Master 1 Customer Relationship Consumer Behavior Management Prof. Gisèle Dudognon Elective Prof: Dr. Gisèle DUDOGNON gdudognon@strammacom.com
Academic Profile: PhD in Management (CRM) Executive MBA Master of Research in Management MSc in Information Technologies and Communication BSBA Professional experience: Sales & development - LCL CRM project manager - Virbac Marketing and Communication - IUM Management consultant - Strammacom
Agenda Definition of the concept of CRM Customer orientation Satisfaction & loyalty Customer Value Creation Offering & Brand Customer experience management Pricing strategies CRM segmentation strategies Customer information management Multichannel strategies Segmentation strategies Marketing metrics CRM technologies and project deployment Conclusion
Students evaluation Class exercises Group assignment: Analysis of the CRM strategy of a company of your choice. Groups of 5/6 students max Ppt presentation: 10 mn max!
Students evaluation Group assignment content: Company CRM strategy analysis: Select the company of your choice (preferably one that you have experienced) and explain how it handles customer relationships (increase of satisfaction, development of loyalty, improvement of ROI, etc.). Company can be a bank, insurance company, mobile phone or internet provider, hospitality or catering company, Consultancy Company, goods manufacturers, etc.
Students evaluation Your argumentation should include: A description of the company s activities The customer base structure (which segments are targeted, what are their characteristics, ) Relationship Marketing/CRM activities deployed: loyalty programs, technologies used (cal centers, web-based applications, sales force network, etc. Personal input: do you consider the company s strategy efficient? Are there weaknesses on the way the CRM is implemented/perceived/used/understood..? Conclusion: what have you learned on CRM? What is the aspect that caught your attention the most?
The concept of C.R.M. CUSTOMER RELATIONSHIP MANAGEMENT
Evolution of terms Database Marketing Direct Marketing Interactive Marketing CRM One-to-one Marketing CMR Digital Marketing Relationship Marketing 1960 1980 1990 2000 2007
Pareto s 80:20 rule Roughly 20% of customers often produce 80% of income. 8% of United Airline s travellers generate 43% of their annual income. 9% of American Airlines generate 45% In the credit card market 80% of all transactions are conducted by 25% of all adults. In the hi-tech market, 30% of customers account for 85% of sales - and buy 22 times more than the low-value segment.
Focus on Customer Retention It costs typically 5-10 times more to attract a new customer than keep an existing one A 2% increase in customer retention rates can equal a 50% increase in profitability A 2% increase in retention is equivalent to a 10% reduction in costs Price Waterhouse
Pyramid of relationships
Differential marketing investments Customer: High Value Investment: High Low Value Low
Change in way companies are valued Traditionally: Fixed Assets Liabilities Inventory Goodwill Emerging trend: No. of customers Metrics of customer value Share of customer spend Customer database Predicted lifetime values
Customer Relationship Management 1980s: development of computer sciences 1990s: development of relationship marketing Late 1990s, CRM as a management approach was born CRM is a mix of technology, marketing and management
Customer Relationship Management Relationship Marketing: Creation, development, and valuation of the relationship with the customer. to develop loyalty, to increase profitability
Customer Relationship Management What s a relationship? Commitment Value Trust Between two parties Relationship continuum Transaction Value exchange Partnership
The relationship orientation Interactions must take place between at least two parties; activities of one of the parties influence those of the other and vice versa. A degree of continuity; interactions from the past influence present and future interactions; extend over a longer period of time.
Customer Relationship Management Customer Orientation Superior customer value Loyalty/retention P R O F I T A B I L I T y
CRM Definition 1 the automation of horizontally integrated business processes involving front office customer contact points (marketing, sales, service and support) via multiple, interconnected delivery channels. Source: Metagroup.
CRM Definition 2 a process that addresses all aspects of identifying customers, creating customer knowledge, building customer relationships, and shaping their perceptions of the organisation and its products Source: Gartner.
CRM Definition 3 Building and sustaining customer and infrastructure relationships. It is the integration of customers in the company s design, development, manufacturing and sales processes. All employees need to be in the business of building CRM Source: McKenna.
Customer Relationship Management Process of managing detailed information about individual customers, and carefully managing all customer «touch points» to maximize customer loyalty and profitability
Customer Relationship Management CUSTOMER ORIENTATION
Customer relationship management From product orientation.. Product development Marketing and sales Customer
Customer relationship management to Customer Orientation Marketing Sales Accounting I.T. Customer Finance H.R.M. Production R&D
Product Orientation vs. Market Orientation Company Product Market Missouri-Pacific Railroad Xerox Standard Oil We run a railroad We make copying equipment We sell gasoline We are a peopleand-goods mover We improve office productivity We supply energy Columbia Pictures We make movies We entertain people
From 4Ps to 4Cs Source: Based on Kotler et al., 1999, p. 110
Customer Relationship Management SATISFACTION & LOYALTY
Loyalty Consumer is NOT loyal by definition Different measures: Quantitative indicators: frequency of purchase, sales, not enough Qualitative indicators: word of mouth, referrals, instant feedback, level of satisfaction!
Loyalty A deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.
Loyalty Different kinds of loyalty: By conviction: Customer is highly satisfied experiencing one brand By «laziness»: Customer had experienced several brands but will be loyal to one to avoid waste of time/energy By Risk Aversion: You know what you loose! By Inertia: Customer prisoner of habits, don t search for other alternatives
Managing Customer Loyalty
Strategies to increase loyalty Strategy Action Technics Retention To compel Cross-selling, contracts, Promotion To reward Loyalty programs (miles, points, coupons, samples, Relation To convince Positioning, quality management, marketing-mix
Loyalty & Satisfaction The level of (dis)satisfaction is one determinant of the intensity of loyalty: Actions in case of dissatisfaction: Silence: decrease of purchase, switch to competitors Complaint: feedback to company or negative WOM: customer switches customer stays
Quality Is What We Expect It to Be Expectancy Disconfirmation Model Marketers must manage expectations Don t overpromise When product fails, reassure customers with honesty
Customer satisfaction levels
Customer Satisfaction and Retention Customer Satisfaction, Complaint Behavior, and Customer Retention
CUSTOMER RELATIONSHIP MANAGEMENT CRM MARKETING STRATEGIES
Offensive versus defensive strategies
Customer Relationship Management Strategy of acquisition: Identify your prospects Design their profile Attract them with the adapted offer Strategy of retention: Differentiate customers in terms of need, value to the company Interact with customer to improve your knowledge about their needs and build strong relationships Customize products, services, messages to each customer
Customer Relationship Management Objectives of CRM: Reducing the rate of customer defection: By increasing satisfaction and loyalty or by locking systems
Customer Relationship Management Objectives of CRM: Increasing the longevity of the customer relationship Contracts, long-term subscriptions, loyalty programs
Customer Relationship Management Objectives of CRM: Enhancing the growth potential of each customer: by «share of wallet», cross-selling, and up-selling
Customer Relationship Management Objectives of CRM: Making low-profit customers more profitable or terminating them: By developing volume of sales
Customer Relationship Management Objectives of CRM: Focusing disproportionate effort on highvalue customers Special offers or programs
Customer Relationship Management Problematic CRM strategy Examples Increase loyalty Motivate (re)purchase Feedback on customer satisfaction Implementation of services related to the initial offering Implementation of specific sales conditions Gathering, storage, analysis of information Increase of revenues Diversification of the product/service portfolio
Customer Relationship Management CUSTOMER VALUE CREATION
The Five Cs of Value Creation 1. Comprehend the value for the customers 2. Create value for the customers 3. Communicate the value 4. Convince customers that they must pay for value received 5. Capture value with appropriate price metrics
The Customer Value Creation Process UNDERSTANDING THE VALUE FOR THE CUSTOMER MEASURING THE VALUE FOR THE CUSTOMER MANAGING THE VALUE FOR THE CUSTOMER Demand Analysis Fishbein model Customer Value Management Strategies
Customer value pentadigm Understand the customer Commit to the customer Create customer value Obtain customer feedback Measure and improve value De Bonis, Balinski, Allen (2002)
Pentadigm roadmap DISCOVER IMPROVE COMMIT CUSTOMER VALUE ASSESS CREATE
Customer Value Creation Types of Perceived Benefits Product Benefits Service Benefits Brand/Company Benefits
Customer value creation drivers Product value Service value Personel value Global value Brand value Monetary costs Perceived delivered value Time costs Energy costs Total cost Psychological costs
The Customer Value Creation Process UNDERSTANDING THE VALUE FOR THE CUSTOMER MEASURING THE VALUE FOR THE CUSTOMER MANAGING THE VALUE FOR THE CUSTOMER
Customer Value Creation drivers Product / service value: Fishbein analysis model CRITERIA AND WEIGHTS IN CAR-BUYING DECISION (SCALE OF 1 TO 10)
CUSTOMER VALUE CREATION DRIVERS Assessment of Car Alternatives
CUSTOMER VALUE CREATION DRIVERS Weighting of Vehicles (Assessment Criteria Criteria Weight)
The Customer Value Creation Process UNDERSTANDING THE VALUE FOR THE CUSTOMER MEASURING THE VALUE FOR THE CUSTOMER MANAGING THE VALUE FOR THE CUSTOMER
Customer value creation drivers VALUE PROPOSITION PRODUCT SERVICE BRAND IMAGE How to create and deliver value to the customer? EXPERIENCE PRICE
Customer Value Creation VALUE PROPOSITION
Customer value creation drivers OFFERING BRAND IMAGE How to create and deliver value to the customer? EXPERIENCE PRICE
Customer value creation drivers Value proposition: The whole cluster of benefits the company promises to deliver Positioning / position statement To develop superior offering
From value proposition to commitment Customer Value Segment: who specifically are you targeting? Customer Value: what is the specific value in your offer that addresses the value set of the target audience? Ex: convenient and easy to purchase, transparent pricing Superior Value: what elements of value do you offer that are relevant to the target audience and are better than competing offerings? Ex : cost competitive, easiest to do business with Profitable for the supplier: how are you going to make a profit from the value commitment? Ex : low cost to serve, adherence to clear rules, no confusion Banner headline: how can you express in a few chosen words your customer value commitment? Ex : the fastest and the cheapest delivery service,
Customer value creation drivers Explain in details the components of the (perceived) value proposition of the followings:
THE OFFERING PORTFOLIO The Offering Concept An offering consists of the benefits or satisfaction provided to target markets by an organization It contains the following elements: Tangible Product/Service Related Services Brand Name(s) Warranties/ Guarantees Packaging Other Features
POSITIONING OFFERINGS Positioning by Attribute or Benefit Is the strategy most frequently used Requires determining: Which attributes are important to target markets Which attributes competitors emphasize How the offering can be fitted into this offering-target market environment Accomplished by designing an offering that contains or stresses the appropriate attributes
ATTRIBUTES AND MARKETING SEGMENT POSITIONING Toothpaste Attributes Children Market Segments Teens; Young Adults Family Adults Flavor Color Whiteness of Teeth Fresh Breath Decay Prevention Price Plaque Prevention Stain Prevention Principal Brands for Each Segment Aim; Stripe Ultra Brite; McCleans Colgate; Crest Topol; Rembrandt NOTE: A check ( ) indicates principal benefits sought by each market segment.
STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS Idea Generation Idea Screening Business Analysis Market Testing Commercialization
Concept of co-creation Co-creation is about joint creation of value by the company and the customer. It is not the firm trying to please the customer Creating an experience environment in which consumers can have active dialogue and coconstruct personalized experiences; product may be the same, but customers can construct different experiences
IKEA CONTEST: A way of evaluating and designing experiences in real time The IKEA contest : asked amateur outsiders to send in clever designs for storing home media in the living room. Out of 5,000 ideas submitted, fourteen winners went to the IKEA headquaters to participate in a workshop and receive EUR 2,500, and the designs will actually get produced and end up in IKEA stores for all to see, buy and assemble. TRENDWATCHING 2006