CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

MODULE 1

From the Industrial Age to the Information Age, the customer-enterprise relationship has
changed

Industrial Era and Orientations towards Market place

• Product oriented business – highly innovative and entrepreneurial and provides visionary
leadership, but customer voice missing, no customer research, assumptions made about
customer wants. They sometimes over specify, over engineer, too costly for customers to
buy, small segment of buyers (2.5 %). example: Apple, fashion houses.

• Production oriented companies-focus on operational excellence, keeping costs low,

through standardized offers. May blind the company to other segments, disruptive
changes and could be limiting

• Sales orientation – assumes if sufficient investment made in communications, customers

can be persuaded to buy. Focus on immediate sale and profits and transactional focus and
not on customer satisfaction, retention, relationship, etc. Customer may not need the
product/regret buying later. Cost of serving high as aggressive selling, promotion etc.
also negative WOM/complaints /no benefit of referral.

Marketing or customer orientation – Company focussed on customers (Amazon, Ritz

Carlton)

Information (Interactive) Age businesses structured around:

• Customer centricity

• Customer information as competitive advantage (Learning organizations)

• Relationship Management

• Two-way brands or branded relationship (Building brand as relationship – HBR

article - discussed in class)

Opening Case Discussion – Walmart used data and CRM to its advantage to learn and
implement findings to increase Customer and Business value propositions

Traditional Marketing Vs. CRM

• Traditional Marketing focuses on the four P’s for increasing market share through
increase in the number of customers.
 • CRM focuses on using strategies, tools and technology for promoting the relationship
between the seller and the customer to increase revenue, profitability and customer
satisfaction/delight. The main aim is to increase share of wallet.

Traditional Marketing and Sales concentrate Contemporary CRM approach concentrates

on Market share on Share of Customer Wallet
 Products and brands as source of  Customers as source of revenue
company value  Sells as many products as possible to
 Sells one product at a time at a time to one customer at a time
as many customers as possible  Differentiates customers from each
 Differentiates products from other
competitors  Collaborates with customers
 Sells to customers  Finds a constant stream of new
 Finds a constant stream of new business from established customers
customers  Makes sure each customer is
 Makes sure each product is profitable, profitable, even if loses money on
even at expense of customer occasional product or transaction
confidence  Uses interactive communication to
 Uses mass media to build brand and determine needs and communicate
announce products individually

Improved Market share with traditional Marketing vs. Improved customer mix (increase
customer profitability with CRM)

MVCs (most valuable customers) are those who have high highest actual life-time values.
(Strategy – Retention)

STCs (Second tier customers) are those with highest unrealised potential. (Strategy – growth)
BZs (Below zero customers) are those who are detrimental to the organizations profitability
(Strategy – divest)

CRM – Definition and Meaning

CRM is the core business strategy that integrates internal processes and functions, and
external networks, to create and deliver value to targeted customers at a profit. It is grounded
on high-quality customer data and enabled by IT. (Francis Buttle, 2004)

Definition explained:

• CRM integrates internal processes and functions. Allows departments within an

organisation to dissolve silo walls that separate them. Access to Customer related data
implies that the 3 components of operational CRM functions (sales, marketing and
service) are aware of each other’s interactions with customers. It enables a 360 degree
view of customer

• Back office functions such as finance & operations can also learn from & contribute to
customer related data

• Customer Related Data allows external networks eg suppliers, distributors, resellers etc
to also align their efforts with the focal company

• Underpinning this core business strategy in majority of cases is IT – hardware and

software

• Data from social media is also useful in creating customer value propositions

OTHER DEFINITIONS

 CRM is a comprehensive strategy and process of acquiring, retaining and partnering

with selective customers to create superior value for the company and customers
(Sheth and Parvatiyar, 2000)

 The primary goal of CRM is to improve long-term growth and profitability through a
better understanding of customer behaviour. CRM aims to provide more effective
feedback and improved integration to ensure better ROI in these areas.

Examples discussed in class: ING Bank, Amazon, Target, Starbucks, British Airways.

WHY CRM

 CRM is a contemporary response to the emerging climate of unprecedented customer

churn, waning brand loyalty and lower profitability (Cross, Richard and Smith, 1996).
  Companies are motivated to adopt CRM for defensive marketing. (Bucket theory of
marketing – retaining customers)

 Better decision making through data analysis (Need not go by the random opinions and
ideas)

 CRM – retention costs 6 times lesser than acquisition, lifetime value of customer, share
of mind, heart, wallet rather than share of mkt etc.

 Companies are looking for better processes to increase business performance - reduce
costs, increase revenues and profits and increase customer satisfaction, value, loyalty.

Types of CRM (Levels of CRM)

1. Strategic CRM

A top–down perspective on CRM which views CRM as a core customer-centric business

strategy that aims at winning and keeping profitable customers.

It is focussed upon the development of a customer-centric business culture - placing customer

first, using customer and competitor information to develop better value propositions for
customers. It creates a learning firm, that adapts to changing customer and competitor conditions.
This culture is reflected in leadership behaviours, design of formal systems of the company, and
the myths & stories created within a firm. Resources are allocated where they best enhance
customer value, reward systems to promote employee behaviour that enhance customer
satisfaction and retention and customer information is collected, shared and applied across
business.

Example: Honda Australia – “Customers for life” (Role play)

2. Operational CRM

A perspective on CRM which focuses on major automation of customer facing business

processes such as service automation, sales force automation or marketing automation.

a. Marketing automation – It focusses on executing marketing activities of the firm with

greater effectiveness and efficiency. for example - marketing automation can help in -
campaign management, event based trigger marketing, real time marketing

 campaign management – creating campaigns, customer uses multi channels hence

integration of communication and offers, evaluation of performance

 Shoppers Stop campaign

 Event based, or trigger marketing-can be initiated by customer behaviours eg call for

enquiry or contextual conditions. Applicable in B to B context also.
  Calling for bill details at Vodafone may trigger an offer for a more
suitable plan
 Birthday offers for Idea club royal customers, Birth month offer for West
side customers
 B-to-B (Star and Vodafone – an offer for Vodafone while the contract is
about to expire)

 Real time marketing- eg Google and Amazon use location and search behaviours

b. Salesforce automation – Sales force automation (SFA) was the original form of
operational CRM. SFA helps standardize and improve selling process. SFA applies
technology to company selling activities and selling process stages.

SFA involves opportunity management software that has lead management applications
and sales forecasting applications. Lead management applications enable users to qualify
leads and assign appropriate salesperson. Sales forecasting applications use transactional
histories and sales force estimates to generate future sales estimates.

Other applications are Contact mgt applications, quotation and proposal generation,
product configuration applications.

c. Service automation – Service automation helps companies to manage their service

operations through multi channels (face to face, call centre, contact centre etc.) with
elevated levels of efficiency, reliability and effectiveness. It enables companies to handle
both inbound and outbound communications across all channels. It enables users to be
more efficient and effective by reducing service costs, improving service quality, lifting
productivity, enhancing customer experience and enhancing customer satisfaction

Call routing software (Interactive voice response -IVR).

It handles customer complaints in social media.

Crowd sourced customer service.

Online diagnosis and trouble shooting

B2B service automation on field help technicians with diagnostics, repair manuals,
inventory mgt, job info.

Examples of Sales and Service Automation  Role plays done in class

3. Analytical CRM
A bottom–up perspective on CRM which focuses on the intelligent mining of customer data
for strategic or tactical purposes.

Customer related data can be found in enterprise wide repositories – sales data (purchase history)
financial data (payment history, credit score) marketing data (campaign response, loyalty scheme
response), service data etc.

External sources – geo demographic and lifestyle data from business intelligence organisations
are structured data sets held in relational data bases.

Big data – unstructured and in many forms example - text, audio, video, click streams, log files
example - Facebook, twitter, YouTube

Example: Walmart finding patterns in purchases

All the above three types are interlinked. Operational CRM struggles to reach its full
effectiveness without Analytical information about the customers.

Example: Bank / Mobile service provider

GOALS OF CRM

Strategic goals of CRM

 the acquisition of carefully targeted customers or market segments

  the retention of strategically significant customers or market segments (loyalty of
customers)

 the continuous development and delivery of competitively superior value propositions to

the selected customers

Operational level goals

• Converting prospective customers into actual customers

• Converting unprofitable customers into profitable ones

• Retain customers

• Increasing revenue per customer

• Streamlining order processing and inventory management

• Providing enhanced customer value and experience and delight by customising offers

• Terminating unprofitable relationships

• Increase business opportunities by offering right offer at right time through the
right channel for each consumer

• Improve communication process with each consumer

• Reduce marketing, selling and administrative cost-Lower cost of recruiting customers,

reduce costs of sales

• Better customer service, customer responsiveness, customer value, customer experience

leading to customer satisfaction and customer delight
 • Increased customer profitability- through profitability analysis example- SOW, ABC
analysis, RFM, etc

CRM Constituencies

CRM implementations involves several stakeholders:

• Companies – early adopters are airlines, hotels, banks and financial services, telecoms,
retail outlets

• Customers and partners of company

• Vendors of CRM systems – Oracle, IBM, SAS, SAP sell licenses and install CRM
software on company servers, train clients people

• CRM cloud solution providers – allows access to CRM functionality on subscription

basis through hosted CRM vendors example- Salesforce.com

• Social media players

• Vendors of CRM software and hardware supply technology such as servers, computers,
hand held and mobile devices, call centre hardware and telephony systems

• Management consultant - strategy, business, application, technical consulting etc .eg

systems integration, choosing vendors, developing implementation plans, project mgt,
data quality improvement, process engineering, culture change.

CRM: Myths and Misunderstandings

1. CRM is database marketing – reality... database marketing is only a part of CRM!

2. CRM is a marketing process – reality...CRM extends into selling, service and many
other functions. Example R&D, Operations etc

3. CRM is an IT issue –reality - IT is enabler .IT cannot compensate for bad processes,
inept people. Also not all CRM initiatives involve IT investments example: CRM
projects may involve developing relationships with customers through behavioural
changes in sales, customer service and call centre staff.

4. CRM is about loyalty schemes- not all CRM implementations are linked to loyalty
schemes

5. CRM can be implemented by any company-Strategic CRM -vision, mission, values.

Yes. Operational CRM- technology investments, Analytical CRM- most difficult if
customer data is missing
Types of CRM Programs

1. Continuity Marketing

2. One to One Marketing

3. Partnering/Co-Marketing

Continuity Marketing

The Aim of this is to increase retention and loyalty. Loyalty is achieved through long-term
special services that has a potential to increase mutual value through learning about each other.

Membership programs, loyalty card, privilege services, feedback, discounts on cross sells etc are
continuity marketing programs.

Examples discussed in class

After- Enrich – mail / sms after service, Ola, Uber, Nanavati

Marketing

Loyalty Jet Airways

program

Cross-selling Coursera

One-to-One Marketing

Aimed at meeting and satisfying each customers need uniquely and individually

Is possible at low cost due to availability of scalable data warehouse and data mining
 Interactive marketing , Permission marketing (Permission marketing is an approach to
selling goods and services in which a prospect explicitly agrees in advance to receive
marketing information). in order to develop relationship with high yielding customers are
one-to-one programs. Using personalization in marketing campaigns cuts through the clutter
and capture the attention of prospects and customers.

One-to-one programs Examples

Personalization Amazon website landing page,

recommendations

Interactive Marketing A call to Vodafone call centre may

initiate an offer

Permission Marketing Starbucks

 1. Partnering Programs

Partnering (partnership) between marketers to serve end user needs

 Two types of Partnership Marketing

- Affinity – Partnering program: Marketers do not create new brand but use endorsement
strategies.

- Co- branding : Two marketers jointly offer advanced products & services to mass
market consumers example: Delta and American Express

TRADITIONAL CRM VS WEB – ENABLED INTEGRATED CRM

 At its inception, CRM focused on automating processes and trying to drive efficiencies
into the call center or the sales force with a heavy client/server and inflexible
architecture. These solutions are costly to deploy, costly to maintain, and have a low rate
of adoption.

 Modern CRM software has challenged the early CRM software vendors by redefining the
space around a differentiated CRM solution that is based on an intelligent, open
architecture that operates across multiple channels in real time.

 Modern CRM software is flexible and driven by an embedded recognition of the

customer, followed by immediate, real-time action to meet the needs of the customer.

Traditional CRM

 Focused primarily with only front end departments like sales, marketing and customer
service

 Useful in ‘Managing customers’ but not ‘Engaging customers’

 Customization of CRM program is difficult

 Limited channels of customer support – Call center, service centers

 Real time data is not available

  Personalization is based on user past history data and preferences

 Expensive to implement

Web Enabled CRM (e-CRM)

 With the movement of business application to the internet, CRM has enhanced an
organizations capability by providing access to its customers and supplier via the web.
This web experience and communication through the wireless web is called e-CRM or
Web enabled CRM

 E-CRM provides the ability to capture, integrate, and distribute data gained at the
organization’s Web site throughout the enterprise.

 e-CRM expands the traditional CRM techniques by integrating technologies of new

electronic channels (communication through social media is made possible through
eCRM)

 click stream analysis, content analysis (customer call records, emails etc), social media
data etc. is captures through e-CRM

 A successful e-CRM is the solution for the challenge of consolidating all customer-
related information into a single view.
  e-CRM can enable companies of all sizes and across all industries to offer one-to-one
relationships to customers.

CRM - IDIC MODEL

Identify – Relationships are possible only with individuals, not with segments or markets.
Therefore the first task is to identify the customers not with a product code but with a customer
code. Know the client by name, his family, basic details. Ability to recognize the customer when
he calls comes in person or visits online. Customer information is an asset.

Differentiate – Customers represent different levels of value to the enterprise and they have
different needs from the enterprise.

Differentiate the customers based on the value they bring to the enterprise. Differentiate
customers based on needs and behavior too.

Interact – Each successive interaction with the customer should take place in the light of the
previous interaction. Each interaction should result in gathering more information about the
customer. The learning relationship gets better with each interaction.

Customize the offer – The enterprise should adapt some aspect of its behavior towards the
customer based on the individuals need and value.

(Case for IDIC done in class. Chapter Revision done as quiz)