CRM And Market Segmentation Essay.

A study has been done regarding the motivation for participants in the sporting event Alpe d’HuZes where thousands of people form teams and climb up and down a famous mountain, following a route which is a well-known stage in the Tour de France cycle race. While the sporting event is designed to raise money for cancer research, there are groups of people who have varying motivation and behaviours for partaking in the event. That all to be said, please help the organizing and planning committee at Alpe d’HuZes with the following questions considering customer segmentation. Moreover, consider the necessary recommendations with regards to better serving the event’s participants and to ultimately achieve the three most important initiatives for Customer Relationship Management.

Case Study Case Questions:

1. You are approached as a consultant (by the organizers of Alpe d’HuZes) to provide an overview to new employees to why segmenting a customer base is critical in managing Customer Relationships. Please explain how segmentation can help address the 3 main achievement goals for CRM – with as many other industry / company examples as you see fit – to fully explain the value of segmentation, and how it can relate to the situation for Alpe d’HuZes.

2. Now that Alpe d’HuZes has conducted some key primary research it seems like people have varying different types of motivations for which to participate in the annual event. However, now Alpe d’Huzes needs to strategize how specifically the organization should strategically allocate its resources (financial, staff, marketing, supply chain, etc)

What is Customer Relationship Management (CRM)?

Customer Relationship Management (CRM) is a strategy that an organization uses to manage its interactions, connection, and relationship with its existing and potential customers in order to enhance customer satisfaction and increase profitability (Kumar, 2010). CRM is facilitated by a CRM software which stores customers’ data such as profile, products preference, buying history, and communication messages, in order to give the organization a clear image about the customer for purposes of improving how the organization relates with the customers. The main objectives of CRM are; enhancing customer satisfaction, increasing customer base, boosting sales, and improving business efficiency (Kumar, 2010).

Customer base segmentation which is also known as market segmentation is the marketing strategy of grouping customers into discrete groups of customers with similar needs, demands, and characteristics (Wedel & Kamakura, 2012). The factors that determine the grouping of a customer in a particular market segment include; buying patterns, geographical location, occupation, age, among others.  The main aim of market segmentation is to create a market mix that commensurate with the expectations of a customer in a particular market segment (Reimann, Schilke, & Thomas, 2010).   

Market segmentation is useful in Customer Relationship Management since it helps the organization managers to put people with almost similar interests together, and address their needs as a group, thus reducing cost (Menzly & Ozbas, 2010). Market segmentation boosts CRM through the provision of customized promotion information, therefore, making the customers feel that the product suits the best.  Proper segmentation of the market will help the organization to maintain a good relationship with their customers through regular product improvement in order to meet the changing needs of a particular market segment.

Many international companies have adopted market segmentation in their operations. BMW automobile company has segmented its market depending on the level of income of its customers. It provides cheap vehicles to the low-income earners and luxury vehicles such as BMW X6 to the affluent customers (Avery, Bergsteiner, 2011). Alpe d’Huzes can segment its customers based on their varying motivation, behavior, age and Income. Therefore it should provide activities which match the interest of the different market segments.

Resource allocation in CRM plays a pivotal role in influencing the achievement of CRM objectives. Assuming that Alpe d’Huzes has a budget of $100,000 for the next year, the resources can be allocated among the three main objectives of CRM as follows.

In order to achieve customer satisfaction, Alpe d’Huzes should allocate 25% ($2500) of the resources.  30% of this money will be used to finance the establishment of an efficient communication channel that will provide a connection between the organizations and the customers. 20% will be used to acquire and maintain a good database to keep customers records. 10% will be used in offering personalized promotional messages to customers. 10% will be for regular activity development. 30% will be used to hire qualified human resource to handle the customers.

Why is Market Segmentation an important strategy for Customer Relationship Management?

In order to achieve increased customer base, Alpe d’Huzes should allocate 40% ($40000) of the resources. 50% of this money will be used in advertisement and promotion. 20% will be used in doing market research so as to know the various motivation interests of different potential customers and then do market segmentation. 30% will be subjected into hiring qualified human resource and adopting good technology to do marketing.

In order to increase profitability, Alpe d’Huzes should allocate 35% of the resources. 50% of the allocated money should be used to organize the activities, and provision of required materials to conduct the activities. The remaining 50% should be allocated to do auditing and regular monitoring in order to ensure that the money that is raised from any single activity surpasses the cost of holding the activity.

According to Wedel & Kamakura (2012), Alpe d’Huzes can use social media advertising to capture the young people market segment since many young people are frequent social media visitors. The company can use live streaming/ airing of their activities as a marketing tactic to capture the female market segment because ladies get interested in an activity when they see other people doing it. Word of mouth referral can be used to capture the various market segments which are based on varying motivations and behavior since many people are likely to respond to a friend’s invitation to participate in an activity.

The efficiency and effectiveness of the resource allocation can be measured based on the deliverables gained/ obtained within the 12 months. Increased customer satisfaction can be measured by increased referrals which should constitute 10% of the new customers, increased customer retention at a rate of 70%, reduction in complains by 50%, positive comments from customers, among others.

Increased customer base can be measured based on attainment of 70% increase in new customers compared to previous year. Each marketing technique that is employed should generate sufficient customers whose total turnover surpasses the cost of using the marketing technique by at least 25%. Increased profitability can be measured based on the money gained that year compared to last year. The total gains should be at least 50% higher than last year’s gains and at least 25% above the total cost incurred.

Alpe d’Huzes can segment its customers based on:

Age:

This will result in two market segments which are; Youth (18 years- 35 years) and middle-aged (35 years- 65years), (Menzly & Ozbas, 2010). The youth are most suitable for mountain climbing while as the middle-aged are suitable for cycling activity.   

Motivation:

Different people engage in the activity out of different motivations, therefore, the market can be segmented into two groups which are: Charity motivation group for people who engage in the activity for purposes of financing cancer treatment and Adventurers group for people who join the activity for fun.

Income:

According to Wedel & Kamakura (2012), Alpe d’Huzes can have three market segments which are low-income earners, mid-income earners, and high-income earners.  

Behavior:

The market segments can include; those who know about the activity, potential customers, and first-time participants (Menzly & Ozbas, 2010).

Geographical location:

This involves dividing the market into various regions and providing activities that match the interest of the people in that particular region.

A good example of a company that has applied geographical market segmentation is Coca-Cola Company which has divided its markets into; North America, South America, Europe, Asia, Africa, and Australia (De Mooij, 2013).

In addition to motivation to participate in an activity Alpe d’Huzes should obtain key information such as; level of income in order to know the affordability of a customer to participate in an activity, age of the customer in order to know which activity suits them best, customer’s lifestyle in order to match them with peers, and customers time schedule in order to schedule activities at a time convenient to that market segment (Menzly & Ozbas, 2010).   

References

Avery, G. C., & Bergsteiner, H. (2011). How BMW successfully practices sustainable leadership principles. Strategy & Leadership, 39(6), 11-18.

De Mooij, M. (2013). Global marketing and advertising: Understanding cultural paradoxes. Sage Publications.

Kumar, V. (2010). Customer relationship management. John Wiley & Sons, Ltd.

Menzly, L., & Ozbas, O. (2010). Market segmentation and cross?predictability of returns. The Journal of Finance, 65(4), 1555-1580.

Reimann, M., Schilke, O., & Thomas, J. S. (2010). Customer relationship management and firm performance: the mediating role of business strategy. Journal of the Academy of Marketing Science, 38(3), 326-346.

Wedel, M., & Kamakura, W. A. (2012). Market segmentation: Conceptual and methodological foundations (Vol. 8). Springer Science & Business Media.