CRM Exam 3

Cross-Selling

Selling related but different products to existing customers. ➔ Goal: Increase share of wallet by offering complementary goods. Example: Selling a phone case and screen protector when someone buys a phone.

Up-Selling

Encouraging customers to purchase a higher-value or upgraded product. ➔ Goal: Maximize revenue per customer. Example: Convincing a customer to buy a MacBook Pro instead of a MacBook Air.

Deep-Selling (Penetration Selling)

Selling more quantity of the same product or service. ➔ Goal: Increase transaction size or usage. Example: Offering a loyalty discount for bulk coffee orders at Starbucks.

Cross-Promotion

Collaborating with other brands to market related products to each other's customers. Example: Spotify and Hulu offering bundled subscriptions.

Bundling

Combining multiple products/services together for a discounted price. ➔ Goal: Sell more products at once. Example: Cable TV, internet, and phone service package.

Loyalty Program (LP)

A marketing strategy where customers earn rewards based on repeat behavior or engagement.

Build True Loyalty

Behavioral loyalty (repeat buying) + Attitudinal loyalty (emotional connection). Customers stay with the brand even without rewards.

Generate Efficiency Profits

Reduce marketing and sales costs by retaining customers. Loyal customers are cheaper to serve over time.

Generate Effectiveness Profits

Use customer data to cross-sell, upsell, and increase the share of wallet.

Value Alignment

Allocate rewards and resources based on customer lifetime value (CLV).

Behavioral Loyalty

Observed behavior: regular repeat purchases. No emotional attachment necessarily. Example: Shopping at the nearest grocery store for convenience.

Attitudinal Loyalty

Positive feelings and commitment toward a brand. Example: Always recommending Tesla because you love the brand.

High Costs

Rewards can be expensive and outweigh profits.

Low Active Engagement

Many customers enroll but rarely redeem rewards.

Slow Reward Accumulation

Customers get frustrated and leave programs.

Loyalty Fatigue

Customers overwhelmed by too many similar programs.

Reward Mechanism

Transaction-Based: Rewards for purchases only. Engagement-Based: Rewards for actions (social sharing, reviews).

Reward Structure

Hard Rewards: Tangible (cash back, free gifts). Soft Rewards: Intangible (special access, VIP status).

Participation Requirements

Open Enrollment: Anyone can join (e.g., Sephora).

Closed Enrollment

Invitation-only (e.g., Amex Centurion).

Payment Function

Funded by a single brand or partnerships (multi-brand programs like airline alliances).

Sponsorship Types

Single-Sponsor LPs: One brand. Multi-Sponsor LPs: Points usable at multiple companies.

Cost and Revenue Considerations

Balance program cost vs. increased CLV.

Campaign Management

The systematic process of planning, executing, and analyzing marketing activities aimed at a specific objective.

Planning

Set objectives: market penetration, extension, development, or diversification. Define campaign KPIs (conversion rate, ROI).

Development

Identify Customer Segments: using CRM data. Create the Offer: relevant, valuable, time-sensitive. Develop the Communication Strategy: clear message across channels.

Execution

Coordinate departments (marketing, sales, IT). Launch campaign according to a Gantt chart schedule.

Monitoring and Fine-Tuning

Track early indicators (response rates). Adjust strategy mid-campaign if needed.

Analysis and Control

Measure success: Conversion Rate (CR) = (Responses ÷ Campaign Size) × 100; Cost Per Sale (CPS) = Campaign Cost ÷ Number of Sales; Return on Investment (ROI) = (Profit - Campaign Cost) ÷ Campaign Cost.

Feedback

Gather learnings. Profile responders vs non-responders. Improve next campaign.

Split-Run Testing

Compare two different versions of an ad or message. Used to find best-performing creative.

Cross-Over Testing

Test groups receive different ads at different times to minimize bias.

Binary Classification Tree

A data-driven model used to classify customers into 'yes' or 'no' groups (e.g., will they buy?).

How Binary Tree Splitting Works

Choose variable (age, gender, previous purchase) that best splits buyers vs non-buyers. Continue splitting subgroups until no meaningful improvement.

Misclassification Rate

Misclassified Customers ÷ Total Customers. Goal: Lowest misclassification = best tree.

CRM Application

Target customers with high probability of response. Avoid spending on low-response segments.

Loyalty Program Exercises

List common LP problems. Suggest improvements to LPs. Compare transaction vs engagement-based rewards. Design a loyalty program for a new retailer.

Campaign Management Exercises

Describe the phases of campaign management. Identify effective customer segmentation strategies. Develop a marketing communication offer. Calculate campaign ROI and explain campaign success measurements.