BUS630: Consumer Behavior

6a. Identify the components of an effective customer management strategy

• What is a customer relationship management (CRM) system?
• Why is it necessary for a marketing company to manage consumers?
• How might a marketing company develop a strategy to manage consumers?

A customer relationship management (CRM) system helps organizations organize consumer information. This might include marketing, sales information, and any consumer account information. The system may also collect information about interactions with the consumer.

Companies need to collect all the data they have on a consumer and also run the business with that information. A CRM system can be very detailed and even contain data analysis so the marketing department can better understand what a customer wants.

A CRM system is vital to any company and its customer management strategy to sell products to consumers, and almost any department can use the system to gain insight into a consumer's behavior. A CRM system can also help to better develop a strategy for managing consumer information.

To review, see Customer Relationship Management Systems and Customer Relationship Management.

 

6b. Compare the different formulas for calculating customer value

• How can customer value be calculated?
• Do companies save specific sales information about each customer? Why or why not?
• Why would customer value be important for a marketing company to track?

Most sales companies collect information about consumers and what value they may add to the company. Some of this information can easily be calculated by creating formulas. This may be as simple as reviewing the average purchase amount for each sale as a way of calculating customer value. This information can help a company to focus marketing and marketing efforts.

For example, a customer who has an average purchase amount of $3000 may be more valuable to a company than a customer who, on average, spends $300 per purchase. Other factors should also be taken into consideration. If, for example, the customer with the higher average purchase amount takes up employees' time by asking for special arrangements (extra attention, special shipping, etc.), that value may decrease. Another possible formula to explore is how often the customer makes a purchase. This may create a customer lifetime value that can easily be calculated. Each company may use a different way to evaluate this information, but it is essentially the same.

To review, see Customer Relationship Management Systems and Customer Relationship Management.

 

6c. Identify the different dimensions for a customer segmentation

• How might customer information be segmented?
• What demographics would a marketing company use to segment customer information?
• What are the four segmentations that might be used to manage customer information?

A marketing company might use customer segmentation to organize potential consumers into groups based on demographic, psychographic, geographic, or behavioral information. For example, a marketer might want to know the average age of people who purchase a certain product. This demographic information can give the marketer an age range of people who may become the target market for that product.

Psychographic segmentation occurs when a company groups individuals based on interests, values, or beliefs. Geographic segmentation occurs when a company groups together customers by their physical location. Behavioral segmentation occurs when a company groups customers based on their habits (for example, spending or online browsing information).

By segmenting customer information, a company can more easily understand customers. Each segment can be used to gain specific information about a group of people. A marketing company may use segmentation to obtain specific information about its target market.

To review, see Customer Relationship Management Systems and IMC.

 

6d. Explain how to use information from the customer management cycle to acquire better customers

• What is the customer management cycle?
• How can marketers use the customer management cycle?
• How can the customer management cycle be used to find customers?

A customer management cycle or customer life cycle may include different aspects. These might include retention, conversion rate, information about how a customer was initially obtained, or customer loyalty. It is important to understand this information so that it may yield a better understanding of the target market when grouped. In turn, this information may help a marketing company to obtain additional or better customers.

A marketer may study the average age and conversion rate for a specific product, which may allow for a more specific target market in the future. For example, if senior citizens are more likely to purchase luxury vacations and take those trips once or twice a year (conversation rate), a luxury cruise line may want to target senior citizens to purchase their cruises. Compared to individuals in the 40–50-year-old range who might take a luxury vacation once every five years, the conversion rate is not as high as it might be with a senior citizen. This information may allow a marketing company to focus on a specific population.

To review, see Customer Relationship Management Systems and IMC and Other Areas Impacted by Customer Management.

 

6e. Evaluate the differences between the customer management approaches for mass marketing versus direct marketing

• What is the difference between mass marketing and direct marketing?
• How might a mass marketing company target customers?
• How might a direct marketing company target customers?

Mass marketing might include television commercials, radio ads, at-home mailers, or newspapers, while direct marketing specifically targets their most likely buyers. These are types of marketing but with different approaches.

With mass marketing, you are trying to reach a market by getting the word out to millions of people at once, and the result is that a few will buy the product or service. For example, a grocery store may market to people living in that immediate area, with no specific target market. A pizza parlor may be another good example of a company that might use mass marketing because the products they sell fit a larger population.

Direct marketing may include very specific information about who their target market is. A health food store may want to specifically target healthy or athletic individuals. They may be able to use a mass marketing technique to reach these people. However, it may not be cost-effective. By specifically targeting healthy individuals, they can focus their marketing efforts.

To review, see Customer Relationship Management Systems and IMC.

Unit 6 Vocabulary

This vocabulary list includes terms you will need to know to successfully complete the final exam.

• calculating customer value
• customer lifetime value
• customer management cycle
• customer management strategy
• customer relationship management (CRM)
• customer segmentation
• direct marketing
• mass marketing