CRM Process

FOCUS ON EXISTING CUSTOMERS According to Reichheld (1996,2001), there are many benefits of customer retention as follows:Acquiring new customers can cost FIVE times more than satisfying and retaining current customers. It requires a great deal of effort to induce satisfied customers to switch away from their current customers. The average company loses 10% of its customers each year. A 5% reduction in the customer defection rate can increase profits by 25% to 85% depending on the industry. The customer profit rate tends to increase over the life of the retained customer due to increased purchases, referrals, and price premiums and reduced operating costs to service.

CRM ProcessCRM is an iterative process that turns customer data into customer loyalty through four sequential steps/ activities as shown in the figure. Collecting Customer DataAnalysing customer data and Identifying target customersDeveloping CRM strategies/programsImplementing CRM strategies/programsLEARNINGACTION

CRM Process Step 1: Collecting Customer Data

For the purpose of constructing customer database, which serves as the foundation for subsequent activities. It contains the following information:

Customer transaction : a complete history of the purchase made by the customer. Customer contacts: a record of the interaction that the customer has had the retailer. Customer preferences: what the customer likes, such as favorite brands, flavors etc. Descriptive information: Demographic and psychographic data describing the customer that can be used in developing market segments. Responses to marketing activities: The analysis of the transaction and the contact data provides information about the customers responsiveness to marketing activities.

How to identify customers?Easy for On-line retailers to identify customers with every transaction as they provide their names and contact information, so that the purchase can be sent to them.

Difficult for Store-based retailers to identify customers because they often pay with cheque, cash or credit card without giving the name and contact information.

Some approaches to identify customers: 1) Asking for identifying information. 2) Offering a frequent shoppers card or membership card. 3) Linking bank account no. and credit cards to customer names. 4) Biometric scanning

CRM Process Step 2 Analyzing Customer data & identifying Target customer Techniques used to analyze data and develop information are: 1) Data mining: It is technique used to identify patterns in data ,typically those patterns that the analysts is unaware prior to searching through the data . It helps in re-directing marketing efforts properly. 2) Market basket analysis: It focuses on composition of the basket or bundle of products purchase by house hold during a single shopping occasion. It helps in finding out where to place merchandise in store.

Segmenting customers - Retailers do not consider all customers equally and do not maintain same quality of relationship with all customer segments.

Bases of segmentation may be the Buyer characteristics, Purchase value over a period of time, LTV, RFM Analysis

CRM Process Step 3. Developing CRM Programmes Frequent shoppers programs: Also called Loyalty programs. These are used to encourage repeat behavior and retailer loyalty. Special customer service: It is provided to high LTV customers to build and maintain the loyalty of platinum customers. Personalization: It refers to the ability to develop the communication and marketing offer for small groups of customers and even specific individual. Companies now economically offers unique and target messages to individual customers. Community: It is to develop a sense of community among customers

Step 4. Implementing CRM programs Effective implementation of CRM programmes requires the close coordination of activities in a retailers organization. MIS department needs to collect, analyze and make the relevant information readily accessible for employees implementing the programs- the front line service providers and sales associates and the marketers responsible for communicating with customers. Human resources management needs to hire ,train and motivate the employees who will be using the information to deliver personalized services.