UNIT-I INTRODUCTION

Definitions - Concepts and Context of Relationship Management –Evolution-Transactional Vs

Relationship Approach - CRM as a strategic marketing tool - CRM significance to the
stakeholders

1.1 INTRODUCTION

 A long term relationship with customers to nurture its stability in today‘s blooming
market.

 Customer‘s expectations are now not only limited to get best products and services, they
also need a face-to-face business in which they want to receive exactly what they demand
and in a quick time.

 CRM is a business strategy directed to understand, anticipate and respond to the needs of
an enterprise's current and potential customers in order to grow the relationship value.
 The Customer Relationship Management is the procedure that is crucial for every
business.

1.2 MEANING

• Customer Relationship Management is an upright concept or strategy to solidify relations

with customers and at the same time reducing cost and enhancing productivity and
profitability in business.

• A CRM system is implemented for small business, as well as large enterprises also as the
main goal is to assist the customers efficiently.

• The Customer Relationship Management is the procedure that is crucial for every
business. As the customer is the most important part of the business.

1.3 DEFINITION

• Parvatiyar and sheth (2001) defined CRM is a comprehensive strategy and process of
acquiring, retaining and partnering with selective customers to create superior value for
the company and the customer.

• According to Gartner‖ CRM is a business strategy designed to optimize profitability,

revenue, and customer satisfaction‖.
 • A CRM system is not only used to deal with the existing customers but is also useful in
acquiring new customers. The process first starts with identifying a customer and
maintaining all the corresponding details into the CRM system which is also called an
‘Opportunity of Business‘. The Sales and Field representatives then try getting business
out of these customers by sophistically following up with them and converting them into
a winning deal.
• Customer Relationship Management strategies have given a new outlook to all the
suppliers and customers to keep the business going under an estimable relationship by
fulfilling mutual needs of buying and selling.

1.4 CONCEPT AND CONTEXT OF RELATIONSHIP MANAGEMENT

Customer relationship management is the technique of providing information to prospects

and customers, and collecting information about prospects and customers, that allows us to
help them evaluate and purchase products that deliver the best possible value to them.
One-to-one marketing, and relationship marketing is to make it easier for the customer to do
business with you. Marketing and sales people have many opportunities to influence
customer purchase decisions. Until recently it was normal for these functions to be
performed separately — by different departments within a company — without acting as a
unified team. So we must understand that coordinated efforts are now being made to unify
approach

Customer Relationship Management has become a popular name for a variety of

software tools and techniques aimed at attracting and retaining customers. In general, CRM
uses a centralized database to bring marketing and sales activities together in a unified
approach to serving customers.
One-to-one marketing and relationship marketing is to make it easier for the
manufacturer to do business.

• Marketing and sales people have many opportunities to influence customer purchase
decisions by the way making smooth relationship with the customer.

• The concept of relationship management with respect to the customer, to get efficiency
(cost reduction) and responsiveness (instant delivery).

• RELATIONSHIP MANAGEMENT by an organization can be divided into two

categories

1. External relations
 2. Internal relations

1.4.1 EXTERNAL RELATIONSHIP

• Two major external stakeholders of a business are customers and suppliers.

Customer relations: customer relations can be defined as the process by which

companies promote customer satisfaction and loyalty.

• It involves managing communications with customers, particularly customer‘s questions

and complaints and solving their disputes.

• The ultimate goal of customer relations program is to build long term relationships.

• Building a strong reputation for the brand and company.

Supplier relations: All companies tries to build a strong relationship with their suppliers.

• Supplier relationships are different from simple purchasing transactions in several ways.
There can be a sense of commitment to the supplier.

• Eg: vendor (seller) sells certain items to the buyer for several times then he thinks that he
will come for a next time purchase.

1.4.2 INTERNAL RELATIONSHIP

• It is an integrative process with in a system for fostering positive working relationship in

a developmental way in a climate cooperation and achievement.

• Internal relationship is an ongoing process that occurs strictly within a company or

organization.

• Internal relationship helps to motivate and empower employees at all levels of

management and its consistently deliver a satisfying customer experience.

• Features of internal relationship management

• Customer commitment is earned in a social contract

• There is a open ideas for mutual gain.

• Close partnership between suppliers and customers.

• Customers are viewed as individual people and so are value providers.

 • Continuous interaction and dialogue between suppliers and customers.

• Focuses on discovering, creating and responding to customer needs.

• Relationships are viewed as enterprise assets.

• There is a systematic collection and dissemination of customer information (detailing and

negotiating requirements, expectations, needs, attitudes and satisfaction)

1.4.3 ROLE OF INTERNAL RELATIONSHIP MANAGEMENT

• MANAGEMENT OF CHANGE Introduction of IT & new management practices.

• BUILDING CORPORATE IMAGE:

The team develops corporate image among the employees.

• STRATEGIC INTERNAL MARKETING:

The CRM team solve an inter departmental conflict and work common benefit of the
organization.

• Relationship between companies and customers

• Reducing marketing costs

• Better customer insights

• Life time value(LTV)

1.5 EVOLUATION OF CRM

The modern concept of customer service has its roots in the Craftsman Economy of the 1800s,
when individuals and small groups of Manufacturers competed to produce arts and crafts to
meet public Demand. Individual orders were booked for each customer and supplied according
to his/her taste and demands. The economies were small and so were the transactions. The
manufacturer was able to meet the customers on one to one basis and talk to customer to
understand the minute details. Customer care and service were highly personalized.
But then the economics swing was setting in. The technology was increasing and so was it
difficult to cater to the individualistic needs of the customer. Gradually, the era of mass
production came in.
The advent of Mass Production in the early 20th century, followed by an explosion in
the demand for goods after World War II, increased the power of suppliers at the expense of
consumers, and thus reduced the importance of customer service. History tells us that
customer service as a concept was kept aside in the cell. The manufacturers could produce
what they could and these goods will find their way to customers on their own. Infect, it was
the age of demand exceeding supplies. There was no need for customer service as an activity
or as a tool for promotion or enhancement of markets. But things never remain the same for
long periods of time.

A shift in this balance began in the 1970s, as international competition increased, and
the dominance of western manufacturers was challenged, first by Japan, then by Korea, China
and other developing economies. New world emerged with these Eastern economies taking to
tremendous growth Producers responded by improving the quality of their products and
services.

They introduced to the world entirely a new concept—the concept of simplicity and
convenience and economy to the world The economic boom of the 1990s again increased the
power of suppliers who, while not completely reverting to lower standards of service, were
able to be more selective of which customers to serve, and of what levels of service to
provide.

The overall quality of customer service - in society and in specific industry- will
continue to be determined by the relative balance of power between suppliers and
consumers; it will improve as competition becomes more intense, and decline as
competition decreases. We have to assess the global situation today and derive that we are
facing a new development. Briefly, the product similarity is making it more a challenge
today than ever before, to upgrade customer services to get an edge over the competitors.

 The changes in market demand and competitive strategy forced the company to change
from transactional marketing to relationship marketing.

 Marketing mix was developed in the 1950s in order to exploit market demand. all the p‘s
of marketing helps to explore increased demand of the company‘s products and services.

 The objective of transactional approach of marketing is to sell more products and services
to maximize sales and profit.

 Increased competition and matured markets have led to the low growth. Which results in
increased pressure and corporate profitability?

 The beginning of globalization of markets, new competitions led to the greater customer
choice.

 Companies must move from a short-term transaction oriented goal to long term
relationship building goal.
  Companies are compete successfully in domestic and global markets including
customers, distributors, employees, unions and governments.

 The term marketing domain is defined as stakeholders which have to be taken into
consideration in order to develop relationships and to achieve long-term success in the
final marketplace.

 The increased importance of relationship marketing also led to an increasing demand for
an efficient customer relationship management.

 The task of finding who your customers are?

What they exactly want and providing it seems to be a task with difficulties.

 Understanding and management of customer‘s expectations is rather a key to success in

order to be able to create satisfied customers.

 Customer knowledge is required to satisfy their customers and reach the ultimate goal of
a company.

 Create customer knowledge and the utilization of the customer relationship management
system is essential.

1.6 TRANSACTIONAL vs RELATIONSHIP APPROACH

As marketing has entered the 21st Century, a significant change is taking place in the way
companies interact with customers. The traditional view of marketing as a simple exchange
process—a concept that might be termed transaction-based marketing—is being replaced by a
different, longer-term approach.

Transactional marketing strategies focused on attracting consumers. The goal was to identify
prospects, convert them to customers, and complete sales transactions. But today‘s marketers
realize that, although it remains important, attracting new customers is truly an intermediate step
in the marketing process. Marketing efforts must focus on establishing and maintaining mutually
beneficial relationships with existing customers. These efforts must expand to include suppliers
and employees, as well.

The concept, called relationship marketing, refers to the development, growth, and
maintenance of long-term, cost-effective exchange relationships with individual customers,
suppliers, employees, and other partners for mutual benefits. It broaches the scope of external
marketing relationships to include suppliers, customers, and referral sources. In relationship
marketing, the term customer takes on a new meaning. Employees serve customers within an
organization as well as outside it; individual employees and their departments are customers of
and suppliers to one another.

They must apply the same high standards of customer satisfaction to inter-departmental
relationships as they do to external customer relationships. Relationship marketing recognizes
the critical importance of internal marketing to the success of external marketing plans. Programs
that improve customer service inside a company also raise productivity and staff morale,
resulting in better customer relationships outside the firm.

Relationship marketing gives a company new opportunities to gain a competitive edge by

moving customers up a loyalty hierarchy from new customers to regular purchasers, then to loyal
supporters of the company and its goods and services, and finally to advocates who not only buy
the company‘s products but recommend them to others. by converting indifferent customers into
loyal ones, companies generate repeat sales.

The cost of maintaining existing customers is far below the cost of finding new ones, and
these loyal customers are profitable ones. Effective relationship marketing relies heavily on
information technologies such as computer databases that record customers‘ tastes, price
preferences, and lifestyles along with the increase of electronic communications. This
technology helps companies become one-to-one marketers that gather customer-specific
information and provide individually customized goods and services.

The firms target their marketing programs to appropriate groups, rather than relying on
mass-marketing campaigns. Companies who study their customers‘ preferences and react
accordingly gain distinct competitive advantages.

1.6.1 THE KEY POINTS ARE AS FOLLOWS..

• Transactional marketing, which was developed in the late 1950‘s and 1960‘s.

• Transactional marketing main concept which centers on the four P‘S, was developed by
borden in 1964.

• The marketing mix has since been described as an ―infallible guide for the effective
planning and implementation of marketing strategy‖.

• The focus on transactional marketing is shifting to focus on relationship marketing.

• The firms make the market fall by providing consumer packaged goods at one extreme
and the services at the other.

• In this situation all the firms are forced to adopt from transactional to relationship
approach.
 • Transactional marketing approach is on individual transaction and does not concern
continuous relationship with customers.

• Transactional marketing does not contain a strategic long term perspective.

• The relationship marketing focuses on continuous multiple transactions rather than

isolated individual transactions.

• It also considers customer as insiders to the business and aims to build a long term and
never-ending relationship with them.

1.7 CRM AS A STRATEGIC MARKETING TOOL

Marketing is one of the new discoveries in business management. Of late, marketing has
come to occupy significant position in the overall strategic studies. Various challenges
are emerging in marketing as well as new approaches are being made in its study to view
its different aspects of the many things it has been recently realized that customer is the
most important elements in marketing and its sustenance and retention is far more
important than any other marketing functions. CRM is one of the core area in marketing.

1.7.1 The major areas of CRM focus on:

• Generation and servicing more loyal customers.

• Expansion of customer base
• Reduction of advertising costs
• Increase in profitable customers
• Ease in introduction of new products
• Personal Information Gathering and Processing, Self-Service.
• CRM is the marketing management practice of identifying, attracting and retaining the
most valuable customer to sustain profitable growth

• CRM is the process of making and keeping customers and maximizing their profitability,
behaviors and satisfaction.

• Today customer demand open equal access, real time specialized information, convenient
access, portability, process and logistics transparency, pricing transparency, global
pricing, ability to set prices, choices of distribution channels and control over their
information.

• First time customer can become a repeat customer, thereafter a client, then an advocate
and finally one‘s partner in progress.

• Loyal customers always create a profit and also reduced operating cost, increased
purchases and give plenty of referrals.
 • The realistic observation on customers that it costs ten times more to sell to new
customers than to sell to an existing one.

• Existing customer deliver most of the revenues.

• It‘s very important part of CRM is to identify the Most Valuable Customers (MVC) for
the success of the business.

• A small net upward migration of customers (5-10%) can deliver a dramatic improvement
in business performance.

• Marketing and sales are charged with influencing customer behavior.

• Customer success always equal to business success.

1.8 CRM SIGNIFICANCE TO STAKEHOLDERS

• Four principal stake holders play a major role in the entire process of customer
relationship management.

1. Customers

2. Employees

3. Suppliers

4. Partners

1.8.1 CRM SIGNIFICANCE

• Perpetual stream of revenue

• Positive referral creation

• Provides premium

• Helps customer retention

• Lowers cost of sale

• Helps understanding consumer behavior

• Provides opportunity to cross-sell and up-sell

• Reduces marketing time

• Channel cost rationalization

• Enables business process re-engineering.

UNIT-II UNDERSTANDING CUSTOMERS
Customer information Database - Customer Profile Analysis - Customer perception,
Expectations analysis - Customer behavior in relationship perspectives; Individual and
group customer’s - Customer life time value - Selection of Profitable customer segments

2.1 CUSTOMER INFORMATION DATABASE:

―The true business of the every company is to make and keep customers‖. The single most
important factor for the success of any business enterprise is the customer. Understanding the
customer needs and wants is the important factor for selling of our product and services.

2.1.1 CUSTOMER INFORMATION.

The most often used information in a CRM database is the customer information. This can
include personal information, such as contact addresses and phone numbers, as well as family
size, location, and other demographic information. Many companies also use their CRM
database to record purchase information, service calls, customer support needs, and even
warranty information. Anything relative to customer interaction can be placed in a CRM
database.

• Customer information database includes personal information, such as contact addresses,

phone numbers etc.

• It also includes family size, location and other demographic information and geographical
location.
• CRM database to record purchase information, service calls, customer support needs, and
even warranty information.
• Customer related databases might be maintained in a number functional areas; eg.
sales,marketing,logistics and accounts.
• Customer Information Database
• Databases might required quite different operational purposes
• Eg: Opportunities, campaigns,enquiries,deliveries and billing.
• Customer related data can have a current, past and future perspectives, focusing upon
current oppurtunities,historic sales or potential opportunities etc.
 2.1.2 INFORMATION TO BE INCLUDED IN CUSTOMER DATABASE
• Contact names
• Job title and job definitions

• Demographic or psychographic information

• Name of the company

• Address
• Methods of contact

• Buying history
• Sources of lead
• Sources of sale

• Special needs of customers

2.1.3 BENEFITS OF A CUSTOMER DATABASE

By using a customer database to keep in touch with, and market to, your customers, you can:

 Increase awareness of your brand

 Enhance marketing opportunities
 Build and strengthen relationships between you and your customers
 Build trust in your products and services
 Increase your profits

2.1.4 DEVELOPING A CUSTOMER INFORMATION DATABASE

1. Define the database functions

• Strategic CRM: Data about markets, market offering, customers, channels, competitors,
performance and potential.

• Operational CRM: Customer related data to help in the everyday running of the business.
• Analytical CRM: Data to support the marketing, sales and services decisions that aim to
enhance the value created for and from the customers.
 • Collaborative CRM: It includes two subsets of operational and analytical
purpose.(OLTP,OLAP)onlineT-transaction, A-analytical processing.

2. Define the information requirements

• Customer information fields

• Contact data
• Contact history
• Transactional history

• Current pipeline
• Opportunities: It looks forward after sales.
• Products
• Communication preferences

3. Identify the information sources

• Internal data: market size ,market segmentation, customer profile, customer acquisition
channel, competitor product and pricing, customer requirement
• External data:

a) Compiled list data:

b) Census data: obtained from govt records.

c) Modeled data generated by third parties includes variety of sources.

• Secondary and primary data:

a) Competition entries
b) Subscriptions: customer Subscribe of newsletter or magazine
c) Registrations: customers are invite to register their purchase
d)Loyalty programs

4. Select the database technology and hardware platform

• Hierarchical
• Network
• Relational: assign unique number in rows and columns and assign other data's of
marketing, service, payments and so on.
5. Hardware Platform
5 Size of the databases :using of PC and server

6 Existing technology : using software

7 Number and location of users
8 Relational Database Management System(RDBMS)

5. Populate the database

Sourcing: obtain information from customers
Verification
Validation
1. Range validation: Does an entry lie outside the possible range for a field.
2. Missing values: Check for values that are missing in column.
3. Check against the external values: check the details with mail authority.
• De-duplication :
1. Remove the record that should be retained
2. Retain the record that should be removed
• Merge and purge &

6. Maintain the Database

• All new transactions, campaigns and communications are inserted immediately.
• Regularly re duplicates the database.

• Get customers to update their own records.(online purchase)

• Audit the subset of files every year.
• Drip-feed

2.1.5 PROCESS OF ANALYSING CUSTOMER INFORMATION DATABASE

• Extract(information)
• Clean
• Merge &
• Analyze
2.2 CUSTOMER PROFILE
• A good method of identifying and understanding customers is to develop customer
profile.
• This approach is similar to that used in market segmentation.

• The marketers creates some basis for dividing the various customer groups.
• The marketer then develops a typical customer profile which helps to analyze and
understand consumer behavior.

2.2.1 COMPONENTS OF CUSTOMER PROFILE

• Customer profile analysis :
Customer profile that gives an indication of who might typically use their outlet.
A customer profile is affected by the macro business environment.
A customer profile is also influenced by the micro-environment, the specific business
arena in which the individual market operates.
The perspective of changing consumer profile can be very important to the marketer in
order to adequately manage the marketing mix and formulate a marketing strategy.
• Changing customer profile includes into two categories.
Changing customer demography
Changing in consumer values and life style.
2.2.2 CHANGING SHOPPER DEMOGRAPHY
• Demographics comprise selected characteristics of a population
(Age and income distribution and trends, mobility, educational attainment, home
ownership and employment status.)
The study of the population in terms of measurable aspects such as birth rate, age profile,
working pattern and occupation, total income and expenditure levels.
The changes are out of the marketer‘s control.
Some demographic changes those are likely to impact on the business.
1. Generation cohorts.

2. Age profile
3. Income and Expenditure
4. Ethnic Diversity
5. Working patterns

1. Generational cohorts (buddies or followers)

• Those who share historical or social life experiences. These life experiences tend to
distinguish one generation from another.
• Members of the generation groups are linked through shared experiences which create a
bond tying members together in what has termed as cohorts.
• Generation cohorts includes
1. Seniors before 1946(conformity, conservatism, traditional family values, team player)
2.Baby boomers 1946-1964(experimental, individualism, free spirited, less optimistic)
3. Generation X 1965-1976 (quest of emotional security, independent, informality,
entrepreneurial)
4. Generation Y 1977-1994 (physical security and safety,patriotism, heightened fears, acceptance
of change) bal. b/w work and life style.
5. Tweens 1995 to till date (Belief in individuality, technology interpreted, fast face living)

Changing customer demography

1. Age profile (falling population of teenagers)
2. Income and Expenditure
(The changes in income brought changes in spending pattern of the consumers)
3. Ethnic Diversity (Differences in groups, culture, customs, religion etc)
4. Working patterns (The trend of more women's to enter into workplace. Increasing of working
time in work place)

2.2.3 CHANGES IN SHOPPERS VALUE AND LIFE STYLE

 Changing shopping perspective
 Changing patronage for different retail format
 Attitude towards shopping:
1. Shopping experience
2. Attitudes towards shopping time
3. Changing feelings about retailing
 4. Reasons for buying or not buying
5. Attitude by market segment

6. Attitude towards private brand

 Impulse purchase and customer loyalty:
1. Impulse purchase

a. completely unplanned
b. Partially unplanned
C.unplanned substitution
2. Customer loyalty.

2.3 FACTORS INFLUENCING CUSTOMER EXPECTATIONS OF SERVICES

• Sources of desired service expectations (desired services Zone of tolerance adequate
service)
1. Personal needs
2. Enduring service intensifiers - desired service expectations

• Sources of Adequate service expectations

1. Transitory service intensifiers (urgent need-small purchase, doctors etc)
2. Perceived service alternatives (booking of tickets)
3. Customer‘s self perceived service roles (food service in hotel)
4. Situational factors (petrol bank, food served for marriage)
5. Predicted services (give quality service rather than predicted service)

• Sources of both desired and predicted service expectations

1. Explicit services promises (ad -we promises to customers)
2. Implicit service promises (two company charges diff. prices)
3. Word-of-mouth communication
4. Past experience (previous exposure to the focal firm‘s service )
• Managing customer expectations
• During pre-purchase phase
1. Learn what customers expect
2. Tell customers what they can expect
3. Consistently provide the service that customers expect.

• During the service encounter

• During the post-purchase phase

2.4 CUSTOMER PERCEPTION ANALYSIS

Customer perception analysis is a value-chain assessment methodology that gives a better
understanding of one‘s interaction with customers.
Perception is a process through which the information from outsider‘s environment is
selected, received, organized and interpreted to make it meaningful.

2.4.1 PERCEPTION
According to kolasa,‖ perception is selection and organization of materials which stems from
the outside environment at one time or the other to provide the meaningful entity we
experience.‖
According to Robbins, "perception may be defined as a process by which individuals
organize and interpret their sensory impressions in order to give meaning to their
environment.‖

2.4. 2 FACTORS INFLUENCING CUSTOMERS PERCEPTION ANALYSIS

1. Exposure- attention(ad)
2. Interpretations (It involves making sense out of stimulus)
3. Relevance –several other factors (substitute)
4. Surprising stimuli
5. Subliminal stimuli
6. Selective perception process

7. Selective Exposure
8. Selective Attention
9. Selective Comprehension
10. Selective Retention

2.4.3 STRATEGIES FOR INFLUENCING CUSTOMER PERCEPTION

1. Measure and manage customer satisfaction and service quality
2. Aim for customer quality and satisfaction in every service encounter-zero defects

3. Plan for effective recovery

4. Facilitate adaptability and flexibility
5. Encourage spontaneity

6. Help employees with problem customers

7. Reflect evidence of service
8. Enhance customer perception of quality and value through pricing.

2.5 CUSTOMER BEHAVIOR

Customer or consumer behavior is the study of how individuals make decisions to spend their
valuable resources (Time,money,effort) on consumption-related items. It includes what they
buy it, why they buy it, where they buy it, how often they buy it, and how often they use it.
According to belch and belch ‖consumer behavior is the process and activities people engage
in when searching for, selecting, purchasing, using, evaluating and disposing of products and
services so as to satisfy their needs and desires.

2.5.1 CUSTOMER BEHAVIOR IN RELATIONSHIP PERSPECTIVE

1. Understanding customer is the central part of the marketing process to know why a customer
or buyer makes a purchase.
2. Without such an understanding, business will find it hard to respond to the customer‘s needs
and wants.
3. Some business still produces the product without knowing the importance of the customer.
4. Organization clearly understands the benefits wanted by customers, reasons for purchase, re-
purchase etc.
5. Importance of customer behavior
6. Production policies

7. Price policies
8. Decision regarding channel of distribution
9. Decision regarding sales promotion

10. Exploiting market opportunities

11. Customers do not always act or react predictably.
12. Consumers preferences are changing and becoming highly diversified.
13. Rapid introduction of new products

14. Implementing the ―marketing concept‖

2.5.2 FACTORS INFLUENCING CONSUMER BEHAVIOR

15. Psychological factors

1. Motivation
2. Perception
3. Learning
4. Beliefs and attitude
• Personal Factors

1. Age and Life cycle stage

2. Occupation
3. Life style

4. Personality and self concept

• Cultural factors

1. Culture
2. Sub culture
3. Social class

• Social factors
1. Refernce groups
2. Family
3. Roles and status
• Buying role of a customer
• Initiator

• Influencer
• Decider
• Gatekeeper
 • Buyer
• User

Buying decision of customers

• What to buy?

• How much to buy?

• Where to buy?

• When to buy?
• How to buy?

2.6 INDIVIDUAL CUSTOMER

• The term consumer, end user, individual buyer and individual user refer to the same, a
buyer who buys product and services for end use.
• Understanding their need, want, value expectation and service expectations are the way to
win this market by product and services which a firm is offering.
Individual customer decision making process/Buying process
• Problem recognition

• Pre-purchase information research

1. Personal service

2. Commercial sources
3. Public sources
4. Experimental sources

• Evaluation of alternatives:
1. Evaluative criteria

2. Beliefs
3. Attitudes
4. Intensions
• Purchase decisions
• Post-purchase behavior
1. Post-purchase satisfaction
2. Post-purchase action
3. Post-purchase use and disposal

2.7 GROUP CUSTOMERS

• Group customer are referred as industrial market which consists of all the individuals or
organizations who acquire goods and services that enter into the production of other
products or services that are sold, rented or supplied to others.

• Organizations establish the need for purchased products and services, and identify,
evaluate and choose among alternatives brands and suppliers.
Group customer decision making process/Buying process

• Problem recognition
• General need Description
• Product specification

• Supplier Search
• Proposal solicitation
• Supplier selection
• Purchase Routine selection

• Post purchase evaluation

2.8 CUSTOMER LIFE TIME VALUE

• Customer lifetime value (CLV), lifetime customer value (LCV), or lifetime value (LTV)
is the net present value of the cash flows attributed to the relationship with a customer.
• The use of customer lifetime value as a marketing metric tends to place greater emphasis
on customer service and long-term customer satisfaction, rather than on maximizing
short-term sales.

• Building Profitable Customer-Centric Strategies: Maximizing Profit Potential

• Our high-impact processes for becoming more customer-centric and creating innovative
strategies will be valuable only if we can effectively deliver on these profitably.
2.9. SELECTION OF PROFITABLE CUSTOMER PROFITABILITY
• We first understand the key factors that will drive profitability for customer insight
initiatives.
• During the innovation stage, the objective was to creatively generate new sources for
capturing intelligence from customers and creating insight that could enhance the way we
communicate and sell to customers.

• As you learn more from customers about their needs and preferences, you have the
opportunity to better target your marketing messages, offers and channels, which
ultimately leads to reduced marketing expenses and increased conversion rates.

• Customer life time value

The key factors that will drive the profitability of customer insight initiatives include these:
• Reaching high-value customers and prospects
• Capturing intelligence on a critical mass of customers to justify the fixed costs of setting
up and managing the program
• Generating incremental profits from increased sales to new customers, higher customer
retention, selling more to existing customers or winning back lost customers
• Reducing costs of delivering solutions and servicing customers
• Capturing intelligence cost-effectively
• Building the ability to influence customer profitability over time
UNIT – III CRM STRUCTURES 9

Elements of CRM – CRM Process – Strategies for Customer acquisition – Retention and
Prevention of defection – Models of CRM – CRM road map for business applications.

3.1 ELEMENTS OF CRM:

When your company communicates with your customers the process can involve many different
people within both organizations using a variety of different methods. The main tool that is used
is an order that is communicated by your customer to your sales department. However this is
only one of many communications that should be managed. To ensure that your company can
provide the best customer service experience possible the use of customer relationship
management (CRM) software should be considered.

• CUSTOMER KNOWLEDGE

The customer service function in your company represents the front office functions that
interact with your customers. These are the business processes that allow your company
to sell products and services to your customers, communicate with your customers with
regards marketing and dealing with the after sales service requirements of your
customers. Each interaction with the customer is recorded and stored within the CRM
software where it can be retrieved by other employees if needed.

• RELATIONSHIP STRATEGY

• COMMUNICATION

• INDIVIDUAL VALUE PROPOSITION

• SALES FORCE AUTOMATION

• The company‘s sales department is constantly looking for sales opportunities with
existing and new customers. The sales force automation functionality of CRM software
allows the sales teams to record each contact with customers, the details of the contact
and if follow up is required. This can provide a sales force with greater efficiencies as
there is little chance for duplication of effort. The ability for employees outside of the
sales team to have access to this data ensures that they have the most recent contact
 information with customers. This is important when customers contact employees outside
of the sales team so that customers are given the best level of customer service.

• CAMPAIGN MANAGEMENT

• The sales team approach prospective customers in the hope of winning new business. The
approach taken by the sales team is often focused in a campaign, where a group of
specific customers are targeted based on a set of criteria. These customers will receive
targeted marketing materials and often special pricing or terms are offered as an
inducement. CRM software is used to record the campaign details, customer responses
and analysis performed as part of the campaign.

3.2 CRM PROCESS

• The formation process of CRM refers to the decisions regarding initiation of relational
activities for a firm with respect to a specific group of customers or to an individual
customer with whom the company wishes to engage in a cooperative or collaborative
relationship.

• It is important that a company be able to identify and differentiate individual customers.

In the formation process, there are three important decision areas: defining the purpose
(or objectives) of engaging in CRM; selecting parties (or customer partners) for
appropriate CRM programs; and developing programs (or relational activity schemes) for
relationship engagement with the customer.
 CRM PROCESS
CRM PROCESS FIGURE 1

• THREE STEPS OF CRM PROCESS

1.Acquisition :

It comprises enquiry, interaction, exchange, co-ordination and adaptation.

2. Customer Interaction Management

3.Customer Retention

• Customer Acquisition

• Customer acquisition is a broad term that is used to identify the process and procedures
used to locate, qualify, and ultimately secure the business of new customers.

• Customer retention effort is to identify and quality potential customers.

• Inputs for Acquisition

• The purpose of customer acquisition an organization is likely to focus its attention on the
following

1. The suspects

2. The enquiries
3. The lapsed customers

4. The former customers

5. The competitors customers

6. The competitors lapsed customer‘s

7. The competitor‘s enquiries

8. The competitors former customers

9. The referrals

10. The existing customers

3.3 STRATEGIES FOR CUSTOMER ACQUISITION

1. FOCUSED APPROACH:

a) Knower
b) Preferer
c) Indifferent
d) Rejecters

2. PROVIDING A WIN-WIN PLATFORM

3. INTITATE FORUM FOR COMMUNICATION

4. ATTEMPT TO MINIMIZE ―FUD‖ (Fear,Uncertainity,Doubts)

5. PROJECTION OF BENEFITS AND NOT PRODUCTS

6. CONTEXTUAL APPLICATION

7. FOCUS ON DECISION PROCESS

3.4 CUSTOMER RETENTION

Customer retention is the activity that a selling organization undertakes in order to reduce
customer defections.

Successful customer retention starts with the first contact an organization has with a
customer and continues throughout the entire lifetime of a relationship.

A company‘s ability to attract and retain new customers, is not only related to its product or
services, but strongly related to the way it services its existing customers and the reputation it
creates within and across the marketplace.
 Customer Retention Programs : Figure: 3.2

3.4.1 STRATEGIES FOR CUSTOMER RETENTIONS

1. PEOPLE

2. PRODUCT

3. PROCESS

4. ORGANISATION

5. SETTING SATISFACTORY SERVICE STANDARDS

6. CONCENTRATION ON COMPETITORS

7. CUSTOMER ANALYSIS

8. COST ANALYSIS

9. CONCENTRATION ON THE PAYING ABILITY OF CUSTOMERS

10. KNOWLEDGE ON PURCHASE BEHAVIOUR PATTERN

11. DIFFERENCIATION IN PRICES AND QUALITY STANDARDS

12. FOCUS ON REDUCING DISSATISFACTION

13. ATTENTION ON CHANGING REQUIREMENT OF CUSTOMERS

14. CONCENTRATION ON PERFORMANCE

15. TRAINING TO SUPPLY CHAIN EMPLOYEES

16. EMPOWERMENT TO SERVICE PROVIDERS

17. INCENTIVIZING SERVICE PROVIDERS

18. AUGMENTING INTANGIBLE BENEFITS

19. VISIT TO THE POINT OF USAGE OF THE PRODUCT

20. DEVELOP PARTNERSHIP WITH CUSTOMERS

21. ORGANIZING CUSTOMER CLUBS

22. RELATIONSHIP BASED PRICING SCHEMES

23. EFFECTIVE CUSTOMER COMMUNICATION SYSTEM

24. CUSTOMER COMPLIANT MONITORING CELL

25. DEVELOPING CUSTOMER SATISFACTION INDEX

26. FOCUS ON PREVENTIVE ACTIONS

27. CONCENTRATION ON CUSTOMER SATISFACTION RESEARCH

28. FOCUS ON FOCUS GROUP

29. BUILDING SWITCHING BARRIERS

3.5 CUSTOMER DEFECTION

Customer defection is the rate at which customers defect or stop the usage of products of a
company. business with high defection rate, would be losing their existing customers.

In order to overcome this they use another term of customer retention, in simple words its to
retain or prevent the existing customers to defect the product.
3.5.1 TYPES OF DEFECTION

 PRICE DEFECTORS
 PRODUCT DEFECTORS
 SERVICE DEFECTORS
 MARKET DEFECTORS
 TECHNOLOGICAL DEFECTORS
 ORGANISATIONAL DEFECTORS

3.5.2 STRATEGIES FOR PREVENTION OF DEFECTION

Every customer that you keep represents at least three that you don’t have to attract.
Numerous research studies indicate that the cost of acquiring a new customer usually runs from
two to four times the annual cost of keeping an existing customer. Obviously, an effective
customer retention strategy translates into profits.

It has been estimated that most companies spend about 98 percent of their time reacting to
problems and less than 2 percent preventing them. The first, most important, way to prevent
customer defections is to identify and define each problem from the customer‘s vantage point.
This blog suggests several ways to retain customers once you understand the problems and their
ramifications.

Superior service and database management provide your best defense against customer
defections. Service provides the opportunity to solve customer problems and build partnerships;
the database serves as a vehicle to personalize customer communication and enhance your
relationships. The Key Points Are

4 ANALYZE CUSTOMER DEFECTIONS AND MONITOR DECLINING ACCOUNTS

5 ADDRESS KEY CHURN DRIVERS

6 IMPLEMENT EFFECTIVE COMPLAINT-HANDLING AND SERVICE RECOVERY

PROCEDURES

7 INCREASE SWITCHING COSTS.

 3.6 MODELS OF CRM

• IDIC MODEL:

I- IDENTIFY

D – DIFFENCIATE

I – INTERACT

C – CUSTOMIZE
1.IDIC Model:
The IDIC model was developed by Peppers and Rogers. This model suggests that companies
should take four actions in order to the building, keeping and retaining the long-term one-to-one
relationships with customers.

Identify
First, a company must identify who is an actual customer and should know about deep knowledge of
their customers. It is not only necessary to know about your customers but you have to know about more and
more your customers so that you can easily understand them and serve them profitably.
Differentiate
Differentiate your customer on two bases: value and need
Value: Differentiate your customer to identify which customer is generating most value now and which offer
most for the future. Give more value to those customers who are generating more value for you.
Need: Differentiate your customers according to their needs. Different customers have different need and
serving the in profitable ways need more knowledge about their needs.
Interaction
The company must emphasis on interaction with the customer to ensure that you understand customer’s
expectations and their relationship with a brand.
The company must consider Interaction with customers according to their needs and value that they are
providing you. Interaction directly with customers makes believe that company has a concern with them and
company wants to serve them individually. These efforts make customers loyal and help the company to build
long-term relationships.

Customize
When you differentiate your customers according to their values and needs, after that, you have to
customize your product according to their needs and values. Customize the offer and communications to
ensure that the expectations of customers are met. Interact to customize is information to customers about your
ability to cope with their need. Failure in the third step means something wrong with second or third steps. So
return or go back to previous steps study them again and search out more and more and rearrange these steps.

2. QCI MODEL: The QCI model is also a product of a consultancy firm.

The model’s authors prefer to describe their model as a customer management model, omitting the word
‘relationship’. At the heart of the model, they depict a series of activities that companies need to perform in
order to acquire and retain customers. The model features people performing processes and using technology
to assist in those activities.

This model includes the series of activities related to employees, people, and organization, and technology as
well.
According to this model, relationships process with the external environment. Because when a customer wants to
start selling process or wants to interact with the organization, external environment directly affects the customer
experience. External environment also affects the planning process of the organizations. Now as you can see in the
figure that customer experience affects three activities future: customer proposition, customer management activity,
and measurement.

Customer proposition means something that a company offers to the customer against the price. Customer
management activity is a process of capturing customers, start with targeting, conversation, selling and end with
retaining or winning back the customers. Customer management activity affects customer’s experience that how a
company acquires, retains a customer and also penetrates.

Finally, measurement process also affects the customer experience. People and organization have relation with the
planning process, customer proposition, customer management activity and measurement. Because CRM starts with
people and ends with people. Infrastructure deals with the organization in a sense of technology, customer
information, and process management. One big thing is that each activity, people, organization, process, and
technology has a dual effect and intercorrelated with each other.

3. CRM Value Chain Model

CRM, the meaning of those three letters, is emotionally contested. For some, CRM is simply a bridge between
marketing and IT: CRM is, therefore, an IT-enabled sales and service function.

For others, it’s little more than precisely targeted 1- to-1 communications.

Simply we can say, CRM Is a tool to manage customer relationships with the help of people, information
technology, customer’s data, company

’s process and
customers themselves.
• Payne‘s Five-process model : Figure:3.5

• Gartner Competency model : Figure:3.6

3.7 CRM IMPLEMENTATION ROADMAP

A CRM Roadmap is a strategic plan that identifies how a company can meet and exceed its
customers‘ needs. This includes, but is not limited to, assessing how the sales, marketing,
and service entities work together to:
1) Gain insight from their customers
2) Produce valuable offerings/products (for example, personalized product); and 3)
Provide the ultimate customer experience.
Developing a CRM Roadmap involves aligning an organization‘s business strategy with its
prioritized CRM capabilities. For example, if a company‘s business strategy is to develop
products faster to gain unique market positioning, the capabilities that the company needs to
master should be aligned with that strategy,
and might include:
• Leveraging customer information from the service process (for example, integrating customer
feedback during service calls with the marketing department).
• Effectively managing product mix (measure success by campaign).
• Effectively managing sales channel strategy (eliminate conflict between distribution channels).
So how do companies know which CRM capabilities they have, and which they‘ll need to realize
their strategic goal? Below are the eight primary steps (which have been used across industries,
including financial services, electronics and high-tech, consumer products, manufacturing, etc.)
to follow when developing a CRM Roadmap.

• SCENARIO ANALYSIS

• PURPOSE AND OBJECTIVES

• BUSINESS PLANNING

• PROCESS DESIGN

a.Technology and vendor selection

B.Solution development

C.Implementation

D. Measurement