Customer Relationship Management (CRM) Not a concept or a project Business strategy

Chapter FourChapter Four

Copyright © 2006McGraw-Hill/Irwin

Customer Relationship

Management and the Marketing

Research Process

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• Customer Relationship Management (CRM)– Not a concept or a project– Business strategy

• To understand, anticipate and manage the needs of an organization’s current and potential customers

– CRM• A combination of strategic, process,

organizational, and technological change

Value of Customer Relationship Management

Understand the essential elements that comprise a customer

relationship management program

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• Allied Medical Corp– Strong correlation between customer

satisfaction– 50% of unhappy customers will “bail out”– Knowing your customer and adding value

to their transactions—add profits

Value of Customer Relationship Management

Understand the essential elements that comprise a customer

relationship management program

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• Customer Relationship Management (CRM)– Integration of customer information throughout

the business– Business enterprise

• Must respond to rapidly changing environments• Disrupters

– Internet– Electronic commerce– New types of businesses

• Retaining your current customers cheaper than getting new ones

– ratio 1 to 5 for sales and marketing expenditures– http://www.mannesmann.com http://www.lendingtree.com

The Essentials of CRMDescribe the relationship that exist between marketing research and

customer relationship management

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Exhibit 4.1Describe the relationship that exist between marketing research and

customer relationship management

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– Customer Interaction• Organizations• Centerpiece of CRM Program• Customer Knowledge

The Essentials of CRMDescribe the relationship that exist between marketing research and

customer relationship management

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– CRM begins with the determining of1. Types of relationships with customers

2. Types of interaction required to acquire and capture customer information

3. How to store and integrate the customer data

4. How and when to analyze the information to determine the best customer segments based on profitability

5. How this information is to be disseminated throughout the enterprise

The Essentials of CRMDescribe the relationship that exist between marketing research and

customer relationship management

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• Primary Functions of CRM– To Collect– To Store– To Analyze Customer Interaction

Information • Customer knowledge

Marketing Research and Customer Relationship

Management

Describe the relationship that exist between marketing research and

customer relationship management

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• Marketing Research’s Role– Market Intelligence

• Real-time customer information

– CRM Starts with Customer Knowledge• Understanding the wants and needs of

customers

– Major Use of Customer Knowledge• Assess profitability and provide increased

value to targeted customer segments

Marketing Research and Customer Relationship

Management

Describe the relationship that exist between marketing research and

customer relationship management

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– Marketing Research1. What kind of relationship will add value to the

enterprise’s customers?

2. What is the value perception of the customer segment and how can the value be enhanced?

3. What products, services, and mode of delivery have value to the customer segment?

4. What are customers’ responses to marketing and sales campaigns?

Marketing Research and Customer Relationship

Management

Describe the relationship that exist between marketing research and

customer relationship management

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– MR Captures and Integrates Information• Demographic, psychographic, behavioral and

preference data

– Data Used for Two Purposes• To create customer profiles• To segment customers

– Create a Market Intelligence Culture• silos

Marketing Research and Customer Relationship

Management

Describe the relationship that exist between marketing research and

customer relationship management

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• Customer Information Falls into the 20/80 ratio– MIE Business Model—Granular Data

• Detailed, highly personalized and specifically structured around the individual customer

• Overall goal—capturing and retaining customers

– Customer-centric Approach

Transforming Marketing Research into Market

Intelligence

Understand the meaning of marketing intelligence

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– Strategic Use of Customer Information• Two Key Questions

1. What does my customer value?

2. What is the value of my customer?

• Primary Information Collected

• MR

– Analyzes customer values, likes and dislikes, lifetime value, and profitability

• Information used

– To refine product and service offerings

Transforming Marketing Research into Market

Intelligence

Understand the meaning of marketing intelligence

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– Information Based on Transactional Focus• Exchanges with customers—Window of

Opportunity• Build loyalty

– Enterprise Wide Approach to the Use of Information

• Information at every touchpoint

– Technology Support of the CRM Structure• Link-pin—turning customer data into customer

knowledge

Transforming Marketing Research into Market

Intelligence

Understand the meaning of marketing intelligence

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• Technology– Driving force behind the integration and

sharing of data and the collection of customer data

– Goal• To collect all relevant customer interaction

data• to store the data in the warehouse• To analyze the data

Data Collection in a CRM Environment

Illustrate the process of data collection for a CRM program

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• Accessing Customer Data over the Internet– Passive Data

• Such as geographic and specific user information

– Active Data• User interacts with website• Cookies

– Directed Data• Comprehensive data collected about customers

Data Collection in a CRM Environment

Illustrate the process of data collection for a CRM program

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• What is a Database• Collection of information indicating what

customers are purchasing, how often they purchase, and the amount they purchase

– Database Generated By• Sales invoices• Warranty cards• Telephone calls• Market research projects

Illustrate the development and purpose of the data warehouse

MR and CM: The Database Process

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• Purpose of a Customer Database• To develop meaningful, personal

communication with its customers

– Customer Database– Specific Purpose of Databases

• To improve the efficiency of market segmentation

• To increase the probability of repeat purchases• To enhance sales and media effectiveness• To enable users to measure, track and analyze

customer behaviors

Data Collection in a CRM Environment

Illustrate the development and purpose of the data warehouse

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– Benefits of Databases• Exchanging information with customers• Determining heavy users• Determining lifetime customer value• Building segment profiles

Data Collection in a CRM Environment

Illustrate the development and purpose of the data warehouse

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– Marketing databases answer crucial questions

– Why do some consumers buy our products or services regularly, while others do not?

– How do our products compare with the competition?– What is the relationship between perceived value

and price of the product?– How satisfied are customers with the service level

and support for the product?– What are the comparisons among lifestyles,

demographics, attitudes, and media habits?

Data Collection in a CRM Environment

Illustrate the development and purpose of the data warehouse

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• Data Enhancement• The overlay of information about customers to

better determine their responsiveness to marketing programs

– Three Advantages• Move knowledge of customers• Increased effectiveness• Predicting responses to changing marketing

programs

Marketing Research and Data Enhancement

Illustrate the development and purpose of the data warehouse

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Exhibit 4.2 Illustrate the development and purpose of the data warehouse

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– Effective Development of Enhanced Databases• Geodemographic factors• Attribute data

– Attitudinal data

– Motivational data

• Target market characteristics– Heavy product users versus light users

– Based on demographic, purchase volume and frequency

– Other data points—shopping patterns, advertising effectiveness and price sensitivity

Illustrate the development and purpose of the data warehouse

Marketing Research and Data Enhancement

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• Comprehensive Collection of Interrelated Data– Databases

• Affinity• Frequency• Recency• Amount

• Rule of Thumb in Database Development– Long-term commitment– Width

• Total number of records

– Depth• Overall number of key

data fields

– Resources

Illustrate the development and purpose of the data warehouse

Dynamics of Database Development

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– What is Data• Data Item or Field

– Database Technology• Tools used to transform data into information• Processes data and stores it in a single

databank• Database management system• Data dictionary

Illustrate the development and purpose of the data warehouseDatabase Technology

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• Two Types of Database Processing Systems– Sequential Database System

• Organizes data in a simple path, linkage or network

• Only two single data fields can be paired– See Exhibit 4.4

Illustrate the development and purpose of the data warehouseDatabase Technology

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Illustrate the development and purpose of the data warehouse

Exhibit 4.4

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• Two Types of Database Processing Systems– Relational Databases System

• Requires no direct relationship between data fields

• Uses tables with rows and columns• Tables not the data fields are linked together

– See Exhibit 4.5

Illustrate the development and purpose of the data warehouseDatabase Technology

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Illustrate the development and purpose of the data warehouse

Exhibit 4.5

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• Data Warehouse– Central Repository– Two Purposes

• Collect and store data– Operational Data– Online Transactional Processing (PLTP)

• Collect, organize and make data available– Informational Data– Online Analytical Processing (OLAP)

– Comparable to a Library

Illustrate the development and purpose of the data warehouse

What is Data Warehousing?

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• Marketing-Related Data and Data Warehousing– Two Unique Forms of Customer Data

• Real-time transactional data– Collected at the point of sale

• Customer-volunteered information– Customer comment cards or complaints– Customer registration information– Customer communications via chat rooms– Data obtained through advisory groups

Database Technology and Data Warehousing

Illustrate the development and purpose of the data warehouse

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– Data Mining• Process of finding hidden relationships among

variables contained in data stored in the data warehouse

– Analysis Procedure• Known primarily for the recognition of

significant patterns of data for particular customers or customer groups

Explain the process of data mining as it relates to the data warehouse

Data Mining: Transforming Data Into

Information

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Explain the process of data mining as it relates to the data warehouse

Exhibit 4.6

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• Marketing Research Question– Description– Prediction

• Data Mining Approaches– Profile groups– Predict customer satisfaction levels

Database Technology and Data Warehousing

Explain the process of data mining as it relates to the data warehouse

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• Data Mining Implementation– Identifies

• Method for storage and categorization of data

– Data Mining Approach

• Visual Data Mining– Presentation of the results– Access and comprehension of the results

of analysis

Database Technology and Data Warehousing

Explain the process of data mining as it relates to the data warehouse

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• Database Modeling and Analysis– Statistical Analysis– Designed to Summarize– Customer Modeling– Question that should be asked

• Scoring Models– Used to predict– Initial object

Database Modeling Understand the role of modeling in database analysis

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Exhibit 4.8 Understand the role of modeling in database analysis

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– Key Variables in Scoring Models• Enable researcher to determine which factors

can be used to separate customer into purchase groups

– Use weights to multiply assigned values– Use actual purchase behavior data– Key variables

» Assign weights or scores depending on ability to predict purchase behavior

Understand the role of modeling in database analysisDatabase Modeling

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• Lifetime Value Models– Premise– Lifetime Value Models

• Price variables• Sales promotional variables• Advertising expenditures• Product costs• Relationship-building efforts

– Database Information• Used to identify most profitable customers

Understand the role of modeling in database analysisDatabase Modeling

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Understand the role of modeling in database analysisExhibit 4.9

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• Value of Customer Relationship Management

• Essentials of Customer Relationship Management

• Marketing Research and Customer Relationship Management

• Transforming Marketing Research Into Market Intelligence

• Data Collection in a CRM Environment

• Marketing Research and Customer Management: The Database Process

Summary

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• Marketing Research and Data Enhancement

• The Dynamics of Database Development

• Database Technology

• What Is Data Warehousing?

• Data Mining: Transforming Data Into Information

• Database Modeling

Summary