Supply Chain Chapter 11

Customer Defection Analysis

The process of analyzing the customers who have stopped buying to determine why

Customer Lifetime Value (CLV)

- A prediction of the net profit attributed to the entire future relationship with a particular customer. - Some customers are worth more than others. Identifying your key customers is key to aligning your customer support resources. - CLV is an important metric for determining how much support to provide existing customers vs. money to spend on acquiring new customers. - It is determined by forecasting the expected revenue generation for each strategic customer, understanding the margin structure and cost to support each.

Target Marketing

- A segment of customers a company has decided to aim its marketing efforts. A well-defined target market is the first element of any marketing strategy - Target Marketing is usually more cost effective than mass marketing, as it allows the company to focus efforts on marketing to those customers most likely to respond. - It is a more efficient and effective use of the company's resources avoiding customers who do not fit the targeted criteria.

Field Service

- Allows customers to interact directly with the company's service personnel. - Customers make an appointment to have the service person come out to install or service the product. Customers are communicating directly with company representatives so knowledge, training and appearance are all important.

Relationship or Permission Marketing

- An approach to selling products and services in which a customer explicitly agrees in advance to receive marketing information. Customers self-select the type and time of communication they want. - "opt-in" e-mail, where a potential customer signs up in advance for information about certain products or services.

Strategically Significant Customers

- Are likely to provide the most value for the effort. - Customers with high life-time value - Customers who serve as role models or benchmarks for other customers. - Customers who inspire change in the supplier and/or the supply chain.

Predicting Customer Behaviors

- Collect and analyze customer buying history, preferences, and trend information which could then be used to predict customer buying behaviors going forward - This information could also be used to determine how effective marketing, advertising and promotions have been in the past and determine whether these practices should be continued or altered. - This predictive information could be used to create a more accurate forecast

Goals And Benefits Of CRM

- Increased customer satisfaction. - Increased customer loyalty and retention - Faster responses to customer inquiries. - Increased revenue. - Growth of the customer base through referrals. - A simplified and more cost effective marketing & sales process. - Increase sales effectiveness. Closing sales faster. - Increased sales through cross-selling and/or up-selling. - Access to updated customer information and personalized interactions. - Automation of repetitive tasks.

Up-selling

- Involves persuading a customer to buy a more expensive item or upgrade a product or service to make the sale more profitable. - It also involves selling the customer extra features or add-ons to the product they are already buying or considering.

Event Based Marketing

- Is a form of marketing that identifies key events in the customer and business lifecycle. - Customer specific marketing activity is undertaken for the event. - An event can be something basic and predicted, like the end of a contract, a holiday, a season (Halloween, "Black Friday", "Cyber Monday", Christmas, etc.) or something more detailed and personal, like a birthday, a marriage, or a graduation

Customer Relationship Management

- Is aligning the people, process, and technology of a company to be a customer-centric organization, focusing on customer requirements, rather than internal company goals. - A philosophy of putting the customer first - Finding a new customer costs five times as much as keeping an old customer

Churn Reduction

- Is all of the efforts companies develop to stop losing customers to the competition - Churn is the process of customers changing their buying preferences because they find better or cheaper products and services elsewhere. - Customer Defection Analysis leads to Churn Reduction by determining why customers leave and finding ways to retain them

Call Centers

- Links an organization to its customers. - It is a facility housing personnel who respond to customer queries, whether general, specific or technical support. - It's entire focus is handling current or potential customer inquiries

Why Do Companies Need CRM

- Loyal customers are the source of most profits for a company 1. Repeat Customers - No acquisition costs, understand company products and services 2. Profitable Revenue - Reduced TCO 3. Marketing - Source of business opportunities 4. Testimonials - Validation for new customers 5. Service - Lower service costs as develop knowledge, support for other customers

Post-transaction elements

- Occur after the sale Includes warranty repair capabilities, complaint resolution, product returns, operating information, etc.

Transaction elements

- Occur during the sale - Includes the order lead time, the order processing capabilities, the distribution system accuracy, etc.

Cross-selling

- Occurs when a company sells an additional related or complementary product or service to an existing customer after the initial purchase. - Example: If you're buying an item on Amazon.com, you may be shown other similar items to the one you are looking at, or companion products to the item that you are considering.

Web Self-Service

- Portals for customers to access their account information, check operating hours, ask questions, see product information, find contact information, check on orders, get shipping information, etc. - Customers can put their own information into the system which avoids having the company take the time to do it, and also potentially eliminates errors. - Customers can edit and modify the information accordingly

Pre-transaction elements

- Precede the sale - Includes customer service policies, the mission statement, the organizational structure, system flexibility, etc.

Customer Loyalty

- Raving Fan: Insists that others use your business and does your selling for you - Advocate: Introduces other people to your business - Member: Has a sense of belonging - Customer: Has bought from you a second time - Shopper: Someone who bought from you once Prospect: Someone who has taken action and you have their details - Suspect: Fits your target market

Segmenting Customers

- The practice of dividing a customer base into groups of individuals that are similar in specific ways relevant to marketing. - There are many different ways to group customers, (income, demographics, geography, buying preferences, etc.) - Segmenting customers allows a company to zero in on a particular population of customers to sell a specific product. - If a company can identify different segments of customers, they can potentially be more efficient and effective in the use of their resources by tailoring programs and initiatives for each segment

Personalizing Customer Communications

- Understanding customer behaviors and preferences, allows a firm to customize communications aimed at specific groups of customers and is likely to result in greater levels of sales. - Communication that is personalized sends a message to the customer that the company cares about them and the relationship is more then a transaction. - It is a way to differentiate the company from its competitors and it helps to build customer loyalty.

Tools to improve efficiency and effectiveness (Call Center)

1. Eliminate the call a) Web self service b) Chat c) Social media d) Voice response system 2. Reduce the call time / cost a) Multi level agent training b) Standard response scripts c) Agent incentives d) Charge for support

Key Tools and Components of CRM

1. Predicting Customer Behaviors 2. Segmenting Customers 3. Target Marketing 4. Event Based Marketing 5. Cross Selling and Up-Selling 6. Personalizing Customer Communications 7. Relationship or Permission Marketing 8. Analyzing Customer Defection 9. Customer Lifetime Value (CLV)

Sales Force Automation (SFA)

A core component of CRM systems used to document and measure sales team activities

Trends in CRM

Customer Data Privacy: - Important issue is to assure privacy & data protection - Is a legal and ethical responsibility of companies Social Media: - Creating and cultivating virtual communities around product or brand to engage consumers and develop loyalty Increasing Customer Expectations: - Access to product information, pricing, reviews, etc. - Intense / global competition for each customer