Chapter 11

Question 1

the percentage of total purchases made by a customer in a store

Answer 1

SHARE OF WALLET

Question 2

committed to purchasing from that retailer … resist efforts of competitors … emotional attachment to retailer (personal attention, memorable positive experiences, brand building communication programs)

Answer 2

CUSTOMER LOYALTY

Question 3

(recency, frequency, monetary) … often used by catalog retailers and direct marketers … a scheme for segmenting customers on the basis of how recently they’ve made a purchase, how frequently they make purchases, and how much they’ve purchased

Answer 3

RFM

Question 4

CUSTOMER RELATIONSHIP MANAGEMENT

Answer 4

business philosophy and set of strategies, programs & systems that focus on identifying and building loyalty with a retailer’s most valuable customers … all customers are not equally profitable, and more or less profitable customers need to be treated differently
→gain customer loyalty

Question 5

The CRM process

Answer 5

an iterative process that turns customer data into customer loyalty through 4 activities:

1. ) Collecting Customer Data
   a. Customer Database ( transactions, customer contacts, customer preferences, descriptive information, responses to marketing activities)
   b. Identifying Information … Four Approaches that store based retailers use (asking for identifying information, offering frequent shopper cards, private label credit card, connect internet purchase data with the store)
2. ) Analyzing Customer Data and Identifying Prospects
3. ) Developing CRM Programs
4. ) Implementing CRM Program

Question 6

FTC GUIDELINES FOR FAIR INFORMATION PRACTICES

Answer 6

NOTICE & AWARENESS – the disclosure of information practices, including a comprehensive statement of information use such as information storage, manipulation and dissemination
CHOICE/CONSENT – includes both opt-out and opt-in options & allows customers to have the opportunity to trade information for benefits
ACCESS/PARTICIPATION – allows for the confirmation of information accuracy by customers
INTEGRITY/SECURITY – controls for the theft of and tampering with personal information
ENFORCEMENT/REDRESS – provides a mechanism to ensure compliance by participating companies

Question 7

DATA MINING

Answer 7

technique used to identify patterns in data found in data warehouses, typically patterns that the analyst is unaware of prior to searching through the data

Question 8

focus on composition of the market basket (what items are bought during a single shopping) … useful for suggestions on where to place items in the store

Answer 8

MARKET BASKET ANALYSIS

Question 9

– estimate Lifetime Value (LTV) by using past behaviors to forecast future purchases and the costs associated with serving the customers … classify customers by recency, frequency and monetary value of purchases (RFM Analysis) … 80/20 rule

Answer 9

IDENTIFYING MARKET SEGMENTS & THE BEST CUSTOMERS

Question 10

CRM TECHNIQUES

Answer 10

Customer Retention
Frequent Shopper Programs – tiered rewards, offer choices of rewards, reward all transactions, transparent & simple
Personalization – 1 to 1 retailing
Converting Good Customers to Best Customers
Customer Alchemy – increasing sales made to good customers to convert them into best customers… add-on selling
Dealing with Worst Customers
-Offer less costly services to satisfy the needs of these customers
-charging customers for the services they are abusing
-remove from direct marketing lists
-deter bad customers while not losing the good ones