What is CRM

1
What is CRM?

• Customer Relationship Management It is a
  strategy used to learn more about customers'
  needs and behaviors in order to develop stronger
  relationships with them.
• The more useful way to think about CRM is as a
  process that will help bring together lots of
  pieces of information about customers, sales,
  marketing effectiveness, responsiveness and
  market trends.

2
Why do we need CRM?

• Customers count
• Information about customers counts
• Managing that information counts.
• Relationships matter
• But CRM remains elusive to most companies

3
Harrah'sHitting the Jackpot in CRM

• Harrahs Entertainment has the most devoted
  clientele in the casino industry.

4
Building Customer Relationships
Chapter
7

• Relationship Marketing
• Paradigm shift in marketing
• From an acquisition / transaction focus
• Toward a retention / relationship focus
• Focuses on keeping and improving relationships
  with current customers

5
Relationship Marketing

• is a philosophy of doing business, a strategic
  orientation, that focuses on keeping current
  customers and improving relationships with them
• does not necessarily emphasize acquiring new
  customers
• is usually cheaper (for the firm)
• keeping a current customer costs less than
  attracting a new one
• thus, the focus is less on attraction, and more
  on retention and enhancement of customer
  relationships

6
Evolution of Customer Relationships

• Customers as Strangers
• Primary goal attract and acquire
• Customers as Acquaintances
• Primary goal satisfy
• Customers as Friends
• Primary goal retain
• Customers as Partners
• Primary goal enhance

7
Benefits of Relationship Marketing

• Benefits for Customers
• Receipt of greater value
• Confidence benefits
• trust
• confidence in provider
• reduced anxiety
• Social benefits
• familiarity
• social support
• personal relationships
• Special treatment benefits
• special deals
• price breaks

8
Benefits of Relationship Marketing

• Benefits for Firms
• Economic benefits
• increased revenues
• reduced marketing and administrative costs
• regular revenue stream
• Customer behavior benefits
• strong word-of-mouth endorsements
• customer voluntary performance
• social benefits to other customers
• mentors to other customers
• Human resource management benefits
• easier jobs for employees
• social benefits for employees
• employee retention

9
Building Customer Relationships
Chapter
7

• Customer Profitability Segments
• Customers differ in their relationship value
• May not be practical or profitable to meet all
  customers expectations
• 20-80-30 rule

10
20 80 30 Rule
20
20 of your customers
80
Generate 80 of your profit
30
Half of your profit is lost serving the bottom
30 of your customer base
11
Harrahs Customer Profitability Analysis

• Datamining showed that 26 of gamblers who
  visited Harrahs properties generated 82 of
  their revenues.
• As a result, Harrahs shifted focus from how much
  people spent in their casinos during a single
  visit to their potential worth over time.

12
Profitability TiersThe Customer Pyramid
Most profitable customers
What segment spends more with us over time, costs
less to maintain, spreads positive word-of-mouth?
Platinum
Gold
Iron
What segment costs us in time, effort and money
yet does not provide the return we want? What
segment is difficult to do business with?
Lead
Least profitable customers
13
Customer Development at Harrahs

• Cultivates lasting relationships with the
  companys core customers slot players.
• Total Rewards Program
• Customers aspire to higher levels of achievement
  and reward

14
Customer Development at Harrahs
15
Building Customer Relationships
Chapter
7

• Relationship Development Strategies
• Core Service Provision
• service foundations built upon delivery of
  excellent service
• satisfaction, perceived service quality,
  perceived value
• Switching Barriers
• customer inertia
• switching costs
• set up costs, search costs, learning costs,
  contractual costs

16
Relationship Development Model
Customer Benefits Confidence benefits Social
benefits Special treatment benefits
Relationship Bonds Financial bonds Social
bonds Customization bonds Structural bonds
Strong Customer Relationship (Loyalty)
Core Service Provision Satisfaction Perceived
service quality Perceived value
Firm Benefits Economic benefits Customer behavior
benefits Human resource management benefits
Switching Barriers Customer inertia Switching
costs
17
Strategies for Building Relationships

• Relationship Bonds
• financial bonds
• Customer tied to firm through financial
  incentives
• social bonds
• Build long term relationships through social and
  interpersonal as well as financial bonds
• customization bonds
• Mass customization and customer intimacy
• structural bonds
• Most difficult to imitate
• Structural bonds

18
Levels of Relationship Strategies
Stable pricing
Bundling and cross selling
Volume and frequency rewards
1. Financial bonds
Integrated information systems
Continuous relationships
Excellent service and value
2. Social bonds
4. Structural bonds
Personal relationships
Joint investments
Shared processes and equipment
Social bonds among customers
3. Customization Bonds
Customer intimacy
Anticipation/ innovation
Mass customization
19
Strong Customer Bonds
The U.S. Harley Davidson site promotes the
benefits of joining H.O.G. (Harley Owners Group)
20
Customer Loyalty Exercise

• Think of a service provider to who you are loyal.
• What do you do (your behaviors, actions,
  feelings) that indicates you are loyal?
• Why are you loyal to this provider?
• What factors have influenced the formation of
  your loyalty?

21
Words of Wisdom

• "Satisfied customers are apathetic. Loyal
  customers will be your advocate." -- Jeffrey
  Gitomer

22
The Customer Is NOT Always Right

• Not all customers are good relationship
  customers
• wrong segment
• not profitable in the long term
• difficult customers

23
Value-Draining Customers

• Not all customers add value to your company
• Cost of serving these customers costs more than
  your cost of capital
• MUST identify value-draining customers

24
Fire Your Customer!

• In the last economy, owning capacity was your
  source of strategic control. Today there tends to
  be overcapacity around the world. Whats critical
  now is understanding the customer and, whenever
  possible, owning the relationship with the
  customer.
• Adrian Slywotzky, V.P., Mercer Management
  Consulting and author of Value Management (1995),
  The Profit Zone (1998), and Profit Patterns (1999)

25
Customer Relationship Marketing Capital One

• How do they retain customers?
• Have a retention specialist that customers
  speak with before allowing them to cancel
• Offer better deals to keep customers
• Predict why someone is calling, and then route to
  the best person
• We can answer your question before you ask it
• Ran 28,000 experiments last year
• testing new products, new sales pitches, new
  advertising approaches, business models, etc.
• Offer 6,000 different credit cards
• customers like the customized product

26
Customer Relationship Marketing Capital One

• Good at cross-selling
• Every interaction is a selling opportunity
• Half of their customers buy something other than
  just the credit card (insurance, long distance,
  etc.)
• People prefer to buy when they call Capital One,
  not when Capital One calls them
• They invented the teaser rate
• Way to acquire customers

27
Be ROTten

• Be ROTten to all of your customers
• Be as ROTten as you want to be
• Make being ROTten a way of life
• Attributable to Bob Lewis, Keep the Joint
  Running, 8/2/04 www.itcatalysts.com

28
Why Be ROTten?

• Relationships
• Over
• Transactions

29
And If You are ROTten?

• You will have more customers than you can handle
  and can fire the bottom 20 of your customers
  every year.