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Customer Relationship Management (CRM) Chapter 5 Customer Intimacy Learning Objectives The purpose of customer intimacy The importance of high-quality data to CRM performance That the customer database is the foundation for the execution of CRM strategy The issues that need to be considered in developing a customer database How concerned public policy makers are about data protection and privacy issues
Customer Intimacy Customer intimacy is the second of the primary phases of the customer relationship management (CRM) value chain Fig. below. Without that degree of understanding, it is impossible to create and deliver value propositions that you are confident meet customer requirements better than those of competitors. Customer insight enables more intelligent CRM decisions to be made.
Introduction: For CRM to achieve its end goal of customer profitability, high-quality data need to be made available to those involved in implementing CRM at the sales, marketing and service interfaces, and to those who are responsible for developing the overall CRM strategy. Proficiency at acquiring, enhancing, storing, distributing and using customer data is critical to CRM performance. Poor-quality data produces poor-quality decisions.
Building a Customer Database: Seven major steps are there to create building customer database
Define the Database function: It serves two functions: • operational and analytical The operational function of the database is to help in the everyday running of the business. For example: ü A telecoms customer service representative (CSR) needs to access a customer record when she receives a telephone query ü A hotel receptionist needs access to a guest’s history so that she can reserve the preferred type of room: smoking or non-smoking, standard or de-luxe üA salesperson needs to check a customer’s payment history to find out whether the account has reached the maximum credit limit.
Functions of Database: Analytical function of database is to enable companies to optimize the value that they create for and from customers. It enables them to interrogate the data before making decisions. For example: üThe telecoms company might want to target a retention offer to customers who are signalling an intention to switch to a different supplier ü The hotel company might want to promote a weekend break to customers who have indicated their complete delight in previous customer satisfaction surveys üThe sales representative might want to compute his customer’s profitability, given the level of service that is being provided. Customer data are organized into two subsets: operational data resides in Online transactions processing and analytical data resides in OLAP
Define the Information Requirement: The fundamental issue that companies have to ask is: what information do we need in our database so that we can intelligently develop and implement our CRM strategy? Some important questions follow. ü Who are our current customers? ü What are their contact details? ü What do they buy? ü What is their payment history? ü Who else do they buy from? ü What are our customers’ requirements, expectations and preferences across all components of the value proposition, including product, service, channel, and communication? ü Which prospects should we target? What does it cost to recruit new customers? Do these costs vary across different channels? ü What does it cost to serve customers? ü Which customers should we develop? What offers should we make to these customers? ü Which customers should we retain? Which should we sack?
Define the Information Requirement: The people best placed to answer the question ‘what information is needed? ’ are those who interact with customers, and those who have to make strategic CRM decisions. For example, a direct marketer who is planning an event-based campaign might want to know response rates to previous mailings broken down by customer group, the content of those offers, sales achieved by these mailings and the number of items returned unopened. She/he would also want to know: ü The names and addresses of her selected target, ü Their preferred method of communication (Mail? E-mail? Phone? ), ü Their preferred form of salutation (First name? Mr? Ms? ) and ü The types of offer that have been successful in the past. She/he might have a particular offer in mind and want to identify and profile the customers most likely to respond. Operational and analytical needs such as these define the contents of the database.
Customer information fields: Within the CRM databases, several fields (columns) of information about customers are important: üContact data, (name, role: decision making, buyer, influencer, initiator, delivery address, phone number, fax numbers, email, postal address) üContact history, (out bound, inbound) üTransactional history, (what items bought) ü Intentions, (look forward, future needs) ü Needs, (need to understand the reasons of customer buying) ü Benefits, (customer buy products to experience the benefits they create) ü Expectations, (expectations act as comparison standards when the customer has used or consumed your product) ü Preferences and benchmarks. Milller produced a four level hierarchy ………………for classify expectations
Miller four level hierarchy: ü The ideal level: ‘what can be’ ü The predicted level: ‘what will be’ ü The minimum tolerable: ‘what must be’ ü The deserved level: ‘what should be’. This is the level that customers think is equitable or fair given what they have invested in finding and buying the product.
Miller four level hierarchy: ü Parasuraman and his colleagues suggested that customer expectations fall within a zone of tolerance, ranging from ‘what must be’ (minimum tolerable) to ‘what can be’ (desired level) ü Woodruff’s group of researchers suggested that customers are willing to accept a level of performance that falls within a zone of indifference. This zone ranges around the customer’s judgement of what is a reasonable expectation of the supplier. ü The figure suggests that customer expectations can be classified in a number of ways. What customers want ranges from what they ‘need’ to what they regard as ‘ideal’. What customers predict they will experience is generally set at a lower level of expectation from the intolerable to the desired.
Desirable data attributes: Data need to be: ü Shareable ü Transportable from storage location to user ü Data accuracy ü Relevant data ü Timely data ü Data Security ü
Identify the Information Resources: Marketing might have data on: ü Market segmentation ü Customer profiles ü Customer acquisition channels ü Promotional campaign responses ü Product registrations ü Product warranties ü Requests for product information
Data information Resources: Sales might have records on: ü Customer purchasing history, including recency, frequency, monetary value ü Buyers’ names and contact details ü Account number ü Important buying criteria ü Terms of trade: discounts, payment period ü Potential customers (prospects) ü Responses to proposals ü Competitor products and pricing ü Customer requirements and preferences
Data information Resources: Finance may have: ü Credit ratings ü Payment histories Customer service might have records of: ü customer satisfaction levels ü customer complaints, resolved and unresolved ü communication history: dates and issues ü loyalty programme membership and status ü service histories ü service requirements
Secondary and Primary Data ü Secondary data are data that have already been collected, perhaps for a purpose that is very different from the CRM requirement. ü Primary data are data that are collected for the first time, either for CRM or for other purposes Among the data-building schemes that have been used are: competition entries: customers are invited to enter competitions of skill, or lotteries. They surrender personal data on the entry forms subscriptions: customers may be invited to subscribe to a newsletter or magazine, again surrendering personal details
Secondary and primary data: ü Registrations: customers are invited to register their purchase. This may be so that they can be advised on product updates ü loyalty programmes: many companies run loyalty programmes. These enable companies to link purchasing behaviour to individual customers and segments. When joining a programme, customers complete application forms, providing the company with personal, demographic and even lifestyle data
Selection of Database Technology and hardware platform: Data can be stored in a database in a number of different ways: ü Hierarchical ü Network ü Relational Relationship types in relational database ü one to one ü one to many ü many to many The choice of Hardware: ü The size of the database ü Existing Technology ü The number and location of user
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