Customer Relationship Customer Relationship

Management
A D t b d A h A Databased Approach
V. Kumar
Werner J Reinartz Werner J. Reinartz
Instructors Presentation Slides
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Chapter One Chapter One
CRM D t b M k ti CRM, Database Marketing
and Customer Value
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Overview
Topics discussed:
Marketing concept Marketing concept
Link between CRM and Database Marketing
CRM and Customer value
C f C Conceptualizations of CRM
Relevance of CRM
Data based Customer Value Management
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Marketing-definition
Marketing is an organizational function and a set of processes for
creating, communicating and delivering value to customers and for
i t l ti hi i th t b fit th managing customer relationships in ways that benefit the
organization and its stakeholders.
American Marketing Association,2004
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Link Between CRM and Database Marketingg
Database Marketing
C t D t b Customer Databases
Identify and analyze customer population
G b d i il iti Group based on similarities
Recommend separate marketing campaigns for different groups
CRM
Applies database marketing techniques at customer level Applies database marketing techniques at customer level
Develops strong company-to-customer relationships
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CRM
Capture customer data and interact with the
customer simultaneously
Develop specific strategies for interaction with each customer
Better relationships with profitable customers
Locating and enticing new customers that will be profitable
Finding appropriate strategies to deal with unprofitable customers,
including termination of relationships
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Link Between CRM and Customer Value Link Between CRM and Customer Value
Customer Value: The economic value of the customer relationship to
the firm expressed on the basis of contribution margin or net profit
CRM is the practice of analyzing and utilizing marketing databases
and leveraging communication technologies to determine corporate
practices and methods that will maximize the lifetime value of each
individual customer to the firm
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Using Customer Value
f M k ti D i i for Marketing Decisions
Benefits
Decrease in Costs
Maximization of Revenues
Improvement in Profits and ROI
Changes with respect to
Marketing Function (contd ) Marketing Function (contd.)
Decreasing market efficiency and effectiveness due to
Focus on acquisition, price and short-term transactions
Proliferation of new contact channels
Increased or flat cost of contact Increased or flat cost of contact
Decreased customer response
Reduced value for advertising in any medium
Consequences
Press re on the marketing f nction Pressure on the marketing function
Marketing in danger of being restricted to advertising and media
planning
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Implications of Changes
in Business Environment in Business Environment
Greater demand for learning about
Customer preferences
Product and service customization
Focus on customer-centric instead of product-centric strategies
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Data Based Customer Value Management
To satisfy increasing customer heterogeneity To satisfy increasing customer heterogeneity
To address concerns of marketing accountability
To put available data to use
To use customer profitability as the key objective function
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Benefits of Data Based Customer Value
Management Approach Management Approach
Integrate and consolidate customer information g
Provide consolidated information across all channels to assist in
timely and relevant communication with customers
Manage customer cases
Personalize the service and products offered to each customer to
meet e pectations meet expectations
Automatically and manually generate new sales opportunities
Provide flexibility to adapt campaigns to take changes in customer Provide flexibility to adapt campaigns to take changes in customer
behavior or information into account
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Benefits of Data Based Customer Value
Management approach (contd ) Management approach (contd.)
Yield faster and more accurate follow up on sales leads referrals Yield faster and more accurate follow-up on sales leads, referrals
and customer enquiries
Manage all business processes by introducing a central point of Manage all business processes by introducing a central point of
control ensuring all business processes are executed in accordance
with correct and effective business rules
Give top managers a detailed and accurate picture of all sales and
marketing activities
Instantly react to a changing business environment
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Summary
From a strategic perspective, CRM is the process of selecting the
customers a firm can most profitably serve and shaping the customers a firm can most profitably serve and shaping the
interactions between a company and these individual customers
Assessing Customer Value is critical to CRM g
Rapid changes are taking place in the environment in which firms
operate with respect to customers, market places, technology, and
marketing functions
These changes have driven the marketplace to become relationship-
based and customer-centric based and customer centric
CRMs goal is to optimize the current and future value of the
customers for the company
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