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OVERVIEW OF Relationship Marketing in the Millennium Source: http://highered.mcgraw-hill.com/sites/00 70583374 Relationship marketing –Text &Cases, McGraw-Hill Prof.s.shajahan MBA PhD dean,iim Shillong INDIA
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Customer Relationship Marketing CRM

Sep 14, 2014

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Page 1: Customer Relationship Marketing CRM

OVERVIEW OF Relationship Marketingin the Millennium

Source: http://highered.mcgraw-hill.com/sites/0070583374

Relationship marketing –Text &Cases, McGraw-HillProf.s.shajahan MBA PhD dean,iim Shillong INDIA

Page 2: Customer Relationship Marketing CRM

Market place has been evolving under the converging pressures of changing demographics, global politics, economics, technology and so on.

Page 3: Customer Relationship Marketing CRM

PARADIGM SHIFT IN MARKETING

Prominent marketing scholars like Philip Kotler and Frederick Webster have expressed that there has been a shift from a transactions to a relationship focus

Page 4: Customer Relationship Marketing CRM

Customer orientation focus on profitability rather

than sales volumes and emphasis on market

segmentation are gaining

importance.

New trend in marketing has replaced “products

and “services” with “value”

Relationship Marketing concept requires specific

resource commitments, key part of which is

the

use of marketing research,

DRIVING FORCES

Page 5: Customer Relationship Marketing CRM

THEMES FOR NEW MARKETING

The 4Ps are also loosing credibility. They are more production than customer oriented and poses lot of flaws in its definition

A creative process to look at the market;

· Understand potential customer needs and wants

· Consider the basic capabilities of the firm;

· Conceive potential product offerings based on the present and potential capabilities;

· Design and develop products and services for their customers

Page 6: Customer Relationship Marketing CRM

Relationship marketing gives a solution for many problems

Emphasis should be given to create value for chosen customer value segments and gain profitability for the company

The focus on value equity enables the company to assume and exert control over matching customer’s perception with the firm’s objective

Managing the customer as an asset is more critical to a firm’s success

MOVING TOWARDS RELATIONSHIP MARKETING

Page 7: Customer Relationship Marketing CRM

Managers need to create a business model for their organisations that uses technology for strategic purposes

Customers gain near-perfect information on their alternatives, dropping switching barriers dramatically

Direct selling, target marketing, technological marketing and cross selling are some of the successful emerging practices in marketing

INTERGRATING RELATIONSHIP STRATEGIES WITH INFORMATION TECHNOLOGY (IT)

Page 8: Customer Relationship Marketing CRM

ADOPTING RELATIONSHIP MARKEING PRACTICES

Many companies sensing the pulse of the market

trend have opted for relationship marketing practices.

On an average, business firms spend six times more

to acquire customers than they do to retain them

Developments in IT, data warehousing and data

mining have made it possible for firms to maintain a

one-to-one relationship with their customers.Contd….

Page 9: Customer Relationship Marketing CRM

developing customer-centric processes,

selecting and implementing technology solutions,

employee empowerment,

customer information and knowledge generation capabilities and

the ability of the organisation to learn from best practices

Successful implementation of relationship marketing practices requires a strategic approach which encompasses

Page 10: Customer Relationship Marketing CRM

Winning confidence and loyalty of

customers are the prime foci of any

business

Market-driven organisations

excel at retaining their most

valuable customers

Page 11: Customer Relationship Marketing CRM

BASIS OF BUILDING RELATIONSHIP

Establishing a relationship can be divided into

two parts:

· Attracting right type of the customer

· Building relationship with that them in a

mutually beneficial manner

Page 12: Customer Relationship Marketing CRM

Every organisation irrespective of whether it is a service firm or a manufacturing firm should learn to cope with the new competition of the service economy

Relationship marketing makes customers less price sensitive

Mind share analysis and customer satisfaction surveys inputs for building relationship strategies

Customer perceived quality (CPQ) is basically a function of the customer perception of two dimensions viz., technical quality and functional quality

SERVICE COMPETITION

Page 13: Customer Relationship Marketing CRM

BUILDING BRAND EQUITY

Positive associations and predisposition in the

mind of the consumer brought by building

brand equity result in more favorable response

to the firm’s marketing efforts

A brand creates value by creating positive

attitude towards firm’s offer

Page 14: Customer Relationship Marketing CRM

RELATIONSHIP MARKETING AND VALUE CHAIN

The concept of relationship marketing is built

around the concept of customer value and the

value chain

Managing the customer as an asset is

becoming increasingly important where

emphasis is given to customer retention,

lifetime value and customer affinity

Page 15: Customer Relationship Marketing CRM

RELATIONSHIP MARKETING PROGRAMMES

Continuity marketing

Partnering

One-to-one marketing

Integrated telephone marketing

Page 16: Customer Relationship Marketing CRM

STRIVING FOR INTERRACTIVITY

Interactivity results in high lifetime value

Recency is the most powerful predictor

Page 17: Customer Relationship Marketing CRM

RFM MODEL

A customer who has visited the company

website recently (R) and frequently (F), and

created a lot of monetary value (M) through

purchase is the target audience for

e-promotion campaign

Higher the RFM score, more profitable the

customer is

Page 18: Customer Relationship Marketing CRM

CustomerAcquisitionStrategies

Page 19: Customer Relationship Marketing CRM

) A firm should

· focus on each stage in the customer life cycle and develop more touch points for expanding customer relationship

· recognise and act on customer’s uniqueness

) A benchmark estimate of the potential in this strategy is the Life Time value

Page 20: Customer Relationship Marketing CRM

CUSTOMER LIFE CYCLE

Stage 1: Prospects

Stage 2: First-time buyers

Stage 3: Early repeat buyers

Stage 4: Core customers,

Stage 5: Core defectors

Page 21: Customer Relationship Marketing CRM

TARGETING

The Acquisition Tactical Management

(Actman) model helps in detecting

various elements in the customer

acquisition process

The next in the set is to compute

acquisition equity

Page 22: Customer Relationship Marketing CRM

TARGETING

The Acquisition Tactical Management

(Actman) model helps in detecting

various elements in the customer

acquisition process

The next in the set is to compute

acquisition equity

Page 23: Customer Relationship Marketing CRM

Customer profiling is the basis of behaviour-based relationship marketing

Major forms of profiling : · Best customer profiling· Indexing profiling· Regression scoring· Net present value of a new customer

Total new-customer investment as a percentage of sales and profits are critical measures in customer equity

PROFILING

Page 24: Customer Relationship Marketing CRM

The ADD-

ON Selling

Strategies

Page 25: Customer Relationship Marketing CRM

Customer relationship marketing strategies are built

around three core concepts:· Acquisition· Retention· Add-on selling

The concept of add-on selling strategy is derived

from the firm’s ability to· foster better decisions· generate higher profits, and· increase shareholder wealth

Page 26: Customer Relationship Marketing CRM

Add-on selling strategy assumes that not every

potential customer is worth the customer acquisition

investment

Add-on selling depends on many factors like:· Number of add-on offers a firm can

economically

provide per period· Response rate to the product offers· Sales quantity per offer· The cost the company can afford while

making the offer· Size of the customer universe · Margins on the offered product

Page 27: Customer Relationship Marketing CRM

Customer affinity is a combination of

· the relationship a customer has with a

firm and

· the expertise that the customer

believes the firm

possesses

Managing and delivering customer

expectations is one of the major tasks of

the firm

Page 28: Customer Relationship Marketing CRM

Cross-buying analysis

Collaborative filtering

Response modelling

TYPES OF ANALYTICAL METHODS

The impact of marketing mix on customer value analysis are felt in areas of acquisition, retention and add-on selling

Page 29: Customer Relationship Marketing CRM

MARKETING MIX BY STAGE IN THE CUSTOMER LIFE CYCLE

High customer satisfaction or delight

creates an emotional bond with the brand or

company

Add-on selling strategies help companies to

strengthen their bond with customers

Page 30: Customer Relationship Marketing CRM

Information

Technology

(IT)-Enabled

Marketing

Page 31: Customer Relationship Marketing CRM

True relationship marketing

requires a fundamental shift in

attitude towards viewing the

customer as a partner and a

business asset to be managed

Page 32: Customer Relationship Marketing CRM

Each actual or potential

customer is identified as a

record on the marketing

database

DATABASE MARKETING

Page 33: Customer Relationship Marketing CRM

Types of data

· Transaction data

· Product data

· Promotion data

Prospect database

Merging data from different proprietary

sources may result in redundant data

SOURCES AND TYPES OF DATA

Page 34: Customer Relationship Marketing CRM

CHARACTERISTICS OF DATABASE MARKETING

Database marketing is an interactive approach to marketing, which uses individually addressable marketing media and channels

• To extend help to a company's target audience• To stimulate their demand and• To stay close to them by recording and keeping an

electronic database memory of customer, prospect and all commercial contacts, to help improve all future contacts and to ensure more realistic planning of all marketing

Page 35: Customer Relationship Marketing CRM

ADVANTAGES OF DATABASE MARKETING

The use of databases for targeting and analysis is powerful because it enables a shift from third-degree segmentations (or self – selection) to first degree segmentation: the creation of individually tailored offerings based on customer characteristics and behavior. It employs observation rather than inference.

Page 36: Customer Relationship Marketing CRM

CUSTOMER PROFILE DATABASE

Profiling customers (or prospects) is the

process of obtaining detailed information about

them. This information can range from

demographic to psychographic data. The results

of profiling help a firm to determine the best

messages to convey, products to target, and

communications to avoid. There are six main

categories of profile data for a Shopping mall :

Contd…...

Page 37: Customer Relationship Marketing CRM

1. Customer sales potential

2. Customer characteristics

3. Summary of customer acquisition,

retention

and add-on-selling measures

4. Organisational/product charts of various

shops and key personnel

5. Influences and specifiers for the visit and

6. Customer attitudes and motivation to

shop

CUSTOMER PROFILE DATABASE

Page 38: Customer Relationship Marketing CRM

CASUAL MARKETING DATABASES

Casual marketing databases capture data on

the marketing programs offered to individual

prospects and customers. They are

extremely complex to create, because firms

rarely track marketing activities at the

individual-customer level. However, they are

also extremely valuable, because the

information they contain can significantly

improve marketing efficiency and

effectiveness.

Page 39: Customer Relationship Marketing CRM

DATA QUALITY

Data quality is measured by the results of the

surveillance audit carried out by the firm from

time to time. During this period, every customer

or prospect interaction is tracked form different

angles. These contacts sometime may not

generate revenue, but each one can be linked to

an expected or potential monetary value in the

future. Hence the quality of data in the data

warehouse is more important.

Page 40: Customer Relationship Marketing CRM

DATA WAREHOUSES AND DATAMINING

Data mining involves the use of

sophisticated statistical and mathematical

techniques such as cluster analysis,

automatic interaction detection, predictive

modeling, and neural networking. Through

data mining, marketing statisticians can

extract useful information about individuals,

trends, and segments from the mass of data

Page 41: Customer Relationship Marketing CRM

Database marketing help the firm

to focus on the data and

undertake certain analyses like

Deciles and the RFM

The RS Matrix is a tool used to

target defectors

MEASUREMENT IN DATABASE MARKETING

Page 42: Customer Relationship Marketing CRM

TECHNOLOGICALSHIP MARKETING

In technologicalship marketing,

IT tools are used to provide

relationship-building credibility

and opportunities

Page 43: Customer Relationship Marketing CRM

COST EFFECTIVENESS OF MAKING OFFERSTHROUGH DATADRIVEN MARKETING

A well-integrated application of

technology, staff and operations

that respond instantaneously to

customer needs can produce

miraculous results