copyright by debra l. zahay 2002 customer relationship marketing dr. zahay

Copyright by Debra L. Zahay 2002

Customer Relationship Marketing

Dr. Zahay


Marketing and Seduction

• Lonely hearts club members

• Received direct mail from fictional “lonely women”

• Over time, solicited money, gifts

Deighton, Harvard University


Marketing is….



Marketing

Customer Service

Operations

CRM


Three phases of company strategy

Product Competitors Customers



• 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


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


Other Names for CRM

• 1 to 1 Marketing

• Relationship Marketing

• Aftermarketing

• Segment-of-one marketing

• IMC


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


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


RM >> CRM >> eCRM


To what extent are Interactive Marketing, Direct Marketing,

Relationship Marketing and Customer Relationship Management related?

Are they the same thing?


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


Why CRM in Insurance Industry?

• Customer Retention (4/5)

• Customer Satisfaction

• Cost Savings (2.8/5)

Source: Insurancenet, Peoplesoft


“The Loyalty Effect”

Customers

Suppliers Shareholders

Profitability

Reichheld 1996


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


What is a relationship?


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)


Characteristics of Relationships


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)


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


Can a consumer have a relationship with a company?


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



• 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


Phases of relationship building

• 1) awareness

• 2) exploration

• 3) expansion

• 4) commitment

• 5) dissolution • Scanzoni (1979)


The Relationship Continuum

Mass Market

Differentiated

Customized

Transactions Relationships

Mass MarketDifferentiation/Segmentation

PersonalizationCustomization

Relationships


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


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


CRM vs. 1 to 1

• Identify• Acquire• Enhance• Retain

• Identify• Differentiate• Interact• Personalize/Customize


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)


SAS CRM Business Flow:The Role of Customer Intelligence


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

Email

E-Resp. Mgmt.

Fax, Letter Direct Interaction

MarketingAutomationVertical Apps

Category Mgmt. Campaign Mgmt.

CustomerActivity

Data Mart

CustomerData Mart

ProductData Mart

Data Warehouse

Cu

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Clo

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Lo

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Pro

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Ag

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Collaborative CRMBusiness Collaboration Management

CRM Technologies


CRM and the Value Chain

CustomerRelationships

Inbound(Purchasing,Logistics)

Operations(Production,InventoryManagement)

Outbound(Distribution)

Marketing and Sales

ServicePrimary

Technology

Application

Value (Use)

Information

copyright by debra l. zahay 2002 customer relationship marketing dr. zahay

Documents

customer retention

dissatisfied customer

relationship typesjackson

close relationship

unique response marketing

use relationships

interpersonal relationships

repeatable sales processes