Retailing

MKTG 3346

Retail CRM (Consumer

Relationship Management)
Professor Edward Fox
Cox School of Business/SMU
Customer Relationship Management

 Recognizes that the customer, rather than individual

purchases or contracts, is the source of value to the
firm
 Focuses on customer acquisition and retention
 Highlights repeat purchase and loyalty over time as key
goals
 Recognizes the importance of customer satisfaction
 Requires customer data to forecast their response to
potential offerings and manage customers over time
Customer Relationship Management

 Relating with few customers

 Emphasizes sales force
 Usually B-to-B
 Relating with many customers
 Emphasis is on purchase history
 Often, though not always B-to-C

With retail consumers (i.e., many customers)…

 The retailer must be able to customize the product or
price or service offering
 The retailer must be able to address consumers
individually
Customer Relationship Management
OBJECTIVES

 Create loyal purchase behavior

 Customize product and price offerings to target
customers
Consumer Targeting Continuum
Mass Segment Niche Micro-
Marketing Marketing Marketing Marketing

 Increase customer lifetime value

Customer Relationship Management
ORGANIZATIONAL REQUIREMENTS

 Performance measures
 Internal incentives
 Customer information / data architecture
Customer Relationship Management
PROGRAMS

 Card programs
 Discount
 Credit
 Membership
 Specific examples
 Catalina coupons catalina marketing
 Collaborative filtering (recommenders) amazon.com
 Virtual model landsend.com

How can the retailer reward loyalty rather than

purchase volume?
Customer Relationship Management
LOYALTY PROGRAMS

 Loyalty programs are set up to reward customers

with incentives such as discounts on purchases, free
food, gifts, or even cruises or trips in return for their
repeated business.
 Retailers use them for three reasons:
 to retain loyal customers
 to increase loyalty of non-loyal customers
 to collect information about them and what they buy

Loyal customers are the source of most profits

Less price sensitive
More purchases per customer – higher share-of-requirements
Customer Relationship Management
RETAIL CUSTOMER DATA

 Customer Relationship
Management (CRM) is
enabled by the gathering and
warehousing of consumer
data
 Retailers gather customer
data from:
 Frequent shopper or
shopper loyalty cards
 Store credit cards
 Identifiable tender
Customer Relationship Management
RETAIL CUSTOMER DATA

 Retail customer databases are

organized collections of data about
individual consumers including:
 Geographic
 Demographic
 Behavioral data
 Purchase histories
 Appended behaviors

Databases may enable retailers to gain a

competitive advantage Adapted from Prentice Hall
Customer Relationship Management
RETAIL CUSTOMER DATA

 Most leading retailers use card programs

 89% of retail “leaders” in the practice of CRM use
card programs (Progressive Grocer, 2001)
 However, retailers are not using the resulting data
effectively
 “The retailers have collected all of this frequent
shopper data, but few, if any, attempts have been
made to mine the opportunities that it probably
presents.” (Shulman 2003)
Issues
How can retailers better exploit consumer data?
How can it be used for targeted marketing offers?
Customer Relationship Management
DATA WAREHOUSING

 Data warehousing is the coordinated and periodic

copying of data from various sources, both inside and
outside the enterprise, into an environment ready for
analytical and informational processing
 Wal-Mart makes good use of its data warehouse. It
should. Experts estimate that it is second in size to
that of the U.S. government
Customer Relationship Management
DATA MINING

 Data mining is the process by which insights are derived

from vast amounts of data, such as that contained in a
data warehouse.
 Statistical algorithms are applied to customer data to
identify merchandise buying patterns and relationships.
Customer Relationship Management
MARKET BASKET ANALYSIS

 A market-basket analysis is uses data mining

techniques to determine what predominant categories
individual consumers are buying.
 Based on these analyses, Wal-Mart has changed the
traditional locations of several items:
 Since bananas are the most common item in America’s
grocery carts, they sell bananas next to corn flakes (to help
sell more cereal) as well as in the produce section.
 Kleenex tissues are in the paper-goods aisle and also
positioned among the cough and cold medicines.
 Measuring spoons are in housewares and also hanging
next to Crisco shortening.
RETAIL CRM ISSUES

 How does the retailer respect the shopper’s privacy while

gathering information to respond more effectively to that
customer?
 What does the retail shopper get out of CRM? Why should
(s)he give is the retailer information about (her-)himself?
 Should the retailer offer different levels of price or service?
What is the advantage of uniformly high prices or customer
service?
 What is the appropriate level of customization? How much
does the retailer gain by individual, rather than store-specific
offers? At what cost?