CUSTOMER RELATIONSHIP MANAGEMENT
BBA-6 – a.r
MODULE 01
CRM TODAY…
Preamble
• Today’s central problem facing business is not a shortage of goods
but a shortage of customers, most of the world’s industries can
produce far more goods than the world’s consumers can buy.
Overcapacity leads to hyper competition, competitors desperate to
attract customers, lower their prices and add giveaways. These
strategies ultimately mean lower margins, lower profits, some failing
companies, and more mergers and acquisitions. Marketing is the
answer to how to compete on bases other than price. Marketing is
the company’s customer manufacturing department.
• Philip Kotler
CRM TODAY…The Imperative
• Peter Drucker defined the marketing concept as “the business as seen from
the customer’s point of view, and those point of views can lead to the
inventions of millions of business models around the world. SRC Effect.
• These definitions emerged when the approach to marketing was
predominantly about addressing the needs of customer segments, because
distinguishing individual customers was far too difficult.
• The era of mass marketing led to Product commoditization
• Segmentation led to a downgrade of individual consumer preferences.
Reasons?
CRM TODAY…The Imperative
• For many companies yesterday and many companies today, marketing
campaigns aimed mainly to increase customer loyalty to a product or service.
• Loyalty is the consequence of what? (Discount or a relationship of value)
• Branding emerged to offset this perception of being like all the other.
• For years organizations source of competitive advantage came from a
formidable branding strategy, The Mass Marketing Era.
• In the interactive era of the twenty-first century, firms are instead strategizing
how to gain sustainable competitive advantage from the information they
gather about customers
• Two way brand or Branded Relationship
Industrial Age and Mass marketing implications
• Producers grew increasingly removed from any direct contact with end
users
• They tried to make up for what they did not know about the customers.
• B2B Markets were poles a part from consumer markets.
• Salespeople in B2B markets were cognizant of each customer’s buying
habits, preferences, and peculiarities.
• Info was never codified until recently, thanks to Sales Automation
Softwares.
• The exception occurred with direct mailers (Direct Marketers) and catalog
marketers for consumer markets.
• The individual customer’s stream of transactions provided clues as to
other items that might interest that customer.
The Afterwards
• Direct marketers became more adroit.
• CRM readiness depended on more than conducting numerous transactions
with individual customers. Companies needed to build comprehensive
customer databases.
• The database got various names.
• Modern techs made it possible to learn more about customers, learn
remember and shape the offering, but it is just a partial factor.
• Market share vs share of customers
• CRM is Acquisition Retention and Development, technologies, software are
only 15% of the job.
• “Rather than pursue all types of customers at great expense only to lose
many of them, the objective is to focus only on those particular customers
with current and long-term potential in order to preserve and increase their
value to the company”
Philip Kotler
CRM TODAY…The Imperative
• Today the key dimension is understanding and meeting individual
customer needs. (Micro)
• The marketing concept needs to make way for the customer
concept.
“The customer concept is the conduct of all marketing activities with
the belief that the individual customer is the central unit of analysis
and action”
CRM TODAY…The Imperative
• Focus on interactive relationships, every touch point is important.
• Because of the focus on the individual, costumers take a more active
part in the relationship.
• An important part of CRM is identifying the different types of
customers and then developing specific strategies (Profitability) for
interacting with each one. (Identification, Retention and
Development).
• How is customer value defined and determined?
Why Managing Customers Is More Critical Than Ever
• Competitive landscape and the volatile economies.
• Data and New Trends.
Major factors that influence CRM
1. Consumers
2. Marketplaces
3. Marketing functions
Changes with Respect to Consumers
• There are nine major consumer trends divided in two categories
I. Demographic Changes and Increasing Consumer Diversity
1.
2.
Aging Populations in Developed Countries
1. Deyouthing and median age psyche.
2. Effects on the degree to which relationship marketing is effective.
Increasing Diversity in Ethnicity
1. Integration of countries and better opportunities
2. Shifts will transform segments and will form new cohorts.
3.
Increasing Individualization
1. Family is evolving as a unit of social and consumption analysis.
2. Homogeneity is evolving to heterogeneity.
Changes with Respect to Consumers
II. Behavioral Changes
4.
Increased Use of Social Media
1. Companies must take advantage of at least three key opportunities for
companies in this shift.
• they can learn by listening to consumers online
• social media offers ways to improve the timeliness of customer
feedback.
• social media allow companies to execute new forms of active
communication strategies that integrate consumers.
2. There are also downsides for the companies, woms which can go viral.
3. Insecurity about data.
Changes with Respect to Consumers
II. Behavioral Changes
5. Increased Use of Apps
• Apps diversified concentrically leveraging new product developments and
improvement, the shift from info to utility.
6. Use of Real Time Data
• Internet and mobile devices in particular.
• Faster pace in consumers’ lives.
• Real time bidding for companies.
7. Need for Convenience and the Rise of Self-Service
1. Time poverty and consumers convenience.
2. Consumers demand a more active role.
3. Self-service options
Changes with Respect to Consumers
II. Behavioral Changes
8. Increased Demand for Experiences and Authenticity
1. The transition from goods to services progression of values to memorable
events and experience that personally engage the consumer.
2. Every time consumer expectations are met; companies raise their bar.
3. Consumer skepticism and company’s transparency.
9. Increased Health and Sustainability Consciousness
1. Sustainable Brands
2. Millennials prefer healthy and organic products
3. Self information, barcodes.
4. New form of transparency
Changes with Respect to Marketplace
I. Intensified Competition for Customers in Fragmented Markets
1.
2.
3.
4.
5.
6.
Trade barriers, geographic boundaries.
Idea of location advantage is eroded.
Access to markets is no longer localized
Logistics management and distribution partnering are becoming more
significant
In a developed market in which supply exceeds demand, customers have
differentiated needs
Segmentation needed.
Changes with Respect to Marketplace
II. Difficult Differentiation
1.
2.
Product quality is no longer a source of competitive advantage for many.
Brand loyalty founded on a product quality differential is a relative achievement
and may diminish over time. (The case of private label)
• A good product is not sufficient to compete in a world of very high product standards
• A shift away from a transaction-based model to enduring commercial relationships is
needed.
• Learn about new and latent customer preferences by observing their purchase and
behavioral histories
Changes with Respect to the Marketing Function
I. Media Dilution and Channel Multiplication
1. The convention was to regard little to heterogeneity.
2. The consumption of media outlets has shifted
II. Decreasing Marketing Efficiency and Effectiveness
1. Pressure to contribute something to the bottom line.
2. The problem stems in part from previous marketing practices that focused on
acquisition rather than retention, price rather than added value, and short-term
transactions rather than the development of lasting, profitable relationships.
Given all these changes, CRM provides a more formidable means to
satisfy new demands.
The Benefits of the Customer Value Management Approach
1. Integrate and consolidate customer information
2. Provide consolidated information across all channels
3. Manage customer cases
4. Personalize
5. Automatically and manually generate new sales opportunities
6. Generate and manage campaigns
7. Yield faster and more accurate follow-up
8. Manage all business processes
9. Give top managers a detailed and accurate picture
10.Instantly react to changing market environments
Evolution and Growth of CRM, since 1990
Integration of front-end customers with back-end systems
• CRM is the practice of analyzing
and using marketing databases
and leveraging communication
technologies to determine
corporate practices and methods
that maximize the lifetime value
of each customer to the firm
1. Functional level: Customer relationship management can be
practiced on a very limited functional basis (e.g., sales force automation
in the sales function, campaign management by the marketing
function).
2. Customer-facing front-end level: This type of CRM focuses on the
total customer experience. The goal is to build a single view of the
customer across all contact channels and to distribute 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.
The underlying philosophy of Customer Relationships…
“The Learning Relationship works like this: If you’re my customer and I get you to
talk to me, and I remember what you tell me, then I get smarter and smarter
about you. I know something about you my competitors don’t know. So I can do
things for you my competitors can’t do, because they don’t know you as well as I
do. Before long, you can get something from me you can’t get anywhere else, for
any price. At the very least, you’d have to start all over somewhere else, but
starting over is more costly than staying with me, so long as you like me and trust
me to look out for your best interests.”
Acquisition-Retention-Development
Increasing the value of the customer base, whether through cross-selling (getting customers to buy
other products and services), upselling (getting customers to buy more expensive offerings) or
customer referrals, will lead to a more profitable enterprise. The enterprise can also reduce the cost
of serving its best customers by making it more convenient for them to buy from the enterprise.
Roots of Customer relationships and experience
• Companies determined to build successful and profitable customer relationships
understand that it is an ongoing process that helps transform the enterprise from a
focus on traditional selling or manufacturing to a customer focus while increasing
revenues and profits in the current period and the long term.
• The leadership and commitment necessary to cascade throughout the organization the
thinking and decision-making capability that puts customer value and relationships first
as the direct path to increasing shareholder value.
• The reality is that becoming a customer-strategy enterprise is about using information
to gain a competitive advantage and deliver growth and profit.
• CRM can be thought of as a set of business practices designed, simply, to put an
enterprise into closer and closer touch with its customers, in order to learn more about
each one and to deliver greater and greater value to each one, with the overall goal of
making each one more valuable to the firm to increase the value of the enterprise.
Customer centricity and its Synonyms
Taking customer-specific action, treating different customers differently, improving each
customer’s experience with the company or product, building the value of the customer
base, creating and managing relationships with individual customers that go on through
time to get better and deeper
All customers, in all walks of life, in all industries, all over the world, want to be
individually and personally served. It is simply a more efficient way of doing business.
• An airline offers a passenger in the airport waiting for his flight to arrive an upgrade
offer to business class through a phone app he has used to check his flight status, as
an apology for a 45-minute departure delay.
• A woman receives an e-mail before her eight-month obstetrics appointment that gives
information about what to expect at the appointment and her baby’s stage of growth.
A month later, the same woman receives a notification of her baby’s immunization
appointment that is triggered when she leaves the hospital with her newborn.
Customer centricity
• A business sees that a customer has left their Web site, abandoning a cart with
selected products before checkout, and sends an e-mail with more detailed
information about those specific products to the customer the next day.
• An outdoor gear company sees that their tents are being discussed on a social
channel and sends a free tent as a trial sample to a consistent product supporter.
• A group of three friends open the Web page of the same kitchenware company
that they all have ordered from in the past. Each friend views a different offer
featured on the company home page on her device.
• A customer service representative sees a complaint a customer has made on a
social channel and is able to view at the same time his purchasing history and
order status. The service rep uses that information to reply to the complaint via the
same social channel.
• Instead of mailing out the same offer to everyone, a company waits for specific
trigger behavior from a customer and increases response rates 25-fold.
Customer centricity
• An insurance company not only handles a claim for property damage but also
connects the insured party with a contractor in her area who can bypass the
purchasing department and do the repairs directly.
• A supervisor orders more computer components by going to a Web page that displays
his firm’s contract terms, his own spending to date, and his departmental
authorizations.
• Sitting in the call center, a service rep sees a “smart dialogue” suggestion pop onto a
monitor during a call with a customer, suggesting a question the company wants to
ask that customer (not the same question being asked of all customers who call this
week).
Customer centricity
• A retail clothes company sends a message to a customer it knows is
standing outside one of their stores to come in and use a 15 percent
discount, sometimes with a sweetener such as free shipping. Or the
items appear as a reminder next to the newspaper articles the
shopper reads next morning.
Customer centricity
• The enterprise makes itself, its products, and/or its services so satisfying,
convenient, or valuable to the customer that she becomes more willing to
devote her time and money to this enterprise than to any competitor.
Building the value of customers increases the value of the demand chain,
the stream of business that flows from the customer down through the
retailer all the way to the manufacturer.
• A suite of buzzwords have come to surround this endeavor: customer
relationship management (CRM), one-to-one marketing, customer
experience management customer value management, customer focus,
customer orientation, customer centricity, customer experience journey
mapping, and more.
Customer centricity
• The four Ps are all about the “get” part of “get, keep, and grow customers
• The customer needed to believe that the enterprise’s offerings would be
superior in delivering the “four Cs”: customer value, lower costs, better
convenience, and better communication
Initial assessment: Where is a Firm on the Customer Strategy Map?
• Enterprise Strategy Map
Objective of customer centricity
• Horizontal Bar vs Vertical Bar.
• The two strategies are not antithetical.
What can
Toyota do?
What is the
strategy for
companies like
K&N’s
Technology Accelerates
It Is Not the Same as—Building Customer Value
• Technology has made possible the mass customization of products
and services, enabling businesses to treat different customers
differently, in a cost-efficient way
• Enabling technology should be viewed as the means to an end, not
the end itself
• “The firms that are best at building customer value are not the ones
that ask, “How can we use new technologies to get our customers to
buy more?” Instead, they are the companies that ask, “How can we
use new technologies to deliver more value to our customers?””
Customer Retention and Enterprise Profitability
• Royal bank of Canada’s 16 Mil loyal Customers
• Micro Segmentation
• Basic-Strategic-Tactical
• the longer a customer remains with an enterprise, the more profitable she
becomes
• Four factors contributed to the underlying profit growth
•
•
•
•
Profit derived from increased purchases
Profit from reduced operating costs
Profit from referrals to other customers
Profit from price premium
Customer Retention and Enterprise Profitability
• Given the high cost of customer acquisition, a company can never realize
any potential profit from most customers, especially if a customer leaves the
franchise.
• Fact is, many reps have little, if any, incentive for keeping and growing an
established customer.
• Customers are acquired at a cost, which then gets recovered over time, thus
becoming more and more profitable over time.
• Contractual v Non contractual relationships
• The data show the link between satisfaction and retention is asymmetric
Competitive environment affects the satisfaction loyalty relationship