Retail CRM (Consumer Relationship Management)

1. Retailing MKTG 3346 Retail CRM (Consumer Relationship Management) Professor Edward Fox Cox School of Business/SMU

2. Customer Relationship Management • Recognizes that the customer, rather than individual purchases or contracts, is the source of value to the firm • Focuses on customer acquisition and retention • Highlights repeat purchase and loyalty over time as key goals • Recognizes the importance of customer satisfaction • Requires customer data to forecast their response to potential offerings and manage customers over time

3. Customer Relationship Management • Relating with few customers • Emphasizes sales force • Usually B-to-B • Relating with many customers • Emphasis is on purchase history • Often, though not always B-to-C With retail consumers (i.e., many customers)… • The retailer must be able to customize the product or price or service offering • The retailer must be able to address consumers individually

4. Customer Relationship ManagementOBJECTIVES • Create loyal purchase behavior • Customize product and price offerings to target customers • Increase customer lifetime value Consumer Targeting Continuum Niche Marketing Segment Marketing Mass Marketing Micro-Marketing

5. Customer Relationship ManagementORGANIZATIONAL REQUIREMENTS • Performance measures • Internal incentives • Customer information / data architecture

6. Customer Relationship ManagementPROGRAMS • Card programs • Discount • Credit • Membership • Specific examples • Catalina coupons catalina marketing • Collaborative filtering (recommenders) amazon.com • Virtual model landsend.com How can the retailer reward loyalty rather than purchase volume?

7. Customer Relationship Management LOYALTY PROGRAMS • Loyalty programs are set up to reward customers with incentives such as discounts on purchases, free food, gifts, or even cruises or trips in return for their repeated business. • Retailers use them for three reasons: • to retain loyal customers • to increase loyalty of non-loyal customers • to collect information about them and what they buy Loyal customers are the source of most profits • Less price sensitive • More purchases per customer – higher share-of-requirements

8. Customer Relationship Management RETAIL CUSTOMER DATA • Customer Relationship Management (CRM) is enabled by the gathering and warehousing of consumer data • Retailers gather customer data from: • Frequent shopper or shopper loyalty cards • Store credit cards • Identifiable tender

9. Customer Relationship Management RETAIL CUSTOMER DATA • Retail customer databases are organized collections of data about individual consumers including: • Geographic • Demographic • Behavioral data • Purchase histories • Appended behaviors Databases may enable retailers to gain a competitive advantage Adapted from Prentice Hall

10. Customer Relationship Management RETAIL CUSTOMER DATA • Most leading retailers use card programs • 89% of retail “leaders” in the practice of CRM use card programs (Progressive Grocer, 2001) • However, retailers are not using the resulting data effectively • “The retailers have collected all of this frequent shopper data, but few, if any, attempts have been made to mine the opportunities that it probably presents.” (Shulman 2003) Issues • How can retailers better exploit consumer data? • How can it be used for targeted marketing offers?

11. Customer Relationship Management DATA WAREHOUSING • Data warehousing is the coordinated and periodic copying of data from various sources, both inside and outside the enterprise, into an environment ready for analytical and informational processing • Wal-Mart makes good use of its data warehouse. It should. Experts estimate that it is second in size to that of the U.S. government

12. Customer Relationship Management DATA MINING • Data mining is the process by which insights are derived from vast amounts of data, such as that contained in a data warehouse. • Statistical algorithms are applied to customer data to identify merchandise buying patterns and relationships.

13. Customer Relationship Management MARKET BASKET ANALYSIS • A market-basket analysis is uses data mining techniques to determine what predominant categories individual consumers are buying. • Based on these analyses, Wal-Mart has changed the traditional locations of several items: • Since bananas are the most common item in America’s grocery carts, they sell bananas next to corn flakes (to help sell more cereal) as well as in the produce section. • Kleenex tissues are in the paper-goods aisle and also positioned among the cough and cold medicines. • Measuring spoons are in housewares and also hanging next to Crisco shortening.

14. RETAIL CRM ISSUES • How does the retailer respect the shopper’s privacy while gathering information to respond more effectively to that customer? • What does the retail shopper get out of CRM? Why should (s)he give is the retailer information about (her-)himself? • Should the retailer offer different levels of price or service? What is the advantage of uniformly high prices or customer service? • What is the appropriate level of customization? How much does the retailer gain by individual, rather than store-specific offers? At what cost?