The Cost of Acquiring Customers

Customer relationship management (CRM) is the infrastructure that enables the

delineation of and increase in customer value, and the correct means by which to
motivate valuable customers to remain loyal—indeed, to buy again.

Customer Loyalty
• In a recent survey, of the companies actively implementing CRM, 93 percent
claimed increased loyalty and customer satisfaction would justify their CRM
investment.
• The second-highest percentage, 83 percent, stated the need to demonstrate
increased revenue.
• Treating customers like cattle is the antithesis of CRM, the goal of which is to
recognize and treat each customer as an individual.

Optimizing the Customer Experience

 Web Options
• 24-hour access
• Up-to-the-minute information (on, for example, stock levels, product features, and prices)
• The ability to research a product or merchant during a shopping trip
• Online customer support
• Online self-service
• Personalized content

CRM Related Terms

• eCRM (alternatively, e-CRM) - “electronic” customer relationship management
• ECRM - “enterprise” CRM
• PRM - partner relationship management
• cCRM - collaborative CRM
• SRM - supplier relationship management
• mCRM - mobile CRM
• xCRM - CRM hybrids
 Operational CRM

Customers

Customer Call Web Direct

E-mail Usage Fax
Touchpoints center Access Sales

Refined Business Actions

 Analytical CRM
Refined Business Activities

Analysis Business Process

Intelligence Improvement

Information Integrated Database

Accounts
Business Billing Payable/ Call Center
Systems Receivable

Provisioning Sales
 From Product to Customer

Launch
Did people
New Product Marketing
buy it?
Campaign
Yes No

Repackage/
Monitor
Rebrand
Revenues
Product

Launch
Adjust Revised
Pricing Campaign
 Target Marketing
Customer Categories
• Geography
• Psychographics - groups of customers with similar interests, opinions, and preferences
• Firmographics - characterize a business and are used especially often in business-to-business (B2B)
communications
• Infographics - delineate customers according to how they want to be communicated with, as well as how
they prefer to interact with the company
• Preferred sales channel
• Profitability
• Number of products
• Sales territory
• Tenure
• Lifetime value
• Household demographics
• Risk score
• Life stage
• Privacy preferences
 Propensity to Buy Segmentation

Segment Early Adopters Pragmatists Skeptics Laggards

Will purchase new Await mass-
Most likely to buy Only purchase if value
products after value is acceptance of product
newly offered is proven. Chances
well understood. prior to purchase. Not
products and services. increase with rebates
Description Might need to see the likely to respond to
Especially attracted to or money-back
product in action. new promotions.
technology innovation guarantees.

Percentage of
11 46 28 15
Customer Base
 Refining Marketing Campaigns
Customer Interaction
Customer New
Response Campaign

Behavior
Analysis
 Relationship Marketing and One-to-One
Marketing Evolution
Mass Marketing Market Segmentation Relationship Marketing
• Product-focused • Group-focused • Customer-focused
• Anonymous • General category profiles • Targeted to individuals
• Few campaigns • More campaigns • Many campaigns
• Wide reach • Smaller reach • Discrete reach
• Little or no research • Based on segment analysis or • Based on detailed customer
• Short-term demographics behavior and profiles
• Short-term • Long-term
• Finding, entering, storing, and tracking individual customer data records was beyond
most companies' capabilities, not to mention their budgets
• The sheer labor involved in launching new marketing campaigns, rendered all the
more difficult with the increasing frequency of smaller, more targeted promotions

Determine Determine Analyze

Conceive Plan Launch
Who How Results

Time
 Conceive

Analyze
Plan
Results

Determine
Launch
Who

Determine
How
 Components of a Full Campaign Lifecycle
• Campaign definition
• Planning
• Customer segmentation
• Scheduling
• Response management
• Opt-in versus opt-out processing
 Cross-Selling and Up-Selling
• Cross-selling is the act of selling a product or service to a customer as a result of
another purchase.
• Up-selling is motivating the existing customers to trade up to more profitable products

Customer Retention
• Analyzing customer attrition operates on the fact that keeping an existing customer is
far more cost effective than acquiring a new one
• Currently, companies are using sophisticated predictive technologies that compare like
attributes of similar customers to delineate customers who are “likely to churn,” and
they're simultaneously personalizing tailored marketing interactions designed to
motivate those customers to stay
• While they figure out the best way to keep customers who are on the brink of leaving,
companies are working on designing marketing campaigns to bump low-value
customers to a higher value band rather than allowing them to churn by default.
 Behavior Prediction
• Propensity-to-buy analysis. Understanding which products a particular customer is likely to
purchase.
• Next sequential purchase. Predicting what product or service a customer is likely to buy
next.
• Product affinity analysis. Understanding which products will be purchased with other
products. Also known as “market basket analysis,” it can be viewed as examining products in
a shopper's basket to understand possible product associations.
• Price elasticity modeling and dynamic pricing. Determining the optimal price for a given
product, often for a given customer or customer segment.
Marketing Decisions
• Preemptively offering discounts or fee waivers to existing customers who are at risk of
churning
• Refining target marketing campaigns to smaller customer segments or specific products
• Packaging certain products together and fixed-pricing them to sell more products and
increase their profitability
• Cross-selling products likely to be purchased with other products
 Customer Profitability and Value Modeling
• A customer can be unprofitable but could have referred three high-value customers to
your firm, thereby rendering himself very valuable.
• Customer value is a pregnant phrase, variously referring to a customer's lifetime value
(LTV), potential value, or competitive value (also known as wallet share).
• The challenge of value modeling is that it is only as accurate as the customer data is
rich—and the analysis statistically robust.

Channel Optimization
• Channel management means optimizing a company's “inbound” channels with its
“outbound” means of customer interaction and knowing how to choose the best
approach for each.
 Personalization
• Personalization technologies can tailor messages to individual customers, accessing
current personal data each time the customer visits the site and using it to create
custom content
• Personalization in the B2C space is largely based on the analysis of a customer's
clickstreams, his navigation path through a company's Web site
• Changes to Web impressions (images on the Web site) according to a customer's
navigation patterns and past purchases
• Custom promotions or discounts based on past purchases or research
• Customized Web pages according to the visitor's use of the site
 Event-Based Marketing
• Event-based marketing is a time-sensitive marketing or sales communication reacting to
a customer-specific event.
• Event-based marketing—also called event-driven marketing—can apply to a segment of
customers or to individual customers.
• The ideal goal of event-based marketing is to be able to react to customer events in
near real-time, soon after the actual event occurs.
• Event-based marketing requires solid process automation and a well-calibrated
workflow to be effective.
• The term “event-based marketing” is often used erroneously to replace “life stage” or
“life event” marketing, in which a company determines where a customer is in the
continuum of her life span in order to deliver the appropriate marketing message.

Customer Privacy
 Call Centers
• Call center technologies entered the marketplace to effectively alleviate some of the repeat
work and increase efficiencies, allowing companies to handle escalating call volumes
Call Routing
• Because performance remains the central metric of contact center success, minimizing the
time a customer waits on hold for a CSR stays a top priority.
• “Load balancing” (the ability of the network to automatically route a customer's call to the
first available operator) is a critical operational objective.
• This automatic call distribution not only reduces the time a customer stays on hold by
efficiently routing calls to available agents, but it can also apply intelligence about the
customer to its decision about where to route a call.
• More sophisticated automatic call distribution, also known as precision call distribution,
facilitates calls to be routed to agents who have access to specific information or with
particular areas of expertise.
• Interactive voice response (IVR) systems provide round-the-clock routing based on a
customer's response to questions typed on her telephone keypad.
 Contact Center Sales Support
Web-Based Self-Service
• Most Web sites have made FAQs—Frequently Asked Questions
• It can also mean the inclusion of a “Call me” button that allows the customer to request an
in-person conversation with a company representative
• “Live person chat” features bring customer support to real time; customers with a single
phone line need not log off the Web site to call an 800 number.

Customer Satisfaction Measurement

• Such survey forms not only monitor customer satisfaction, but detailed questions are often
personalized to specific customers or customer segments.
• Such tracking of customer satisfaction over time enables a company to fine-tune how it
communicates with its customers according to their preferences.
 Electronic Surveys
• What will make customers return to a company's Web site
• How customers found the site
• Why customers did or didn't make a purchase during the visit
• Why customers did or didn't register on the site
• Which features the customers found particularly useful onsite
• How the customers' impressions about the company or the brand was affected by this visit
• How customers would rate the site in comparison to the Web sites of the company's
competitors

Call Scripting
• The reason for the contact
• The customer's value
• Cross-selling opportunities and propensity-to-buy data
• Current product promotions or discounts
• Past-due bills or accounts payable issues
 SFA Categories
• Sales Process/Activity Management
 Sales process management - include a sequence of sales activities that can
guide sales reps through each discrete step in the sales process
 Activity management tools offer calendars to assist in the planning of key
customer events such as proposal presentations or product demonstrations
 The ability to oversee activities within the sales process enables management
staff to schedule and assign discrete tasks, in effect, automating both an
individual and organizational to-do list
• Sales and Territory Management
 Enable managers to set up sales teams and link individuals to accounts,
regions, and industries
 Sales managers can track territory assignments and monitor pipelines and
leads for individual territories
 SFA Categories
• Contact Management
 Deals with organizing and managing data across and within a company's client and prospect
organizations
 The real value of contact management CRM is in its capability to track not only where
customers are but also who they are in terms of their influence and decision-making clout
• Lead Management
 Lead management (also known as “opportunity management” and “pipeline management”)
aims to provide foolproof sales strategies so no sales task, document, or communication falls
through the cracks
 Enable a company's marketing or sales management organization to automatically distribute
client leads to a field or telemarketing rep based on the rep's product knowledge or territory
 SFA tools can track other prospect attributes such as known product interests, discretionary
budget amounts, and likely competitors, providing a real-world view of each lead and its
likelihood of becoming a full-fledged sale
 Bring the sales process full circle, tracking leads against orders to provide a view of close
rates and salesperson productivity
 SFA Categories
• Configuration Support
• Knowledge Management
 Systems that can locate and store such information and provide users with a
means of communicating about and adding to its contents from a single
application are known as knowledge management (KM) systems
 Include a means of granting individuals control or editing rights over a
document to avoid users working on the same material simultaneously
 Provide a history of who has modified material, and when
 Offer a search engine, allowing users easy file lookup by keyword
 Allow users to view various files and documents via a portal that unifies
materials that in fact exist in many different places
 eCRM Evolution
• 10% of a company’s customers account for 90% of the profit
• brick-and-mortar businesses have mastered economies of scale, having learned the
lesson early that a wider variety of well-priced products will draw more customers, and
they are expert at getting rid of nonproductive inventory

Multichannel CRM
• many acknowledged e-commerce best practices are retailers who combine powerful
online features, including customer self-service such as order and shipment tracking,
with an established brick-and-mortar presence, giving customers the experience they
still want
• physical storefront or no, the service orientation of e-commerce leaders aims at giving
customers as many choices as possible, and puts more power in the customer's hands
 CRM in B2B
• constantly searching for solid information they can share with customers and prospects
via Web and FTP sites, e-mail lists, phone calls, whatever it takes
• create a new kind of corporate identity, based not on the repetitive advertising needed
to create “brand awareness,” but on substantive, personalized communications
• the better the organization's current computing power, the more effective will be
integration of the new Web channel into existing operations
• need the best databases, with the highest-quality data, and the applications and
processes necessary to deliver that data, not to mention a cultural willingness to share
data with suppliers and customers