CUSTOMER RELATIONSHIP MANAGEMENT ANSWERS – NOV 2012
Question one
I.
II.
III.
IV.
V.
Customer Intimacy; involves building customer relationships by getting to know the customers
exact needs and wants and providing long lasting solution. It involves an organization precisely
segmenting its markets and tailoring its products or services to match exactly the needs of
targeted customers. It specializes in satisfying unique customer needs through a close
relationship with and intimate knowledge of the customer.
[3 marks]
Customer loyalty refers to the customer behavior built on positive experiences and value such
that the customer continues to buy/rely on the products and services.
[3 marks]
Customer Privacy is about an individual’s right to have his /her personally identifiable data
protected, at home and at work. Personal identifiable information includes all the data that
helps to identify or contact an individual, plus all additional facts that we store about these
individuals. It does not cover anonymous behavior that is not linked to an identified individual
or trend data that is just a summary of what lots of individuals have done. Privacy applies to all
the data you collect or have collected about your customers, whether online or off.
Data mining; It is a process that analyses and assemble data patterns that can be used to
predict customer response. Data mining starts with a reasoned hypothesis about how we think
a certain set of customers with the same patterns of attribute will behave
[3 marks]
E-CRM refers to the web centered approach to manage customer’s relationships across
communication channels, business functions and audiences.
[3 marks]
Question two
Total Quality Management[7 marks]
TQM is a culture aimed at continually improving performance in meeting the requirements in
all functions of the company. The basic principle of TQM is that the cost of preventing
mistakes is less than the cost of correcting them once they occur and the cost of loss potential
for future sales. The aim should therefore be to get things right first time consistently.
TQM embraces the idea that no product made should ever be defective. In other words, there
is never an acceptable level of rejects.
TQM can use techniques such as the Quality Function Deployment [QFD]. QFD is a quality
technique used to cut across functional boundaries. QDF is aimed at getting design quality
right, early in the process. This is achieved by assessing in detail the customer’s needs and
including them in a design specification, so that they are accurately translated into relevant
technical requirements.
How to measure quality of service for GDH customers
[8 marks]
The service organization should be able to identify the following gaps using the gap service
model.
Gap 1
Represents the discrepancy between what the customer wants (customer expectations) and
what management thinks they want (management perceptions).
Gap 2:
Represents the discrepancy between management’s perception of client expectations and
service quality specifications
Gap 3
Represents the discrepancy between the service delivered and the service quality
specifications
Gap 4
Represents the discrepancy between the promised service (external communication to
customers) and the service provided
Gap 5
This gap represents the discrepancy between customer expectations of the service provided
and customer perceptions about the service. This is the most important gap that needs to be
closed in order to deliver the best service according to customer expectations.
Parasuraman, Zeithaml and Berry developed questionnaires in order to determine whether the
above gaps exist in an organization. The questionnaires help to measure service delivery. The
idea is to be able to close the gaps, especially Gap 5 which is the most important.
These questionnaires are applied to customers (Gap 5), management (Gaps 1& 2) and service
contact personnel (Gaps 3 & 4).
The gaps service model can therefore be used by service organizations such as banks to
measure the effectiveness of their service offering in relation to customers perceptions.
Determinants of quality of service
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
Reliability – involves consistence of performance and dependability
Responsiveness – this concerns the willingness/ readiness of employees to provide service
Competence – possessing of required skills and knowledge to perform the service
Access - involves approachability and ease of contact
Courtesy – involves politeness, respect, consideration and friendliness of contact personnel.
Communication- involves keeping the customer involved
Credibility-Involves trustworthiness, believability, honesty
Security – customer should feel that he or she is free from danger/risk/doubt
Knowing your customer – making an effort to understand customer needs
Tangibles – physical evidence of the service
Question THREE
To:
From:
Date:
Subject:
Chief Executive Officer
Customer Relations Officer
18th November 2012
The Relationship between empowering employees & improving customer
service.
Main points of the report
I.
II.
III.
IV.
Quicker on-line responses to customer needs during service delivery
Quicker online responses to dissatisfied customers during service recovery
Employees feel better about their jobs and themselves. Empowering employees makes them to
take ownership of the job and they often feel responsible for their day to day decisions about
customers and therefore commitment to their jobs
Employees will interact with customers with more warmth and enthusiasm. Customer’s
perception of service quality is shaped by the courtesy, empathy and responsiveness of service
employees. Customers want employees to be concerned with their needs. In service
V.
encounters, employees feelings about their jobs will spill over to affect how customers feel
about the service they get.
Great word of mouth advertising and customer retention
QUESTION FOUR
Product extras
Keeping customers requires giving them more than basic product that initially attracted them.
Related benefits can be provided by other items in the product line. In this way customers
come to realize the existence and value of the total consumption system. For example
McDonalds no longer just sells hamburgers, but complete meals also for different types of the
day[e.g. breakfast, lunch, snack], and different services as well. Customers get involved in the
system rather than focusing sorely on the basic product.
Reinforcing promotions
Product promotions work better when aimed at existing customers. If a marketer knows who
these customers are, benefits can be obtained by giving them reinforcing communication. One
promotional tactic for reinforcing customers involves direct mail. These are targeted to
customers who have already exhibited some degree of commitment to the product. These
include periodic newsletters, special reports, catalogues and annual reports.
Sales force connections
A sales force can be orientated by surveying a long term relationship with the customer. They
should be able to solve customer’s problems to keep them for long. This will need a good sales
management system. This involves selection, training and compensation that foster long-term
relationship.
Specialized distribution
This will focus on where the alternative takes place. In considering getting customers and
retaining customers as separate functions, the possibility exists for arranging distribution along
these two lines. The first method calls for separate distribution channels for getting and
keeping functions. One channel is designed to entice, welcome and complete purchases by
new customers.
Post- purchase communication
A company must anticipate that some customers will encounter either minor or serious
problems after purchasing. If the firm is not ready to hear and correct these difficulties, the
customer may not repurchase or may cancel the arrangement. The firm should engage
customers to initiate contact whenever need arises to clarify instructions, to request further
information, to point out a problem or to seek remedy.
SECTION B
QUESTION FIVE
(a) Market segmentation can be defined as a process of dividing markets into distinct segments of
consumers with common needs or characteristics.
(b) Demographic & Geographic Segmentation
Demographic Segmentation
Demography refers to the study of vital and measurable statics of a population.
Demographic factors are therefore factors in the population and they include sex, age,
marital status, income, occupation and education. Demographic segmentation
therefore helps marketers to come up with targets markets according to these factors
in the population. For instance
Geographic segmentation
A particular market is divided by location. The theory behind this type of segmentation
is that people who leave in the same area share the some similar needs and wants and
that these needs and wants differ from those of people living in other areas.
Geographic segmentation can be done by region, city size, density areas and climate.
(c) Segmentation Strategies
Differentiated segmentation strategy
Undifferentiated segmentation strategy
Concentrated segmentation strategy
Question SIX
Developing a CRM strategy
Phase 1: Develop a strategy using the strategic planning process
Phase 2: Building the infrastructure
Phase 3: Know your customer
Phase 4: Deliver the offer to the customer
Question SEVEN
SIX MARKET model
Internal markets
These refer to individuals and groups within the organization who buy their actions and beliefs
determine the style and ethos of the business. Shared values need to be developed in support
of a customer-orientated corporate culture for sustained success in the market place.
Referral markets
Referral markets can come from sources of professional advice such as doctors, lawyers, bank
managers and accountants as well as from satisfied customers. Building relationships with
these sources of word of mouth recommendation should be an integral part of marketing
strategy.
Influence Markets
Theses comprise entities, organizations and individuals which have the ability to influence the
marketing environment within which the company competes positively or negatively.
Therefore public relations or public affairs management should be an intergral part of the
relationship marketing process. Successful companies have good relationship with critical
sources of influences relevant to their markets.
Employee Markets
This form the focal point for relationship marketing because of the need to recruit and retain
employees who will further the aims of the company in the market place. The company need
to be made into an organization that is attractive to people who share the values of the
company intends.
Supplier Markets
Suppliers provide materials, products and services to which the marketing organization adds
further customer value. There should therefore be a closer, mutual beneficial relationships with
suppliers. The benefits from the marketing organization and supplier relationships include;
improved quality, faster time-to- market, more innovative products and lower levels of
inventory.
Customer markets
This represent all the people/or organizations that buy goods/services from a marketing
organization. They can be end users or intermediaries. In these markets customer service
offers the only means of differentiating the offer from that of competitors.
Question 8
Strategies pursued by market leaders
Position defence
This consists of flexible consolidation. No company can remain static, since others will be
trying to increase their own market share. Product innovation is necessary in order to remain
tenable and maintain market position, even with well established products. An entrenched
market leader will need to pursue promotional innovation to keep its product in front of the
eyes of its customers.
This is likely to give the leader massive cost advantages and help it to defend even a sustained
attack.
Pre-emptive defence
Attack is often the best means of defence, and an attack on a potential challenger can distract
them through their need to defend themselves. It might be described as "getting your
retaliation in first", and is a strategy successfully pursued by a number of well-known
companies.
Counter-offensive
This involves carrying out an aggressive response to an attack in order to protect market share.
Mobile defence
This involves a company keeping on the move through innovation, market expansion and
diversification into new marketplaces. This type of entrepreneurial strategy is pursued even
when there is no apparent attacker in sight. Richard Branson's expansion of Virgin from records
to air travel to trains, etc. is a good example of this type of strategy.
Flanking defence
In this strategy companies which are under attack may try to match the products of an
attacking competitor. However, this can misfire, as the American motor companies found
when they tried to compete against imports of smaller foreign cars by producing similar-sized
ones of their own. The strategy failed because the foreign designs were proven, whereas the
Americans were working in an area unknown to them, and hence their designs were not as
good.
Contracting defence
If this means pulling back to a position of strength from which to mount a counterattack it can
be a successful strategy. However, if it means continually falling back, then, rather like a
football team's defence which retreats as the opposition advances until their strikers can shoot
at goal, a company can reach a point where it has to contract. The Post Office has been
retreating as competition hots up, particularly
Strategies pursued by market Challengers
Frontal attack
Indirect attack
Strategies pursued by market Followers
Direct challenge (differential advantage)
This is a high-risk strategy with a potentially high pay-off. Because market leaders are in a very
strong position a large financial investment as well as great determination, is required to
pursue this strategy.
One example of this strategy was Tesco's successful bid to take market share away from
Sainsbury and become the new market leader.
Direct attack (distinctive competence)
This strategy involves removing the leader's competitive advantage by means of an innovative
product. It is a very effective method, provided the advantages are valued by the target
market.
Direct attack (market share)
This is the process of taking over smaller firms in the marketplace in order to build up market
share. The clever part with this strategy is the retention of customers from those businesses
taken over.
Flank attack
In this strategy it is necessary to find a slot in the market which is not currently filled. The niche
is identified by segmentation analysis. Having discovered the gap it is essential to determine
whether or not it is untenable. If it is not untenable then it can be used as a base from which to
attack in order to build market presence and share.
Encirclement
This is an attempt to overwhelm a competitor on every front. It is very expensive to mount, but
also very expensive to resist. Japanese companies in the electronics market often pursued this
strategy successfully by producing a constant stream of ever-better, ever-cheaper products
until they achieved dominance.
Bypass
This is a method of indirect attack by broadening a resource base until the attacker is
strategically prepared for actual confrontation.
Guerrilla
Small competitors who are unable to attack a big competitor on a broad front can hit them
aggressively in areas where they know they will be slow to respond.
Although this strategy is unlikely to defeat a market leader, it can enable the smaller firm to
take a substantial profit from the market
Strategies pursued by market Nichers
Focus strategy[porter]