SlideShare a Scribd company logo

Crm retail

•Download as PPT, PDF•
•
D
dyogakrishna

Retailers use customer relationship management (CRM) to build loyalty with valuable customers. CRM involves collecting customer data, analyzing it to identify best customers, developing loyalty programs, and implementing them. Retailers determine best customers through metrics like recency, frequency, and monetary value of purchases. Loyalty programs reward frequent shoppers, while privacy concerns must be addressed to gain customer trust and participation.

1 of 52
Abhishek Mazumdar Danda Yoga Krishna Rohit Suhas Kulkarni Amartya Ghosh Chanakya Retail Marketing - Customer Relationship Management
Questions  What is customer relationship management?  Why do retailers want to treat customers differently?  How do retailers determine who their best customers are?  How can retailers build customer loyalty?  What can retailers do to increase their share of wallet?  What can retailers do to alleviate the privacy concerns of their customers?
Customer Relationship Management (CRM) A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a retailer’s most valuable customers.
CRM All customers are not equally profitable, and more or less profitable customers need to be treated differently Retailers now concentrate on providing more value to their best customers using targeted promotions and services to increase their share of wallet – the percentage of the customers’ purchases made from the retailer
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 Price Discounts Achieve Customer Loyalty? 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
The CRM Process CRM is an iterative process that turns customer data into customer loyalty through four activities: 1. Collecting customer data 2. Analyzing the customer data and identifying target customers 3. Developing CRM programs 4. Implementing CRM programs
CRM Process Cycle
Collecting Customer Data: Customer Database  Transactions – a complete 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  Demographic and psychographic data  Customer’s responses to marketing activities
Collecting Customer Data: Identifying Information Approaches that store-based retailers use:  Asking for identifying information Telephone number, name and address  Offering frequent shopper cards Loyalty programs that identify and provide rewards to customers who patronize a retailer Private label credit card (that has the store’s name on it)  Connecting Internet purchasing data with the stores
Privacy Concerns  Control over Collection  Do customers know what information is being collected  Do customers feel they can decide upon 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
Heighten Privacy Concerns When Using Electronic Channel  Information collected without the awareness of customers  Collecting click stream data using cookies Similar to an invisible person videotaping a customer as they walk through a store
Customer’s Decision to Offer Information Balance benefits and risksDiscounts Special Treatment Personal Attention Disclosure of Information Unwanted Sales Contacts
Protecting Customer Privacy: Differences between U.S. and EU  Limited protection in specific areas  Credit reporting  Video rentals  Banking  Medical records  Opt out: Consumers must explicitly tell retailers not to use their personal information  Limited protection in specific areas  Credit reporting  Video rentals  Banking  Medical records  Opt out: Consumers must explicitly tell retailers not to use their personal information ■ Stringent consumer privacy laws ■ Information only can be collected for specific purposes ■ Purpose must be disclosed to customer ■ Information can only be used for specific purpose ■ Information cannot be exported to countries with less stringent regulations ■ Opt in: Consumers own their personal information, and retailers must get consumers to explicitly agree to share this personal information United States European Union
FTC Guideline for Fair Information Practices  Notice and awareness comprehensive statement about information storage, manipulation, and dissemination  Choice/consent Opt-in and opt-out options  Access/participation Customer able to confirm accuracy  Integrity/security Controls for theft and tampering  Enforcement/redress Mechanism to insure compliance
J.Crew Security and Privacy Policy
Analyzing Customer Data and Identifying Target Customers Analyze the customer database and convert the data into information that will help retailers develop programs for building customer loyalty Data Mining – technique used to identify patterns in data  Market Basket Analysis  Identifying Market Segments  Identifying Best Customers
Market Basket Analysis Data analysis focusing upon the composition of the customer’s market basket – what items are bought during a single shopping occasion Uses:  Adjacencies for displaying merchandise  Joint promotions  Bananas in the cereal aisle as well as in the produce section  Beer with baby dippers  Tissues with cold medicine
Market Basket Analysis Taught Wal-Mart to Change! Product Placed Near Bananas cornflakes, produce Kleenex paper goods, cold medicine Measuring spoons housewares, Crisco shortening Flashlights hardware, Halloween costumes Little Debbie snack cakes coffee Bug spray hunting gear
Identifying Best Customers  Estimating Lifetime Value (LTV)  The expected contribution from the customer to the retailer’s profits over his or her entire relationship with the retailer  Use past behaviors to forecast future purchases, the gross margin from these purchases, and the costs associated with serving the customers  Classifying Customers by recency, frequency, and monetary value of purchases (RFM Analysis)
Which Customer Probably Has the Greatest Lifetime Value Purchases Over Last 10 Weeks 1 2 3 4 5 6 7 8 9 10 Jack $20 $20 $20 $20 $20 $20 $20 $20 $20 $20 Jill $210 $0 $0 $0 $0 $0 $0 $0 $0 $0
Customer Pyramid Platinum Best Most loyal Least price sensitive 80-20 rule: 80% of sales or profits come from 20% of the customers
Customer Pyramid Gold Next best Not as loyal
Customer Pyramid Iron Doesn’t deserve as much attention
Customer Pyramid Lead Have negative LTV value “Lead out”
RFM Analysis Used by catalog retailers and direct marketers Recency: how recently customers have made a purchase Frequency: how frequently they make purchases Monetary: how much they have bought
RFM Target Strategies
Illustration of RFM Application  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?
Illustration of RFM Application  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
Developing CRM Programs Retaining Best Customers Converting Good Customers into Best Customers Getting Rid of Unprofitable Customers
Customer Retention  Frequent Shopper Programs  Special Customer Services  Personalization 1-to1 Retailing  Community
Elements in Effective Frequent Shopper Programs  Tiered rewards based on customer value  Offer choices of rewards  No all customers value the same rewards  Non-monetary incentives, altruistic 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 rewards
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
Personalization
Converting Good Customers into Best Customers  Customer alchemy: converting iron and gold customers into platinum customers  Add-on selling as a way to achieve customer alchemy  Involves offering and selling more products and services to existing customers and increasing the retailer’s share of wallet with these customers  The Oprah Winfrey Show to sell books, movies, and TV specials (Harpo Productions), a cable channel (Oxygen Media), a Web site (www.oprah.com), magazine (O) Shopping Buddy
Dealing with Unprofitable Customers  Offer less approaches for dealing with these customers  Charge customers for extra services demanded
Implementing CRM Programs  Need systems, databases  Close coordination between departments – marketing, MIS, store operations, HR  Shift in orientation Product Centric Customer Centric
11-38
CRM @ RELIANCE RETAIL  CUSTOMER LOYALTY  CUSTOMER RETENTION  CUSTOMER COMMUNICATION  CUSTOMER SATISFACTION
Customer LOYALTY  Reliance ONE Membership  Gets 1 redeemable point  Oppurtunity of Getting 4 Different Insurance
Customer Retention  Zonal Level  Offers & Discounts  Repeated, if it works with Products
Customer Communication  Form of SMS or Email (Reliance One Members)  Organizing Special Events  Thank You & Festive Cards
Customer Gratification  Trained Sales Person  Thank You with  Gifts & Discount Coupons
Problems Faced  Personal Contact Numbers  Policy Less Followed in Small Towns  Common Policy for Reliance Fresh & Mart  Delay in Processing Membership Cards  Long Ques @ Billing Counters
Measures Taken No.Of Billing Counters Increased Adoption of New Technology Store(Brand) Specific Strategies Inform Through SMS Timings to Call
11-46
1. Create A Channel For The Perfect Customer Experience Rather than leave its primary customer interaction to random employees of big box stores, Apple took the risky and expensive step of creating its own chain of retail stores. By creating the Apple store – a store devoted to selling Apple’s own products – Apple created an environment that allowed them to manage every detail of the customer experience and dictate the customer’s interaction with Apple as a brand.
2. Design An Environment For Customers To “Hang Out” Not only did Apple’s retail gambit help them build the most valuable brand in the world, the Apple stores themselves are the most profitable retail spaces in the world, generating an average of $5,600 per square foot of retail space.
3. Minimize Customer Service Problems With Tight Quality Control If you’re going to be one of the world leaders in customer satisfaction, your customer service has to grow from the very core of your company’s business model. No matter how well trained your technical support staff, how friendly your retail staff, no matter how carefully you’ve selected your customer management outsourcing partners, a company that produces shoddy products will have problems with customer loyalty and retention.
4. View Customer Management as a Long Term Investment While tech companies traditionally viewed customer management as an expense to be ruthlessly minimized, Apple viewed it as a long term investment in customer loyalty and brand building. Apple has made important customer-oriented decisions such as refusing to move the heart of its North American phone support offshore, and maintaining a hassle-free approach to replacing broken devices. Studies have shown that these decisions have been directly responsible for Apple consistently placing number one in customer service satisfaction studies. These policy decisions all stem from viewing customer management as a long term investment towards building customer loyalty and improving retention
4. Have A Laser Targeted Business Focus Despite being the richest technology company in the world, Apple only makes a handful of products. In fact, nearly every customer waiting outside an Apple store on the eve of a product launch could likely recite Apple’s entire product line by heart. This is no accident.  Steve Jobs understood that the key to great customer management is to be able to answer the question, “What is our business?”. Perhaps more importantly, Jobs understood that this question had to be asked from the perspective of the customer.
THANK YOU

More Related Content

Crm retail

  • 1. Abhishek Mazumdar Danda Yoga Krishna Rohit Suhas Kulkarni Amartya Ghosh Chanakya Retail Marketing - Customer Relationship Management
  • 2. Questions  What is customer relationship management?  Why do retailers want to treat customers differently?  How do retailers determine who their best customers are?  How can retailers build customer loyalty?  What can retailers do to increase their share of wallet?  What can retailers do to alleviate the privacy concerns of their customers?
  • 3. Customer Relationship Management (CRM) A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a retailer’s most valuable customers.
  • 4. CRM All customers are not equally profitable, and more or less profitable customers need to be treated differently Retailers now concentrate on providing more value to their best customers using targeted promotions and services to increase their share of wallet – the percentage of the customers’ purchases made from the retailer
  • 5. 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
  • 6. Can Offering Price Discounts Achieve Customer Loyalty? 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
  • 7. The CRM Process CRM is an iterative process that turns customer data into customer loyalty through four activities: 1. Collecting customer data 2. Analyzing the customer data and identifying target customers 3. Developing CRM programs 4. Implementing CRM programs
  • 9. Collecting Customer Data: Customer Database  Transactions – a complete 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  Demographic and psychographic data  Customer’s responses to marketing activities
  • 10. Collecting Customer Data: Identifying Information Approaches that store-based retailers use:  Asking for identifying information Telephone number, name and address  Offering frequent shopper cards Loyalty programs that identify and provide rewards to customers who patronize a retailer Private label credit card (that has the store’s name on it)  Connecting Internet purchasing data with the stores
  • 11. Privacy Concerns  Control over Collection  Do customers know what information is being collected  Do customers feel they can decide upon 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
  • 12. Heighten Privacy Concerns When Using Electronic Channel  Information collected without the awareness of customers  Collecting click stream data using cookies Similar to an invisible person videotaping a customer as they walk through a store
  • 13. Customer’s Decision to Offer Information Balance benefits and risksDiscounts Special Treatment Personal Attention Disclosure of Information Unwanted Sales Contacts
  • 14. Protecting Customer Privacy: Differences between U.S. and EU  Limited protection in specific areas  Credit reporting  Video rentals  Banking  Medical records  Opt out: Consumers must explicitly tell retailers not to use their personal information  Limited protection in specific areas  Credit reporting  Video rentals  Banking  Medical records  Opt out: Consumers must explicitly tell retailers not to use their personal information ■ Stringent consumer privacy laws ■ Information only can be collected for specific purposes ■ Purpose must be disclosed to customer ■ Information can only be used for specific purpose ■ Information cannot be exported to countries with less stringent regulations ■ Opt in: Consumers own their personal information, and retailers must get consumers to explicitly agree to share this personal information United States European Union
  • 15. FTC Guideline for Fair Information Practices  Notice and awareness comprehensive statement about information storage, manipulation, and dissemination  Choice/consent Opt-in and opt-out options  Access/participation Customer able to confirm accuracy  Integrity/security Controls for theft and tampering  Enforcement/redress Mechanism to insure compliance
  • 16. J.Crew Security and Privacy Policy
  • 17. Analyzing Customer Data and Identifying Target Customers Analyze the customer database and convert the data into information that will help retailers develop programs for building customer loyalty Data Mining – technique used to identify patterns in data  Market Basket Analysis  Identifying Market Segments  Identifying Best Customers
  • 18. Market Basket Analysis Data analysis focusing upon the composition of the customer’s market basket – what items are bought during a single shopping occasion Uses:  Adjacencies for displaying merchandise  Joint promotions  Bananas in the cereal aisle as well as in the produce section  Beer with baby dippers  Tissues with cold medicine
  • 19. Market Basket Analysis Taught Wal-Mart to Change! Product Placed Near Bananas cornflakes, produce Kleenex paper goods, cold medicine Measuring spoons housewares, Crisco shortening Flashlights hardware, Halloween costumes Little Debbie snack cakes coffee Bug spray hunting gear
  • 20. Identifying Best Customers  Estimating Lifetime Value (LTV)  The expected contribution from the customer to the retailer’s profits over his or her entire relationship with the retailer  Use past behaviors to forecast future purchases, the gross margin from these purchases, and the costs associated with serving the customers  Classifying Customers by recency, frequency, and monetary value of purchases (RFM Analysis)
  • 21. Which Customer Probably Has the Greatest Lifetime Value Purchases Over Last 10 Weeks 1 2 3 4 5 6 7 8 9 10 Jack $20 $20 $20 $20 $20 $20 $20 $20 $20 $20 Jill $210 $0 $0 $0 $0 $0 $0 $0 $0 $0
  • 22. Customer Pyramid Platinum Best Most loyal Least price sensitive 80-20 rule: 80% of sales or profits come from 20% of the customers
  • 25. Customer Pyramid Lead Have negative LTV value “Lead out”
  • 26. RFM Analysis Used by catalog retailers and direct marketers Recency: how recently customers have made a purchase Frequency: how frequently they make purchases Monetary: how much they have bought
  • 28. Illustration of RFM Application  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?
  • 29. Illustration of RFM Application  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
  • 30. Developing CRM Programs Retaining Best Customers Converting Good Customers into Best Customers Getting Rid of Unprofitable Customers
  • 31. Customer Retention  Frequent Shopper Programs  Special Customer Services  Personalization 1-to1 Retailing  Community
  • 32. Elements in Effective Frequent Shopper Programs  Tiered rewards based on customer value  Offer choices of rewards  No all customers value the same rewards  Non-monetary incentives, altruistic 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 rewards
  • 33. 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
  • 35. Converting Good Customers into Best Customers  Customer alchemy: converting iron and gold customers into platinum customers  Add-on selling as a way to achieve customer alchemy  Involves offering and selling more products and services to existing customers and increasing the retailer’s share of wallet with these customers  The Oprah Winfrey Show to sell books, movies, and TV specials (Harpo Productions), a cable channel (Oxygen Media), a Web site (www.oprah.com), magazine (O) Shopping Buddy
  • 36. Dealing with Unprofitable Customers  Offer less approaches for dealing with these customers  Charge customers for extra services demanded
  • 37. Implementing CRM Programs  Need systems, databases  Close coordination between departments – marketing, MIS, store operations, HR  Shift in orientation Product Centric Customer Centric
  • 38. 11-38
  • 39. CRM @ RELIANCE RETAIL  CUSTOMER LOYALTY  CUSTOMER RETENTION  CUSTOMER COMMUNICATION  CUSTOMER SATISFACTION
  • 40. Customer LOYALTY  Reliance ONE Membership  Gets 1 redeemable point  Oppurtunity of Getting 4 Different Insurance
  • 41. Customer Retention  Zonal Level  Offers & Discounts  Repeated, if it works with Products
  • 42. Customer Communication  Form of SMS or Email (Reliance One Members)  Organizing Special Events  Thank You & Festive Cards
  • 43. Customer Gratification  Trained Sales Person  Thank You with  Gifts & Discount Coupons
  • 44. Problems Faced  Personal Contact Numbers  Policy Less Followed in Small Towns  Common Policy for Reliance Fresh & Mart  Delay in Processing Membership Cards  Long Ques @ Billing Counters
  • 45. Measures Taken No.Of Billing Counters Increased Adoption of New Technology Store(Brand) Specific Strategies Inform Through SMS Timings to Call
  • 46. 11-46
  • 47. 1. Create A Channel For The Perfect Customer Experience Rather than leave its primary customer interaction to random employees of big box stores, Apple took the risky and expensive step of creating its own chain of retail stores. By creating the Apple store – a store devoted to selling Apple’s own products – Apple created an environment that allowed them to manage every detail of the customer experience and dictate the customer’s interaction with Apple as a brand.
  • 48. 2. Design An Environment For Customers To “Hang Out” Not only did Apple’s retail gambit help them build the most valuable brand in the world, the Apple stores themselves are the most profitable retail spaces in the world, generating an average of $5,600 per square foot of retail space.
  • 49. 3. Minimize Customer Service Problems With Tight Quality Control If you’re going to be one of the world leaders in customer satisfaction, your customer service has to grow from the very core of your company’s business model. No matter how well trained your technical support staff, how friendly your retail staff, no matter how carefully you’ve selected your customer management outsourcing partners, a company that produces shoddy products will have problems with customer loyalty and retention.
  • 50. 4. View Customer Management as a Long Term Investment While tech companies traditionally viewed customer management as an expense to be ruthlessly minimized, Apple viewed it as a long term investment in customer loyalty and brand building. Apple has made important customer-oriented decisions such as refusing to move the heart of its North American phone support offshore, and maintaining a hassle-free approach to replacing broken devices. Studies have shown that these decisions have been directly responsible for Apple consistently placing number one in customer service satisfaction studies. These policy decisions all stem from viewing customer management as a long term investment towards building customer loyalty and improving retention
  • 51. 4. Have A Laser Targeted Business Focus Despite being the richest technology company in the world, Apple only makes a handful of products. In fact, nearly every customer waiting outside an Apple store on the eve of a product launch could likely recite Apple’s entire product line by heart. This is no accident.  Steve Jobs understood that the key to great customer management is to be able to answer the question, “What is our business?”. Perhaps more importantly, Jobs understood that this question had to be asked from the perspective of the customer.

Editor's Notes

  1. Despite the incredible profitability of Apple stores, the majority of customers that enter an Apple store don’t actually make any purchases. Instead, teenagers, young professionals, and middle aged parents all congregate to the Apple store to hang out and play around with Apple’s cool new products. Rather than have their staff pressure customers into sales, customers are greeted by smiling, knowledgeable, passionate employees who encourage customers to experience the product. Apple managed to turn shopping for computers and phones into an enjoyable customer experience.
  2. While high quality standards are a must for any major consumer electronics company, Apple has taken quality control to a new level. Apple is well known for exercising tight control over every aspect of their business, from the famous veil of secrecy that shrouds upcoming products, to their notorious control over the iOS. This has allowed Apple an unprecedented level of control over the user experience and allowed them to stand in a class of its own when it comes to customer satisfaction. Apple has taken unprecedented steps to ensure that the user experience for their smart phones and tablets are strictly controlled at a scale never before seen in mainstream operating systems. In their App store, Apple vets every piece of software before it can be installed onto an iOS device. Apple was even willing to neglect support for Flash – a piece of multimedia software required to view more than 75% of all video on the web – in their iOS software. Despite initial user uproar, Apple was willing to make this decision for the sake of maintaining a quality environment for users of their iPhone and iPad products. This unprecedented level of quality control has contributed significantly to the famous user-friendliness of Apple’s products, and ensures that Apple’s support staff and customer management outsourcing partners are rarely flooded with support requests
  3. Steve Jobs understood that Apple was delivering more than just computers, phones and portable music players, Apple was delivering cool, elegant, reliable products that stood out from the crowd, and thus allowed its users to stand out from the crowd. By focusing only on delivering this experience to customers, Apple was able to build incredible – nearly fanatical – customer loyalty and user satisfaction. Whether you’re working with an in house customer management team or a customer management outsourcing partner, it’s crucial that everyone from senior managers to customer facing personnel can answer the question: “What is our business to our customer?”. Knowing the answer to this question is the key to developing a customer management strategy that stands apart from the rest.