2.3.

1 How relationship marketing impact on customer services

CRM operating process cycle- IDIC Methodology
The IDIC operating cycle by Peppers and Rogers Group and Microsoft Great Plains, 2001 isa
blue print of CRM implementation and can be used to put into action the framework by Chuand
Pike, 2002 in a number of situations. This blueprint views the problem from a CRMperspective
from a retail point of view. It is also possible for retailers to customize theirCRM approach to
better meet their objectives. IDIC bridges the gap between the CRMstrategies, frameworks as
discussed earlier and the actual implementation of the project. IDICstands for the acronyms:
identify; differentiate; interact and customize. These are thesequence of stages a company must
employ to realize the objectives it seeks from its CRMdrive. Peppers and Rogers Group and
Microsoft Great Plains, 2001 identify that the perfectCRM solution is implemented when a oneto-one relationship with each customer is realized. It may be very costly or complex, but
anecdotal evidence from Peppers and Rogers Group suggests that a firm that changes the way
they deal with the top 5% or bottom 20% of their customer base can realize payback on a CRM
project.
The stages of the IDIC blueprint in the customer services have been elaborated as follows:
Identify customers:
Information such as name, address, email, telephone number, purchase information and other
details must be collected across the company and at all points of contact with the customer. The
more information gathered about the customer helps in understanding their habits and
preferences. Purchase information is of high importance in the
luxury retail environment. A lot of information can be inferred about a persons income,

attitudes and preferences from the purchase information. A number of retailers have usedloyalty
schemes like club memberships, loyalty cards and promotional offers in conjunctionwith the
Internet to boost sales and collect more and more of customer data and buyingpatterns by
tracking their purchase records and browsing patterns online as well as offline.
Differentiate customers:
Peppers and Rogers argue that customers represent different levelsof value to a company and that
they have varied needs (Peppers & Rogers Group & MicrosoftGreat Plains, 2001). Retailers
must be able to differentiate between individual customers orcustomer segments. Once the
Retailers successfully identify their customers thendifferentiation is relatively easy, since full
information about the customers has been
collected. With the information gained on the total spend of each customer it is very easy to
work out their value to the company (e.g. top 10-20%). Customers can be differentiated
based on the products they purchase (for e.g. categories such
as vegetarian, parent and social class).These socio
-economic categories are clearly independent of one another, so customers can be members of
different combinations allowing a high degree of differentiation. This is extended further when
combined with the custo
mers value to the
company.
Interact with customers:
Once the customers have been differentiated, luxury retailers canthen choose to treat them
differently and interact with them accordingly. Valuable customerscan be given more benefits in
order to keep them happy and retain them, since they are of significant value to the retailers.

New customers can be given some benefits too in order toencourage them to try a product, with
the motive of acquiring them.
Customize Content:
After analysis and interactions with the customers it is much clear toassess the value of each
customer to the retailer, personality and attitudes. Based on this aone-to-one personalized service
can be offered to each customer. Offers and products can betailored or customized according to
the differentiated customer groups.The research paper draws upon these frameworks especially
the pyramid framework whileanalyzing and making recommendations because of its high
relevance to the retail sector.

3.4 Customer Relationship Marketing: Deficiencies and

Drawbacks
So far, the assets and benefits of CRM have been highlighted and discussed thoroughly;CRM has
its own set of deficiencies and drawbacks. A number of authorities criticizecompanies that spend
large sums of money on implementing CRM strategies, systems andargue that there is no
significant link between customer satisfaction and customer retention.
Klee and Thurau, 1997 point out that the link between satisfaction and the long
-termretention of customers is typically formulated by marketing practitioners and scholars in
arather categorical way, and is therefore treated as the starting point, rather than the core
question of the analysis . LaBarbera andMazursky, 1983 say that most of the research in this
subject is based on the assumption thatrepurchasing behavior is highly influenced by customer
satisfaction/dissatisfaction.

2.3.2

How

customer

services

relay

on

relationship

marketing

2.4 RM for CS in the luxury industry

As luxury brands fight hard to build momentum after the economy dipped and fizzled, many are
investing in CRM strategies to deliver even more extraordinary customer experiences that
wealthy clients expect and demand. However, these high-end retailers have implemented CRM
from an operational angle, relying on technology and gathering information on customers'
purchasing preferences, sales activity, marketing campaigns and results, and even employees, to
paint a picture for the corporate decision makers about the vitality of their prestige, retail
landscape. But is just knowing this information enough to deliver value and develop stronger
customer relationships?
CRM Data Improves Customer Service
Luxury shoppers don't go to stores just to buy things. Prestigious consumers place enormous
value on the experience of the acquisition, expecting not only extraordinary service and the
highest quality but also personalization and understanding. According to Greg Furman, founder
and president of the Luxury Marketing Council in New York, "Luxury buyers want to see
evidence that the store or brand understands who they are and what their buying patterns are."
Sophisticated shoppers want to be recognized, be shown products that would truly be of interest
to them (based on their past purchases), and made to feel like they are the store's or brand's best
customer.
To remain in the retail lap of luxury, prestige brands must be able to provide a level of service
that delivers on their promise of luxury. One way they can achieve that distinction is to optimize

the collected CRM information and put it into the hands of their direct salespeople or online
associates through hand-held computers or a mobile phones; otherwise it will remain raw data.
Empowering their floor and online sales force with real-time data makes can be used to make the
customer feel truly special because the sales associate can reference important, historical
information about the customer, using it to add value to the shopping experience and probably
additional dollars to the sale.
Using CRM to Show Luxury Buyers They're Understood and Recognized
Luxury consumers are not receptive to mass e-mails about store specials and sales; learning that
everything is being marked down 50% is irrelevant to them. CRM data enables management to
target an audience with an effective offer. If a savvy, prestige store crafts a message offering a
discount based on a customer's historical purchases, the wealthier shopper will take notice
because they're being recognized. Another method to show a store's best customers their buying
preferences are appreciated and valued is for retailers to up-sell or cross-sell a brand's products.
For instance, knowing a customer's preference for Gucci handbags and that they've never bought
a pair of Gucci shoes, the store then offers a limited time only discount on Gucci shoes. Or,
because CRM data reveals that certain loyal customers have shopped in a particular department
numerous times, the store can offer discounts at certain locations on certain days.
While the analytical data CRM provides to management is invaluable, using it for customer
experience relationships and help in getting luxury shoppers to transfer brand loyalty, spend
more and feel good about it, is the ultimate goal for the luxury retailer.

2.4.1 Review of the industry

The luxury market has developed rapidly in the last fifty years, as our society has changed in a
number of ways (Okonkwo, 2007, p.225). One of the biggest contributors to change is
globalisation
- which has internationalized the luxury sector and hereby led to increased competition - as
brands
from all over the world now compete against each other (Okonkwo, 2007, p.38). In addition,
competition has also increased due to advancements in business and management practices that,
along with globalisation, have led to a lowering of the entry barrier, meaning that new luxury
brands emerge and compete for consumers attention (Okonkwo, 2007). Also the rise of
fashion brands from mass to premium has increased competition and influences the luxury
sector, as consumers view these products as alternatives to luxury products at better price-value
(Okonkwo, 2007).
Another trait of the current luxury market is democratization, which more specifically implies
that
consumer markets have expanded to include more or less everybody (Chevalier & Mazzalovo,
2008, pp.150), primarily due to a general increase in wealth not just among the best potential
clients
- the High Net Worth Individuals - but also among the middle-class (Kapferer & Bastien, 2009,
and Okonkwo, 2007).
Surprisingly enough, the financial crisis has, according to several experts (Fellowes, 2008), not
really had a negative effect on the luxury market, as the globalisation of the sector has created
various national markets for the luxury brands to rely on.
But it is not only global presence that saves luxury brands from the recession; Ogilvy, moreover,

argues that people who are used to buy luxury will continue to do so, as they treasure quality. All
in all, the current market traits indicate that it is crucial for luxury businesses to have a strong
and competitive brand identity and history, as well as a global presence.
2.3 Luxury market in China
According to the World Wealth Report (2008) made by Merrill Lynch and Capgemini the number
of High Net Worth Individuals (HNWI) has grown tremendously in newly emerging
economies, especially in China. China has been ranked as second in HNWI population growth,
increasing about 20 percent in 2007. China with annual growth of twenty percent in need for
luxury items has become the worlds second largest luxury branded products purchasing country
surpassing the United State and joining Japan (Chadha & Husband, 2006). According to Chadha
and Husband (2006) Chinese consumers spent eight billion USD on luxury products. China has
about 250 million rapid rising middle class consumers who not only have the financial ability to
afford luxury products but also are willing to spend on them.
In todays unstable global economy, it has become difficult to predict future business
opportunities, especially in Western countries. On the other hand Chinas market is showing a
continually robust economy and this shows consumption of luxury products have a bright future.
In fact after the global financial crisis Chinas economy started to show improvements from
2008 more easily than other countries and also the Chinese government introduced many policies
to stimulate the economy and this is starting to show results. All these signs show China will
grow continually, especially in the luxury branded products market. 20

Nowadays, due to the large scale of the Chinese market, if luxury brands want to sustain their
winning power in the world they have to perform in the Chinese market. Success in China allows
luxury brands to achieve a superior share of wealthy Chinese consumers, maintain their image
internationally and get the chance to compete with the future rising local luxury brands (Chadha
& Husband, 2006).
2.4 Luxury consumption in China
Historically Chinese have longer luxury consumption than the Western countries. This is proven
by many precious Chinese artefacts, paintings etc that are displayed in many museums all over
the world. In the study of Chinese history luxury consumption Lu (2008) explained that ancient
Chinese upper class pursued fine painting, artefacts and ceramics to represent their taste and their
social status this is similar with todays rapid demand for western luxury products. It shows that
the old elite lifestyle still remains in todays Chinese consumers mind.
Chinese consumers luxury consumption is not only influenced by traditional ones, modern
Chinese culture also plays an important role. The increases of wealth, success, modernity culture
give Chinese consumers the chance to consume luxury products, (Kapferer, 1997).
Today Chinese consumers show a general acceptance of western culture. There are groups of
westernised Chinese living in big cities like Shanghai and Beijing who now prefer the western
education system and prefer to dress in the western style. They show a huge interest for learning
experiences from overseas and they are also willing to communicate with people from other
countries (OCass & McEwen, 2004). In addition, according to Zhang and Shavitt (2003) the
young Chinese generation has a greater preference for foreign values and products (Wang, 2000;
Zhang & Shavitt, 2003). The desire to achieve a more western style of living will reflect and
encourage more Chinese luxury consumption.

2.4.2 Current issues

Based on the market and consumer characteristics, many challenges can be identified for luxury
brands. First of all in relation to globalisation, which has increased competition in complex ways,
as
explained above, and moreover has resulted in new markets on differing evolutionary levels and
hereby a culturally diverse consumer base that vary in needs and wishes, which makes it
challenging to develop strong and streamlined brand communication and a clear-cut brand
identity
(Okonkwo, 2007, pp.3-4, Schroeder & Salzer-Mrling, 2006, p.70). As indicated above,
international presence and globalisation is nevertheless also positive and necessary for luxury
brands, as it secures and strengthens the brand by increasing the number of different markets and
hereby sales (Fellowes, 2008, 18-19), so luxury brands need to find an approach that enables
them to fight competition and appeal to all markets, and this is a real challenge.

2.4.3 RM in the luxury industry for improving CS

2.5 Summary of arguments

2.6 Conclusion