CH 14 CSR

Review Questions 1. Explain why relationship capital is the foundation of future business. In an environment of customer control, with attention a scarce commodity, a firms ability to build and maintain relationships with customers, suppliers, and partners may be more important than a firms land, property, and financial assets. It is this relationship capital that provides the foundation of future business. 2. Define relationship marketing and contrast it with mass marketing. As originally defined, relationship marketing is about establishing, maintaining, enhancing, and commercializing customer relationships through promise fulfillment

Mass marketing Discrete transactions Short-term emphasis One-way communication Acquisition focus Share of market Product Differentiation

Relationship marketing Continuing transactions Long-term emphasis Two-way communication /collaboration Retention focus Wallet share Customer Differentiation

3. What are the main benefits of CRM? The one key benefit of CRM is its cost-effectiveness, and another is its future profit potential by retaining customers. Most businesses spend more money acquiring new customers than they spend keeping current customersbut this is usually a mistake. The cost of acquiring a new customer is typically five times higher than the cost of retaining a current one. 4. Why do companies use sales force automation and marketing automation? Increase your sales, not your sales force. This is the claim of sales force automation software (SFA). Used primarily in the B2B market, SFA allows salespeople to build, maintain, and access customer records; manage leads and accounts; manage their schedules; and more. In relation to e-marketing, SFA helps the sales force acquire, retain, and grow customers by accessing customer and product data from the companys data warehouses, both while in the office and on the road. Salespeople can also send the results of sales calls and activity reports to the data warehouse for

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access by others. Up-to-date customer and prospect records help customer service representatives and others build customer relationships. Marketing automation activities aid e-marketers in effective targeting, efficient marketing communication, and real time monitoring of customer and market trends. It is a disciplined approach to the capture, integration, and analysis of customer data [that] is needed to identify and leverage customer relationships and opportunities to their fullest. This emerging space, called marketing automation, forms the core of the knowledge engine which drives customer relationship management (CRM). 5. What are the eight building blocks of CRM? 1. CRM Vision: Leadership, value proposition 2. CRM Strategy: Objectives, target markets 3. Valued Customer Experience: Understand requirements Monitor expectations Maintain satisfaction Collaboration and feedback Customer interaction 4. Organizational Collaboration: Culture and structure Customer understanding People,skills,competencies Incentives and compensation Employee communicationPartners and suppliers 5. CRM Processes: Customer life cycle, knowledge management 6. CRM Information: Data, analysis, one view across channels 7. CRM Technology: Applications, architecture, infrastructure 8. CRM Metrics 6. What are the five levels of relationship intensity and why do e-marketers strive to move customers to the top level? The five levels of relationship intensity are Advocacy, Community, Connected, Identity, Awareness. Many of these CRM goals refer to customer loyalty. Most firms would be delighted if they had customers who proudly wore their brand name on clothing and tried to talk others into buying the brandlike customers of Harley Davidson and Apple Computer. The pyramid shape indicates that fewer customers are at the highest level, where they have become advocates who tell everyone how great the brand is. Many people are advocates because of positive experiences with their MacIntosh computers or with eBay auctions. One student purchased the inventory of a bankrupt comic store and made $10,000 auctioning the comics on eBayhe became an eBay advocate. Thus, an important CRM strategy is trying to move customers upward in this pyramid. 9. Why do e-marketers see community-building as an important aspect of CRM? As noted in other chapters as well as in this chapter, community-building is an important way to forge relationships and strengthen loyalty. Firms that build community can learn about customers and products through real-time chat and bulletin board/newsgroup e-mail postings at its Web site. Analysis of these exchanges is used in the aggregate to design marketing mixes that meet user needs. 10. What are the advantages to CRM-SCM integration? Give an example. 167

CRM usually refers to front-end operations. This means that firms work to create satisfying experiences at all customer touch points: telephone calls to customer service reps, in-person visits to stores, e-mail contact, and so forth. This is quite challenging because different employees and computer systems collect various information, and somehow it must be integrated into appropriate customer records. In one study sponsored by Jupiter Communications, three phone calls were made to Forbes magazine asking why two renewal offers were different. The interviewer got three different explanations. Fortunately several firms now provide software to address this issue. For example, the Aspect Relationship Portal assists CRM staff by integrating all customer contact mediaphone, FAX, e-mail, and Webwith frontand back-office operations (www.aspect.com). 11. What are the six stages in the customer care life cycle? The six stages of the customer care life cycle are Target, acquire, transact, service, retain, grow. 12. Explain how data mining, real-time profiling, collaborative filtering, and outgoing e-mail help firms customize offerings. Data mining involves the extraction of hidden predictive information in large databases through statistical analysis. A firm can then create profiles from this information to customize and cross-sell their products. Real-time profiling occurs when special software tracks a users movements through a Web site, then compiles and reports on the data at a moments notice. Collaborative filtering software gathers opinions of like-minded users and returns those opinions to the individual in real-time. Firms can use these two technologies to immediately send targeted and customized advertising. Marketers use e-mail databases to build relationships by keeping in touch with useful and timely information. Customized E-mail can be sent to individuals or sent en masse using a distributed e-mail list based on user preferences, opt-in plans, etc. 13. How are company-side and client-side customization tools different? Explain your answer. Users are generally unaware that marketers are collecting data and using Companyside tools to customize offerings. Company-side tools include cookies, Web site logs, data mining, real-time profiling, collaborative filtering, outgoing e-mail, chat and bulletin boards, and iPOS terminals. Client-side tools come into play based on a users action at her computer or handheld device. Although the tools generally reside on a Web server, it is the customer pull that initiates the customized response. Examples of Client-side tools include agents, experiential marketing, individuals Web portals, wireless data services, Web forms, FAX-on-demand, and incoming email. Discussion Questions 14. Explain the difference between wallet share and share of market. Wallet share, often called share of customer or share of mind, differentiates individual customers based on need rather than differentiating products for target groups. Owning the customers total experiencethis refers to the wallet share. Share of market is the actual share of total market sales regardless of perceptions of price, quality, brand, etc. For example, luxury items typically dont have strong

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market share within a given category but possess stronger wallet share. The opposite can be true as well, where an item can have poor wallet share and high share of market; this usually involves generic or commodity items. 15. If good relationship marketing means firing a companys least-profitable or most-costly customers, suggest how it might be accomplished without causing them to criticize the company to their friends. It is usually not a good idea to fire customers, however, high cost customers can be discouraged through various means. Companies try to keep customers because retention through CRM is usually less costly than acquisition costs (promotion, advertising and discounts costs). Additionally, current customers are likely to have higher response rates to promotional efforts and sales teams can be more effective since they should know their individual customers well. CRM makes sense because they build loyal, experienced customers. They know who to call in the firm when they have questions. This means loyal customers should cost less to service. Firms may not be able to fire customers individually if they endeavor to use CRM effectively. However, if a firm must fire customers they should do so with the utmost care since one disgruntled customer can be louder than many satisfied ones. By utilizing automated, Internet based tools firms can address commonly asked questions and problems posed by the most-costly customers proactively. In any case, good CRM still requires firms to do their best to satisfy customer needs. Firms can utilize the experience to create and make available a database of successful solutions online. The key is shifting costly customer interaction to cheaper online based solutions. This can be seen with companies such as Hewlett-Packard and Microsoft who have extensive online databases. By charging for interactive telephone customer support, both of these companies have effectively fired their most costly customers. To mitigate complaints from this system, HP offers free support through their warranty program which must be purchased ahead of time. Differentiation by valuation is not profitable unless a firm can say that at least half of its profits come from 20% or fewer of its customers.

16. Explain how the customer benefits from SCM-CRM integration. Customer relationship management (CRM) usually refers to front-end operations. This means that firms work to create satisfying experiences at all customer touch points: telephone calls to customer service reps, in-person visits to stores, e-mail contact, and so forth. This is quite challenging because different employees and computer systems collect various information, and somehow it must be integrated into appropriate customer records. Supply chain management (SCM) deals with the back-end of getting the order out to the customer once a product has been ordered.

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(e.g., inventory and payment). By integrating these two the entire supply chain can work together to single-mindedly focus on meeting consumer needs and make higher profits in the process. Ultimately customers should have the most up-to-date information on prices, availability, models, etc. 17. Do you agree with the statement that the customers goal in relationship marketing is choice reduction? Are consumers really such creatures of habit? Why or why not? Being a consumer can be difficult because of constant bombardment by marketing communications and unlimited product choices. This suggests that consumers want to patronize the same Web site, mall, and service providers because doing so is efficient. That is, consumers do not want to spend their days contemplating which brand of toothpaste to buy or how to find a good dentist. Many consumers are loyalty prone, searching for the right product or service and then sticking with it as long as the promises are more or less fulfilled. Customers generally like to patronize stores, services, and Web sites where they are treated like individuals with important needs and where they know those needs will be met, satisfaction guaranteed. Should those needs not be met, customers may then renege to other brands. Dependent on what kind of items consumers are seeking, choice reduction may not apply. Consumers will spend much more time researching a major purchase such as a car or house then everyday commodity items like toothpaste or milk. However, consumers are still likely to stick with trusted sites if too many choices are available. 18. Which tools do you think are more powerful for building relationships company-side tools or client-side tools? Why? Both methodologies are very powerful. Whether either is more powerful than the other is dependent on what firms value. Users are generally unaware that marketers are collecting data and using company-side tools to customize offerings. Companyside tools can be used to collect large amounts of data but may ultimately be too vague to customize responses without some consumer interaction. Client-side tools come into play based on a users action at her computer or handheld device. Although the tools generally reside on a Web server, it is the customer pull that initiates the customized response. Client-side tools while great for highly customized profiles, can only be utilized if consumers are willing to participate and take time out to fill out forms, surveys, etc. Even then users may give inaccurate information, aliases, etc. from fear of SPAM or privacy concerns. 19. Compare and contrast the concept of differentiating customers with that of differentiating products. Both are needed to compete aggressively in a highly commodified Internet market. Differentiating customers involves finding the unique interests and needs of individual consumers. It is the basis of relationship marketing along with customizing product offerings to meet individual customer needs. With the power of the Internetbased technologies, firms can finally micro-market to the individual effectively at a relatively low cost. Differentiating products involves building a brand name in quality, uniqueness, etc. that sets apart your product from others. It is the traditional cycle of identifying

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segments and then differentiating products to meet the needs of a segment rather than an individual customer. 20. As a consumer, would you be more likely to buy from a Web site displaying the TRUSTe seal and logo than from a competing Web site without the TRUSTe affiliation? Explain your answer. The relative level of trust and comfort with using Internet technologies will determine whether or not a consumer will more or less likely buy or not from a Web site displaying TRUSTe. Bargain hunters, innovators, and technology enthusiasts who use the Internet a lot may trust Web sites without reservation. TRUSTe provides another layer of reinforcement for those who may be hesitant to make online purchases. The same could probably be seen with credit cards and telemarketing when those technologies first emerged. However, it just takes one bad experience to change this trust. Though in reality the same accountability with credit cards and online purchases apply. Consumers can always challenge fraudulent charges with the credit card company whether the purchase was made online or not.

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