Use of technology in CRM

CRM (Customer Relationship Management) in retail focuses on building strong customer relationships to boost loyalty and repeat purchases. Below are key aspects of CRM, including identifying target customers, developing CRM programs, and using technology to enhance these efforts.

1. Identifying Target Customers

• Purpose: CRM begins with identifying the customers who provide the highest value to the retailer.
• Methods:
  • Customer Lifetime Value (CLV): Evaluates a customer’s projected contribution to the retailer’s profit over their relationship with the store. High CLV customers are often prioritized for loyalty and retention strategies.
  • Segmentation:
    • Behavior-Based Segmentation: Groups customers based on purchase behavior, such as frequency and type of products bought.
    • Demographic and Psychographic Data: Incorporates customer demographics, interests, and values to develop detailed customer profiles for more targeted marketing.
  • Example: A retailer might identify a segment of health-focused, high-spending customers and target them with relevant wellness products.

2. Developing and Implementing CRM Programs

• Program Development:
  • Loyalty Programs: Retailers implement loyalty or frequent-shopper programs to build customer loyalty. These programs reward customers for repeat purchases, fostering a sense of exclusivity and belonging.
  • Customer Pyramid:
    • Platinum: Highest-value customers who are the most loyal.
    • Gold: Valuable customers, though not as loyal as platinum.
    • Iron: Moderate spenders, targeted with periodic incentives.
    • Lead: Least profitable and often costly customers.
• Program Elements:
  • Tiered Rewards: Loyalty programs often include tiered rewards, such as VIP benefits for high-tier members.
  • Personalization: Retailers customize offers, discounts, or exclusive access based on individual customer behavior to enhance engagement.
• Example: Sephora’s Beauty Insider program offers rewards tiers like Rouge, VIB, and Insider, with perks scaling up for the most engaged members.

3. Use of Technology in CRM

• Data Warehousing: Retailers use data warehouses to store and organize vast amounts of customer data, including transaction history, interactions, preferences, and demographics. This organized data enables more precise customer insights.
• Retail Analytics:
  • Market Basket Analysis: Identifies products frequently bought together, allowing retailers to suggest add-ons and create bundle promotions.
  • RFID Technology: Radio Frequency Identification (RFID) helps track products and customer interactions in-store, providing insights into shopping behaviors and preferences.
• Digital Loyalty Programs:
  • Mobile Apps: Many retailers offer loyalty apps that let customers track rewards, view personalized offers, and receive real-time notifications.
  • Cookies and Online Tracking: Used to understand customer behavior on websites and customize online shopping experiences. This data helps inform CRM strategies and personalization.

Identifying target customers, developing effective CRM programs, and leveraging technology are fundamental steps for successful retail CRM. These elements together support tailored customer interactions that drive loyalty and increase customer lifetime value.