Lecture Retailing management (6/e): Chapter 11 - Levy Weitz
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Chapter 11
Customer Relationship Management
McGrawHill/Irwin
Retailing Management, 6/e
Copyright © 2007 by The McGrawHill Companies, Inc. All rights reserved.
11-
Retailing Strategy
2
Retail Market Strategy
Financial Strategy
Site Location
Customer Relationship
Management
Retail Locations
Organizational Structure and
HR Management
Information Systems
11-
Customer Relationship Management
3
• A business philosophy and set of strategies,
programs, and systems that focus on identifying
and building loyalty with a retailer’s most
valuable customers.
• What is loyalty? Is it the same thing as liking a
retailer or frequently patronizing a retailer?
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Customer Loyalty
4
• Committed to purchasing merchandise
and services from a retailer
• Resist efforts of competitors to attract the
loyal customer
• Emotional attachment to retailer
– Personal attention
– Memorable positive experiences
– Brand building communications programs
Can Offering Discounts Achieve
Customer Loyalty?
115
No!
Retail strategies like these can
be copied by competitors
These strategies encourage
customers to be always
looking for the best deal
rather than developing a
relationship with a retailer
McGraw-Hill Companies, Inc./Gary He, photographer
11-
CRM Process
6
117
Information About Each Customer in the Database
• History of purchases
• Purchase date, price paid, SKUs bought, whether or not
the purchase was stimulated by a promotion
• Customer contacts by retailer (touch points) --visits to
web site, inquires to call center, direct mail sent to
customer
• Customer preferences
• Descriptive information about customer
• Customer’s responses to marketing activities
Approaches for Collecting
Customer Information
• Need to connection contacts with a specific
customer identifier
• Ask for identifying information
– Telephone number, name and address
• Encourage use of frequent shopper cards
• Link checking account number and/or third
party credit cards to customer
118
11-
Privacy Concerns
• Control over Collection
• Do customers know what
information is being collected?
• Do customers feel they can
decide on the amount and type of
information collected by retailers?
• Control over Use
• Do customers know how the
information will be used by the
retailer?
• Will the retailer share the
information with third parties?
9
Steve Cole/Getty Images
Frequent Shopper Cards
Card is often squeezed out of wallet
Customers forget to bring it to the store
Might not even show it if in a hurry
(c) image100/PunchStock
1110
Heighten Concerns When Using
Electronic Channel
1111
Information collected without
the awareness of customers
Collecting click stream data
using cookies
Similar to an invisible person
videotaping a customer as they
walk through a store
Stockbyte/Punchstock Images
Customer’s Decision to
Offer Information
Disclosure of Information
Unwanted Sales Contacts
Discounts
Special Treatment
Personal Attention
Balance benefits and risks
1112
Consumer Protection Differences
• United States
• Limited protection in
specific areas
–
–
–
–
Credit reporting
Video rentals
Banking
Medical records
1113
European Union
• Information only can only
be collected for specific
purposes
• Purpose must be
disclosed to customer
• Information can only be
used for specific purpose
• Information can not be
exported to countries
with less stringent
regulations
1114
FTC Guideline for Fair Information Practices
Notice and awareness
– comprehensive statement about information storage,
manipulation, and dissemination
Choice/consent
– Opt-in and opt-out options
Access/participation
– Customer able to confirm accuracy
Integrity/security
– Controls for theft and tampering
Enforcement/redress
– Mechanism to insure compliance
1115
J.Crew Security and Privacy Policy
Analyzing Customer Data
1116
Data Mining – technique used
to identify patterns in data.
Market Basket Analysis
Identifying Market Segments
Identifying Best Customers
Ryan McVay/Getty Images
Market Basket Analysis
Data analysis focusing on
the composition of the
customer’s market basket
– what items are bought
during a single shopping
occasion
Uses:
Burke/Triolo Productions/Getty Images
-Adjacencies for displaying merchandise
-Joint promotions
1117
1118
Market Basket Analysis Taught Wal-Mart to Change!
Product
Bananas
Kleenex
Measuring spoons
Flashlights
costumes
Little Debbie snack cakes
Bug spray
Placed Near
cornflakes, produce
paper goods, cold medicine
housewares, Crisco shortening
hardware, Halloween
coffee
hunting gear
Identifying Best Customers
• Estimating Lifetime Value
• Based on assumptions that the
customer’s future purchase behaviors
will be the same as they have been in
the past
• Classifying Customers by recency,
frequency, and monetary value of
purchases (RFM Analysis)
(c) Brand X Pictures/PunchStock
1119
Which Customer Probably Has the
Greatest Lifetime Value
1120
Purchases Over Last 10 Weeks
1 2 3 4 5 6 7 8 9 10
Jack $20 $20 $20 $20 $20 $20 $20 $20 $20 $20
Jill $210 $0 $0 $0 $0 $0 $0 $0 $0 $0
Customer Pyramid
Platinum
Best
Most loyal
Least price sensitive
1121
Customer Pyramid
Gold
Next best
Not as loyal
1122
Customer Pyramid
Iron
Doesn’t deserve
much attention
1123
Customer Pyramid
Lead
Demands attention
May have
negative value
1124
RFM Analysis
1125
