Retail Mgmt Ch 11

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Retail Mgmt Ch 11
2012-05-18 13:50:09
Customer Relationship ManaCustgement

FIT Retail Management Final
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  1. Customer Relationship Management (CRM)
    • A business philosophy and set of strategies that focus on identifying and building loyalty with a retailer's most valuable customers
    • Retailers use targeted promotions aimed to increase their best customer's share of wallet
  2. Share of wallet
    The percentage of a customer's purchases made from a particular retailer
  3. Customer loyalty
    • Committed to purchasing merchandises and services from a retailers
    • Resist efforts of competitors to attract them
    • Emotional attachment to the retailer
  4. Can offering price discounts achieve customer loyalty?
    • NO! Because it can be copied by competitors
    • Not a competitive advantage
    • Encourage customers to always be looking for a better deal rather than developing a relationship with a retailer
  5. The CRM process
    • 1) Collect customer data
    • 2) Analyze the customer data and identify target customers
    • 3) Develop CRM programs
    • 4) Impement CRM programs
  6. Info in a customer database
    • Transactions: history of purchases
    • Customer contacts or touch points: visits to website, calls, direct mail
    • Customer preferences
    • Descriptive information: demographics, psychographics
    • Customer's responses: to marketing activities
  7. Ways to obtain consumer info for databases
    • Asking for identifying info (name, phone, address)
    • Offering frequent shopper cards, loyalty programs
    • Connecting Internet purchasing data with the stores
  8. Privacy concerns
    • Control over information collected - what information is collected?
    • Control over use of information - will it be shared with third parties?
    • Electronic channel - cookies
  9. FTC Guidelines for Fair Information Practices
    • Notice and awareness
    • Choice/consent
    • Access/participation
    • Integrity/security
    • Enforcement/redress
  10. Data mining
    • Technique used to identify patterns in data
    • Market basket analysis
    • Identifying market segments
    • Identifying best customers
  11. Market Basket Analysis
    • Data analysis focusing on the composition of the customer's market basket
    • What items are bought during a single shopping trip?
    • Uses: adjancies for displaying merchandise, joint promotions (ex, bananas in cereal aisle)
  12. Identifying best customers
    • Estimating lifetime value (LTV)
    • Use past behaviors to forecast future purchases, the gross margin from these purchases, and the costs associated with servcing the customers
    • Classifying customers by recency, frequency, and monetary value of purchases (RFM analysis)
  13. Lifetime Value (LTV)
    The expected contribution from the customer to the retailer's profits over his/her entire relationship with the retailer
  14. Customer pyramid
    • Platinum (best, most loyal, least price sensitive = most profitable)
    • Gold (next best, not as loyal)
    • Iron (doesn't deserve as much attention)
    • Lead (negative LTV value = least profitable)
  15. RFM analysis
    • Used by catalog retailers and direct marketers to segment customers based on...
    • Recency: how recently customers have made a purchase
    • Frequency: how frequently they make purchases
    • Monetary: how much they have bought
  16. Developing CRM programs
    • Retaining best customers
    • Converting good customers into best customers
    • Getting rid of unprofitable customers
  17. Customer retention
    • Frequent shopper programs
    • Special customer services
    • Personalization
    • Community
  18. Elements in effective frequent shopper programs
    • Tiered rewards based on customer value
    • Offer choices of rewards
    • Reward all transactions to ensure the collection of all customer transaction data and encourage repeat purchases
    • Transparent and simple so that customers easily understand when they will receive awards
  19. Customer alchemy
    Converting iron and gold customres into platinum customers
  20. Add-on selling
    • Way to achieve customer alchemy
    • Involves offering and selling more products and services to existing customers and increasing retailer's share of wallet with them
    • Ex: Martha Stewart selling Everyday Food, sheets, paint, etc.
  21. Dealing with unprofitable customers
    • Offer less costly approaches for dealing with them
    • Charge customers for extra services demanded
  22. Frequent-shopper program
    A reward and communication program used by a retailer to encourage continued purchases from the retailer's best customers
  23. 1-to-1 retailing
    Developing retail programs for small groups or individual customers