University of Washington EMBA Program Relationship Marketing

University of Washington EMBA Program “Relationship Marketing & CRM Intro ” Instructor: Elizabeth Stearns

Relationship Marketing • Marketing on the Differences • Marketing with a Memory • Demassifying the Communications Process • Customizing Communications and Products/Services

Relationship Marketing Attributes • • Evolutionary process, not an event Experience-based, not transaction-based Mutually beneficial, two way Emotional and/or logical appeals

Relationship Process Measurement On-going Dialogue Database Support Communication Objectives Customer Segmentation Brand Equity / Promise

Relationship Marketing • Relationship marketing recognizes that prospects and customers can be at different points of awareness, interest and intent-to-buy along the prospectivity continuum • Persuasion is a process: Dialogue precedes purchase/engagement for most products and services

Model of Market Prospectivity Unaware Vague Awareness Category Familiarity Brand Familiarity Passive Consideration Active Interest Purchase Usage

Understand Your Customers • • • Their Demand for Your Product or Service Their Changes over Time Their Growth Needs Their Technology/Personal Service Conundrum Their Available Choices for Solutions Their Value to You!

Some Customers are Worth More! $$ $$ $$$$ $$ $$$$ $ $$

Brand Relevance to Customers “To enhance customer loyalty, a company must strengthen the relationship with the brand” “A focus on loyalty segmentation provides strategic and tactical insights that assist in building strong brands” David Aaker, “Building Strong Brands”

Customer Loyalty • Reduced or No Desire to Switch • Increased Perception of Value / Quality • Reduced Risk of Buying (More) • Trial New Products or Services

Customer Loyalty • Feels Recognized and Special • Volunteers Information • Positive Word of Mouth / Recommends to Others

Satisfaction = Performance minus Expectations

Make Surveys Count! “One of my customers cornered me at a charity board meeting and told me, “I got a call after I picked up my car asking if I was satisfied with the sales experience. Then I got a call after the car was serviced, asking if I was satisfied with the service experience. Finally, another surveyor called several weeks later to check if I was happy with the ownership experience. So when am I going to get a call asking if I’m satisfied with the satisfaction survey experience? ”” Reichheld, The Loyalty Effect

Why Relationship Marketing?

Economic Value to Keeping Customers 2% Retention equals approximately 10% reduction in costs

Why Customers Are More Valuable Over Time Company Profit Price Premium Referrals Reduced Operating Costs Increased Purchases & Higher Balances Base Profit Customer Acquisition Cost Time • Profit Comes from Different Sources Reichheld & Sasser, Jr.

Relationship Marketing Can Increase Lifetime Value • Increase the retention rate • • Increase the referral rate Increase the spending rate Decrease the direct costs Decrease the marketing costs

CRM

The CRM Goal Individual Permission – Based Interaction

The CRM Process Acquire & Retain Interact & Deliver CRM Develop & Customize Understand & Differentiate

Customer Experience Cycle Customer Understanding

Customer Experience Cycle Customer Purchase Cycle Customer Understanding • Stages of the Purchase Cycle • Length of each Stage • Related Complexity of Each Stage • Indicators of When a Customer Enters a Stage • Frequency at Which a Customer Repeats the Cycle • Level of Resources Directed at Each Stage

Customer Experience Cycle Customer Needs Customer Understanding • Information • Convenience • Efficiency • Price • Reputation etc.

Customer Experience Cycle Customer Interaction Opportunities Customer Understanding • Tied to specific stages of the purchase cycle. • Inbound and outbound. • Cross-channel and cross-media. • Situation-driven or driven by a deeper understanding of customer needs and behaviors

Marketing Communications Field Sales Corporate Comm. / Public Relations Customer Value Customer Satisfaction Point of Sales/ Service Customer Understanding Advertising Call Center Web Customer Care Customer Loyalty

CRM Transformation Map Business Focus Products Sales Channels Marketing Services Customers Promotion Management Channel Management Contact Management Customer Management Program Performance Customer Revenues Customer Satisfaction Customer Lifetime Value and Loyalty Targeted Campaigns Segment-Specific Communication Customer-Contact Integration Individual Permission-Based Interaction Data Access Data Maintenance Data Marts Customer Touchpoint Systems Organizational Structure Product Management Place Management Business Metrics Product Performance Place Performance Customer Interaction Mass Transaction Opportunistic Promotion Technology Transaction Processing Data Maintenance

CRM Implementation 1. Situation Assessment – Internal evaluation of your capabilities – External evaluation of the customer’s experience with your org. 2. CRM Gap Analysis – Comparison between an organization's current state and the desired state. It is essential to define the desired customer experience. 3. CRM Action Plan – Cost to implement – Benefit – Feasibility (organizational readiness, senior management acceptance, etc. ) – Time

The Strategy Development and Implementation Process Contention Differing Perspectives Consensus Marketing Finance Human Resources R&D Operations Sales Project Planning Execution Strategy Formulation Program Formulation Creativity Coordination

Designing Offers for Customers Product Delivery Technical Innovation Services Sales Relationship Brand Equity Value Price Time Effort Risk Cost Offer

A Business Focus on Customers Means: • The organization's primary focus is on acquiring, deepening, and retaining customer relationships. • The business model is based on optimizing value delivered to customers to maximize value received from them. • Customers are at the core of the organization's value system, and the unifying force across business units and functions. Business Focus Products Sales Channels Marketing Services Customers

Organizing around CRM • Appoint segment managers, each responsible for acquisition, development, and retention of their customer segment. • Create a cross-functional Customer Relationship department, which will ensure that CRM strategies are successfully implemented across the organization • Implement staff training, performance measurement and compensation based on CRM Organizational Structure Product Management Place Management Promotion Management Channel Management Contact Management Customer Management

Customer Metrics • Customer Revenues – Who are the top customers in terms of revenue? – Are revenues from any customer segment increasing or decreasing? • Customer Satisfaction – For which customer segments has satisfaction increased or decreased? – How do satisfied customers differ from dissatisfied customers? • Customer Loyalty and Value – How can we increase customer profitability? – What drives loyalty for our most profitable customers? How can we increase customer loyal – Which prospects should our organization focus on in order to “clone” our best customers? Business Metrics Product Performance Place Performance Program Performance Customer Revenues Customer Satisfaction Customer Lifetime Value and Loyalty

Developing Customer-Focused Metrics and Analyses • Collect the Right Customer Data • Increase Your Customer I. Q. – Customer Profiling – Customer Segmentation – Customer Valuation • Profitability • Lifetime Value • Share of Wallet – Customer Lifecycle – Customer Attitudes – Customer Changes • Create and Track a Customer Scorecard

Arthur Hughes’ Chrysler Story • Letter to Lee Iacocca • Eastern Region (Baltimore) Sales Manager “Mr Hughes, I have your letter here to Mr Iacocca. Now Mr Hughes, I want to assure you that we do have a database. I’ve looked you up, and you’re on it!”

Arthur Hughes’ Chrysler Story (continued) n db Marketing Conference/Chrysler Exec/ 25 million names “So, you are in charge of the Chrysler database? ” “Yes, I am. ” “Well, tell me. What are you doing with your database? ” “Oh, ” he said, “we have it on a UNIX platform. ” !!!!!!

Two Kinds of Database People • Constructors People who build databases Merge/Purge, Hardware, Software • Creators People who understand strategy Build loyalty and repeat sales • You need both kinds!

Right Side Quality First Customer Focus Customer First Service Quality Customer Satisfaction CEO’s Brain Left Side Costs Revenues Market Share Budgets Incentives Compensation Strategic Plans Profits Market Value

A CRM System is: • Any application that supports the collection, cleansing, and maintenance of, and/or access to, customer information, and that provides this information to appropriate entities in support of CRM applications. Including… • Customer databases • Marketing applications • Data mining applications • Sales force automation systems • Customer care applications • Online applications Technology Transaction Processing Data Maintenance Data Access Data Maintenance Data Marts Customer Touchpoint Systems

CRM Systems Issues • It is important to develop a customer information plan, including: – Where and how to efficiently collect customer data – How to transform data into meaningful, practical information – How to distribute customer information throughout the organization • Build a business case for your system • Determine whether your system should be in-house or outsourced, based on: – – Solution scope Core competencies Time horizons IT resources

CRM Systems Issues • Monitor the quality of your data, including: – – Data coverage Data accuracy Data precision Data relevance • Make the data accessible to people who can put it to use • Gain the acceptance of employees who will be using the system

Aspects of Measuring CRM Success: • Internal CRM Capabilities • Customer Interactions – Create a customer interaction scorecard • Customer Dynamics – – Customer acquisition Customer growth & development (cross-sell, upsell) Customer retention Customer reactivation • Operational Efficiencies • Bottom-Line Business Metrics – Increased revenues – Decreased costs – Increased competitive differentiation

Think like a Customer: 10 rules for Building Customer Relationships 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. The “average customer” does not exist – get to know us Make our experience special: Give us something to talk about. If something is wrong, fix it quickly. Guarantee our satisfaction. Trust us, and we’ll trust you. (respect) Don’t take us for granted. Our time is as important as your time. The details are important to us – they should be to you, too Employ people who are ready, willing, and able to serve us We care whether you’re a responsible corporate citizen.