CRM Session 1

8/8/2019 CRM Session 1

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Customer Relationship

Management: An Introduction

Introduction

The objective of many marketing strategies in thelast 10 years has been building the customer¶scommitment to a brand or a dealer.

This has taken following three forms: Creating customer satisfaction -delivering superior

quality products and services

Building brand equity- the sum - the sum of the

intangible assets of a brand. Creating and maintaining relationships

Contd.

There has been an evolution of marketing thoughtand activity over this last decade.

Initially, the quality movement placed customer

satisfaction the ultimate goal of marketing programs.

But as satisfied customers were shown to defectto other brands or providers at relatively highrates, strategists looked to creating a greater commitment with the customer.

Contd.

Two ways to achieve this were to build

brand equity (primarily for consumer products) and

to build relationships (primarily for industrial products.)

Brand equity used mass media advertising, corporatecitizenship and public events sponsorship to build a brand

image.

Relationship marketing sought to build interdependence

between partners and relied on one-to-onecommunications, historically delivered through the sales

Contd.

With the growth of marketing databases and the

Internet, the ability to reach customers

individually became a viable strategy for a wide

range of firms

Contd.

Frederick Reichheld developed the importance of

building customer commitment in his 1996 book

The Loyalty Effect .

He focused on the cost of customer defection and

set the stage for the problem by claiming ³many

major corporations now lose and have to replace

half their customers in five years [...]´

Contd.

Reichheld claimed that even small improvements

in customer retention can as much as double

company profits.

This is because:

It costs less to serve long-term customers.

Loyal customers will pay a price premium.

Loyal customers will generate word-of -mouth referralsto other prospective customers.

Factors Contributing to Building Brand

Equity:

Name awareness,

Perceived quality,

Brand loyalty,

The associations consumers have towards the brand,

Trademarks,

Packaging, and Marketing channel presence

Understanding Loyalty

Knowing the buying motivations of customers has

been an important part of understanding customer

loyalty and brand switching behavior

Brand loyalty has three components:

Commitment,

Preference and

Repeat purchase

Levels of Loyalty

There are four levels of loyalty based on the components

of brand loyalty:

Cognitive ± one brand is preferable based on superior brand

attributes. Affective ± liking towards brand has developed over the course

of multiple purchase situations that were satisfying.

Conative ± Affective stage with the express intention to re- buy.

Action ± Conative stage plus the active desire to overcome

situational influences and marketing efforts that may have the

potential to cause switching behavior.

Paradigm shift in Marketing

Transactional (Traditional)Focus Orientation to single sales

Discontinuous customer contact

Focus on product features Short time scale

Little emphasis on customer service

Limited commitment tomeeting customer expectations

Quality is the concern of production staff

Relationship Focus Orientation to customer

retention

Continuous customer contact

Focus on customer value

Long time scale

High customer serviceemphasis

High commitment to meetingcustomer expectations

Quality is the concern of allthe staff

Contd.

It is a refocusing of traditional marketing with a

greater emphasis on creation of µcustomer value¶

The basic principle on which this concept is

founded is

Greater the level of customer satisfaction with the

relationship, the greater the likelihood of their stay with

Contd.

At the core of relationship approach to marketing

Integration, company-wide of so far separate customer

service and total quality initiatives with the mainstream

of marketing strategy

Quality and customer service are intertwined and

managed as one because on quality and service,

relationships are built

Relationship Marketing

Relationship marketing is not about having a

"buddy- buddy" relationship with your customers.

Customers do not want that.

Relationship Marketing uses the event-driven

tactics of customer retention marketing, but treats

marketing as a process over time rather than

single unconnected events

Contd.

Usually defined as a series of stages, and there aremany different names given to these stages,depending on the marketing perspective and the

type of business Interaction > Communication > Valuation >

Termination

Awareness > Comparison > Transaction >

Reinforcement > Advocacy Suspect > Prospect > Customer > Partner > Advocate >

Former Customer

Relationship Building

Is a long-term process

There are a number of identifiable stages in longterm customer relationship

This can be explained through the Relationship

Ladder constituting of six different phases of

relationship

Contd.

At the foot is the µprospect¶ or target market

The traditional or classical marketing emphasizes

on means of converting prospects into customers

In relationship marketing customer is

Someone who has done business with us only once or

occasionally

Contd.

The next is µclient¶ who is someone who will do business with us on a repeat basis but may beneutral or negative about company

The client when converted into a µsupporter¶,strength of relationship becomes apparent

These people like being associated us and mayalso be persuaded to become advocates

The final step is when customers become partnersin which mutual advantage can be gained fromrelationship

Contd.

Emphasis in relationship marketing is on

Finding appropriate means to move customers up the

ladder and to keep them there

Conventional marketing focuses on

Winning of customers and building market share

without emphasizing more on customer retention

Scope of Market in Relationship Marketing

There is wider view of marketing rather than

simply focusing on end user

For building and sustaining real customer value

Relationships need to be built with numerous

constituents

This is known as µSix Markets¶ model

Six Markets Model

Internal markets

Individuals and groups within organization who

determine the style and ethos of business

Referral markets

From sources of professional advice (doctors, lawyers,

bank managers etc)

Building relationships with these sources of word-of -

mouth should be integral part

Contd.

Influence markets

Entities, individuals and organizations having the

ability positively or negatively to influence the

marketing environment in which the companycompetes

Employee markets

There is need to recruit and retain employees who will

further the aims of the company in the marketplace

Contd.

Supplier markets

Refers to network of organizations that provide material,

products and services to the organization

Results in improved quality, faster time-to-market, moreinnovative products and lower levels of inventory

Customer markets

All people and organizations that buy goods or services from us

Can be either end users or intermediaries

Customer service is the most important tool

R elationship management chain

Marketing should be viewed as a business-wide process with the goal of creating superior customer -value

Delivering superior customer -value results in enduring

customer relationship

Involves the following four logical sequence of activities:

Defining the value proposition

Identifying appropriate customer value segments

Designing value delivery system

Managing and maintaining delivered satisfaction

R elationship Marketing Plan

The purpose is to integrate and focus across six

critical markets that forms the platform for successful

customer relationships Begins with a clearly expressed definition of the

customer -retention goals of the organization

The objective is of holding on to and developing

today¶s and tomorrow¶s µgold card¶ customers

Strategies for Practicing R elationship

Marketing Berry (1983) has recommended the following five

strategies:

Developing a core service around which to buildcustomer relationship

Customizing the relationship to the individual customer

Augmenting the core service with extra benefits

Pricing services to encourage customer loyalty

Marketing to employees so that they would performwell for customers

CustomerR elationship Management:

An overview

It is a process or methodology used to learn more aboutcustomers' needs and behaviors in order to developstronger relationships with them.

The more useful way to think about CRM is as a processthat will help bring together lots of pieces of informationabout

customers, sales, marketing effectiveness,responsiveness and market trends.

CRM helps businesses use technology and humanresources to gain insight into the behavior of customersand the value of those customers.

Contd.

The Chartered Institute of Marketing definition of CRMis

³The coherent management of contacts and

interactions with customers´.

They identify that

³The essence of a CRM system is that customer data is

collected from all touch points and deposited into one

central data pool for more effective marketing, better

order processing, production and accounting.´

Contd.

CRM is ³the development and maintenance of mutually beneficial long-term relationships with strategicallysignificant customers´

(Buttle, 2000)

CRM is ³an it enhanced value process, which identifies,develops, integrates and focuses the various competenciesof the firm to the µvoice¶ of the customer in order todeliver long-term superior customer value, at a profit to

well identified existing and potential customers´.(P lakoyiannaki and tzokas, 2001)

Contd.

In simple terms, CRM is defined as Finding, getting, and retaining customers.

Is also defined as tracking customer behavior in order to

develop marketing and relationship- building programs that

bond consumers to a brand often by development of software systems to provide one-on-one contact between the

marketing business and their customer.

CRM is the core of any customer -focused business strategy

and includes The people, processes, and technology associated with

sales, marketing, and service.

A Brief History of CR M

Unkept promises:

1980s: Database Marketing

Speaking individually to countless customers It's too costly, too difficult, and doesn't pay out on

the bottom line

A little database marketing goes a long way, maybe

plus an iota of demographics

Contd.

1990s: Relationship Marketing Major phenomenon: Loyalty programs.

Major promise: Loyalty!

Major result: Companies such as airlines now have an enormous

incremental layer of expenses, without much to show for it

Early 2000's: Customer RelationshipManagement (CRM).

Major phenomenon: Great promise Major reality: Promise unattained.

EVOLUTION OF CR M

1980¶S

Focus on Data Mining and Direct

Marketing was the outcome

1990¶S

Focus on loyalty programs

2000¶s+

DATABASEMARKETING

RELATIONSHIP

MARKETING

CUSTOMER

RELATIONSHIP

MARKETING

Historical Perspective on the Shift to a

Customer-Centric Focus

Category Killer

Phase(70 ± 90¶s)

Customer Centric

Phase(Presently)

Brand Management

(¶50 70¶s)

Need for CR M: Some facts

It costs six times more to sell to a new customer than toan existing one

A typical dissatisfied customer will tell eight to ten people about their experience

A company can boost its profits by 85% by increasing itsannual customer retention by only 5%

The odds of selling a product to a new customer are 15%;an existing customer 50%

Contd.

Businesses are turning to customer relationship

management as a major customer -centric business

strategy

CRM uses IT to create a cross functional enterprisesystem that integrates and automates many of the

customer serving processes in sales, marketing and

product services that interact with a company¶s customers

Contd.

Need for creating an IT framework that integrates all of

these processes with the rest of a company¶s business

processes

Consist of a family of software modules that perform the business activities

Provides tools that enable a business and its employees to

provide fast, convenient, dependable, and consistent

service to its customers

CR M Systems

CRM systems typically include

Track customer contacts and other business and life cycle

events of customers

Direct Marketing and Fulfillment

Automate tasks such as qualifying leads, managing

responses, scheduling sales contacts, and providing

information to prospects and customers

Contd.

Customer Service and Support

Helps customer service managers quickly create, assign,

and manage service requests

Help desk software assists customer service reps in helping

customers who are having problems by providing relevant

service data and suggestions for resolving problems

Business Benefits of CR M Systems

Ability to identify and target best customers

Allows real-time customization and personalization of products and services based on customer wants, needs,

buying habits, and life cycles Keeps track of when a customer contacts the company

regardless of contact point

Components of CR M

SalesCross-Sell

Up-Sell

TeleSales

Store Front

and Field

Service

Marketing and

Fulfillment

Customer

Service and

Support

R etention

and Loyalty

Programs

Customer

Contact Management

Phases of Evolution of CR M

CRM has evolved since its earliest incarnation,

originally driven by an inside-out focus, through three

phases of evolution:

Technology,

Integration and

Process.

Recently there has been a major leap forward to a

fourth phase: customer -driven

CRM ² an outside

-inapproach that has intriguing financial promise.

Technology

In its earliest incarnation, CRM meant

Applying automation to existing sales, marketing, support andchannel processes as organizations attempted to improvecommunications, planning, opportunity and campaign management,forecasting, problem solving, and to share best practices.

But, automating poorly performing activities or processesrarely improves the quality of the outcome.

So, for the most part, the quality of the return on investment(ROI) was meager

The promise of the technology was there, but few

organizations were realizing the best of performance. The metric of success was increased efficiency in sales,

marketing, support and channel processes.

Integration

By developing cross-functional integration, supported bydata warehousing and shared roles and responsibilities,organizations began to create a customized view of thecustomer.

Support issues, web hits, sales calls and marketinginquiries started building a deeper understanding of eachcustomer and allowed aggressive organizations to adapttheir tactics to fit individual needs.

Integration focused around two primary components:

Make it easier to do business with the seller Predictive modeling

Process

By rethinking the quality and effectiveness of customer -related processes, many organizations began to

Eliminate unnecessary activities,

Improve outdated processes, and

Redesign activities that had failed to deliver the desired outcomes.

Then, by re-creating the process through an understandingof the capabilities of the technology, the outcomes weremore predictable and the promises for a meaningful ROImore substantial and realistic.

The metrics for success became the improved effectivenessin serving the customer.

The fourth phase: Customer driven CR M

Today, revenue performance has become the central theme for CRM as organizations seek to achieve and maintain expectedfinancial results

The main concerns are:

Which of my customers have the potential for a high- profit,

sustainable relationship? What defines profitable and unprofitable customer segments?

What must change to realize that optimal potential?

Where's my opportunity for growth?

Where's my risk for loss?

Am I making the right decisions related to balancingacquisition, cross-selling and up-selling ² and for the rightcustomer groups?

Determinants of CR M

Understanding customer needs and problems

Meeting their commitments

Providing superior after sales support

Making sure that the customer is always told the truth(must be honest)

Have a passionate interest in establishing and retaining along-term relationship

Goals of CR M

Provide better customer service

Make call centers more efficient

Cross sell products more effectively

Help sales staff close deals faster

Simplify marketing and sales processes

Discover new customers

Increase customer revenues

Stages in the development of customer

relationship

The pre-relationship stage:

The event that triggers a buyer to seek a new business partner.

The early stage:

Experience is accumulated between the buyer andseller although a great degree of uncertainty anddistance exists.

The development stage:

Increased levels of transactions lead to a higher degree of commitment and the distance is reduced to asocial exchange.

Contd.

The long-term stage:

Characterised by the companies¶ mutualimportance to each other.

The final stage:

The interaction between the companies becomesinstitutionalized.

ARELATIONSHIPLIFE CYCLE MODEL

COOPER ATION

COMPETITION

COOPER ATION

COMPETITION

RELATIONSHIP

DEVELOPMENT

MATURITY

DECLINE

(WILKINSON AND YOUNG, 1997)

Functions of CR M

Direct functions:

These are the basic requirements of a company that are

necessary to survive in the competitive marketplace. This includes:

Profit

Volume and

Safeguard

Indirect functions:

These are the actions necessary to convince the customer to participate invarious marketing activities. This includes:

Innovation

Market

Scout and

Access.

Functions of CustomerR elationship Management

Management

Decision

Process

Customer sensitivity

Diversity

Information

Differentiatedoffering

Value Creation Process

Technology delivery process

Technology integration

Efficiency, effectiveness

learning

Product delivery process

Concept to launch

Manufacturing process

Customer delivery process

Supply chain

Distribution

Infomediation (distribution

of information)

Value-based

Strategies

Pricing

Communication

(Sh l 2001)58

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