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Customer Relationship Management: A Database Approach MARK 7397 Spring 2007 James D. Hess C.T. Bauer Professor of Marketing Science 375H Melcher Hall [email protected] 713 743-4175 Class 2

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MARK 7397 Spring 2007. Customer Relationship Management: A Database Approach. Class 2. James D. Hess C.T. Bauer Professor of Marketing Science 375H Melcher Hall [email protected] 713 743-4175. Four Perils of CRM. 1. Implementing CRM before creating a customer strategy. - PowerPoint PPT Presentation

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Page 1: Customer Relationship Management: A Database Approach

Customer Relationship Management:A Database Approach

MARK 7397Spring 2007

James D. HessC.T. Bauer Professor of Marketing Science

375H Melcher Hall [email protected] 743-4175

Class 2

Page 2: Customer Relationship Management: A Database Approach

Four Perils of CRM

1. Implementing CRM before creating a customer strategy

2. Installing CRM technology before creating a customer-focused organization

3. Assuming that high tech CRM is better than low tech

4. Stalking, not wooing, customers

Page 3: Customer Relationship Management: A Database Approach

PotentialRepurchase

Frequency

High Retention Strategy-Loyalty rewards-Communication

Personalization Strategy-Differentiation-Operations

Low CRM has low payoff Acquisition Strategy-Data Analytics-Attract Angels

Low High

Potential Degree of Customizability

1. Implementing CRM before creating a customer strategy

Page 4: Customer Relationship Management: A Database Approach

2. Installing CRM technology before creating a customer-focused organization

Management often has “marketing myopia” (focus on existing products rather than customer needs):

“We are in the business of selling filing cabinets” rather than

“We are in the business of storing and accessing paper records.”

CRM-Forum 2001 study of problems with CRM• Organizational change 29%•Company politics 22%•Lack of CRM understanding 20%•Lack of CRM skills 6%•Software problems 2%

Page 5: Customer Relationship Management: A Database Approach

3. Assuming that high tech CRM is better than low tech

A customer bought a $45,000 Lexus and on the way how from the dealer turned on the radio. He discovered his favorite classical radio stationed was programmed on the first channel button. He pushed the second button and it had his regular news station. The third button had his daughter’s favorite rock station. When he got home, he called the Lexus dealer to ask whether they were psychic. “No,” said the salesperson, “We just had the mechanic note the settings on your trade-in car and set the radio in the your new Lexus for you.”

Page 6: Customer Relationship Management: A Database Approach

4. Stalking, not wooing, customers

Isn’t CRM just capturing names and addresses from customer transactions and then up-selling or cross selling them in the future?

Customers just want there lives made easier.

Page 7: Customer Relationship Management: A Database Approach

Customer Satisfactiondriven by the gap between the customer's expectation of performance and their perceived experience of performance

American Customer Satisfaction Index

Page 8: Customer Relationship Management: A Database Approach

Declining Customer Satisfaction- Examples

Household Appliances

60

65

70

75

80

85

90

1994 1996 1998 2000 2002

-3.5%

Scheduled Airlines

60

65

70

75

80

85

90

1994 1996 1998 2000 2002

-8.4%

Commercial Banks

60

65

70

75

80

85

90

1994 1996 1998 2000 2002

-2.7%

Parcel Delivery

60

65

70

75

80

85

90

1994 1996 1998 2000 2002

-2.5%

Personal Computers

60

65

70

75

80

85

90

1994 1996 1998 2000 2002

-9.0%

Publishing/ Newspapers

60

65

70

75

80

85

90

1994 1996 1998 2000 2002

-12.5%

(American Customer Satisfaction Index) with products and services

Source: http://www.theacsi.org, University of Michigan

Page 9: Customer Relationship Management: A Database Approach
Page 10: Customer Relationship Management: A Database Approach
Page 11: Customer Relationship Management: A Database Approach

Preventing the Premature Death of CRM

CRM from the Consumer’s Viewpoint1. Too many trivial one-to-one relationships is untenable2. Relationships are give and take3. Companies focus on best customers only4. Companies often create rather than solve problems for customers

Relevant Rules of Friendship1. Provide emotional support2. Respect privacy and preserve confidence3. Be tolerant of other friendships

Does CRM court customer friendship?

Page 12: Customer Relationship Management: A Database Approach
Page 13: Customer Relationship Management: A Database Approach

What are some of your examples of delightful customer relationships? Flying Billing Lodging Retail

GE Capital: $25 annual fee for people that did not have at least $25 in interest changes

Schwab answers the phone in 15 seconds for Signature clients with $100,000 assets

Starwood Hotels ejected customers from rooms to make way for “Platinum” club member

Best Buy stocks merchandise that appeals to “angels” and has cut ties to http://www.fatwallet.com/

Is this bad news for consumers?

The New Consumer Apartheid

Page 14: Customer Relationship Management: A Database Approach
Page 15: Customer Relationship Management: A Database Approach

Privacy is valued To a Radio Shack clerk: My zip code's none of your business.

But so is identity At a hotel reception desk: Do you know who I am?

What are Americans Concerned With?*

Loss of personal privacy 56%Healthcare 54%Crime 53%Taxes 52%

* October 2001 Harris Interactive survey

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Page 18: Customer Relationship Management: A Database Approach

Permission Marketing

92% of people surveyed in 2001 feel positively about companies that ask permission before sharing information.

Opting In: Can I send you stuff?Opting On: Will you agree to listen?Opting When: Will you tell me when you will listen?Opting Where: Where do you want to listen?Opting How: How should I reach you?Opting Now: Should I be “always on” for you?

Page 19: Customer Relationship Management: A Database Approach

How should companies interact with reluctant customers?

With Don Peppers, Dr. Rogers co-authored The One to One Future (Currency/Doubleday 1993), celebrating its 11th year in print, was named by Inc. magazine's editor, George Gendron, as "one of the two or three most important business books ever written" and is widely acknowledged as the bible of the customer strategy revolution.

Martha Rogers

Adjunct Professor of Marketing – Duke University Ph.D. University of Tennessee, 1983