A REVIEW OF THE MAIN CONCEPTS RELATED

TO CUSTOMER RELATIONSHIP MANAGEMENT

COURSE 1
Customer Relationship Management
MAIN TOPICS
1.Characteristics of a genuine business relationship
2.Factors which created customers-driven on of
relationship marketing
3.Evolution of relationship marketing
4.Customer-driven competition
5. Learning relationships
6. Relationships- forming building blocks
7. CRM approaches
8. CRM main functions
9. The major components for the successful
implementation of CRM
 WHAT IS A RELATIONSHIP?

AN ENTERPRISE strives

To grow the
To keep that
To get a value of the
customer for
customer customer to
a lifetime
the enterprise
CHARACTERISTICS OF A GENUINE BUSINESS RELATIONSHIP

 Mutual

 Interactive

 Provides ongoing benefits to both parties

 Requires a change in behaviour for both parties
 Unique

 Requires and produces trust

FACTORS WHICH CREATED CUSTOMER-DRIVEN BUSINESSES

1. The evolution of the relationship

marketing concept

2. The impact of information

technology

3. Changing customer behaviour

and motivation
 EVOLUTION OF RELATIONSHIP MARKETING

The concept of customer relationship

marketing is focused on the idea that a
stronger relationship between a customer and
a business will lead to a customer spending more
money with the company, engaging with the
company and advocating for the company.
 EVOLUTION OF RELATIONSHIP MARKETING

 Sincethe early 1990s, academics and consultants have

promoted the idea that marketing practice should
focus upon identifying and serving the organization’s
best customers and prospective customers.
 Traditional marketing
focused on re-segmenting markets
to create and dominate defensible product positions
 Firms were
free to pick and choose in which market
segments they wished to compete on the basis of
market and financial attractiveness.
 EVOLUTION OF RELATIONSHIP MARKETING
REICHELD (1996) – argued that customers become
increasingly profitable over time because:
1. customer acquisition costs spread over a larger
turnover;
2. customer spending tends to accelerate over time;
3. operating costs fall as customers know the firm’s
products, services and policies better
4. satisfied customers make referrals;
5. loyal customers are less price sensitive
 EVOLUTION OF RELATIONSHIP MARKETING

Arguments in favour of relationship marketing:

1.Differences in customer profitability are at least as
important as differences in product/market profitability
to shareholder value.
2. Customer value is created by customers effectively
using goods and services as individuals
 EVOLUTION OF RELATIONSHIP MARKETING

3. In most industries, a minority of customers (10–15

per cent) generate the majority of profits.
4. Organizations that move beyond short-term,
transactional customer relationships can address
customers’ deeper and broader needs
 2. IMPACT OF INFORMATION TECHNOLOGY

New technologies have enabled firms to implement

relationship marketing by:
providing greater individual customer insight;
 allowing firms to effectively respond to individual
requirements;
integrating the business processes of the firm around
individual customers.
 3. CHANGING CUSTOMER BEHAVIOUR AND MOTIVATION

Today’s customers have growing expectations of

suppliers, in terms of:
 depth of advice
 product and service quality
 price transparency, warranty
 post-sales service
 Consumerstend to interact directly with the
manufacturers of goods/services they consume
MARKET-DRIVEN COMPETITION VS. CUSTOMER-DRIVEN
COMPETITION

a. Growing market share b. Growing customer shares

MARKET-SHARE STRATEGY VS. SHARE-OF-CUSTOMER STRATEGY
 CUSTOMER-DRIVEN COMPETITION
Business functions need to be integrated into their
overall customer strategy:

1. Financial care of the customer base

2. Production, logistics, and service delivery
3. Marketing communications, customer service,
and interaction
4. Sales distribution and channel management
5. Organizational management strategy.
 CUSTOMER-DRIVEN COMPETITION

• The customer-strategy
enterprise treats the
customer base as its
Financial care primary asset
• The enterprise has to
of the customer manage carefully the
base investment it makes in
this asset
 CUSTOMER-DRIVEN COMPETITION

•Enterprises must be
Production, capable of customizing
their offerings to the needs
logistics, and and preferences of each
service delivery individual customer.
 CUSTOMER-DRIVEN COMPETITION

Marketing •Marketing
communications, communications and all
forms of customer
customer interaction and
service, and connectivity need to be
interaction combined into a unified
function
 CUSTOMER-DRIVEN COMPETITION

•Disintermediation of the
Sales distribution network by
distribution and leaping over the
channel “middleman” is sometimes
one solution to selling to
management individual customers.
 CUSTOMER-DRIVEN COMPETITION

•Enterprises must organize

Organizational themselves internally by
placing managers in
management charge of customers and
strategy customer relationships
REASONS FOR COMPANIES TO BE CUSTOMER-CENTRIC

Customers are scarce

Customers are the sole source of all

company’s revenue

Customers create value on short-

and long-term
 LEARNING RELATIONSHIPS – THE ESSENCE OF CRM

Learning Relationships the enterprise

gives a customer the opportunity to:
o teach it what he wants
o remember it
o give it back to him
o keep the business
 LEARNING RELATIONSHIPS – THE ESSENCE OF CRM

The more the customer teaches the company,

the better the company can provide exactly
what the customer wants and the more the
customer has invested in the relationship.
 LEARNING RELATIONSHIPS – THE ESSENCE OF CRM

Benefits of Learning Relationships

 Increase in customer loyalty
 Thecustomer learns more about his own preferences
from each experience and from the firm’s feedback
 Theenterprise learns more about its own strength
and weaknesses from each interaction and from the
customer’s feedback
RELATIONSHIP-FORMING BUILDING BLOCKS

Trust
Commitment Satisfaction

Uncertainty
and Fairness
dependence
Symmetry
RELATIONSHIP-FORMING BUILDING BLOCKS

•Is central to successful

relationships
•Factors contributing to
formation of trust:
Trust •Shared value
•Interdependence
•Quality communication
•Non-opportunistic behaviour
 RELATIONSHIP-FORMING BUILDING BLOCKS

•Calculative commitment -
results from an economic
analysis of the costs
Commitment •Affective commitment - is
positively related to trust and
supports relationship benefits
much longer in duration
 RELATIONSHIP-FORMING BUILDING BLOCKS

•Satisfied customers generally

are more inclined to remain in
the relationship
Satisfaction
•Companies must focus more
closely on customer
satisfaction during the early
stages of the relationship
 RELATIONSHIP-FORMING BUILDING BLOCKS

Uncertainty •Relationships based on

uncertainty and/or
and dependence tend to be less
dependence stable as they focus on
current existing conditions.
RELATIONSHIP-FORMING BUILDING BLOCKS

•Distributive fairness - based on

the perception of relationship
rewards versus relationship
burdens
Fairness
•Procedural fairness - based on
the perception that
procedures and processes
used are fair and is therefore
more focused on behaviors
 RELATIONSHIP-FORMING BUILDING BLOCKS

•Refers to the degree of

equality between relationship
Symmetry members.
•Symmetric relationships are
more stable than asymmetric
ones.
 THE 5 ES OF THE CUSTOMER RELATIONSHIPS

 1. Customer environment
2. Customer expectations
3. Customer experience
4. Customers emotions
5. Customer engagement
 WHAT IS IT
CUSTOMER RELATIONSHIP
MANAGEMENT?
 CRM APPROACHES

CRM

- Is not a software package

- Is not a database
- Is not a loyalty program, a customer
service program

Is an entire philosophy
 CRM APPROACHES

CRM

A strategic approach designed to improve

shareholder value through developing
appropriate relationship with key
customers and customer segments

Unites the potential of IT and relationship

marketing strategies to deliver profitable,
long term relationships
 CRM APPROACHES
It is a discipline,
not a product

It is an integrated Involves changing the

approach to focus and culture of
managing CRM the organization from
relationships with a product - to a
customers customer-orientation

It is a strategy, not a
tactic
 CRM MAIN FUNCTIONS

1. Identifying, satisfying, retaining

and maximizing the value of the
firm’s best customers
 CRM MAIN FUNCTIONS

2. Ensuring that each contact with the

customer is based upon extensive
knowledge on customer’s needs
 CRM MAIN FUNCTIONS

3. Creating a complete picture of

the customer
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

• Integrates sales,
marketing and
service function
across media 
 A front office • Call centers
• People
• Stores
• internet
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

A data •Store customer

warehouse + information
 The •Analyse the data
appropriate and learn about
customer behaviour
analytical tool
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

• Are developed from

the data analysis
• Have to ensure the
front office benefits
 Business rules from the firm’s
learning about its
customers
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

•Enable customer
Measures of relationships to

performance continually improve
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

Integration into •Ensuring that the front

the firm’s office’s promises are

operational and delivered
support
CUSTOMER RELATIONSHIP MANAGEMENT ON INTERNATIONAL MARKETS

COURSE 2
A review of the main concepts related
to customer relationship management
MAIN TOPICS
1.Characteristics of a genuine business relationship
2.Factors which created customers-driven on of
relationship marketing
3.Evolution of relationship marketing
4.Customer-driven competition
5. Learning relationships
6. Relationships- forming building blocks
7. CRM approaches
8. CRM main functions
9. The major components for the successful
implementation of CRM
 WHAT IS A RELATIONSHIP?

AN ENTERPRISE strives

To grow the
To keep that
To get a value of the
customer for
customer customer to
a lifetime
the enterprise
CHARACTERISTICS OF A GENUINE BUSINESS RELATIONSHIP

 Mutual

 Interactive

 Provides ongoing benefits to both parties

 Requires a change in behaviour for both parties
 Unique

 Requires and produces trust

FACTORS WHICH CREATED CUSTOMER-DRIVEN BUSINESSES

1. The evolution of the relationship

marketing concept

2. The impact of information

technology

3. Changing customer behaviour

and motivation
 EVOLUTION OF RELATIONSHIP MARKETING

The concept of customer relationship

marketing is focused on the idea that a
stronger relationship between a customer and
a business will lead to a customer spending more
money with the company, engaging with the
company and advocating for the company.
 EVOLUTION OF RELATIONSHIP MARKETING

 Sincethe early 1990s, academics and consultants have

promoted the idea that marketing practice should
focus upon identifying and serving the organization’s
best customers and prospective customers.
 Traditional marketing
focused on re-segmenting markets
to create and dominate defensible product positions
 Firms were
free to pick and choose in which market
segments they wished to compete on the basis of
market and financial attractiveness.
 EVOLUTION OF RELATIONSHIP MARKETING
REICHELD (1996) – argued that customers become
increasingly profitable over time because:
1. customer acquisition costs spread over a larger
turnover;
2. customer spending tends to accelerate over time;
3. operating costs fall as customers know the firm’s
products, services and policies better
4. satisfied customers make referrals;
5. loyal customers are less price sensitive
 EVOLUTION OF RELATIONSHIP MARKETING

Arguments in favour of relationship marketing:

1.Differences in customer profitability are at least as
important as differences in product/market profitability
to shareholder value.
2. Customer value is created by customers effectively
using goods and services as individuals
 EVOLUTION OF RELATIONSHIP MARKETING

3. In most industries, a minority of customers (10–15

per cent) generate the majority of profits.
4. Organizations that move beyond short-term,
transactional customer relationships can address
customers’ deeper and broader needs
 2. IMPACT OF INFORMATION TECHNOLOGY

New technologies have enabled firms to implement

relationship marketing by:
providing greater individual customer insight;
 allowing firms to effectively respond to individual
requirements;
integrating the business processes of the firm around
individual customers.
 3. CHANGING CUSTOMER BEHAVIOUR AND MOTIVATION

Today’s customers have growing expectations of

suppliers, in terms of:
 depth of advice
 product and service quality
 price transparency, warranty
 post-sales service
 Consumerstend to interact directly with the
manufacturers of goods/services they consume
MARKET-DRIVEN COMPETITION VS. CUSTOMER-DRIVEN
COMPETITION

a. Growing market share b. Growing customer shares

MARKET-SHARE STRATEGY VS. SHARE-OF-CUSTOMER STRATEGY
 CUSTOMER-DRIVEN COMPETITION
Business functions need to be integrated into their
overall customer strategy:

1. Financial care of the customer base

2. Production, logistics, and service delivery
3. Marketing communications, customer service,
and interaction
4. Sales distribution and channel management
5. Organizational management strategy.
 CUSTOMER-DRIVEN COMPETITION

• The customer-strategy
enterprise treats the
customer base as its
Financial care primary asset
• The enterprise has to
of the customer manage carefully the
base investment it makes in
this asset
 CUSTOMER-DRIVEN COMPETITION

•Enterprises must be
Production, capable of customizing
their offerings to the needs
logistics, and and preferences of each
service delivery individual customer.
 CUSTOMER-DRIVEN COMPETITION

Marketing •Marketing
communications, communications and all
forms of customer
customer interaction and
service, and connectivity need to be
interaction combined into a unified
function
 CUSTOMER-DRIVEN COMPETITION

•Disintermediation of the
Sales distribution network by
distribution and leaping over the
channel “middleman” is sometimes
one solution to selling to
management individual customers.
 CUSTOMER-DRIVEN COMPETITION

•Enterprises must organize

Organizational themselves internally by
placing managers in
management charge of customers and
strategy customer relationships
REASONS FOR COMPANIES TO BE CUSTOMER-CENTRIC

Customers are scarce

Customers are the sole source of all

company’s revenue

Customers create value on short-

and long-term
 LEARNING RELATIONSHIPS – THE ESSENCE OF CRM

Learning Relationships the enterprise

gives a customer the opportunity to:
o teach it what he wants
o remember it
o give it back to him
o keep the business
 LEARNING RELATIONSHIPS – THE ESSENCE OF CRM

The more the customer teaches the company,

the better the company can provide exactly
what the customer wants and the more the
customer has invested in the relationship.
 LEARNING RELATIONSHIPS – THE ESSENCE OF CRM

Benefits of Learning Relationships

 Increase in customer loyalty
 Thecustomer learns more about his own preferences
from each experience and from the firm’s feedback
 Theenterprise learns more about its own strength
and weaknesses from each interaction and from the
customer’s feedback
RELATIONSHIP-FORMING BUILDING BLOCKS

Trust
Commitment Satisfaction

Uncertainty
and Fairness
dependence
Symmetry
RELATIONSHIP-FORMING BUILDING BLOCKS

•Is central to successful

relationships
•Factors contributing to
formation of trust:
Trust •Shared value
•Interdependence
•Quality communication
•Non-opportunistic behaviour
 RELATIONSHIP-FORMING BUILDING BLOCKS

•Calculative commitment -
results from an economic
analysis of the costs
Commitment •Affective commitment - is
positively related to trust and
supports relationship benefits
much longer in duration
 RELATIONSHIP-FORMING BUILDING BLOCKS

•Satisfied customers generally

are more inclined to remain in
the relationship
Satisfaction
•Companies must focus more
closely on customer
satisfaction during the early
stages of the relationship
 RELATIONSHIP-FORMING BUILDING BLOCKS

Uncertainty •Relationships based on

uncertainty and/or
and dependence tend to be less
dependence stable as they focus on
current existing conditions.
RELATIONSHIP-FORMING BUILDING BLOCKS

•Distributive fairness - based on

the perception of relationship
rewards versus relationship
burdens
Fairness
•Procedural fairness - based on
the perception that
procedures and processes
used are fair and is therefore
more focused on behaviors
 RELATIONSHIP-FORMING BUILDING BLOCKS

•Refers to the degree of

equality between relationship
Symmetry members.
•Symmetric relationships are
more stable than asymmetric
ones.
 THE 5 ES OF THE CUSTOMER RELATIONSHIPS

 1. Customer environment
2. Customer expectations
3. Customer experience
4. Customers emotions
5. Customer engagement
 WHAT IS IT
CUSTOMER RELATIONSHIP
MANAGEMENT?
 CRM APPROACHES

CRM

- Is not a software package

- Is not a database
- Is not a loyalty program, a customer
service program

Is an entire philosophy
 CRM APPROACHES

CRM

A strategic approach designed to improve

shareholder value through developing
appropriate relationship with key
customers and customer segments

Unites the potential of IT and relationship

marketing strategies to deliver profitable,
long term relationships
 CRM APPROACHES
It is a discipline,
not a product

It is an integrated Involves changing the

approach to focus and culture of
managing CRM the organization from
relationships with a product - to a
customers customer-orientation

It is a strategy, not a
tactic
 CRM MAIN FUNCTIONS

1. Identifying, satisfying, retaining

and maximizing the value of the
firm’s best customers
 CRM MAIN FUNCTIONS

2. Ensuring that each contact with the

customer is based upon extensive
knowledge on customer’s needs
 CRM MAIN FUNCTIONS

3. Creating a complete picture of

the customer
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

• Integrates sales,
marketing and
service function
across media 
 A front office • Call centers
• People
• Stores
• internet
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

A data •Store customer

warehouse + information
 The •Analyse the data
appropriate and learn about
customer behaviour
analytical tool
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

• Are developed from

the data analysis
• Have to ensure the
front office benefits
 Business rules from the firm’s
learning about its
customers
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

•Enable customer
Measures of relationships to

performance continually improve
 THE MAJOR COMPONENTS FOR THE SUCCESSFUL
IMPLEMENTATION OF CRM

Integration into •Ensuring that the front

the firm’s office’s promises are

operational and delivered
support
Customer Relationship Management

COURSE 3
CRM Processes and Key Elements
 Misunderstandings about CRM

Mis.1: CRM is database marketing

• Databasemarketing is concerned with the

development and exploitation of customer
data for marketing purpose
• CRM
is much wider in scope than database
marketing
 Misunderstandings about CRM

Mis.2: CRM is a marketing process

• Thecustomer data supporting a CRM strategy can be

shared more widely throughout the enterprise than
the marketing function alone
• Customer data can not only be used to integrate
various internal departments, but can be shared
across the extended enterprises (outside suppliers and
partners)
 Misunderstandings about CRM

Mis.3: CRM is an IT issue

• CRM is aimed at creating better value for customers

and company –this aim is made possible by IT
• Not all CRM initiatives involve IT investments
• CRM could involve ♦behavioural changes in store
employees, ♦ education of call-center staff, and ♦ a
focus on empathy and reliability from salespeople
 Misunderstandings about CRM

Mis.4: CRM is about loyalty schemes

• Notall of CRM implementations are linked to loyalty

schemes.
• Loyalty
schemes may play to roles in CRM
implementation:
 generate data for the customer database
 may serve as an exit barrier
 Misunderstandings about CRM

Mis.4: CRM is about loyalty schemes

• Notall of CRM implementations are linked to loyalty

schemes.
• Loyalty
schemes may play to roles in CRM
implementation:
 generate data for the customer database
 may serve as an exit barrier
 Misunderstandings about CRM

Mis.5: CRM can be implemented by any

company

• Strategic
CRM and operational CRM can be
implemented in any company.
CRM is based on customer data – if these
• Analytical
data are missing then analytical CRM cannot be
implemented
 CRM Levels

STRATEGIC CRM

OPERATIONAL CRM

ANALYTICAL CRM
5- process model of CRM
 5- process model of CRM
• Five core processes in CRM

Strategy development process STRATEGIC

CRM
Value creation process

Multi-channel integration OPERATIONAL

process CRM

Performance assessment
process
Information management ANALYTICAL
CRM
process
 Strategic CRM
Strategic
CRM is focused on the
development of a customer-centric
business culture

 a set of beliefs about putting the

customer first
a permanent adaptations to customer
requirements and competitive conditions
 Conditions for a successful CRM strategy

Leadership

 Is one of the most drivers of success

 Oneor more leaders have to:
 develop a vision, create support, motivate
and inspire people
 be aware of the systems, the processes, the
marketing approach, etc.
win the trust of owners and shareholders
 Conditions for a successful CRM strategy
Mission
 Conditions for a successful CRM strategy
Culture
For creating a solid and effective corporate
culture is important to:
oDescribe the common values and norms
oCommunicate intensely internally regarding the
values and norms
oDeploy symbols and other information carriers in the
dissemination of the philosophy
oTake measurements of concrete performance with
regard to relationship orientation
 Conditions for a successful CRM strategy
Structure
 Organizational forms of customer management

The customer pyramid

 Conditions for a successful CRM strategy
People
People with social skills are indispensable in
relationship-oriented organisations.
• Anyone who needs to maintain contact with
customers has to be sufficiently competent in this
area
• All the individuals need abilities to communicate
with customers on product information, invoices,
purchases, complaints, etc
 Conditions for a successful CRM strategy

Communication and information

• The quality of the communication between
the parties is influenced by the structure and
division of labour.
• Duties and positions have to be organised on
the basis of contact with customers
 Conditions for a successful CRM strategy
Systems
 The service-profit chain – connects “hard” value
(financial) with “soft” performance indicators (satisfaction
of customers and employees)
 Conditions for a successful CRM strategy
Systems
 Balanced scorecard– connects strategy elements
with operational elements
 Conditions for a successful CRM strategy
 Balanced scorecard
Key steps in the development and implementation of a
CRM strategy
Customer portfolio analysis

Customer intimacy

Network development

Value proposition development

Manage the customer lifecycle

Tools and processes on the CRM value chain
Operational CRM
 Operational CRM

Marketing automation (MA)

Appliestechnology to marketing
processes
Capabilities:
1. Customer segmentation
2. Campaign management
3. Event-based management
 Marketing automation (MA)

MA- the application of computerized

technologies to support marketers and
marketing management in the
achievement of their work-related
objectives
 Marketing automation (MA)
• Functionality offered by MA software
1. Marketing campaigns
 Campaign management
 Direct mail campaign management
 Email campaign management, etc
2. Digital and online marketing
 Online marketing
 Content management
 Digital analytics, etc
3. Strategic and other marketing
 Integrated marketing management
 Marketing analytics
 Market segmentation etc.
 Operational CRM
Sales-force automation (SFA)

Applies technology to the management of a

company’s selling activities
The selling process can be decomposed into
stages
Capabilities:
 opportunity management
 contact management
 proposal generation
 product configuration
 Sales force automation (SFA)

SFA - the application of computerized technologies to

support salespeople and sales management in the
achievement of their work-related objectives.

• SFA software is used to:

collect
store
analyze CUSTOMER-RELATED DATA
distribute
use
 Sales force automation (SFA) - benefits

• Shorter sales cycles

Salespeople • More closing opportunities
• Higher win rates

• Improved salesperson
productivity
Sales managers • Improved customer
relationships

• Improved visibility of sales

Senior pipelines
management • Increased sales revenue
 Operational CRM
Service automation (SFA)

Allows companies to automate their service

operations
Software enables companies to manage and
coordinate their service-related in-bound and
out-bound communications across all
channels
• Technologies
such as interactive voice response
(IVR) enable customers to interact with company
computers
 Service automation (SA)

SA = the application of computerized

technologies to support service staff
and management in the achievement
of their work-related objectives.
 Service automation
SA is used in four major contexts:
Contact centers

Call centers

Help desks

Field desks
 Service automation - benefits

• 1. Enhanced service effectiveness

• 2. Enhanced service efficiency
• 3. Greater service agent productivity
• 4. Improved customer experience
• 5. Improved customer engagement
• 6. Improved customer retention
 Analytical CRM

Is concerned with exploiting customer data

to enhance both customer and company value.
Customer data is found in enterprise-wide
repository:
Sales data (purchase history)
Financial data (payment history)
Marketing data (campaign response)
Service data
Tothe internal data can be added data from
external sources
 Analytical CRM

Analytical CRM = the process

through which organizations transform
customer-related data into actionable
insight for either strategic or tactical
purposes
 Analytical CRM
Strategic purposes
finding out which customers have the highest
lifetime value
segmenting the customer base so that different
value propositions can be created for the identified
segments
Tactical purposes
• identifying which customers are at risk of churning
• identifying the next best offer that will cross-sell a
customer
 Analytical CRM
Customer Aquisition
leads are converted into customers and cross-selling and
upselling is done wherever possible.
Customer Retention
 It assists the organization in setting up strategies for
sales, marketing and service department for improving
customer relationship and experience and gaining loyalty.
Data Management
Collecting and managing all the customers’ information
and interactions. Analyzes key performance indicators
based on the information gathered.
 Customer Relationship Management in
International Markets
COURSE 4

GLOBAL PERSPECTIVE ON CUSTOMER

RELATIONSHIP MANAGEMENT
 Global perspective on CRM

 International business have the ability to exploit

three sources of competitive advantages:
1. Global efficiency
2. Multi-market flexibility
3. Worldwide learning
 Global perspective on CRM
1. Global efficiency
 By expanding internationally a firm can lower its
costs and improve the bottom line performance
via location advantages
 A firm must fully understand the customer profile
 CRM is very important in this context
 Global perspective on CRM
2. Multi-market flexibility
 Large
multinational firms must respond to changes in
numerous markets that are all inter-related.
 Understanding the differences in markets worldwide
will provide for a competitive advantage over the
long-term
 CRMcan be utilized in achieving first-mover
advantages against the competition.
 Global perspective on CRM
3. Worldwide learning
 The
need for understanding the customer in various
markets is essential
 Company with too much centralized control loses its
ability to innovate as well as to adapt and respond
locally to the needs of its customers
 Datacollection strategies as achieved via CRM can
aid a firm in retaining customers in a profitable fashion
Overview of international strategic theory

Home replication strategy

Multinational strategy

Transnational strategy

Global strategy
 Overview of international strategic
theory
Home replication strategy

 The default international strategy for firms that believe that

their customers’ tastes and preferences are consistent
throughout the world
 The firms reproduce their core competencies on the home
market in the other markets
 Can be a successful strategy for firms that compete in
international markets that are very similar to the home
market
 Overview of international strategic
theory
Multinational strategy
A firm has many relatively independent operating
subsidiaries, each one focusing on a specific domestic
market
 Decentralized management framework
 The strategy is strong on local responsiveness, but is
lacking in terms of corporate efficiency
 Overview of international strategic
theory
Transnational strategy
 The firm attempts to combine the benefits of
global scale efficiencies with the benefits of
local responsiveness
 The firms have chosen to outsource many tasks
offshore rather than simply opting for a
centralized or a decentralized management
platform.
 Overview of international strategic
theory
Global strategy
 The firm views the world a single market place
 The primary goal is creating standardized
goods/services that meet the needs of the
customers worldwide
 This strategy attempts to capitalize on
economies of scale
Components of strategy for cross-border
operations

The distinctive competence

The scale/scope of operation

Resource deployment

Synergy
 Components of strategy for cross-
border operations

1. The distinctive competence

 An
area, or areas, where a firm excels in relation to its
competition.
 In
terms of CRM, answering this question is not an
exercise conducted simply by a firm’s leadership team
 The customers must also be consulted in this process
 Components of strategy for cross-
border operations

2. The scale/scope of operation

 Is related to CRM, as the focus of this component
concerns where a firm plans on conducting its
business, and with whom.
 Scope may be defined:
 in terms of geography,
 In terms of the appropriate product/service niche in
which to compete
 Components of strategy for cross-
border operations
3. Resource deployment
A firm has decide on how resources can be
allocated for its international activities
 Depending on which international strategic
alternative have been chosen, resource deployment
can be:
determined from a centralized platform with the intent
on global efficiency,
determined in more decentralized environment
 Components of strategy for cross-
border operations

4. Synergy
 Firms that are engaged in a CRM environment want to
maximize profitability via cross-selling to its existing
customer base
 Itis more expensive to attract new customers, than it is
to sell complementary products and services to the
existing customers
 CRM across national boundaries

Unless a firm is operating in international markets

with a high level of congruity, a total home
replication strategy, or even a global strategy, is
inconsistent with CRM

The home replication strategy - The global strategy orientation-

places a ‘one size fits all’ the same standardization based
approach to all markets based on the one strategy that is
on how things are done in the expected to work the best in the
home market most markets worldwide
 CRM across national boundaries

 A completely standardized approach to CRM is very

difficult because of factors as:
 Economic environment
 Technological infrastructure
 Trade barriers
 Cultural differences
 Legal regulations
 CRM across national boundaries

Economic environment
 the
majority of CRM applications have been
undertaken in developed countries of the world
 International
trade and urbanization levels can also
impact the success of global CRM strategies
 CRM across national boundaries

Technology
 The levels of infrastructure development worldwide are
very different
 These differences could:
 make the costs associated with data collection very
high
 impact the quantity and quality of the information
available
 It is very difficult to employ a customer orientation
worldwide on a standardized basis
 CRM across national boundaries

Trade barriers and agreements

 some industries may find that there are barriers
to trade that can certainly affect a standardized
approach to CRM strategy
 there are many bilateral agreements that are
complicating business operating environment
 CRM across national boundaries

Cultural differences
 companies with a global CRM strategy may need to
consider different marketing approaches depending
on where they are conducting business
 Western people tend to value more individuality, self-
interest, and immediate gratification
 Asian
people tend to resemble delayed gratification,
and a more collective viewpoint
 CRM across national boundaries

Legal systems and regulations

 An important problem could be the increasing
anxiety of some customers as it concerns the
privacy of their personal information.
 There are varying degrees of acceptability for
data collection processes worldwide.
The pillars of integral customer
relationship management
 Advantages of CRM in international
bussiness
 Every
satisfied customer brings in at least three more
customers.
!An unhappy customer communicates his negative
experience to ten more potential customers.
 The
rate of repeat sales climbs with increased reliance
and satisfaction with the performance of their suppliers.
 Regular customers exhibit less price sensitivity than new
customers
 Advantages of CRM in international
bussiness

 Customer-oriented companies can even

charge higher prices than the competition.
 Marketing and sales costs for maintaining
customer relationships drop.
 Reducing the level of customers leaving the firm
by five percent can raise profit by as much as 85
percent
GCRM chain of effects
 GCRM chain of effects

Customer
orientation

 The international company has to focus on the customer’s

current and potential needs, wishes and problems
 Itis important to have exact knowledge of customer, in
the context of markets, products and competition
 GCRM chain of effects
Quality product
and service
performance

 An important factor in the success of a company comes

from the quality of its products and services in relation to
the competition
 It
is advantageous to incorporate the wants of the
customer into the product in the design stage
 GCRM chain of effects

Customer
satisfaction

 Global customer satisfaction is key when a brand’s vision is

to become a leader in terms of quality, performance and
customer experience
 To achieve this vision requires a detailed knowledge of
customers’ purchase and ownership experience and a
clear direction as to what to prioritise and where to
focus improvements
 GCRM chain of effects

Customer
retention

 Isthe strategic objective of striving to maintain long-term

relationships with value-creating customers
 Companies have to succeed in precisely adapting their
spectrum of performance to the ideas and expectations
of their customers
 GCRM chain of effects
Customer value
and company
success

 There
is a close relationship between customer
commitment and profit level.
 Theprofit per customer increases with the growing
duration of a customer’s relationship to a company.
The pitfalls of CRM implementation
Ineffective change management

Lack of top level executive support

Lack of customer vision

Lack of understanding of CLV

Seeing CRM purely as technology

Underestimating difficulties in data mining

and data integration
 The major changes that influence
GCRM

 1.Changes with respect to consumers

 2. Changes with respect to the market place
 3. Changes with respect to data storage
technology
 4. Changes with respect to the marketing
function
 1. Changes with respect to consumers
1.1 Demographic Changes and Increasing Consumer
Diversity
 Aging populations in developed countries
 Middle-age values and perspectives will increasingly dominate the
national psyche – older consumer’s response favourable to CRM
approaches
 Increasing diversity in ethnicity
 Vendors must cater to ethnically diverse needs in housing, clothing, and
food
 Increasing individualization
 Firms must increasingly consider the individual behaviors of family
members who spend more time apart
 1. Changes with respect to consumers
1.2. Behavioural changes
 Time scarcity
 Marketers must provide products and services on demand and pay
careful attention to time
 Value consciousness and intolerance for low service levels
 Customers are more demanding and the level of expectations is
increasing
 Increased used of social media
 Firms have great opportunities to interact with customers in channels that
the customers themselves have chosen
 Decreased loyalty
 Need for convenience and the rise of self-service
 2. Changes with respect to the market
place
2.1 Intensified Competition for Customers
 Access to markets is no longer localized
 Demands for logistics management and distribution partnering are
becoming more significant.
2.2 Fragmented Markets
 To address customers’ particular needs, the market must be
broken down into multiple segments
2.3. Difficult differentiation
 CRM is critically strategically important in company positioning
in today’s market
 3. Changes with respect to data storage
technology
3.1 Data storage supply
 Consumers and companies increasingly use online space to
save more data and gain convenient access to it from
anywhere.
3.2. Data storage demand
 CRM applications – SFA, data-marts, data warehouse
applications
If they do it correctly, firms can develop unprecedented insights
into and information about customers’ buying behavior
 4. Changes with respect to the
marketing function
 The
marketing scenario today makes greater
demands to learn about:
 customer preferences
 value provision
 product and service customization.
 CRM
represents a strong competitive
means to satisfy new demands
 CUSTOMER RELATIONSHIPS MANAGEMENT
COURSE 5

ISSUES IN GLOBAL CUSTOMER RELATIONSHIPS

MANAGMENT
 CRM – KEY FEATURES

Is the strategic process of selecting

customers a firm can most profitable serve
and shaping the interactions with them.
SCOPE: optimizing the current and future
value of the customers
 CRM – KEY FEATURES

Is the process for achieving continuing

dialogue with customers across all available
touch points
SCOPE: to maximize the contribution from
each customer to overall profitability
 CRM – KEY FEATURES

Is an enterprise-wide process affecting

decisions related to: marketing communications,
pricing, customization of product and services,
resource allocation, customer support services.
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES
Customer-
level External to the
differences firm

FACTORS

Firm-level Internal to
differences the firm
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES

Customer-level
differences

Differences in:
Differences in:
 customer expectations
• the competitive environments
 drivers of satisfaction
• technological infrastructure,
 loyalty, profitability,
political systems, regulatory
 customer value across
variations
countries or cultures
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES
Carrefour, the French retail chain, led Wal-Mart in China in
identifying and dealing with the local economy’s desired buying
experience
The Japanese Web users trusted a local Web site least, were least
satisfied, and were least loyal as compared to the users from USA,
Canada and Germany
Customers could be classified in: “privacy fundamentalist”, “ privacy
pragmatist” and “privacy unconcerned”, related their privacy needs.
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES
There are important differences in the drivers of repeat purchase
such as cost, value, quality, and service in the four regions of Asia,
Latin America, Northern Europe, and Southern Europe
 There is a stronger link between the human elements of service and sales
representatives on repeat purchase intentions for collectivistic cultures
compared to the more individualistic cultures
 Preferential treatment is not effective in USA, Belgium and the
Netherlands – interpersonal communications and tangible rewards are
effective in all three countries
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES
Firm-level
differences

Macro factors Micro factors

CONCEPTUAL FRAMEWORK FOR GLOBAL CUSTOMER
RELATIONSHIP MANAGEMENT
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES- MACRO FACTORS

•Factors internal to the company

1. Firm management objectives
2. Country/global strategy of the company
3. Corporate culture
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES- MACRO FACTORS

•Factors external to the company

1. Trade barriers and governmental regulations
2. Country characteristics
 Market size and growth
 Political environmental
 Economic and market infrastructure
3. Consumer characteristics (culture, consumption habits)
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES- MICRO FACTORS

1. Targeted marketing of company

Targeted offers
Personalized pricing
Loyalty programs and promotion
Interpersonal communications
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES- MICRO FACTORS

2. Other marketing activities of company

Advertising
Public relations
Distribution
Social marketing - CSR
 FACTORS AFFECTING CRM ACROSS NATIONAL
BOUNDARIES/CULTURES- MICRO FACTORS

3. Customer relationship orientation

Category involvement
Relationship proneness
4. Quality of the consumer-firm relationship
Behavioral loyalty
Attitudinal loyalty
GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS

Firms operating in different countries or

regions or a single firm whose operations
span multiple countries or regions must
face significant challenges in adopting a
GCRM orientation
GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS
GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS

Technological

Economic and

Challenges
market
Social and
cultural
Political, legal
and regulatory
GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS
TECHNOLOGICAL

• Four-level conceptual model of CRM development stages:

1. non-IT-assisted CRM, which relies on manual systems;
2. IT-assisted CRM, in which data is collected manually but uses IT
for analysis;
3. IT-automated CRM, which uses IT for customer interaction—what
is often characterized as operational CRM;
4. integrated-CRM (I-CRM), which involves fully integrated systems
and analytical CRM.
GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS
TECHNOLOGICAL

IT infrastructure level of development

Telecom infrastructure
PC household penetration
Internet access
GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS
TECHNOLOGICAL

IT infrastructure level of development impacts:

the amount and quality of customer information
available
the ability to analyze the data
the firm’s communication capabilities through
different customer interaction channels or touch
points.
GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS
TECHNOLOGICAL
FIRMS IN DEVELOPED COUNTRIES use electronic point-of-sale
scanners and technology combined with shopper identification cards
to capture detailed individual customer data in businesses including
retail, airlines and hotels, and financial services.
Firms in USA collect and track individual customer data, due to
widespread use of credit cards.
Credit card penetration exceeds 90% in the United States, it is less
than 20% in the Asia-Pacific region – firms have access to only
limited customer level data
 GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS

ECONOMIC AND MARKET

Industrial structure
Firm resources
Market
.
 GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS

ECONOMIC AND MARKET

Industrial structure – four levels:
1. Subsistence economies
2. Raw material exporting economies
3. Industrializing economies
4. Industrial economies

.
 GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS

ECONOMIC AND MARKET

 Interest in CRM has been concentrated in industrial economies such as the
United States and Western European markets
 In markets such as India, which is experiencing rapid growth in many areas,
the perceived need for CRM that is focused on developing and retaining
current customers may be low
 In mature markets with low growth potential such as the United States the
interest in CRM is higher
 The highest growth is predicted for China, India, and Thailand.

.
 GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS

Social and cultural

CRM – Western orientation

- Western values (self-interest, self-gratification)
 Asian values – filial piety, delayed gratification, loyalty to family,
and Guanxi (connections and network of obligations)
Differences in Differences in CRM approach:
values  the selection of incentives and rewards
for loyalty and retention programs
.  the design of the customer experience
 GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS

Social and cultural

Cultural factors have a greater impact

. on preferences for services

Error-free service may be more

important in individualistic cultures

The sincerity of service employees

may be more important in collectivist
cultures
GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS
Social and cultural
 Global firms adopt metrics to track customer satisfaction  have to
consider the cultural differences
SERVQUAL Reliability
(measuring service Assurance
quality)
Tangibles
Empathy
Responsiveness

Non-Western cultures used different dimensions (sincerity,

formality, and personalization) and different interpretations
of common dimensions (reliability) to evaluate service quality
 GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS

Social and cultural

 Cultural differences may pose challenges for the most basic elements of
CRM such as identifying customers by name and communicating in the
preferred language.
Firms operating in Asian markets must
consider potentially complex language
preferences (e.g/ China)

In Muslim or Chinese communities where

naming customs are quite different from
. typical Western traditions
GCRM ENVIRONMENT: CHALLENGES AND CONSIDERATIONS

Legal and regulatory

 The customer data collected by companies poses significant concerns

regarding privacy
U.S. firms have considerable latitude to collect, store, and even
exchange sell or buy data on individual customers
In Europe the consumers own and control their personal information.
 Customer incentives common in the United States may also be
restricted in other countries
 CRM PRACTICES ACROSS CULTURES

• U.S. multinational corporations (MNCs) generally

use a standardized approach to detect customer
perspectives and adjust business as needed
• The European MNCs tend to customize their
CRM system from country to country based on their
socioeconomic-political differences
 CRM PRACTICES ACROSS CULTURES

• In the United States is technology-driven and often

managed by IT
• The “Nordic School of CRM,” is focused on the
goals of building customer loyalty and retention and
managed by sales and marketing personnel
 CRM PRACTICES ACROSS CULTURES

• In choosing customers to nurture, non-U.S.

companies showed more concern about customer
profitability
• U.S. MNCs, although stressing profitability, did
want to grow in terms of customer size (loyalty
programs = a standard customer relationship tool)
 CRM PRACTICES ACROSS CULTURES

• U.S. firms, compared with non-U.S. firms, tend to

collect a lot of data, some of which are not used.
• Due to cultural differences, certain pieces of
information may not be feasible or appropriate
to collect or to use in some countries.
 CRM PRACTICES ACROSS CULTURES

• Establishing a CRM system can be an expensive

undertaking requiring investments up to $100
million or even more for a company
• Companies currently spend about $80 billion
on CRM globally
Customer Relationships Management in
International Markets
COURSE 6

CUSTOMER PORTFOLIO
MANAGEMENT
Customer portfolio management
Market segmentation

Sales forecasting

Activity-based costing

Lifetime value estimation

Data mining
 Market segmentation

Identify the business the company is in

Identify relevant segmentation variables
Analyze the market using this variables
Assess the value of the market segments
Select target market(s) to serve
 Market segmentation – consumer markets

Identify the business the company is in

Avoid marketing-myopia
A company has to identify its markets and
competitors at three levels:
1. Benefit competitors (delivering the same
benefit)
2. Product competitors (delivering the same
product)
3. Geographic competitors (product and benefit
competitors operating in the same area)
 Market segmentation – consumer markets

Identifyrelevant segmentation
variables

 In recent years there has been a trend

away from simply using demographic
attributes to segment consumer markets.
 Family lifecycle idea is also threatened
 Psychographic segmentation has
become more popular and more frequently
used
 Market segmentation – consumer markets

Usage attributes are particularly useful for

CRM purposes
Market segmentation – business markets
Market segmentation – business markets
•Howdo you assess the value in
a market segment?
 Market segmentation

Assess the value of the market segments

Select target market(s) to serve
• Questions:
1. How attractive is the opportunity?
2. How well placed is the company and its network to exploit the
opportunity?
• Criteria
1. Segment value and attractiveness
 Size of segment, segment growth rate, bargaining power of
customers, number and power of competitors, potential of
differentiation
2. Company and network fit
 The opportunity fit the company’s objectives, mission and values
 The company possess the resources to exploit the opportunity
• Whatmethods we can use to
forecast sales?
 Sales forecasting

Quantitative methods
o customer surveys

Qualitative methods
o sales team estimates
Time-series methods
o moving average
o exponential smoothing
o time-series decomposition
 Causal methods
o leading indicators
o regression models
 Sales forecasting

Quantitative methods

Customer surveys = ask consumers or

purchasing officers to give an opinion on what
they are likely to buy in the forecasting
period
 Sales forecasting

 Qualitative methods

Sales team estimates = can be useful when

salespeople have built close relationships
with their customers
 Sales forecasting

Time-series methods
o Movingaverage
oExponential smoothing
oTime-series decomposition
 Sales forecasting

Time-series methods
o Moving average = takes sales in a number
of previous periods and averages them
oIs computed on successive periods of
data, moving on one period at a time,
 Sales forecasting

Time-series methods
oExponential smoothing = weight the more
recent periods more heavily
o more recent periods are better predictors
Sales forecasting using moving averages
 Sales forecasting

Time-series methods
oThe decomposition method=is applied when
there is evidence of cyclical or seasonal patterns
in the historical data
oSeparates out four components of the time series:
trend factor, cyclical factor, seasonal factor and random
factor
The trend factor = the long-term direction of the trend
after the other three elements are removed
 Sales forecasting

Causal methods
o
Leading indicators

Regression methods
 Sales forecasting

Causal methods
o Leading indicators – contemporary
activity or event that indicates that
another activity or event will happen
in the future.
 Sales forecasting

Causal methods
oRegression models - work by
employing data on a number of
predictor variables to estimate future
demand.
 Activity-based costing

Customer acquisition costs

Terms of trade
Customer service costs
Working capital costs
 Activity-based costing

Customer acquisition costs

Some customers require considerable sales effort
to shift them from prospect to first-time customer
status (free samples, sales costs, engineering advice
etc)
 Terms of trade
Price discounts, advertising and promotion
support, slotting allowances
 Activity-based costing

Customer service costs

• Handling queries, claims and complaints, demands
on salesperson and contact centre, small order
sizes, high order frequency etc
• Working capital costs
Carrying inventory for the customer, cost of
credit.
 Lifetime value estimation (CLV)

• CLV is measured by computing the present-day

value of all net margins (gross margins less cost-
to-serve) earned from a relationship with a
customer, segment or cohort

CLV = lifetime value

M= margin/profit from a customer per
period
r = retention rate (e.g. 80%)
i = discount rate (12%)
 Data mining

1. Defining the business problem to solve

2. Creating a database that can be subjected
to data mining
3. Developing a hypothetical solution to the
problem (model building)
4. Testing and refining the models
TOOLS:
 Clustering techniques
Decision trees
Neural networks
 Data mining
Clustering techniques

1. Each customer is allocated to just one

group. The customer possesses attributes
or behaves in ways that are more closely
associated with that group than any other
group.
2.Each group is relatively homogenous.
3.Each group is significantly different
from others.
 Data mining
Decision trees

Decision trees work by analyzing a dataset to

find the independent variable that, when used to
split the population, results in nodes that are
most different from each other with respect to
the variable you are trying to predict
 Data mining
Decision trees - Example
Credit risk training set
 Data mining
Decision trees
Cross-tabulation of dependent and independent variables
 Data mining
Decision trees
Decision tree output
 Data mining
Neural networks

 can produce excellent predictions from

large and complex datasets containing
hundreds of interactive predictor variables
 are represented by complex mathematical
equations,
Customer portfolio models
Shapiro et al.’s customer portfolio matrix
 Customer portfolio models
Shapiro et al.’s customer portfolio matrix
• customersare classified according to the
price they pay and the costs incurred by
the company to acquire and serve them
• it
recognizes that costs are not evenly
distributed across the customer base.
 Some customers are more costly to win
and serve – if they pay a low price, theuy
are unprofitable
Customer portfolio models
Fiocca’s CPM model
First step - customers are classified according to:
1 The strategic importance of the customer.
2 The difficulty of managing the relationship with the
customer
Customer portfolio models
Fiocca’s CPM model

The strategic importance of a customer –

determined by:
the value or volume of the customer’s purchases
the potential and prestige of the customer
customer market leadership
general desirability - diversification of the supplier’s
markets, providing access to new markets, improving
technological expertise
Customer portfolio models
Fiocca’s CPM model

The difficulty of managing the customer

relationship is related to:
Product characteristics such as novelty and
complexity.
• Accountcharacteristics - the customer’s needs and
requirements, customer’s buying behaviour, customer’s
power
• Competition for the account
Customer portfolio models
Fiocca’s CPM model
Second step - customers are classified according to:
1 The relative strength of the customer relationship
2 Customer’s business attractiveness
Customer portfolio models
Fiocca’s CPM model
The attractiveness of the customer’s business is strongly
influenced by conditions in the customer’s served market:
 market factors
 competition
 financial
 and economic factors,
 technological factors
 socio-political factors
Customer portfolio models
Fiocca’s CPM model
The relative strength of the customer relationship
is determined by:
the length of relationship
the volume or value of purchases
the importance of the customer
cooperation in product development
management distance (language and culture)
geographical distance
 Strategically significant customers
High future lifetime value customers

High volume customers

Benchmark customers

Inspirations

Door openers
 Strategically significant customers

High future •These customers will

contribute significantly to the
lifetime value company’s profitability in the
customers future

•These customers might not

High volume generate much profit, but are
customers significant because of their
absorption of fixed costs
Strategically significant customers

Benchmark •These are customers that other

customers customers follow

•These are customers that bring

Inspirations about improvement in the
supplier’s business.
Strategically significant customers

•These are customers that allow

Door openers the supplier to gain access to a
new market
Customer Relationships Management in
International Markets
COURSE 7

CUSTOMER EXPERIENCE
Understanding value

Value is the customer’s perception

of the balance between benefits
received from
a product or service and the
sacrifices made to experience those
benefits
Understanding value – customer sacrifices

• The price of the product or service

Money • There may be additional costs or
discounts
• Customers incurred transaction
Transaction costs when searching for solutions,
costs negotiating with suppliers and
receiving and integrated the goods

Psychic • Perceived risk = performance,

physical, financial, social,
costs psychological
Understanding value – customer sacrifices

• How customers try to reduce perceived risk

 Delay purchase
Seek word-of-mouth endorsement
Buy established brands
Request pre-purchase trial
Read testimonials
When do customers experience value? –
perspectives on value

• The exchange of one form

of value for another
• Developed economy =
money is exchanged for a
Value-in- good/service
exchange • Less developed economy =
barter (goods are
exchanged for other goods)
When do customers experience value? –
perspectives on value

• Value is realized only when

customers possess, use
consume or interact with
the good and service
Value-in-use • Customers co-create value-
in-use when they interact
with the firms products
When do customers experience value? –
perspectives on value

• Consistent with CRM view

• Value is not only experienced
when customers use products
and services
Value-in-
• customers can experience
experience value as the interact with or
are exposed to any
marketing, sales or service
output of the firm throughout
the customer lifecycle
Sources of customer value

A value proposition = the explicit or

implicit promise made by a company to its
customers that it will deliver a
particular bundle of value-creating
benefits
Source of customer value
•Asuccessful company offer one of three value
propositions to their customers:
low price – companies do a limited number of
things very efficiently (Wal-Mart, McDonald’s)
product innovation - companies aim to provide
the best products, services or solutions to
customers (Intel, Apple, Philips)
customized solutions - companies are able to
adapt their offers to meet the needs of individual
customers (Saatchi and Saatchi, McKinsey)
Customization
CRM aims to build mutually beneficial relationships with
customers
Oneway of achieving this goal is to customize the value
proposition

Customization = companies have to be

aware of and responsive to customers’
differing requirements
Customization

Mass customization =
customized value
propositions to Craft customization
individual customers on = customized offers, but
a massive scale not at mass-market
level
 Customization
• Customization can be applied to any part of the offer
Product Solvay Interox, a chemicals company, customizes its hydrogen
peroxide product for textile industry customers

Price Dell Computer offers lower prices to its larger relationship

customers than its small office/home office (SOHO) customers.

Promotion Ford customizes communications to its dealership

network.
Place Procter and Gamble delivers direct to store for its major retail
customers but not smaller independents
Process Xerox customizes its service guarantee and recovery processes for
individual customers
People Hewlett Packard creates dedicated virtual project groups for its IT
project clients

Physical Certain tour operators customize point-of-sale material by

Different forms of mass customization
Key issues for CRM considering
customization

Do customers want customized

products and services?

What degree of customization is

desired?

Will customers pay a premium

for customization?
Value through marketing mix
Value from products
(service)
o Product innovation
o Incremental benefits – generating customer-perceived
value by claiming additional benefits for their products.
• Product modification
• Product association
o Product-service bundling - offering customers a
package of goods and services at a single price
o Branding – brands offer an implicit assurance of a
particular customer experience
Value through marketing mix
Value from processes

oBusiness processes are how companies get things

done
oVeryimportant – The complaint management
process
Complaints provide information that can help companies
identify, and correct, root causes of problems
A successful complaints-handling process enables
companies to capture customer complaints before
customers start spreading negative word-of-mouth or take
their business elsewhere.
• How to improve complaints management processes
Value through marketing mix
Value from people

o One of the more important jobs in CRM is the customer

contact role
o Two fundamental and interdependent roles:
1. Information management (customer’s requirements,
expectations, preferences)
2. Relationship management (winning, growing and
maintaining the customer’s business, handling
customer queries and complaints, ensuring the
customer’s satisfaction)
Value through marketing mix
Value from physical
evidence

Company’s premises, and their internal and

external environments, print materials,
websites, corporate uniforms and vehicle
Online presence
Company-owned online channels
Enterprise portals
Value through marketing mix
Value from customer
communications

oCustomer–company communication is enabled

through email, web-forms, instant messaging,
phone, fax, web collaboration
oCompanies can also facilitate customer-to
customer (peer-to-peer) communication by blogs,
chat-rooms, newsgroups, online communities and
social media
Value through marketing mix
Value from customer
Three main processes
communications

1. Disintermediation - direct-to-customer (DTC)

communication tools (email, direct mail, and
SMS and MMS
2. Personalization -CRM technologies used in call
and contact centres allow for personalized
interactions between customers and customer
service agents
3. Interactivity – www, instant messaging, email
Value through marketing mix
Value from channels

oMany companies have elected to develop

transactional websites so that they can sell
direct.
oAdditional routes to market include:
osocial media platforms such as Facebook
osearch engines such as Google
opublic or enterprise portals such as www.eMall.sg
ovirtual resellers such as Amazon.
What is it customer experience? (CX)

Customer experience is the cognitive and

affective outcome of the customer’s
exposure to, or interaction with, a company’s people,
processes, technologies,
products, services and other outputs.
What is it customer experience?

•influences customer’s
perceptions of value
Total customer and service quality
experience and affects
customer loyalty
What is customer experience?

CX is significantly influenced by
customer interactions with company’s:
- people
- processes Core elements
- technologies of CRM strategy
Customer experience concepts

Touchpoints

Moment of truth

Customer engagement
Customer experience concepts
Touchpoints
are found wherever customers comes into virtual or concrete
contact with company’s products, services, communications,
places, people, processes or technologies.
include:
• Websites
• Social media
• Service centers
• Warehouses
• Call and contact centers
• Events, exhibitions,
• Direct mail, email
• Retail stores, etc
Customer experience concepts
Moment of truth
any occasion the customer interacts with, or is
exposed to, any organizational output that leads to the
formation of an impression of the organization
occurs during customer interactions at touchpoints
Customers generally have expectations of what
should happen during moments of truth, and if
those expectations are underperformed,
dissatisfaction will result
Customer experience concepts
Customer engagement
Engaged consumers tend to have a higher
connection to a brand or organization
They feel a strong sense of identification, based on
their experiences of the firm’s offerings, activities
and reputation
Traditionalmeasures of satisfaction do not
perform well as measures of engagement
Customer experience concepts
Customer engagement - measures
COGNITIVE - Does the customer know our brand
values? Does the customer know about our sustainability
awards?
EMOTIONAL - Does the customer like the experience
offered by our firm? Does the customer prefer our
offerings to our major competitors’?
BEHAVIOURAL - How often does the customer visit our
website?
SOCIAL - Does the customer ‘like’ our Facebook page?
Does the customer join our Twitter conversation?
The 4 Is of customer engagement

Involvement

Interaction

Intimacy

Influence
The 4 Is of customer engagement

INVOLVEMENT – measures:
Unique site visitors
Advertising impressions
Website page views
Time spent per session
Time spent per page
In-store visits
Newsletter subsciptions
The 4 Is of customer engagement
INTERACTION – measures:
First time purchases
Videos played
Community contributions
Warranty registrations
Loyalty card registration
Request for free samples
Comments in social media
Clock-through on banner ads
Photos uploaded
The 4 Is of customer engagement

INTIMACY – measures:
Satisfaction scores
Sentiment in blogs and social media posts
Call-center feedback
Focus group contributions
The 4 Is of customer engagement
INFLUENCE – measures:

Content forwarded
Friends invited to join online communities
Word-of-mouth

Creation of user generating content

Content embedded in blogs
Invitations to join member program
How to manage customer experience

•Involves the recruitment of

paid shoppers to report on
their customers experience
Mystery •They report on their
experiences of the company
shopping sponsoring the research, but
they might also compare the
sponsor’s performance with
competitors
 How to manage customer experience

•A process that strives to

understand, chart and improve
what happens at customer
touchpoints
Experience •Focus-groups, face-to-face
mapping interviews, telephone interviews
•Objectives:
• What is the experience like?
• How can it be improved?
• Experience map of a hotel guest
 How to manage customer experience

•Can be used to gain a better

understanding of the socio-
cultural context of customer
Ethnographic experience
methods •Ethnography is a naturalistic
form of investigation that
reveals customer experience as
it occurs in everyday life
 How to manage customer experience

•Companies can develop a better

understanding of customer
Participant experience by participating in
observation the customer experience at
various touchpoints
 How to manage customer experience

•Some companies require their

senior managers to observe
Non- customer interactions at
participant customer touchpoints
observation •This is particularly suitable
when the primary customer
touchpoint is a call centre or
contact centre
Features of CRM applications that improve
CX
• refers to the ease with which a CRM
application can be navigated or used
• high usability applications require minimal
Usability user training prior to, or at deployment

• An application’s flexibility determines how

many alternatives are available to the user
at any given time
• A highly flexible application will have many
Flexibility links, and will not require specific processes
to be followed
 Features of CRM applications that improve
CX
• All technologies must be in alignment in order
to create a high performance system.
High • Performance is determined by integration and
performance synchronization technologies

• CRM applications should be evaluated based

on proven numbers of users, and types of users
(concurrent on the Web synchronization, full
Scalability
load call centre, etc.) in order to assess their
ability to scale