Retail CRM (Consumer Relationship Management)

Retail CRM (Consumer Relationship Management)

RetailingMKTG 3346

Professor Edward Fox

Cox School of Business/SMU

Customer Relationship Management

Recognizes that the customer, rather than individual purchases or contracts, is the source of value to the firmFocuses on customer acquisition and retentionHighlights repeat purchase and loyalty over time as key

goalsRecognizes the importance of customer satisfactionRequires customer data to forecast their response to

potential offerings and manage customers over time

Customer Relationship Management

Relating with few customersEmphasizes sales forceUsually B-to-B

Relating with many customersEmphasis is on purchase historyOften, though not always B-to-C

With retail consumers (i.e., many customers)… The retailer must be able to customizecustomize the product or

price or service offering The retailer must be able to addressaddress consumers

individually

Customer Relationship ManagementOBJECTIVES

Create loyal purchase behavior Customize product and price offerings to target

customers

Increase customer lifetime valuecustomer lifetime value

Mass Marketing

Micro-Marketing

Consumer Targeting Continuum

Segment Marketing

Niche Marketing

Customer Relationship ManagementORGANIZATIONAL REQUIREMENTS

Performance measures Internal incentives Customer information / data architecture

Customer Relationship ManagementPROGRAMS

Card programsDiscountCreditMembership

Specific examplesCatalina coupons catalina marketing

Collaborative filtering (recommenders) amazon.com

Virtual model landsend.com

How can the retailer reward loyalty rather than purchase volume?

Customer Relationship Management LOYALTY PROGRAMS

Loyalty programsLoyalty 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 profitsLess price sensitiveMore purchases per customer – higher share-of-requirements

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 cardsStore credit cardsIdentifiable tender

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

Customer Relationship Management RETAIL CUSTOMER DATA

Most leading retailers use card programs89% 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)

IssuesHow can retailers better exploit consumer data?How can it be used for targeted marketing offers?

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

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.

Customer Relationship Management MARKET BASKET ANALYSIS

A market-basket analysismarket-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.

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?