Customer
Retention and Profitability
• In terms of profitability per month, short
lifetime but high revenue customers were
most attractive.
• Profits for long-life customers
did not increase over time.
• Short-life customers paid higher
prices than long-life customers.
• Some long-life customers may cost the firm
more in the long run due expenses.

14. Loyalty, Rewards, and Frequency
Programs
• More than half the United States
participates in at least one
• Flying United vs. Singapore Airlines
• Loyalty programs are primarily
defensive
• Are CRM only if data is used to
establish dialogue
• Are useful for bringing friends and
family into the program
• Are useful in creating databases

15. The Usefulness of CRM for any
Organization

16. Questions To Ask Regarding CRM’s
Usefulness To Any Organization
• Do we have a steep or shallow skew?
• Do we have a multichannel or single-channel value
proposition?
• Is our market characterized by “always a share” or
“lost for good” relationships?

17. CRM Strategy Cycle
The “New Marketing” Strategies
Retention
Winback
Acquisition

18. Acquisition Strategies
• Necessary to fill the pipeline since companies lose
2-40 percent of their customers every year.
• Mass media advertising still useful here.
• Capture potential user IDs and gain permission to
begin dialogue.
• Begin with defining your target and goals for the
acquisition campaign.

19. How To Develop Effective
Acquisition Strategies
• Qualitative and quantitative marketing
research
• Eliminate switching cost
• Present your offer at the appropriate times
• Encourage word-of-mouth referrals

20. Retention Strategies
• Can be based on:
– Rewarding
– Bonding
– Service structure strategy
• With two types of bonds
– Programmatic
– Humanistic

21. Types of Retention Strategies
• Preferential treatment
• Rewarding
• Employ idiosyncratic-fit
• Personalization
• Customization
• Cross-selling
• Up-selling
• Managing migration
• Conversion
• Profit driving
• Brand building
• Providing and attaining
• Intimacy
• Online customer
management
• Data mining

22. Preferential Treatment
…Is the customer’s perception of how much
better they are treated than the company’s
other customers. (Like a King!)
– Marshal Field and company’s Glamorama
– VIP rooms
– “Comps”

23. Rewarding
• Offering tangible benefits such as pricing or gift
incentives to its regular customers in return for
their loyalty.
– Frequent flyer programs
– Customer point programs
– Free gifts
– Used as much in B2B as in B2C

24. Employ the Idiosyncratic-Fit Heuristic in
Creating Loyalty Programs
• This is the tendency for customers to be enticed
by offers for which they enjoy a relative
advantage.
• Increasing program requirements can enhance a
customer’s likelihood of joining IF they feel they
have an advantage over others.
• Make them feel that they, but few others,
qualify.

25. Personalization
• Consumer’s perception about how warmly
they are treated.
• Web related: a company-controlled web site
that a customer can modify to suit their own
purposes.
• Example: the personalized independently
owned women’s fashion business offered by
women selling out of their own homes.

26. Customization
“It’s one thing to train a sales staff to be warm and
attentive. It’s quite another to identify, track and
interact with an individual customer and then
reconfigure your product or service to meet that
customer’s needs.”
Peppers, Rogers, and Dorf

27. Customization
• Over the Web, customization refers to company-
controlled web site modifications.
• Wisconsin Tourist Bureau can customize users’ web
pages by emphasizing their interests through usage:
fishing, hunting, boating, antiquing, hiking, biking,
birding, skiing, etc.
• Companies can also develop new ideas, customize
product functions and features, and collect customer
info through continuous contact through many touch
points.

28. Cross-Selling and Up-Selling
• Brooks Brothers, NRS, and Amazon
• Items to include are determined by customer habits
and clever “bundling”
• Of all the CRM strategies, up-selling is the most
conversation oriented – wait for the relationship to
progress through acquaintanceship and trust stages
and enter the commitment stage

29. Reducing and Reversing Downward
Migration
• McKinsey says reducing downward migration can
provide 2-4 times more profit than reducing
attrition.
• “Migration is the change in customer value over
time.
• Measuring downward
migration is
key, for it may be a
precursor to defection.

30. Conversion
• Some long-time customers may be barnacles and
not treasures.
– If loyalty is overrated, then try to convert your short-
term, transaction-oriented customers to a more
attractive segment.
• Rewards based on purchase
frequency, dollar value, or profit may elevate
these customers to more profitable ones.

31. Brand Building through CRM
Can Help Companies:
– Acquire more customers
– Increase customer share
– Lower rate of brand defection
– Express your brand through CC personnel
– Enable advertising and SP to be more targeted
– Collect better metrics for management (CLV)
– Get more direct and frequent customer inputs
– Provide new types of marketing research data
– Provide new segmentation data by mining
– Provide more customer need data
– Provide more multichannel usage data

32. What Brands Do
• SYMBOLIZE
–Attributes, benefits, producer’s values, culture,
brand
–Personality, and users’ personalities
• EVOKE
–Relationships, experiences, emotions, and life
• CREATE
–Personal meaning, loyalty, friendship, and romance

33. Providing and Attaining Intimacy
• Customers do not want deep relationships with
every company, it’s untenable
– …but customers do want relationships with companies
providing them with products and services with which
they are highly involved
• Lesson: companies should not try to establish
bonds with every customer, just those for whom
the products are important

34. Online Customer Management
and Data Mining
• OCM consists of
– Understanding customers RSFM
– Conduct customer web log analysis
– Site improvement

35. Winback Strategies
• Sometimes referred to as “Regain
Management” or “Comeback Strategies”
– The process of winning back customers who either
give notice to terminate or have already ended the
relationship
– Winback is the process of firms’ revitalizing
relationships with customers who have defected

36. The Importance of Winback…
• Research has shown that a firm has a
– 60- 70 percent chance of successfully repeat-selling
to an active customer
– 20-40 percent chance of successfully repeat-selling
to a lost customer
– 15-20 percent chance of successfully closing the
sale on a brand new customer

37. Questions?