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RMG 200 (77)
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ch 14 part 1.docx

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Retail Management
RMG 200
Brent Barr

CH 14: BUILDING CUSTOMER LOYALTY: CUSTOMER RELATIONSHIP MANAGEMENT AND SERVICE STRATEGIES Five customer service characteristics that customers use to evaluate service quality are: - Reliability – accuracy of billing, meeting promised delivery dates - Assurance (trust) – guarantees and warranties, return policy - Tangibility – appearance of store, salespeople - Empathy – personalized service, receipts of notes and e-mails, recognition by name - Responsiveness – returning calls and e-mails, giving prompt service - Customer relationship management (CRM): a business philosophy and set of strategies, programs, and systems that focuses on identifying and building loyalty with a retailer’s most valued customers - Goal of CRM is to develop a base of loyal customers who patronize the retailer frequently THE CRM PROCESS - Share of wallet: the percentage of total purchases made by a customer in a store - Study shows that it costs six times more to sell products and services to new customers than to existing customers and that small increased in customer retention can lead to dramatic increases in profits What is Loyalty? - Customer loyalty to a retailer means that customers are committed to purchasing merchandise and services from the retailer and will resist the activities of competitors attempting to attract their patronage - Loyal customers have an emotional connection with the retailer - Programs that encourage repeat buying by simply offering price discounts can be easily copied by competitors - Emotional connections develop when customers receive personal attention - Unusual positive experience also build emotional connections Overview of the CRM Process The CRM is an iterative process that turns customer data into customer loyalty through four activities: 1. Collecting customer data 2. Analyzing the customer data and identifying target customers 3. Developing CRM programs 4. Implementing CRM programs COLLECTING CUSTOMER DATA - Customer database: (aka customer data warehouse) 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. It contains all of the data the firm has collected about its customers and is the foundation for subsequent CRM activities Customer Database The database should contain the following: Transactions Complete history of the purchases made by the customer, including the purchase data, the price paid, the SKUs purchased, and whether or not the merchandise was purchased in response to a special promotion or marketing activity Customer contacts Record of interactions that the customer has had with the retailer, including visits to the retailer’s website inquiries made through in store kiosks, and telephone calls made to the retailer’s call center, plus information about contacts initiated by the retailer such as catalogues and direct mail sent to the customer Customer What the customer likes, such as favorite colors, brands, fabrics, and flavors as well as preferences apparel sizes Descriptive Demographic and psychographic data describing the customer that can be sued in information developing market segments Responses to Analysis of the transaction and contact data provides information about the customer’s marketing activities responsiveness to marketing activities Identifying Information Three approaches that store-based retailers use to overcome the problem of identifying customers who are making in store transactions: Asking for - Eg. Ask customers for identifying information such as their phone number or name and identifying address when they ring up a sale information - However there are two limitations: o Some customers may be reluctant to provide the information and feel that the sales associates are violating their privacy o Sales associates might forget to ask for the information or decide not to spend the time getting and recording its during a busy period Offering a frequent - Frequent shopper programs: (aka loyalty programs) a reward and communication shopper card program used by a retailer to encourage continued purchases from the retailer’s best customers - Private label credit card: a credit card that has the store’s name on it and is issued by the retailer - From the retailer’s perspective, frequent shopper programs offer two benefits: o Customers provide demographic and other information when they sign up for the program and then are motivated to identify themselves at each transaction o Customers are motivated by the rewards offered to increase the number of visits to the retailer and the amount purchased on each visit o Major problem with using frequent shopper cards for identification are that the card is often squeezed out of the customer’s wallet by other cards, the customer might forget to bring it to the store when shopping or the customer might decide not to show it if he or she is in a hurry Connecting internet - If customer used the same credit card while shipping the retailer’s website and provided purchasing data shipping information, the retailer could connect the credit card purchases with the with the stores customer Privacy and CRM Programs – Privacy Concerns The degree to which consumers feel their privacy has been violated depends on: o Their control over their personal information when engaging in marketplace transactions o Their knowledge of the collection and use of personal information - Cookies: computer text files that identify visitors when they return to a website, so that customers do not have to identify themselves or use passwords every time they visit the site. Cookies also collect information about other sites the person has visited and what pages have been downloaded Protecting Customer Privacy The privacy act is all about relationships with customers and employees and is based on 10 principles for the protection of personal information 1. Accountability – an organization will be responsible for ensuring that personal information in its possession, including information that has been transferred to a third party for processing, is secure and that the third party is compliant with the law 2. Identifying purposes – how you plan to use customer data must be identified at the time of, or prior to, collection of the individual’s information 3. Consent – you must have consent for the collection use, or disclosure of personal data 4. Limiting collection – if you make marketing lists available to third parties, you will have an obligation to ensure that you have obtained consent from consumers prior to passing their personal information on to third parties 5. Limiting, use, disclosure, and retention – if you are using customer data as part of your marketing activities, you can retail this information as long as the individual is an active customer, or for the length of the marketing c
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