Chapter 11 details approaches that retailers take to manage relationships with their customers. This chapter presents the following content: Customer relationship management, customer loyalty, can offering discounts achieve customer loyalty?...
Chapter 11 Customer Relationship Management McGrawHill/Irwin Retailing Management, 6/e Copyright © 2007 by The McGrawHill Companies, Inc. All rights reserved 11- Retailing Strategy Retail Market Strategy Financial Strategy Site Location Customer Relationship Management Retail Locations Organizational Structure and HR Management Information Systems 11- Customer Relationship Management • A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a retailer’s most valuable customers • What is loyalty? Is it the same thing as liking a retailer or frequently patronizing a retailer? 11- Customer Loyalty • Committed to purchasing merchandise and services from a retailer • Resist efforts of competitors to attract the loyal customer • Emotional attachment to retailer – Personal attention – Memorable positive experiences – Brand building communications programs Can Offering Discounts Achieve Customer Loyalty? 115 No! Retail strategies like these can be copied by competitors These strategies encourage customers to be always looking for the best deal rather than developing a relationship with a retailer McGraw-Hill Companies, Inc./Gary He, photographer 11- CRM Process 117 Information About Each Customer in the Database • History of purchases • Purchase date, price paid, SKUs bought, whether or not the purchase was stimulated by a promotion • Customer contacts by retailer (touch points) visits to web site, inquires to call center, direct mail sent to customer • Customer preferences • Descriptive information about customer • Customer’s responses to marketing activities Approaches for Collecting Customer Information • Need to connection contacts with a specific customer identifier • Ask for identifying information – Telephone number, name and address • Encourage use of frequent shopper cards • Link checking account number and/or third party credit cards to customer 118 11- Privacy Concerns • Control over Collection • Do customers know what information is being collected? • Do customers feel they can decide on the amount and type of information collected by retailers? • Control over Use • Do customers know how the information will be used by the retailer? • Will the retailer share the information with third parties? Steve Cole/Getty Images Frequent Shopper Cards Card is often squeezed out of wallet Customers forget to bring it to the store Might not even show it if in a hurry (c) image100/PunchStock 1110 Customer Pyramid Platinum Best Most loyal Least price sensitive 1121 Customer Pyramid Gold Next best Not as loyal 1122 Customer Pyramid Iron Doesn’t deserve much attention 1123 Customer Pyramid Lead Demands attention May have negative value 1124 RFM Analysis 1125 RFM Target Strategies 1126 Illustration of RFM Application 1127 • A catalog retailer is deciding which group of customers to send a catalog Based on experience and an RFM analysis of customer database: • Average order size for customers in cell $40 • Contribution margin – 50% • Response rate – 5% • Cost of catalog and mailing -$.75 Illustration of RFM Application 1128 • A catalog retailer is deciding which group of customers to send a catalog Based on experience and an RFM analysis of customer database: • Average order size for customers in cell - $40 • Contribution margin – 50% • Response rate – 5% • Cost of catalog and mailing -$.75 Will the retailer make a profit mailing to this RFM segment? $20.00 contribution x 05 response rate - $.75 cost = $.25 profit per catalog mailed CRM Programs 1129 Retailing Best Customers Converting Good Customers to Best Customers Getting Rid of Unprofitable Customers Customer Retention Programs 1130 • Frequent Shopper Programs • Special Customer Services • Personalization 1-to1 Retailing • Community Royalty-Free/CORBIS Elements in Effective Frequent Shopper Programs • Tier Based on Customer Value • Offer Choices of Rewards – Non-monetary incentives • Reward all Transactions • Transparent and Simple 1131 Issues with Effective Frequent Shopper Programs • • • • Expense Difficulty in Making Changes Impact on Loyalty Questionable Easily Duplicated – Difficult to Gain Competitive Advantage – Need to offer “invisible” benefits 1132 Personalization Hello, Barton Weitz 1133 Dealing with Unprofitable Customers 1134 Offer less approaches for dealing with these customers Charge customers for extra services demanded Don Farrall/Getty Images Implementing CRM Programs 1135 Need systems, databases Close coordination between departments – marketing, MIS, store operations, HR Shift in orientation Product Centric Customer Centric ... occasion Uses: Burke/Triolo Productions/Getty Images -Adjacencies for displaying merchandise -Joint promotions 111 7 111 8 Market Basket Analysis Taught Wal-Mart to Change! Product Bananas Kleenex Measuring... the store Might not even show it if in a hurry (c) image100/PunchStock 111 0 Heighten Concerns When Using Electronic Channel 111 1 Information collected without the awareness of customers Collecting.. .1 1- Retailing Strategy Retail Market Strategy Financial Strategy Site Location Customer Relationship Management Retail Locations Organizational Structure and HR Management Information