In a short essay, list the seven steps to developing a customer relationship management model.

Question

What will be an ideal response?

Answer 1

1. The first step is developing a database that is the foundation of the model containing data
related to the current customers that the firm is serving. Some examples are the type of
transactions made by the consumers, the contact information of the consumers, descriptive
information related to the consumers, and the type of response to previous marketing efforts
targeted toward the consumers.
2. The second step is analyzing the consumer data used to develop groups or clusters of
consumers with similar buying patterns. This clustering allows the firm to categorize the
consumers based on the market segment their buying patterns represent. In addition, the analysis
of the data can be used to calculate the existing and future profitability of each consumer. By
determining the “lifetime customer value,” the firm can be more effective in allocating its
resources to target the specific clusters and individual consumers.
3. The third step in the process is selecting the customers based on targeting the current and
future most profitable customers. The customer selection can also be used to “fire” customers
whose costs outweigh the potential future benefits of maintaining the customer.
4. The fourth step is targeting the customers. The ultimate goal of relationship marketing is to
develop a one-to-one relationship between the individual customer and the firm. Through data
analysis, firms can target the specific needs of each individual customer.
5. The fifth step is developing relationship marketing, which can include establishing loyalty or
reward programs, customizing advertising and benefits, and customizing customer service.
6. The sixth step is addressing the privacy issues related to the customer relationship
management model, for example, feelings of being “violated” to the fear of being harmed by
identity theft. Firms must be proactive in being transparent in their privacy policies so they can
react quickly to any violations to ensure these relationships continue with the customers.
7. The seventh and final step is metrics. Metrics are used to measure the success of the customer
relationship management program, for example, financial performance measurements such as
profitability, market share, and revenue growth and should focus on customer-based performance