Database Reference
In-Depth Information
CRM strategies spanning the full customer lifecycle are constituted of four decision patterns
or models:
a. Customer acquisition: This involves decisions on identifying the right customers to acquire,
forecasting the number of new customers, the response of promotional campaigns, and so
on. The objectives of customer acquisition modeling include identifying the right customers
to acquire, predicting whether customers will respond to company promotion campaigns,
forecasting the number of new customers, and examining the short- and long-run effects of
marketing and other business variables on customer acquisition.
This is a conscious move from mass marketing of products to one that is focused on the
end consumer. This is a direct result of increases in data collection and storage capabilities
that have uncovered layer upon layer of customer differentiation. Differentiating and
segmenting with regards to demographic, psychographic, or purchasing power-related
characteristics became more affordable and possible, and eventually became necessary
in order to keep up with competing firms. Although segment-level acquisition did not
take this theory to the extent that one-to-one customer acquisition has, it reinforced a
growing trend of subsets or groups of customers within a larger target market. Being able
to collect, store, and analyze customer data in more practical, affordable, and detailed
ways has made all of this possible. 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. This continuous firm-customer interaction has con-
sistently shaped segment-level marketing practices in the process to better understand
customers.
The decision patterns would incorporate
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Differences between customers acquired through promotions and those acquired
through regular means
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Effect of marketing activities and shipping and transportation costs on acquisition
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Impact of the depth of price promotions
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Differences in the impact of marketing-induced and word-of-mouth customer
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Acquisition on customer equity
b. Customer retention: This involves decisions on who will buy, what the customers will buy,
when they will buy, and how much they will buy, and so on. During the customer's tenure
with the firm, the firm would be interested in retaining this customer for a longer period of
time. This calls for investigating the role of trust and commitment with the firm, metrics
for customer satisfaction, and the role of loyalty and reward programs, among others. The
objective of customer retention modeling includes examining the factors influencing cus-
tomer retention, predicting customers' propensity to stay with the company or terminate the
relationship, and predicting the duration of the customer-company relationship. Customer
retention strategies are used in both in contractual (where customers are bound by contracts
such as cell (mobile) phone subscription or magazine subscription) and in non-contractual
settings (where customers are not bound by contracts such as grocery purchases or apparel
purchases).
Who to retain can often be a difficult question to answer. This is because the cost of
retaining some customers can exceed their future profitability and thus make them unprof-
itable customers. When to engage in the process of customer retention is also an important
component. As a result, firms must monitor their acquired customers appropriately to ensure
