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CRM. MKT 6301 Nanda Kumar http://www.utdallas.edu/~nkumar. Main Issues. Dynamics of customer relationships Monitoring customer satisfaction Mass Customization Using Information Systems to manage customer relationships. Dynamics of Customer Relationships. Satisfied customers

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Presentation Transcript
slide1

CRM

MKT 6301

Nanda Kumar

http://www.utdallas.edu/~nkumar

main issues
Main Issues
  • Dynamics of customer relationships
  • Monitoring customer satisfaction
  • Mass Customization
  • Using Information Systems to manage customer relationships
dynamics of customer relationships
Dynamics of Customer Relationships
  • Satisfied customers
    • EV from consuming your product too high
    • Less willing to consider other alternatives or switch (BA example)
  • Short-term vs. Long-term
    • Myopic one period profits vs. customers’ life time value
related jargon
Related Jargon
  • Acquisition costs
  • Base profit – profit margin from an average customer
  • Revenue growth – positively relationship between duration of relationship and profitability
    • Refinancing home mortgage
other effects
Other Effects
  • Operating costs – serving old customers is less expensive
  • Word of mouth (WOM) – referrals
  • Sensitivity to price – old customers less price sensitive
how much to pay to acquire a customer
How Much to Pay to Acquire a Customer?
  • Present Value of a customer expected to be in a relationship for 4 years?
  • Discount rate – I, 10%
  • PV = 40/(1.1) + 66/(1.1)2+72/(1.1)3+79/(1.1)4 = 198.96
  • Cost of acquiring a customer = $80
  • Pay no more than – (198.96 – 80) = 118.96
  • What if not all costs were borne upfront?
retaining customers
Retaining Customers
  • Satisfied customers are loyal customers
  • Expectation confirmation model
    • Is product performance consistent with expectations?
    • Differential between expectations and actual performance influences degree of satisfaction
  • Expectation formation
    • Different information source, WOM, product advertising, past experience
monitoring satisfaction
Monitoring Satisfaction
  • Survey based approaches
    • Measure satisfaction on a scale relative to expectations
    • Relative to competition
    • Track over time to uncover trends in the industry
  • Track consumer complaints
value management
Value Management
  • Customer value Profitability
  • Perceived Quality Customer Value
  • Increase value by increasing perceived quality or value of your package
  • Can be achieved by changing customers’ preferences (Perdue Chicken)
satisfaction and service
Satisfaction and Service
  • Service is critical in some product categories
    • Deere case – how Deere handles downtime will be critical in value delivered by the product
    • Service can help differentiate from competition
    • Firm-customer interactions numerous – some more critical than others
challenges faced by corporate chains
Challenges faced by Corporate Chains
  • Free-riding in Franchising
    • Service levels affect corporate image
    • Individual operators may not have sufficient incentive
    • Cost of monitoring and lack of incentives may influence ownership
loyalty programs
Loyalty Programs
  • Reward card – Tom Thumb
  • Frequent Flyer cards
  • Sears - $100 or more club
  • Generates customer information that can be used effectively
mass customization
Mass Customization
  • Recognition that customers are heterogeneous
  • Product located closest to customers’ ideal point in product space will have the highest value
  • Shoes, Jeans, PCs, Websites customize look and feel
information systems
Information Systems
  • Knowledge about household events – birth of a child etc.
  • Use information to customize mailings and offers
  • Database marketing
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