CHAPTER
1
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Introduction To
Customer
Relationship
Management (CRM)
Subtopics:-
1.1 Introduction to CRM
1.2 CRM Definitions
1.3 CRM as a Business Strategy
1.4 The CRM Processes and Systems
1.5 Description of Customer-Supplier Relationships
1.1 Introduction To CRM
Customer Relationship Management (CRM) is to create a competitive Advantage by being
the best at understanding, communicating, delivering, and developing existing customer
relationships, in addition to creating and keeping new customers. It has emerged as one of
the largest management buzzword. Popularised by the business press and marketed by the
aggressive CRM vendors as a panacea for all the ills facing the firms and managers, it
means different things to different people. CRM, for some, means one to one marketing
while for others a call centre. Some call database marketing as CRM. There are many others
who refer to technology solutions as CRM. If so, what is CRM?
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1.2 Customer Relationship Management Definitions
1.2.1 CRM Definition 1
A strategy for managing a company’s interactions with customers and sales prospects.
1.2.2 CRM Definition 2
A strategy to establish, develop, maintain and optimize a long-term mutually valuable
relationships between consumers and organizations.
1.2.3 CRM Definition 3
A strategy to develop new customers, nurture and retain them simultaneously reduce the
costs of marketing and customer service.
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OLD MARKETING vs. NEW MARKETING
OLD MARKETING NEW MARKETING
Transaction oriented Relationship oriented
Market share oriented Share of wallet oriented
All customers are equal All customers are not eq
Marketers sell Marketers manage demand
4P marketing Relationship marketing
Mass marketing Individual marketing
Sell to the customer Manage customer experience
Focus on new customers Focus on existing customers
Offensive Defensive
Broadcast oriented Dialogue oriented
Transaction profit Customer lifetime value
1.3 CRM as a Business Strategy
CRM is a business strategy and therefore more than a functional strategy alone. It affects
the organization as a whole: marketing, IT, Service, logistic, Finance, Production and
development, HR, management.
1.3.1 Elements of CRM
The Four cornerstones of CRM which must be mentioned first are:
Customer Knowledge
Relationship Strategy
Communication
The Individual value proposition
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1.3.2 Customer Knowledge
• Knowledge of the individual customer is essential, in order to ultimately develop a
long-term relationship and to supply customization, with customer, his or her
prospects must also be identifiable.
• It has to be possible to determine who someone is.
Examples: What has customer purchased, how does he or she prefer to communicate
1.3.3 Relationship Strategy
• Example:
• - Redemption card such
The relationship strategy refer to
as Bonus link, Real
develop a long-lasting Rewards
customer supplier relationship • - Cash vouchers such as
Sogo Card
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1.3.4 Communication
• In communication between customer and supplier, the relationship strategy will have
to prove itself to a great extent.
• On the surface it may seem like a simple task, yet every consumer who recalls
experience with quickly arrive at the conclusion that the quality of conversation
generally taking place between customer and supplier is somewhat basic.
Examples: Networks of communication channel (‘anywhere, any time and any place’).
1.3.5 The Individual Value Proposition
• An Organization that take imitative to get to know an individual customer to develop
a relationship with him/her and to carry on a dialogue with him or her really cannot
avoid also offering these customers and individual proposition.
• The physical product, service and also the price all adapted circumstances.
• For example: The Company may design his/her ideal product.
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1.4 The CRM Processes and Systems
1.4.1 Identifying customers
Firms gather information about customers from:
• Sales force
• Customer service encounter
• Bar code scanners at retailer
• Web site activity
Firms obtain prospect, business customer, and end consumer information through:
• Personal disclosure
• Automated tracking
1.4.2 Differentiating Customers
Companies differentiate customers by
• Similarities and differences in groups and individuals
• Customer value: 20% of the customers provide 80% of the profits
• Lifetime Value (LTV) – the total value of the customer over that customer’s lifetime
1.4.3 Customizing the Marketing Mix
Mass Customization:
Marketing communication messages tailored to individuals and
delivered electronically.
Customers who can customize to meet their individual needs are
more likely to use that company’s products and services over
time.
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1.5 Description of Customer-Supplier Relationships
With the growing importance of the Internet and other computer networks, companies
have paid a great deal of attention to the customer side of their businesses. This has
manifested itself in areas such as customer relationship management (CRM), knowledge
management (KM), and in the move from call centers to contact centers. And now many
companies are applying this same emphasis on relationships to the supplier side. This has
led to a new solutions area: supplier relationship management (SRM)
1.5.1 Dynamic in relationships
In each of these cases, companies have placed not only a focus on automation and other
technical improvements, but on emphasizing the relationships. When traditionally applied
to the customer side, the goal is not just improvement in financial terms but an effort to
achieve the following goals:
• Greater customer satisfaction
• Deeper insight into customer needs and desires
• A longer-lasting, more profitable relationship with customers
While companies have also paid a great deal of attention to suppliers, the technical
improvements on this side have often focused more on mechanistic means of squeezing
efficiencies from the process, rather than focusing on the relationship with the suppliers. This
is reflected in the language used to talk about each process: customer relationship
management versus supply chain management. Customers and suppliers have the same
goal—to satisfy end user. The better the supplier quality, the better the supplier’s long-term
position, because the customer will have better quality and both three (3) the customer
and the suppliers have limited resources, they must work together as partners to maximize
their return on investment.
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1.5.2 Communities
More and more firms are recognizing the advantages of web-enhanced brand
communities as a lever for relationship-marketing communication. Brand communities not
only provide companies with an additional communication channel, but also allow the
possibility of establishing linkages to devoted users. Therefore, brand community are
discussed in relation to B2C marketing. However, the effect of using web-enhanced brand
communities in a business-to-business (B2B) context may be even greater, in as much as
professional users have a strong and long-standing interest in exchanging product-related
information.
1.5.3 Entrance, applications and success of CRM
The term CRM seems to be new and concept witnessed only in the last five
years. After all, it is the software suppliers that brought the concept to life
through marketing efforts designed to stimulate demand for their solutions, in
terms of its actual content existence.
1.5.4 Benefits of CRM
Increase customer loyalty
Increase the sales productivity
Increase sales opportunities
Improved customer service
Better customer profiling and targeting
Reduced expenses
Increased market share
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1.5.5 The Importance of CRM
To groom the new customers.
To avoid attracting similar customers.
To foster their repeat usage.
To establish strong relationship with the customers.
To increase the strength of the relationship
Effective in increasing client retention
Companies are able to learn and understand customer.
1.5.6 Five Factors to Success In CRM
1. Culture
2. Leadership
3. Human Resource Management
4. IT / Data Management Process
5. Organizational Design
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Review Questions
Activity 1
CLASS ASSIGNMENT
Duration: 30 minutes
Jason is on his way to his office. While trapped in a heavy traffic, the decided to
surf for personal loan options using his mobile phone, he found ABCD Bank
website which offered an attractive bank loan rate. He then decided to call ABCD
Bank.
After identification process and some short discussion, he agreed and confirm
with credit provider to take up the loan.
Later when Jason reached home, he surfs the Internet using his pc to et more
information on the offered loan.
He called ABCD Bank for further information,
After clarification, Jason agreed to close the deal and arranged a face-to-face
meeting ABCD Bank Credit Officer
From the case study above:-
a) List down at least Five CRM strategy that ABCD Bank Can implement.
b) Explain the mutual benefits shared both parties, Jason and ABCD Bank on the
implementation of CRM
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Exercise 1
1. Define customer relationship management.
2. List and explain the THREE (3) classifications of CRM.
3. In order to success in any CRM programs, the CRM managers should keep in mind
the FOUR (4) pillars. What are those?
4. Provide ELEVEN (11) reasons why the CRM is very important?
5. What are the TEN (10) benefits of CRM? Explain.
6. Discuss the THREE (3) components of a complete CRM program.
7. List the EIGHT (8) steps of a good CRM
8. To know the FIVE (5) factors to success in CRM
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