Chapter FourChapter Four
Copyright © 2006McGraw-Hill/Irwin
Customer Relationship
Management and the Marketing
Research Process
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• Customer Relationship Management (CRM)– Not a concept or a project– Business strategy
• To understand, anticipate and manage the needs of an organization’s current and potential customers
– CRM• A combination of strategic, process,
organizational, and technological change
Value of Customer Relationship Management
Understand the essential elements that comprise a customer
relationship management program
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• Allied Medical Corp– Strong correlation between customer
satisfaction– 50% of unhappy customers will “bail out”– Knowing your customer and adding value
to their transactions—add profits
Value of Customer Relationship Management
Understand the essential elements that comprise a customer
relationship management program
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• Customer Relationship Management (CRM)– Integration of customer information throughout
the business– Business enterprise
• Must respond to rapidly changing environments• Disrupters
– Internet– Electronic commerce– New types of businesses
• Retaining your current customers cheaper than getting new ones
– ratio 1 to 5 for sales and marketing expenditures– http://www.mannesmann.com http://www.lendingtree.com
The Essentials of CRMDescribe the relationship that exist between marketing research and
customer relationship management
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Exhibit 4.1Describe the relationship that exist between marketing research and
customer relationship management
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– Customer Interaction• Organizations• Centerpiece of CRM Program• Customer Knowledge
The Essentials of CRMDescribe the relationship that exist between marketing research and
customer relationship management
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– CRM begins with the determining of1. Types of relationships with customers
2. Types of interaction required to acquire and capture customer information
3. How to store and integrate the customer data
4. How and when to analyze the information to determine the best customer segments based on profitability
5. How this information is to be disseminated throughout the enterprise
The Essentials of CRMDescribe the relationship that exist between marketing research and
customer relationship management
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• Primary Functions of CRM– To Collect– To Store– To Analyze Customer Interaction
Information • Customer knowledge
Marketing Research and Customer Relationship
Management
Describe the relationship that exist between marketing research and
customer relationship management
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• Marketing Research’s Role– Market Intelligence
• Real-time customer information
– CRM Starts with Customer Knowledge• Understanding the wants and needs of
customers
– Major Use of Customer Knowledge• Assess profitability and provide increased
value to targeted customer segments
Marketing Research and Customer Relationship
Management
Describe the relationship that exist between marketing research and
customer relationship management
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– Marketing Research1. What kind of relationship will add value to the
enterprise’s customers?
2. What is the value perception of the customer segment and how can the value be enhanced?
3. What products, services, and mode of delivery have value to the customer segment?
4. What are customers’ responses to marketing and sales campaigns?
Marketing Research and Customer Relationship
Management
Describe the relationship that exist between marketing research and
customer relationship management
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– MR Captures and Integrates Information• Demographic, psychographic, behavioral and
preference data
– Data Used for Two Purposes• To create customer profiles• To segment customers
– Create a Market Intelligence Culture• silos
Marketing Research and Customer Relationship
Management
Describe the relationship that exist between marketing research and
customer relationship management
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• Customer Information Falls into the 20/80 ratio– MIE Business Model—Granular Data
• Detailed, highly personalized and specifically structured around the individual customer
• Overall goal—capturing and retaining customers
– Customer-centric Approach
Transforming Marketing Research into Market
Intelligence
Understand the meaning of marketing intelligence
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– Strategic Use of Customer Information• Two Key Questions
1. What does my customer value?
2. What is the value of my customer?
• Primary Information Collected
• MR
– Analyzes customer values, likes and dislikes, lifetime value, and profitability
• Information used
– To refine product and service offerings
Transforming Marketing Research into Market
Intelligence
Understand the meaning of marketing intelligence
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– Information Based on Transactional Focus• Exchanges with customers—Window of
Opportunity• Build loyalty
– Enterprise Wide Approach to the Use of Information
• Information at every touchpoint
– Technology Support of the CRM Structure• Link-pin—turning customer data into customer
knowledge
Transforming Marketing Research into Market
Intelligence
Understand the meaning of marketing intelligence
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• Technology– Driving force behind the integration and
sharing of data and the collection of customer data
– Goal• To collect all relevant customer interaction
data• to store the data in the warehouse• To analyze the data
Data Collection in a CRM Environment
Illustrate the process of data collection for a CRM program
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• Accessing Customer Data over the Internet– Passive Data
• Such as geographic and specific user information
– Active Data• User interacts with website• Cookies
– Directed Data• Comprehensive data collected about customers
Data Collection in a CRM Environment
Illustrate the process of data collection for a CRM program
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• What is a Database• Collection of information indicating what
customers are purchasing, how often they purchase, and the amount they purchase
– Database Generated By• Sales invoices• Warranty cards• Telephone calls• Market research projects
Illustrate the development and purpose of the data warehouse
MR and CM: The Database Process
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• Purpose of a Customer Database• To develop meaningful, personal
communication with its customers
– Customer Database– Specific Purpose of Databases
• To improve the efficiency of market segmentation
• To increase the probability of repeat purchases• To enhance sales and media effectiveness• To enable users to measure, track and analyze
customer behaviors
Data Collection in a CRM Environment
Illustrate the development and purpose of the data warehouse
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– Benefits of Databases• Exchanging information with customers• Determining heavy users• Determining lifetime customer value• Building segment profiles
Data Collection in a CRM Environment
Illustrate the development and purpose of the data warehouse
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– Marketing databases answer crucial questions
– Why do some consumers buy our products or services regularly, while others do not?
– How do our products compare with the competition?– What is the relationship between perceived value
and price of the product?– How satisfied are customers with the service level
and support for the product?– What are the comparisons among lifestyles,
demographics, attitudes, and media habits?
Data Collection in a CRM Environment
Illustrate the development and purpose of the data warehouse
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• Data Enhancement• The overlay of information about customers to
better determine their responsiveness to marketing programs
– Three Advantages• Move knowledge of customers• Increased effectiveness• Predicting responses to changing marketing
programs
Marketing Research and Data Enhancement
Illustrate the development and purpose of the data warehouse
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Exhibit 4.2 Illustrate the development and purpose of the data warehouse
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– Effective Development of Enhanced Databases• Geodemographic factors• Attribute data
– Attitudinal data
– Motivational data
• Target market characteristics– Heavy product users versus light users
– Based on demographic, purchase volume and frequency
– Other data points—shopping patterns, advertising effectiveness and price sensitivity
Illustrate the development and purpose of the data warehouse
Marketing Research and Data Enhancement
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• Comprehensive Collection of Interrelated Data– Databases
• Affinity• Frequency• Recency• Amount
• Rule of Thumb in Database Development– Long-term commitment– Width
• Total number of records
– Depth• Overall number of key
data fields
– Resources
Illustrate the development and purpose of the data warehouse
Dynamics of Database Development
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– What is Data• Data Item or Field
– Database Technology• Tools used to transform data into information• Processes data and stores it in a single
databank• Database management system• Data dictionary
Illustrate the development and purpose of the data warehouseDatabase Technology
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• Two Types of Database Processing Systems– Sequential Database System
• Organizes data in a simple path, linkage or network
• Only two single data fields can be paired– See Exhibit 4.4
Illustrate the development and purpose of the data warehouseDatabase Technology
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Illustrate the development and purpose of the data warehouse
Exhibit 4.4
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• Two Types of Database Processing Systems– Relational Databases System
• Requires no direct relationship between data fields
• Uses tables with rows and columns• Tables not the data fields are linked together
– See Exhibit 4.5
Illustrate the development and purpose of the data warehouseDatabase Technology
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Illustrate the development and purpose of the data warehouse
Exhibit 4.5
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• Data Warehouse– Central Repository– Two Purposes
• Collect and store data– Operational Data– Online Transactional Processing (PLTP)
• Collect, organize and make data available– Informational Data– Online Analytical Processing (OLAP)
– Comparable to a Library
Illustrate the development and purpose of the data warehouse
What is Data Warehousing?
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• Marketing-Related Data and Data Warehousing– Two Unique Forms of Customer Data
• Real-time transactional data– Collected at the point of sale
• Customer-volunteered information– Customer comment cards or complaints– Customer registration information– Customer communications via chat rooms– Data obtained through advisory groups
Database Technology and Data Warehousing
Illustrate the development and purpose of the data warehouse
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– Data Mining• Process of finding hidden relationships among
variables contained in data stored in the data warehouse
– Analysis Procedure• Known primarily for the recognition of
significant patterns of data for particular customers or customer groups
Explain the process of data mining as it relates to the data warehouse
Data Mining: Transforming Data Into
Information
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Explain the process of data mining as it relates to the data warehouse
Exhibit 4.6
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• Marketing Research Question– Description– Prediction
• Data Mining Approaches– Profile groups– Predict customer satisfaction levels
Database Technology and Data Warehousing
Explain the process of data mining as it relates to the data warehouse
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• Data Mining Implementation– Identifies
• Method for storage and categorization of data
– Data Mining Approach
• Visual Data Mining– Presentation of the results– Access and comprehension of the results
of analysis
Database Technology and Data Warehousing
Explain the process of data mining as it relates to the data warehouse
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• Database Modeling and Analysis– Statistical Analysis– Designed to Summarize– Customer Modeling– Question that should be asked
• Scoring Models– Used to predict– Initial object
Database Modeling Understand the role of modeling in database analysis
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Exhibit 4.8 Understand the role of modeling in database analysis
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– Key Variables in Scoring Models• Enable researcher to determine which factors
can be used to separate customer into purchase groups
– Use weights to multiply assigned values– Use actual purchase behavior data– Key variables
» Assign weights or scores depending on ability to predict purchase behavior
Understand the role of modeling in database analysisDatabase Modeling
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• Lifetime Value Models– Premise– Lifetime Value Models
• Price variables• Sales promotional variables• Advertising expenditures• Product costs• Relationship-building efforts
– Database Information• Used to identify most profitable customers
Understand the role of modeling in database analysisDatabase Modeling
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Understand the role of modeling in database analysisExhibit 4.9
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• Value of Customer Relationship Management
• Essentials of Customer Relationship Management
• Marketing Research and Customer Relationship Management
• Transforming Marketing Research Into Market Intelligence
• Data Collection in a CRM Environment
• Marketing Research and Customer Management: The Database Process
Summary
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• Marketing Research and Data Enhancement
• The Dynamics of Database Development
• Database Technology
• What Is Data Warehousing?
• Data Mining: Transforming Data Into Information
• Database Modeling
Summary