Transaction and CRM, Vorlesung Jürgen Rösger, Universität Mannheim

1. Transaction and CRM
page 1

2. Outline
1. Transaction
1.1. Definition of e-commerce
1.2. Increasing importance of e-commerce
2. CRM
2.1. Definition of CRM
2.2. CRM in electronic media
page 2

3. Business is not financial science, it's
about trading… buying and selling. It's
about creating a product or service so
good that people will pay for it.
Anita Roddick, Founder of The Body Shop
page 3

4. The Interactive-Tableau helps to structure
communication activities
Communication cycle
Branding Consideration Transaction CRM
PR
Possible crossmedia integration
PP + Progr.
Print
TV
Online
DM + Mobile
Outlet
page 4

5. Definition of e-commerce
e-commerce (narrow definition)
• e-commerce is a term referring to a wide variety of
Internet-based business models.
• Typically, an e-commerce strategy incorporates various
elements of the marketing mix to drive users to a Web
site for the purpose of purchasing a product or service.
Source: AMA , 2009
page 5

6. Differentiation of e-commerce definitions
Extranet, intranet,
TV, telephone, fax
etc.
E-commerce
Technology (in the broader sense)
E-commerce
Internet (narrow definition)
Information and Transaction
communication
Objectives from
supplier’s point
Source referring to: Marketing; Meffert, H.; 9. edition 2000; p. 917
of view
page 6

7. Areas of e-commerce
Consumer-to- Consumer-to- Consumer-to-
consumer business administration
e.g. income tax,
e.g. eBay e.g. job exchange declaration
of residence
Business-to- Business-to- Business-to-
consumer business administration
e.g. orders e.g. e-procurement e.g. sales tax
(e.g. Amazon)
Administration- Administration- Administration-
to-consumer to-business to-administration
e.g. support at e.g. procurement e.g. transactions
transactions for public institutes of public institutes
page 7

8. Outline
1. Transaction
1.1. Definition of e-commerce
1.2. Increasing importance of e-commerce
2. CRM
2.1. Definition of CRM
2.2. CRM in electronic media
page 8

9. Revenues of B2C e-commerce
23.7
21.9
20.0
18.3
18
16.3
5.59% of TRS
16
4.69% of TRS
14.5
14 13
4.65% of TRS
12 1.29% of TRS 11
4.16% TRS
0.65% of TRS
3.72% of TRS
Bill. Euro
10
0.33% of TRS
8
3.37% of TRS
8
2.91% of TRS
2.1% of TRS
6 5
4 2.5
2 1.25
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Total retail sales (TRS): 370 - 392 bill. € (1999 – 2009)
Source: Hauptverband des deutschen Einzelhandels, 2009 ; containing transaction for tangible goods, services (e.g. delivery services), rights of exploitation
(e.g. travels, tickets) and information (e.g. charged downloads).
page 9

10. Germany„s top ten online shops
6,12
ebay.de* 18
13,73
amazon.de 13.05
3,6
tchibo.de 5.63
otto.de 1,7**
otto.de
tchibo.de 4.85
1,94
weltbild.de 4.27
2,9
quelle.de 4.14
bonprix.de 3.16
Annual revenue (in bill.€)
neckermann.de 2.93
conrad.de Million customers
2.84
buecher.de 1.64
* Including private auctions
** 2007
Source: ACTA, 2008
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11. Growth of online shopping
Online shopper
Online purchases in
the last 12 months
10 and more
5 -9
1-4
Source: ACTA 2009
page 11

12. Online purchases by product category
Books
Travel
Hotel reservation
Clothes, shoes
Hard- and software
Drugs, medical
equipment
Cosmetic
Source: ACTA 2009
page 12

13. Outline
1. Transaction
1.1. Definition of e-commerce
1.2. Increasing importance of e-commerce
2. CRM
2.1. Definition of CRM
2.2. CRM in electronic media
page 13

14. The Interactive-Tableau helps to structure
communication activities
Communication cycle
Branding Consideration Transaction CRM
PR
Possible crossmedia integration
PP + Progr.
Print
TV
Online
DM + Mobile
Outlet
page 14

15. General requirements changed in the 21th century
New challenges
Integration of
customer related
 Increasing data Customer Orientation
individualization of
consumer behavior
 Within today‟s global and Integration of
product related
transparent markets, data Product orientation
competitive differentiation
only via products not
longer sufficient
 Sales of products or
services not regarded Integration of Qualitty orientation
production related
as closing of a deal, but data
rather as beginning of a
long lasting relationship
Source: Benchmarking Customer Relationship Management, University of St. Gallen, 2002
page 15

16. Definition of customer relationship management
• A discipline in marketing combining database and computer
technology with customer service and marketing
communications.
• Customer relationship management seeks to create more
meaningful one-on-one communications with the customer by
applying customer data (demographic, industry, buying history, etc.)
to every communication channel.
• At the simplest level, this would include personalizing e-mail or other
communications with customer names.
• At a more complex level, CRM enables a company to produce a
consistent, personalized marketing communication whether the
customer sees an ad, visits a Web site, or calls customer service.
Source: AMA, 2009
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17. Objectives of CRM
Increase customer  …which means to optimize the long-term value of the
retention… consumer
 …about markets and new competitors
Enlarge knowledge…  …about existing consumer segments (learning relationship)
 …potential consumer segments
Increase effectiveness  …regarding processes
and efficiency…  …regarding costs
 …in existing business segments
Increase acquisitions…
 …in new business segments
 E.g. customer and service orientation
Strengthen brand image  Modern research & development
 Future and environment orientation
Source: insights 2; May 02; editor BBDO Consulting; p. 57
page 17

18. Economic objectives of CRM: Optimizing the CLV
Customer lifetime value (value of a customer)
Sum of all discounted, customer related payments, which are caused by the transactions
with the customer during the phase of acquisition, as well as during the total duration of the
customer relationship.
T t
1
CLVi = Ai + ∑(CMIit – CMOit) .
t=0
1+r
CLVi = Customer lifetime value of customer i
Ai = Present value of investment for acquisition of customer i until t=0
t = Time in years (t=0: start of business relationship)
CMIit = Customer related monetary incomes for customer i and year t
CMOit= Customer related monetary outcomes for customer i and year t
r = Annual interest rate for evaluation of customer related costs of capital
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19. Sample calculation for competing CLV
Costs for banner advertising in the Internet 100,000 EUR
Thereby generated clicks (on homepage) 12,000
Thereof buyers 800
Acquisition costs per customer 125 EUR
Average initial order value per customer 180 EUR
Thereof contribution margin (CM rate 40%) 72 EUR
Initial investment per customer (since costs > revenues) -53 EUR
Average purchasing Contribution margin
Period Rate of repeat buyers CM rate
volume per new customer
1st year 60 % 150 EUR 40 % 36.00 EUR
2nd year 48 % 175 EUR 40 % 33.60 EUR
3rd year 30 % 220 EUR 40 % 26.40 EUR
With interest rate of 20 %
36.00 EUR 33.60 EUR 26.40 EUR
CLV = -53 EUR + + + = 15.61 EUR
1.2 1.22 1.23
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20. CRM – Sources of customer value
Sources of customer value
Basically quantifiable Hard to quantify
 Purchase quantity  Reference potential (gaining of new
 Willingness to pay (payment of prices customers via recommendation / word-
above average)
 Customer support coefficient(reduction of-mouth propaganda)
of marketing costs)  Information potential
 Cross-selling potential (customer as market research object)
 Duration of customer relationship
! But:
 Long lasting customers not necessarily provide an improved marketing efficiency
or a higher willingness to pay.
Source: Krafft, M. / Bromberger, J. (2001): Kundenwert und Kundenbindung, in: Albers, S. / Clement, M. / Peters, K. / Skiera, B. (eds.):
Marketing mit Interaktiven Medien, 3rd edition. Frankfurt am Main, p. 160 – 163
Krafft, M. (2002): Kundenbindung und Kundenwert, Heidelberg, p. 33-40
page 20

21. CRM – Truly for everyone?
Recommendations Recommendations
Cross-selling Complementary products
and services
Up-selling Additional functionalities
Deal-price realization
Basis
profit Retention and frequency
CRM Acquisition costs
costs Customer retention
serving costs
page 21

22. eWOM from virtual communities
Consumers…
Study 2007
75%
62%
51%
50% 43%
62% of the consumers are
25% reading eWOM and
51% are affected by online
ratings.
0%
are reading are affected in are forwarding
eWOM conumption eWOM
decision by to friends
eWOM
Source: Deloitte 2007
page 22

23. Outline
1. Transaction
1.1. Definition of e-commerce
1.2. Increasing importance of e-commerce
2. CRM
2.1. Definition of CRM
2.2. CRM in electronic media
page 23

24. Online CRM
Seite
Examples 24
page 24

25. Online CRM
Examples
page 25

26. Mobile CRM
page 26

27. Mobile CRM
Glow Cap Hexal
Zipcar
page 27

28. Again! – Objectives of CRM
Strengthen Enlarge Increase Raise customer Increase
brand image knowledge acquisitions retention effectiveness and
efficiency
Customer
Branding Consideration Transaction relationship
management
Basic idea of interactive marketing
Source: insights 2; May 02; editor BBDO Consulting; p. 57
page 28

29. From a local brand to a global success
The ABSOLUT Vodka Case
page 29

30. History
How the story began…
1879 + Lars Olsson Smith + A revolutionary distilling method
= „Absolut rent Bränvin“
(absolutely pure vodka)
…and how it went on:
Today
1979
World„s biggest-selling
Export to the USA
premium vodka
Åhus (in volume)
Europe Russia
USA Asia
Latin
America
1997 2002
500th
million bottle World„s number one
was produced luxury brand
Source: Forbes Magazine; Euromonitor; Pernod Ricard
page 30

31. Brand cube of market success
Product Lifestyle &
Design Fashion
Event
focus
high
Advertising Art, Music &
Campaigns Events
ABSOLUT
integrates and balances
its marketing activities
Target
group
low
Digital &
Celebrities Social Media
Interactivity
low high
page 31

32. 1 – Advertising Campaigns
1981 … 27 years later … 2008
ABSOLUT campaign, in ‚In an ABSOLUT world„
which the brand challenges the question:
commented on and paid What if everything in the
tribute to contemporary world was approached with
culture, was launched. More than 1,000 ads in many the same ideals as
different media published and 400 ABSOLUT approaches
advertising awards won. vodka?
Source: www.absolut.com
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33. 2 – Digital & Social Media (I)
www.absolut.com ABSOLUT on your iPhone
ABSOLUT integrates online and mobile world
following the principles of participation and interaction
to create a strong (virtual) brand community.
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34. 2 – Digital & Social Media (II)
ABSOLUT takes part in social communitys,
ABSOLUT
accepts and supports user-generated-content
COLLECTORS
and connects to bloggers
WORLD
www.absolutcollectorsworld.com
to create a strong brand identification.
page 34

35. 3 – Lifestyle & Fashion
Lifestyle
ABSOLUT Icebars in London,
Stockholm, Jukkasjärvi and
Mojave are meeting points for
brand lovers and sightseers.
Fashion
Upcoming and established designers
creat fashion items for the brand
which enthuse fashionists.
Handbag designed by Versace in 1997
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36. 4 – Art, Music & Events
Art, music and events
create emotional connections to the brand and
are import elements for an emotional product differentiation.
Exhibitions Music Contemporary art ads Installations by artists
„Photo Giants“ „ABSOLUT Tracks“ „ABSOLUT Art“ „In an ABSOLUT world opportunities
(World„s biggest outdoor exhibition (4 djs produced unique tracks as a musical (e.g. Andy Warhol and Keith Haring painted always pop up“
of pictures in 3 German cities in 2009) interpretation of the brand in 2004) pictures of the bottle) (By Justin Broadbent in Toronto in 2009)
page 36

37. 5 – Product Design
Limited editions
•limited number increases demand
• fancy design supports brand image
• constant form enables recognition
Rock Colors
Disco
No Label
Masquerade
page 37

38. 6 – Celebrities
Lenny
cool
Kravitz
Brand ambassadors / testimonials
Kate
enable an image transfer from the modern
Beckinsale
person to the brand.
Jason
sexy
Lewis
page 38

39. Integrated communication at every level
Consideration Transaction
Lifestyle &
Fashion
Event
focus
high
Art, Music &
Events
Product
Design
Advertising Target
low
Campaigns group
Digital &
Branding Celebrities
Social Media Inter- CRM
activity
low high
page 39

40. Apple
Why is it so successful?
„Importantly, iPod innovation was not a one-hit wonder, but a series
of „episodes‟. Each has packed a punch that combines superior
functionality, ease of use and aesthetic appeal.
The first iPod offered a step-change in storage capacity, the iTunes Store
made online music-buying much easier and iPod Photo has expanded the
device's functionality, and so the list goes on.”
(Source: Taylor, 2005)
page 40

41. Apple – history
1984 2007
X X X X
1976 2001
page 41

42. Apple – The world of iTunes
iTunes is a multimedia program that enables you to
play – convert – organise – buy your music – games – movies – videos
page 42