Chapter 15
Customer Relationship Management (CRM)
Learning Objectives
Define CRM;
Understand the importance of CRM;
Explain the determinants of CRM and the key stages in its development;
Discuss the main functions and various models of CRM;
Explain the role of salespeople as relationship developers
Discuss the management of customer relationships.
Chapter 15: Customer Relationship Management (CRM)
What is Customer Relationship Management (CRM)?
CRM is “the development and maintenance of mutually beneficial
long-term relationships with strategically significant customers”
(Buttle, 2000)
CRM is “an IT enhanced value process, which identifies, develops,
integrates and focuses the various competencies of the firm to the
‘voice’ of the customer in order to deliver long-term superior
customer value, at a profit to well identified existing and potential
customers”.
(Plakoyiannaki and Tzokas, 2001)
Chapter 15: Customer Relationship Management (CRM)
Understanding Customer Relationship Management (CRM)?
CRM is a business philosophy based on upon individual customers
and customised products and services supported by open lines
of communication and feedback from the participating firms that
mutually benefit both buying and selling organisations.
The buying and selling firms enter into a “learning relationship”,
with the customer being willing to collaborate with the seller and
grow as a loyal customer. In return,, the seller works to maximize
the value of the relationship for the customer’s benefit.
In short, CRM provides selling organisations with the platform
to obtain a competitive advantage by embracing customer needs
and building value-driven long-term relationships.
Chapter 15: Customer Relationship Management (CRM)
Determinants of CRM
Trust
The willingness to rely on the ability, integrity, and motivation of
one company to serve the needs of the other company as agreed
upon implicitly and explicitly.
Value
The ability of a selling organisation to satisfy the needs of the
customer at a comparatively lower cost or higher benefit than
that offered by competitors and measured in monetary,
temporal, functional and psychological terms.
Chapter 15: Customer Relationship Management (CRM)
Determinants of CRM
In addition to trust and value, salespeople must:
Understand customer needs and problems;
Meet their commitments;
Provide superior after sales support;
Make sure that the customer is always told the truth
(must be honest); and
Have a passionate interest in establishing and retaining a longterm relationship (e.g., have long-term perspective).
Chapter 15: Customer Relationship Management (CRM)
Stages in the development of a Customer Relationship
The Pre-relationship Stage
The event that triggers a buyer to seek a new business partner.
The Early Stage
Experience is accumulated between the buyer and seller although a great
degree of uncertainty and distance exists.
The Development Stage
Increased levels of transactions lead to a higher degree of commitment and
the distance is reduced to a social exchange.
The Long-term Stage
Characterised by the companies’ mutual importance to each other.
The Final Stage
The interaction between the companies becomes institutionalized.
Chapter 15: Customer Relationship Management (CRM)
Stages in the Development of a Key-Account Relationship
High
Synergistic KAM
Partnership
Degree of
involvement
Mid-KAM
Early-KAM
Low
Pre-KAM
Transactional
Collaborative
Nature of customer relationship
(Millman and Wilson, 1995)
Chapter 15: Customer Relationship Management (CRM)
A Relationship Life Cycle Model
High cooperation
Low competition
Prerelationship
stage
Development
stage
Maturity
stage
Decline
stage
Low cooperation
High competition
Time
(Wilkinson and Young, 1997)
Chapter 15: Customer Relationship Management (CRM)
Class Exercise
What should the focus and main activities of a global
salesperson be in each stage of the relationship
development process?
Why? (Please justify your answer)
Chapter 15: Customer Relationship Management (CRM)
Functions of Customer Relationship Management
Direct functions (are the basic requirements of a company that are
necessary to survive in the competitive marketplace)
Profit;
Volume; and
Safeguard
Indirect functions (are the actions necessary to convince the
customer to participate in various marketing activities).
Innovation:
Market;
Scout: and
Access.
Chapter 15: Customer Relationship Management (CRM)
Functions of Customer Relationship Management
Value Creation Process
Management
Decision
Process
Customer sensitivity
•Diversity
•Information
•Differentiated
offering
Technology delivery process
•R&D
•Technology integration
•Efficiency, effectiveness
learning
Product delivery process
•Concept to launch
•Manufacturing process
Customer delivery process
•Supply chain
•Distribution
•Infomediation (distribution
of information)
Value-based
Strategies
•Pricing
•Communication
(Sharma et. al., 2001)
Chapter 15: Customer Relationship Management (CRM)
The role of salespeople as relationship builders and promoters
Salespeople by:
identifying potential customers and their needs;
approaching key decision makers in the buying firm;
negotiating and advancing dialogue and mutual trust;
coordinating the cooperation between the customers and
their company;
encouraging the inter-organisational learning process;
contributing to constructive resolution of existing conflicts; and
leading the customer relationship development team
are the individuals in any organisation who act both as relationship
builders and as relationship promoters.
Chapter 15: Customer Relationship Management (CRM)
Models of Customer Relationship Management
The Evans and Luskin (1994) model for effective
Relationship Marketing
Relationship marketing inputs
•Understanding customer expectations
•Building service partnerships
•Empowering employees
•Total quality management
Relationship marketing outcomes
•Customer Satisfaction
•Customer loyalty
•Quality products
•Increased profitability
Assessment state
•Customer feedback
•Integration
(Evans and Luskin, 1994)
Chapter 15: Customer Relationship Management (CRM)
Models of Customer Relationship Management
The Brock and Barcklay (1999) model of selling
partner relationship effectiveness
Independence
Mutual trust
Cooperation
Relative influence
Selling partner
relationship
effectiveness
Chapter 15: Customer Relationship Management (CRM)
Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.
Initiating the relationship
Engage in strategic prospecting and qualifying;
Gather and study pre-call information;
Identify buying influences;
Plan the initial sales call;
Demonstrate an understanding of the customer’s needs;
Identify opportunities to build a relationship; and
Illustrate the value of a relationship with the customer
Chapter 15: Customer Relationship Management (CRM)
Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.
Developing the relationship
Select an appropriate offering;
Customise the relationship;
Link the solutions with the customer’s needs;
Discuss customer concerns;
Summarize the solution to confirm benefits; and
Secure commitment.
Chapter 15: Customer Relationship Management (CRM)
Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.
Enhancing the relationship
Assess customer satisfaction;
Take action to ensure satisfaction;
Maintain open, two-way communication; and
Work to add value and enhance mutual opportunities.
Chapter 15: Customer Relationship Management (CRM)
Managing Customer Relationships
Qualifying prospects for relationship building
High
Use a non
customized
approach
Build a strong
and lasting
relationship
Opportunities
for adding value
Seek better
opportunities
elsewhere
Focus on
loyalty-building
program
Low
Low
Potential profitability of customer
High
Chapter 15: Customer Relationship Management (CRM)
Relationship networks
The ultimate outcome of a successful CRM strategy is the creation
of a unique company asset known as a relationship network.
A relationship network consists of the company and its major
customers with whom the company has established long and
enduring business relationships.
The additional aspects of a global salesperson’s job are to:
Manage customer value;
Act as customer advocate; and
Enhance customer loyalty and build a “health” and
profitable network of relationships.
Chapter 15: Customer Relationship Management (CRM)
Summary
CRM is a new business philosophy based on trust and value;
The core function of CRM is the value creation process;
Customer relationships develop over time;
The role of global salespeople in the process is that of both
relationship builders and relationship promoters; and
The basic premise of CRM is to offer superior value to
customers in an effort to turn prospects into
customers, customers into loyal customers, and
loyal customers into partners.