Retail Mgmt Ch 11

• 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

The percentage of a customer's purchases made from a particular retailer

• Committed to purchasing merchandises and services from a retailers
• Resist efforts of competitors to attract them
• Emotional attachment to the retailer

• 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

• 1) Collect customer data
• 2) Analyze the customer data and identify target customers
• 3) Develop CRM programs
• 4) Impement CRM programs

• 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

• Asking for identifying info (name, phone, address)
• Offering frequent shopper cards, loyalty programs
• Connecting Internet purchasing data with the stores

• Control over information collected - what information is collected?
• Control over use of information - will it be shared with third parties?
• Electronic channel - cookies

• Notice and awareness
• Choice/consent
• Access/participation
• Integrity/security
• Enforcement/redress

• Technique used to identify patterns in data
• Market basket analysis
• Identifying market segments
• Identifying best customers

• 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)

• 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)

The expected contribution from the customer to the retailer's profits over his/her entire relationship with the retailer

• 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)

• 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

• Retaining best customers
• Converting good customers into best customers
• Getting rid of unprofitable customers

• Frequent shopper programs
• Special customer services
• Personalization
• Community

• 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

Converting iron and gold customres into platinum customers

• 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.

• Offer less costly approaches for dealing with them
• Charge customers for extra services demanded

A reward and communication program used by a retailer to encourage continued purchases from the retailer's best customers

Developing retail programs for small groups or individual customers