Serviceandcrm 2

CUSTOMER RELATIONSHIP
MANAGEMENT
 WHAT IS THE BASIC IDEA BEHIND THESE
SCHEMES?
 ENCOURAGE LOYALTY – INCREASE STICKINESS

 REWARD REPEAT PURCHASES
 DATA GENERATION
Customer Relationship
Management
A business philosophy and set of

strategies, programs, and systems that
focus on identifying and building loyalty
with a retailer’s most valuable customers.
CRM Process
Analyzing Customer Data
Data Mining – technique used to

identify patterns in data.
• Market Basket Analysis
• Identifying Market Segments
• Identifying Best Customers
Market Basket Analysis
Market basket analysis is a
technique that discovers
relationships between pairs of
products purchased together
 There are a couple of measures we use when doing
market basket analysis
 The frequency is defined as the number of times two
products were purchased together.
 If hot dogs and buns were found together in 820
baskets this would be its frequency
 If you divide the frequency by the total number of orders
you get the percentage of order containing the pair. This
is called the support
 Now if 820 hot dogs and buns were purchased
together and your store took 1000 orders the support
for this would be calculated as (820 / 1000) = 82.0% .
 Confidence compares the number of times the
pair was purchased to the number of times one of
the items in the pair was purchased.
 if hot dogs were purchases 900 times and out of
those 900 purchases 820 contained buns we would
have a confidence of (820 / 900) = 91.1%.
Product Frequency Support Confidence
Buns 820 82.0% 91.1%
Ketchup 800 80.0% 23.2%
Mustard 750 75.0% 34.5%
Jello 321 32.1% 45.2%
Market Basket Analysis: Hot Dogs

 As a merchandiser I tend to look for pairs

with a high confidence
 After examining the confidence I next
look at the support
 Obviously if you see something with both
a high confidence and high support you’ve
found something interesting.
 Theanalysis can be applied in various

ways:
 Develop combo offers based on products sold
together
 Organizeand place associated
products/categories nearby inside a store
 Determine
the layout of the catalog of an
ecommerce site
 Control
inventory based on product demands
and what products sell together
Using Analytics
 Can you identify your best customers?

 Do you know who your worst customers are?
 Do you know which customers you just lost, and
which ones you’re about to lose?
 Can you identify loyal customers who buy often,
but spend very little?
 Can you target customers who are willing to spend
the most at your store?
Which Customer Probably Has the
Greatest Lifetime Value
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
RFM
If they bought in recent past, they get higher points.
If they bought many times, they get higher score.
And if they spent bigger, they get more points.
Combine these three scores to create the RFM score.

Finally you can segment your customer database into different
groups based on
this Recency – Frequency – Monetary score.
RFM ANALYSIS
 Recency (R) as days since last purchase:

 How many days ago was their last purchase? Deduct most
recent purchase date from today to calculate the recency
value. 1 day ago? 14 days ago? 500 days ago?
 Frequency (F) as total number of transactions:
 How many times has the customer purchased from our store?
For example, if someone placed 10 orders over a period of
time, their frequency is 10.
 Monetary (M) as total money spent:
 How many $$ (or whatever is your currency of calculation)
has this customer spent? Again limit to last two years – or
take all time. Simply total up the money from all
transactions to get the M value.
RFM ANALYSIS
 There are three basic steps to RFM analysis:

 1. Sort all customers in ascending order based on
Recency, Frequency and Monetary Value.
 2. Split customers into quartiles/quintiles for
each factor.
 3. Combine factors to group customers into RFM
segments for targeted marketing.
Today, online retailers should use RFM to
• increase conversion rates,

• personalization,
• relevancy and revenue.
Sophisticated online shoppers demand personalized

shopping experiences, and RFM Analysis is an excellent
way to provide highly relevant, personalized campaigns
that reflect the preferences of the customers they want
to keep.
RFM Analysis
RFM Target Strategies
Customer Pyramid
Platinum
Best
Most loyal
Least price sensitive
CRM Programs
Retaining Best
Customers
Converting Good
Customers to Best
Customers
Getting Rid of
Unprofitable
Customers
Customer Retention Programs
 Frequent Shopper Programs

 Special Customer Services
 Personalization
 1-to1 Retailing
 Community
Dealing with
Unprofitable Customers
 Offerless approaches for dealing with these
customers
 Charge customers for extra services demanded
CUSTOMER
SERVICE
25
WHAT IS IT?
 SET OF ACTIVITIES AND PROGRAMMES UNDERTAKEN BY RETAILERS TO

MAKE THE SHOPPING EXPERIENCE MORE REWARDING FOR THEIR
CUSTOMERS.
 THESE ACTIVITIES INCREASE THE VALUE CUSTOMERS RECEIVE.
26
Services Offered by Retailers
Evaluating Perceived Service
Reliability Tangibility
Cues used to
assess service
Assurance Empathy
Responsiveness
28
CHARACTERSTICS CUSTOMERS USE
TO EVALUATE SERVICE QUALITY
 RELIABILITY –
 ACCURACY OF BILLING, MEETING PROMISED DELIVERY DATES
 ASSURANCE – TRUST –
 GUARANTEES AND WARRANTIES, RETURN POLICY,EMPLOYEE
EMPOWERMENT TO RECTIFY PROBLEMS
 TANGIBILITY –
 STORE APPEARANCE,SALES PEOPLE
29
CHARACTERSTICS CUSTOMERS USE
TO EVALUATE SERVICE QUALITY
 EMPATHY –
 PERSONALISED SERVICE, RECOGNITION BY NAME
 RESPONSIVENESS-
 GIVING PROMPT SERVICE, RETURNING CALLS AND REPLYING
EMAILS
30
HOW DO CUSTOMERS JUDGE QUALITY IN E-TAILER ?
SOURCE – MIT SLOAN - 2006
 E-COMMERCE HAS MINIMISED “HERTEROGINITY”

 E-COMMERCE HAS ALSO REDUCED “PERISHABILITY”
HOW DO CUSTOMERS JUDGE QUALITY
ONLINE?
 DEPENDS ON INTERACTION WITH THREE THINGS

 WEBSITE
 DELIVERY OF PRODUCTS
 HOWPREPARED RETAILERS ARE TO
ADDRESS PROBLEMS WHEN THEY OCCUR
 WEBSITE
 EASE OF USE
 PRIVACY
 SIMPLE DESIGN
 CONSISTENCY AND FLEXIBILITY
 GOOD INFORMATION
 DELIVERY OF THE PRODUCT – MOST IMPORTANT
 TIMELINESS OF ORDER
 ACCURACY OF ORDER
 CONDITION OF THE ORDER
 ADDRESSING PROBLEMS WHEN THEY OCCUR
 OPPORTUNITY TO TALK TO A PERSON
 FAIRNESS OF POLICIES AND PROCEDURES
 COMPENSATION AND APOLOGIES
Finding Service Gaps in the Age of e-Commerce
EXHIBIT 3
Service Frameworks Old &New
THIRTY YEARS AFTER SERVQUAL WAS DEVELOPED, THE ADAPTED E-SERVQUAL MODEL CAN
HELP COMPANIES IDENTIFY SERVICE GAPS ALONG FIVE BROADLY SIMILAR DIMENSIONS.
S ER V Q U A L TA N G I B LES R ELI A B I LI T Y RESPONSIVENES S A S S U RA N CE EM P A T H Y

TRADITIONAL Firm appears Goods always Staff are polite, Customers Customers feel
CUSTOMER neat, clean and delivered on time friendly & helpful trust you understood and
SERVICE inviting treated on their
EXPERIENCE own terms
e.g., bank,
department store, Firm appears Products Staff act as Betraying Firm imposes
car dealership dirty and cluttered, don’t live up to if they can’t be customers by a one-size-fits-
and does not inspire the company’s bothered to wait making false all approach or a
confidence in the promises on you promises or ripping sense of cultural
service being offered them off imperialism
E- SERVQUAL EF F I CI EN C Y F U LF I LLM EN T A V A I LA B I LI T Y PRIVACY/ SECURITY H U M A N T O U CH

DIGITAL Fast, Actual product Website is Website gives Real person im-
CUSTOMER straightforward, reflects what always accessible the impression of mediately available
SERVICE functional online appeared or was and fully being highly secure by phone or other
EXPERIENCE presence & service promised online functioning means when a
e.g., websites problem arises
offering a variety of
products (apparel, Too automated; Product quality Website Website No way of
books, CDs, lengthy online is inferior to what is sometimes features no reaching a service
computers, forms requiring was promised unavailable or messages or representative
electronics, inputs from online crashes during a assurances about when a problem
flowers, groceries, customers transaction data security arises
toys)
pioneer and thought leader. devices, there are also many people who don’t
Source – Finding Service gaps in the age of e- commerce - A Parasuraman - IESE Insight, 2013
DISCOMFORT. A perceived lack of con t rol like them and think they lead to addictive be-
over technology and a feeling of being over- havior such as const antly checking your e-
whelmed by it. mails or Facebook updates. Even people who
INSECURITY. A distrust of technology and skep- are heavy users of technology are sometimes
Gaps Model for Improving
Retail Customer Service
 Knowledge Gap -- knowing what the customer wants
 Standards Gap -- setting service goals
 Delivery Gap -- meeting and exceeding service goals
 Communications Gap -- communicating the service promise
35
Gaps Model for
Improving Service Quality
1 2 3
36
37

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CUSTOMER RELATIONSHIP

 ENCOURAGE LOYALTY – INCREASE STICKINESS

A business philosophy and set of

Data Mining – technique used to

Buns 820 82.0% 91.1%

Ketchup 800 80.0% 23.2%

Mustard 750 75.0% 34.5%

Jello 321 32.1% 45.2%

Market Basket Analysis: Hot Dogs

 As a merchandiser I tend to look for pairs

 Theanalysis can be applied in various

 Can you identify your best customers?

Purchases Over Last 10 Weeks

If they bought in recent past, they get higher points.

If they bought many times, they get higher score.

And if they spent bigger, they get more points.

Combine these three scores to create the RFM score.

 Recency (R) as days since last purchase:

 There are three basic steps to RFM analysis:

• increase conversion rates,

Sophisticated online shoppers demand personalized

 Frequent Shopper Programs

 SET OF ACTIVITIES AND PROGRAMMES UNDERTAKEN BY RETAILERS TO

 E-COMMERCE HAS MINIMISED “HERTEROGINITY”

 DEPENDS ON INTERACTION WITH THREE THINGS

S ER V Q U A L TA N G I B LES R ELI A B I LI T Y RESPONSIVENES S A S S U RA N CE EM P A T H Y

E- SERVQUAL EF F I CI EN C Y F U LF I LLM EN T A V A I LA B I LI T Y PRIVACY/ SECURITY H U M A N T O U CH

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