Copyright by Debra L. Zahay 2002
Customer Relationship Marketing
Dr. Zahay
Copyright by Debra L. Zahay 2002
Marketing and Seduction
• Lonely hearts club members
• Received direct mail from fictional “lonely women”
• Over time, solicited money, gifts
Deighton, Harvard University
Copyright by Debra L. Zahay 2002
Marketing is….
Copyright by Debra L. Zahay 2002
Customer Relationship Marketing
Marketing
Customer Service
Operations
CRM
Copyright by Debra L. Zahay 2002
Three phases of company strategy
Product Competitors Customers
Copyright by Debra L. Zahay 2002
Customer Relationship Marketing
• Definition: Process of creating relationships with customers involving integration of processes throughout the company with the objective of create customer value
• Integrated Sales, marketing and service strategy• Management approach, not just software• Front-end applications as well as business
philosophy
Copyright by Debra L. Zahay 2002
CRM means
• Understanding your customer
• Meeting his/her needs in a way that you also make profit
• Looking at your customer in an integrated way
• Making sure all touch points are coordinated
Copyright by Debra L. Zahay 2002
Other Names for CRM
• 1 to 1 Marketing
• Relationship Marketing
• Aftermarketing
• Segment-of-one marketing
• IMC
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Direct Marketing
• An organized and planned system of contacts
• Using a variety of media
• Seeking to produce a lead or an order
• Developing and maintaining a database
• Measurable in cost and results
• Expandable with confidence
Copyright by Debra L. Zahay 2002
Interactive Marketing
• 1) the ability to address an individual• 2) the ability to gather and remember a response
of an individual• 3) the ability to address that individual once more
in a way that takes into account his or her unique response (Marketing=conversation)
» Deighton, 1996
Copyright by Debra L. Zahay 2002
RM >> CRM >> eCRM
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To what extent are Interactive Marketing, Direct Marketing,
Relationship Marketing and Customer Relationship Management related?
Are they the same thing?
Copyright by Debra L. Zahay 2002
Why CRM?
• Use relationships to grow revenue
• Use integrated information for excellent service
• Introduce more repeatable sales processes and procedures
• Create new value
• Instill loyalty
• Why else?Kahlota and Robinson 1999
Copyright by Debra L. Zahay 2002
Why CRM in Insurance Industry?
• Customer Retention (4/5)
• Customer Satisfaction
• Cost Savings (2.8/5)
Source: Insurancenet, Peoplesoft
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“The Loyalty Effect”
Customers
Suppliers Shareholders
Profitability
Reichheld 1996
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Reminder: Aftermarketing, Retention Marketing
• The average company loses half its customers every 5 years.
• Reducing defections by 5% can increase profits by 25 to 85%, depending on industry.
• Up to 85% of customers who defect say they were satisfied.
• Customers who are extremely satisfied are 6 times more likely to repurchase than customers who are merely satisfied.
• A satisfied customer will tell 5 people while a dissatisfied customer will tell 9 people.
Source: Cambridge Technology Partners
Copyright by Debra L. Zahay 2002
What is a relationship?
Copyright by Debra L. Zahay 2002
Relationships• Reciprocity
– “we should return good for good, in proportion to what we receive;. . . We should resist evil, but not do evil in return;. . . We should make reparation for the harm we do.” (Bagozzi (1995), Becker (1990)
• In interpersonal relationships, a close relationship is one where two people, “mutually influence each other’s behavior over a long period.” (Kelley 1983)
Copyright by Debra L. Zahay 2002
Characteristics of Relationships
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Type of Customer
• Market segmentation– Demographic– Product end-use– Buying situation– Customer benefits– Customer buying behavior– Customer decision making style
» Rangan, Moriarty and Swartz (1992)
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Buying Behavior: Relationship Types
• Jackson (1985)– Always a share (Long-term)– Lost for good (Short-term)
• Friendship Continuum (Fournier 1998)
• Rangan Moriarty and Swartz (1992)– programmed buyers
– relationship buyers
– transaction buyers
– bargain hunters
Copyright by Debra L. Zahay 2002
Can a consumer have a relationship with a company?
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The Relationship Marketing Process
Learn About Customers
Customize and Personalize of the
Marketing Mix
1. Products/Services
2. Communications
3. Channels
4. Price
Inter-actions
Inter-actions
Copyright by Debra L. Zahay 2002
Customer Relationship Marketing
• Process of creating relationships with customers, integration throughout the company to create value
• Integrated Sales, marketing and service strategy• 400-600 software programs claiming to deal with
some aspect of relationship management• Claims made for these packages in terms of
performance
Copyright by Debra L. Zahay 2002
Phases of relationship building
• 1) awareness
• 2) exploration
• 3) expansion
• 4) commitment
• 5) dissolution • Scanzoni (1979)
Copyright by Debra L. Zahay 2002
The Relationship Continuum
Mass Market
Differentiated
Customized
Transactions Relationships
Mass MarketDifferentiation/Segmentation
PersonalizationCustomization
Relationships
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Not All Customers Are Valued or Treated Equally
Tier 1
Tier 2
Tier 3
Tier 4
Customers Revenues Cost
1%
10%
24%
65%
50%
40%
7%
3%
5%
30%
45%
20%
1% 50% 5%
10% 40% 30%
24% 7% 45%
65% 3% 20%
Adopted fromHaht Corporation
Copyright by Debra L. Zahay 2002
Tier 1
Tier 2
Tier 3
Tier 4
Customers Revenues Cost
1%
10%
24%
65%
50%
40%
7%
3%
5%
30%
45%
20%
1% 50% 5%
10% 40% 30%
24% 7% 45%
65% 3% 20%
Nor Should They Be Treated Equally
Grow or Aggregate
Improve Customer Service Tighten Demand Chain
Reduce Costs
Improve Customer ServiceEnhance Customer Loyalty
Haht Corporation
Copyright by Debra L. Zahay 2002
CRM vs. 1 to 1
• Identify• Acquire• Enhance• Retain
• Identify• Differentiate• Interact• Personalize/Customize
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Fulcrum Analytics, The Path to Customer Relationships
Meet me (collect data)
Understand Me(analyze individual customers,data mining)
Value Me
Remember Me (create database)
(create targeted campaign,campaign management)
Copyright by Debra L. Zahay 2002
SAS CRM Business Flow:The Role of Customer Intelligence
Copyright by Debra L. Zahay 2002
Operational CRM Analytical CRMBusiness Operations Mgmt. Business Performance Mgmt.
ERP/ERMSupply Chain
Mgmt.
Order PromisingOrder Mgmt.
LegacySystems
CustomerService
MarketingAutomation
SalesAutomation
Mobile Sales(Product CFG) Field Service
Voice(IVR, CTI,
ACD)
Conferencing
Web Conference
E-Resp. Mgmt.
Fax, Letter Direct Interaction
MarketingAutomationVertical Apps
Category Mgmt. Campaign Mgmt.
CustomerActivity
Data Mart
CustomerData Mart
ProductData Mart
Data Warehouse
Cu
sto
me
rIn
tera
cti
on
Clo
sed
Lo
op
Pro
cess
ing
(EA
I T
oo
lkit
s, E
mb
edd
ed/M
ob
ile
Ag
ents
)
Mo
bil
eO
ffic
eF
ron
tO
ffic
eB
ac
kO
ffic
e
Collaborative CRMBusiness Collaboration Management
CRM Technologies
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CRM and the Value Chain
CustomerRelationships
Inbound(Purchasing,Logistics)
Operations(Production,InventoryManagement)
Outbound(Distribution)
Marketing and Sales
ServicePrimary
Technology
Application
Value (Use)
Information