Customer Relationship Management
(CRM)
CRM ?

“Strategy”

“An approach to building and sustaining
long-term business with customers.”

It is about creating a feel of high touch in
high tech environment
CRM

Comprehensive approach for creating,
maintaining and expanding customer
relationships through the integration of
people, process and technology

CRM is about managing relationships more
effectively so as to drive down costs while
at the same time increasing your sales &
profits
CRM is not just a software
CRM applications & technologies
are just a tool to support CRM
strategy
Business
Strategy
People & Process
Information Technology
CRM strategy drives structure & technology
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Benefits of CRM

Competitive Advantage

Reduces costs, provides efficient operation

Increases customer satisfaction & Loyalty

Automate inefficient and expensive work processes

Increased marketing and selling opportunities
Benefits of CRM
 Identifying the most profitable customers
 Making it easier for sales and channel partners to sell
 Faster response to customer inquiries
 Receiving customer feedback that leads to new and
improved products or services
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CRM Strategies
 Reduce the rate of defection
 Reduce the rate of defection
 Increase longevity
 Enhance “share of wallet”
 Terminate low-profit customers
 Focus more effort on high-profit customers
Business facts!

It costs six times more to sell to a new customer
than to sell to an existing one.

A typical dissatisfied customer will tell eight to ten
people about his or her experience.

The odds of selling a product to a new customer
are 15 percent, whereas the odds of selling a
product to an existing customer are 50 percent.

90% companies don’t have sales and service
integration

70% of complaining customers will do business
again if their complaint quickly addressed.
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Framework for CRM
Identify prospects and customers
Differentiate customers by needs
and value to company
Interact to improve knowledge
Customize for each customer
Three phases of
Customer Relationship Management
Customer Acquisition
Techniques used to gain new customers
Customer Retention
Techniques to maintain relationships with existing customers
Customer Extension
Techniques to encourage customers to increase their involvement with an organization
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Managing the Customer Life Cycle:
The Three Phases of CRM
Acquire
Differentiation
• Innovation
• Convenience
Bundling
• Reduce Cost
• Customer Service
Adaptability
• Listening
• New Products
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Newspaper Exercise

Find ads with A, R & E

Personal Experience of a particular ad/brand
association / dissatisfaction ?

Ads going for acquisition with Discounts

Is acquisition all about 2+ 5 Schemes/ Discounts ?

Ads going for retention with brand power

Any other issues with current ads..Do they affect
retention ?
Customer Pyramids
Components of Customer Pyramid

Active Customers –that have purchased goods from
company within a given period

Inactive Customers – that have purchased goods from
company in the past but not within the given period.

Prospects – with whom there is some kind of relationship –
but they have not yet purchased any goods. For example
those who have responded to a mailing. The prospects, of
course, are customers you expect to upgrade to active
customer status in the near future.
Customer Pyramids

Suspects –that company could be able to serve
with products and services in future. Normally,
company seeks to begin a relationship with suspects
and qualify them as prospects

The Rest of the World – that simply have no need
or desire to purchase company’s products and
services.
Customer Pyramid
Active
Customers
Inactive
Customers
Prospects
Suspects
Rest of the World
Segmenting Active Customers

“Top: Customers – the top 1% of active
customers in terms of sales revenue.

“Big” Customers – the next 4% of active
customers in terms of sales revenue

“Medium” Customers would be the next 15%
customers the list.

“Small” Customers – the remaining are active
customers in terms of sales revenue.
Customer Pyramid Segments
Top
>Rs
75,000
Big Rs 25- 75,000
Medium>3-25,000
Small>Rs 1-3000
Inactives
Prospects
Suspects
Rest of the World
Classify your customers
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The Customer Pyramid
The Platinum Tier


Most profitable customers,
Heavy users of the product, not overly price sensitive, willing to
invest in and try new offerings, and are committed to the firm.
The Gold Tier


Profitability levels are not as high, perhaps because the customers
want price discounts that limit margins.
They might not be as loyal to the firm even though they are heavy
users in the product category – they might minimize risk by
working with multiple vendors rather than just the focal company.
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The Customer Pyramid
(Cont’d)
The Iron Tier


Provide the volume needed to utilize the firm’s capacity
Spending levels, loyalty, and profitability are not
substantial enough for special treatment.
The Lead Tier



Costing the company money.
They demand more attention than they are due given their
spending and profitability, and
they are sometimes problem customers – complaining
about the firm to others and tying up the firm’s resources.
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Differentiating Business Customers in the Retail
Real Estate Industry
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Platinum customers:
• Pay full commission on a home costing Rs 50 Lakh or
more;
• are motivated to purchase within the next six
months;
• have purchased more than two homes in the past;
• and are members of social or professional networks
that make them candidates to refer other high-end
buyers.
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Gold customers:

Purchase homes in the R25 L-50 L range but are more price
sensitive than the top tier. E.G. some Gold customers want to
negotiate on the commission or have the realtors pay points at
closing.
 Some of these customers buy homes that are in the same price
range as Platinum customers but their price sensitivity reduces
their profitability.
 Likely to refer others, but the types of customers to be
referred are not as valuable to the firm as those the Platinum
customers refer.
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Iron customers:
•
Buy homes in the Rs 10 L- Rs25 L range, and include retirees,
young professionals, and families.
•
Young professionals have higher lifetime value potential and
therefore market to them differently than to market to others in
this group.
•
Young professionals who purchase homes at the upper end are
tagged as potential Gold customers and moved to that category
approximately five years after the purchase of a home.
•
Relocations from other areas and are pressed to buy homes
quickly, making them good prospects for the company despite
home prices that are lower than the top two tiers.
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Lead customers:
Shoppers rather than buyers.
•
Some Lead customers spend as long as two years
looking at homes, calling upon realtors to show them
homes when they have free time
•
While they might be looking at homes in all price
ranges, the homes they buy are likely to be under Rs
10 L.
•
Often dissatisfied with what they see, making them
less likely than other tiers to send qualified referrals to
the company.
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Differentiating Business Customers in the
Marketing Research Industry
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Platinum customers
•
Large accounts that are willing to plan a certain amount of research
during the year.
•
The timing and nature of this research could be anticipated, making
it easy for the research firm to smooth supply and demand.
•
Tended to stay with the company and are willing to try new services
and approaches developed by the research firm.
•
Therefore, they bought across research service types and had
minimal sales costs averaging only 2-5%.
•
Willing to serve as references for the firm and are loyal to the firm.
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Gold customers:
•
had similar profiles except that they were more price
sensitive, inclined to spread their research budgets across
several firms.
•
While they were large accounts and had been customers
for multiple years, they were not willing to plan for a year
in advance even though the marketing research firm
would give them better quality if they did.
•
They provided referrals but on an ad hoc basis.
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Iron customers
•
Moderate spenders and conducted research on a project basis,
sending out requests-for-proposals whenever they were
conducting studies.
•
Look for the lowest price and often do not allow sufficient time
to perform the jobs.
•
Because they have no overall plan, projects come in at any time
•
Selling costs are high because the firm continually kept in
personal and mail contact hoping to move these Iron customers
up the Pyramid.
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Lead customers
• Spent little on research, conducted isolated projects that are
usually of a “quick and dirty” nature.
• Selling costs are highest in this group since advertising and
almost all speculative presentations are targeted to these
accounts and salespeople have to spend multiple visits to get
them.
• Once they became clients, the maintenance cost is high because
they don’t understand the process of research.
• They often changed projects mid-stream and expected the firm
to absorb the costs.
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When Should a Firm Use the Customer
Pyramid?

When service resources, including employee time, are limited.

When customers want different services or service levels.

When customers are willing to pay for different levels of service.

When customers define value in different ways.

When customers can be separated from each other.

When service differentials can lead to upgrading customers to
another level.

When they can be accessed either as a group or individually.
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Customer-Product Profitability Analysis
Customer Alchemy

Customer alchemy is the art of turning less profitable customers
into more profitable customers.

It can take place at any tier along the Customer Pyramid, but is
more difficult at some levels than at others.

e.g: it is very difficult to move Lead customers up to Gold or
Platinum tiers, and it is often necessary to “get the Lead out”
rather than try to move those customers up.
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Customer Alchemy

If the decision is made to keep Lead customers, the
strategies used are typically different than those used at
other tiers.

Managing Expectations can help to move the customers up
the ladder
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Customer Alchemy
Growing “share of customer”

Increasing the share of the customer’s purchasing in your
product category.

Best way is through cross-selling
– Getting more business from current customers by
selling them additional or complementary services
e.g : yatra.com, mytrip.com etc
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