Our mission is to earn and grow the lifetime loyalty of our customers.
— SIR TERRY LEAHY,
Chief Executive Officer (Tesco),
quoted in Tesco's 1998 Annual Report.
Learning Objectives
 After studying this chapter, you should be able to:
Obtain information about the latest concepts emerging in
the area of CRM.
2. Evaluate cost-benefit analysis of CRM and to deal, in
details, with the modern customer-centric business
organisation.
1.
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Introduction
 Customer
Relationship Management has various
dimensions. For a comprehensive understanding of the
concept, it is necessary to know the various dimensions of
the subject. This chapter discusses the latest and important
dimensions that have emerged in the area of CRM. The
study of these concepts is so more important that it helps
the implementation of the concept better.
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CRM: A COST BENEFIT ANALYSIS
 CRM Benefits:
 To The Organisation: Increased Revenue and Reduced cost
 To The Customer: Simplified buying process and friendly services
leading to superior satisfaction.
 CRM Cost:
 To The Organisation: Requires greater investment
 To The Customer: Opportunity cost
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Customer Value
 Value creation is a strategic process to manage a product,
service or a business unit's growth and competitive share. It
is built on a core foundation of market research applying
advanced techniques, called customer value analysis
(CVA).
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Customer Value from cost and benefit perspective
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 Delivery of Value consists of following phases:
 choose the value;
 provide the value; and
 communicate the value.
 The value-creation process includes:
 value-defining;
 value-developing; and
 value-delivering.
 The relationship value involves:
 value determination;
 value creation;
 value delivery; and
 value assessment.
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Customer Lifetime Value
 Customer lifetime value (CLV) is the net present value of
the total profits that a company could realise with the
average new customer within a given customer segment
during a given number of years. It is the true value of a
customer that can be considered as the most appropriate
measurement of how much an organisation would or
should be willing to invest to acquire/ retain him.
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Issues in Calculating CLV:
 Customer lifetime value has an intuitive appeal as a marketing concept

1.
2.
3.
4.
because, in theory, it represents exactly how much each customer is
worth in monetary terms and therefore, exactly how much a marketing
department should be willing to spend to acquire each customer.
The precise calculation depends on the nature of the customer
relationship programme. It calls for accounting of following issues:
Lack of data:
Lost customers:
Newer company:
Choosing a formula: There is difficulty in choosing a formula. Do
you include the value of referrals in your calculation? Do you stop at
revenue or go all the way to profit? Do you segment customer groups
or calculate one overall number for the company?
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Customer
Profitability
While providing value to
the customer, companies
also need to be realistic
and keep in mind the
customer profitability.
 Customer
1.
2.
3.
4.
Classification Based on
Customer Profitability:
The first category customer receives high
value from a firm's products and services
and provides high value in the form of
high margins, loyalty and retention.
The second category customer is the
"lost cause" who do not get much value
from the firm's products and services.
The third category of customers is the
one who provides high value to the firm
but does not get lots of value from the
firm's services.
The fourth category of customers is one
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who gets superior value from a firm's
Customer-centric Organisational Structure
 A customer-centric organisation has to fulfil the four
essential steps:
 Communal coordination: A central, enterprise wide
database is the key. It is a 2-way process – the first
involving standardization and the second part involves
retrieving the information from all customer touch
points.
 Serial
coordination: This step consists of creating
business analytical capabilities that leverage the
customer information repository. The business analysts
then pass the analyses to the appropriate unit.
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
Symbiotic coordination: After analyzing past customer data
comes predicting future customer behavior. It requires two way
flow of info among the analysts and multiple business units.
They collaboratively participate in four activities:





Creating models to predict customer behavior;
Experimenting with various interventions designed to alter customer
behavior;
Measuring the results of these interventions; and
Using feedback from the front line to improve the models and
subsequent campaigns.
Integral coordination: in this stage, the organization can use
customer information in daily interactions with customers,
aided by employees who do more than pay-lip service to
customer service
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Enterprise Marketing
Management
 An
important emerging dimensions of Customer Relationship
Management is Enterprise Marketing Management (EMM). It has now
been realized that companies need to build stronger customer relationship
and thus need to make a positive impact on the marketing productivity of
the organization. EMM, which is pioneered by UNICA, has been
introduced with this premise. It is designed to help the enterprise drive the
sales growth with proper utilization of available resources, thus turning the
relationship marketing process into a disciplined and scientific approach.
 EMM involves everything right from the vision building and customer
modeling analysis to the detailed workflow planning of the manager, thus
making it robust and more effective. An EMM solution consists of three
major functions which will be necessary to perform in order to become a
world class marketing company:
i.
Brand building and management,
ii. Customer acquisition and building long-term relationship,
iii. Strategic planning and effective optimized resource management.
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Conclusion
 Today's customers are becoming harder to please. They are smarter, more
price-conscious, more demanding, less forgiving and are approached by
many more competitors with equal or better offers. The challenge is not to
produce satisfied customers, which several competitors can do, but to
produce delighted and loyal customers. If these customers are retained
with the organisation, it becomes really profitable by way of increase in
purchasing, reduced operating costs, price premiums and through
referrals. Too many companies suffer from customer churn, i.e. high
customer defection. It is like adding water into a leaking bucket. Various
strategies such as measuring customer life-time value, efficient complaint
management system and service recovery can be really helpful in retaining
customers.
 Customer value is an interesting and emerging concept in the area of
marketing. This also holds an important position in Customer Relationship
Management, as relationship needs to be designed and sustained when
one party offers some value to the other. So, understanding customer's
value to the company and then designing the offer to him would be the
most appropriate strategy for companies practising CRM.
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PROJECT ASSIGNMENT
 REVIEW QUESTIONS:
Design an insurance
company
from
a
customer-centric
perspective. Also, take
into account the costs
incurred in the direction
of customer centricism
and evaluate the benefits
the
company
would
incur.
1.
2.
3.
4.
"Customer Relationship Management is also
called as customer retention management."
Illucidate.
Discuss various strategies of customer
retention management. How would you
design retention strategy for an airline
company which till now has been ruling
Indian skies?
"Recalling customers is another important
dimension of marketing of modern
businesses, but requires a thoughtful process
by the marketers". Critically analyse the
statement.
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"A successful CRM programme is not just
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