CUSTOMER RELATIONSHIP MANAGEMENT
CUSTOMER RELATIONSHIP MANAGEMENT
CRM is a comprehensive strategy and process of attracting, retaining and partnering with selective
customers to create superior value for the company and customers (Parvatayar & Sheth, 2001)
Customer-relationship management (CRM) is an approach to manage a company's interaction with
current and potential customers.
It uses data analysis about customers' history with a company to improve business relationships with
customers, specifically focusing on customer retention and ultimately driving sales growth.
CRM involves using technology to organize, automate and synchronize business processes- principally
sales, but also those for marketing, customer services and technical support.
LEARNING RELATIONSHIP PROCESS
To build a relationship the firms need to understand their customers. It is continuous
learning through constant interaction. It is a journey not a destination of relationship
Learning about Customers:
Customization of
• Customer Knowledge
Marketing Mix
• Customer Differentiation
4 P’s of Marketing
Customer Relationship Management: A Strategic perspective (G. Shainesh and
Jagdish N. Seth
ELEMENTS OF CRM
The realization of a CRM strategy depends on a no. of components/ competencies. Perhaps the
most obvious competency is related to the ability to infrastructure, which makes it possible for
customers and sellers/suppliers to recognize one another and to be able to interact in real-time.
The four cornerstones of CRM are:
1. Customer Knowledge
2. Relationship Strategy
3. Communication
4. The Individual proposition strategy
CHALLENGES TO BUSINESS ENVIRONMENT
Because of several pressures in the business environment, firms started facing a lot of
new challenges. These challenges enhanced the importance of building a relationship
with the customers.
The key challenges are:
1. Competition.
2. Misalignment between revenue and profits.
COMPETITION
This can be easily linked with the components of porter’s five forces.
MISALIGNMENT B/W REVENUE AND PROFIT
In the early 1990s, managers realized that in the process of acquiring customers &
gaining market share they have built inefficiencies through customer subsidization.
If you look at a typical company the distribution of revenue is exponential while costs
are distributed linearly with customer size.
The revenue is largely skewed from the largest to the smallest customer but costs
decline much more gradually.
CONTINUE…
Cross subsidization: Big customers who
generate lot of revenue are actually
subsidizing the other customers
WHY COMPANIES WANT RELATIONSHIP WITH
CUSTOMERS
Increases retention rate: It increases the size of the consumer base: (EC: Existing
customers, NC: new customers, TC: total customers)
Year Company A (5% churn) Company B (10% churn)
EC NC TC EC NC TC
1 1000 100 1100 1000 100 1100
2 1045 100 1145 990 100 1090
3 1088 100 1188 981 100 1081
4 1129 100 1229 973 100 1073
5 1168 100 1268 966 100 1066
REDUCE MARKETING COSTS
Improving customer retention reduces the company marketing cost .
For e.g. according to an estimation, it cost an advertising agency at least 20 times as
much to recruit a new client than it does to retain an existing client (Reichheld &
Detrick, 2003).
In addition to that, cost of serving existing customers is also tends to fall over period
of time and more crucial in B2B marketing.
BETTER CUSTOMERS INSIGHT
As customer tenure increases with a supplier/ company, they are in condition to
develop the better understanding of customer requirement and expectations.
Can also result in cross-selling and upselling.
Under these circumstances, revenue and profit streams from customers become more
secure.
LIFETIME VALUE
The leads to core CRM is that a customer should not be viewed as a set of
independent transactions, but as a lifetime income stream
It is estimated that a General Motors retail customer is worth $276,000 over a
lifetime of purchasing cars, parts, and services
When a GM consumer shifts to another brand, revenue streams from that consumer
may be lost.
AN INTRODUCTION TO STRATEGIC CRM
Different perspectives of CRM
1. Functional level: limiting to functional basis (sales force automation, campaign
management, etc).
2. Customer-facing frond-end level: Focuses on total customer experiences. Provide
a single view of customers across all contact channels and give details of customer
intelligence to all customer-facing functions.
3. Strategic level: This perspective tries to free the term CRM from any technology
underpinnings and from specific customer management techniques. It describes CRM
as a process to implement customer centricity in the market and build shareholder
value. Here, knowledge about customers and their preferences has implications for
the entire organization, such as for R&D or supply chain management.
WHY MANAGING CUSTOMERS IS CRITICAL
Changes in three major forces:
Customers
Marketplace
Marketing Functions
CHANGES WITH RESPECT TO CUSTOMERS
Major Consumers Trends
Demographic changes and increasing consumer Behavioral changes
diversity
Aging populations, especially in developed Increased use of social media
countries
Increasing diversity in terms of ethnicity Increased use of apps
Increasing individualization Use of real time data
Rise of convenience and self-service consciousness
Increased demand for experience and authenticity
Rise of health and sustainability consciousness
CHANGES WITH RESPECT TO MARKETPLACE
•Intensified Competition for Customers in Fragmented Markets
•Difficult Differentiation
CHANGES WITH RESPECT TO MARKETING FUNCTIONS
•Media Dilution and Channel Multiplication
•Decreasing Marketing Efficiency and Effectiveness
FOCUS ON CUSTOMER VALUE MANAGEMENT APPROACH
• Integrate and consolidate customer information
•Provide consolidated information across all channels
•Manage customer cases
•Personalize
•Automatically and manually generate new sales opportunities
•Generate and manage campaigns
•Yield faster and more accurate follow-up
•Manage all business processes
•Give top managers a detailed and accurate picture
•Instantly react to changing market environments
CUSTOMER VALUE
EVOLUTION & GROWTH OF CRM
