Database Reference
In-Depth Information
such as acquisition, retention, churn, and win-back are essential for establishing a profitable CRM
strategy, merely
maximizing
each of these individual metrics is not necessarily a guarantee for suc-
cess. Implementing specific and tailored strategies for key customer metrics yields a greater impact
on customer decisions and can therefore lead to higher profitability. Prevailing patterns in CRM
data can help in developing these specific strategies in each of the four steps of the customer-firm
relationship life cycle: acquisition, retention, churn, and win-back.
a. Acquisition: the acquisition strategy involves attaining the highest possible customer acquisi-
tion rate by implementing mass-level strategies. Any combination of mass marketing (radio,
billboards, etc.) and direct marketing (telemarketing, mail, e-mail, etc.) would be imple-
mented in order to target
eligible
customers rather than
interested
ones. A new approach to
CRM pertaining to customer acquisition is gaining ground: there is a conscious move from
mass marketing of products to one that is focused on the end consumer. Differentiating and
segmenting with regards to demographic, psychographic, or purchasing power-related char-
acteristics became more affordable and possible, and eventually became necessary in order
to keep up with competing firms. As firms have become more capable and committed with
data analyses, offerings have become more specific, thus increasing the amount of choice for
customers. This has in turn spurred customers to expect more choice and customization in
their purchases. It is through the continued improvements and innovations in data collec-
tion, storage, and analysis that acquisition has moved toward one-to-one acquisition.
b. Retention: since the early 1960s, companies have changed their focus from short-term
acquisition and transactions to long-term relationships and CLTV. In fact, retention studies
indicate that for every 1% improvement in customer retention rate, a firm's value increases
by 5%.
c. Churn or attrition: many firms fail to realize that the majority of customers who are in the
churn stage will not complain or voice their concerns. A study on this found that an esti-
mated 4% of customers in the churn stage will actually voice their opinions, with the other
96% lost without voicing their discontent. Further, about 91% of the lost customers will
never be won back.
d. Win back: Although reacquiring lost customers may be a hard sell, it has been found that
firms still have a 20-40% chance of selling to lost customers versus only 5-20% of selling
to new prospects.
14.9.1.2 Domain-Specific Decision Patterns
In the following, we discuss decision patterns for customer relationship management (CRM)
which get defined and fine-tuned, across an extended period of operational experience, by the
specific requirements of the business, offerings, and geographic region(s) in which the company
operates.
14.9.1.2.1 CRM Decision Patterns
This section describes an overview of the statistical models-based decision patterns used in CRM
applications as the guiding concept for profitable customer management. The primary objectives
of these systems are to acquire profitable customers, retain profitable customers, prevent profitable
customers from migrating to competition, and winning back
lost
profitable customers. These four
objectives collectively lead to increasing the profitability of an organization.
