Introduction to CRM

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Course Summary
Topic

Introduction to Relationship Marketing

Pedagogy

Understanding Relationships & Strategic CRM

Planning CRM Initiative

Articles

Case Discussion

Identifying and Differentiating Customers

Customer Value Metrics
Designing and implementing Loyalty Programs

Evaluation

Managing Loyalty Programs

Class Participation

10

Information Technology and CRM

Case Submission

35

Sales Force Automation

Quiz (2 x 10 marks)

20

End Term Examination

35

Marketing and Services Automation

Weight

Technology trends in CRM

Textbook: Customer Relationship Management: A strategic perspective by G Shainesh &
Jagdish Sheth
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Session objectives
 By the end of the session, students are expected to:
 Gain an overview of Relationship Marketing
 Learn important concepts pertaining Customer
Relationship Marketing (CRM)
 Understand the common CRM related mistakes made
by firms
 Appreciate the importance of customer firm
relationship in CRM projects through discussion of an
article

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Rhyming Relationships
Its better to think about customer satisfaction,
than to settle for optimizing a solo transaction.
If you want to see profits becoming sensational
you need to start thinking of exchange as relational.
And if you want to see all your rivals go bust
you'll generate commitment by enhancing your trust.
There's simply no doubt that this all will transpire:
It's more profitable to retain than it is to acquire.
Source: American Marketing Association
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Definition of Relationship Marketing

Identify & establish, maintain & enhance and,
where necessary terminate, relationships with
customers & other stakeholders, at a profit, so that
objectives of all parties involved are met; and this is
done by mutual exchanges and fulfilment of
promises
Gronroos (1994)

Relationship Marketing refers to all marketing

activities directed toward establishing, developing
and maintaining successful relational exchanges
Morgan & Hunt (1994)
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Overview of CRM

Culture
Process

Technology

Customer
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Relationships vs Transactions

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Forms of Relationships

1. Supplier Partnerships

2. Lateral Partnerships

Goods Suppliers
Service Suppliers

Competitors
Government
Non-Profit Org.
Focal firm
4. Internal Partnerships

3. Buyer Relationships
Ultimate Customers
Intermediaries

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Functional departments
Employees
Business Units

Implementation of Relationship Marketing

 Organizational requirements
 Relationship focused Corporate culture
 Channelize business goals & strategies to focus on Relationship
Quality & Customer Retention
 Powerful personnel policies (DoA, Empowerment, Reward / Penalty)
 Develop RM metrics (Customer Lifetime Value, Service Recovery)

 Market focus (Short term) vs Customer focus (Long term)

 Customer is King / Queen Know him / her well (Transactional
data, Lifestyles, Attitudes, Interests)
 Customer Database is Companys memory Customer Profiling, Data
Mining, Communication plans
 Customer benefits Quick response, Better retention, Improved
compliance, Greater Loyalty

 Develop IT infrastructure Data mining, Analysis, CRM, Service

recovery etc. [e.g. Siebel, Oracle, Salesforce.com, SAP-CRM]
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Successful Relationship Mktg. Strategies

Customer Acquisition





Value Proposition
Communication
Inducement
Pre-sale engagement

Customer Management / Development

 Customer Satisfaction
 Upsell / Share of Wallet

Customer Retention
 Loyalty programs
 Customization of products / services
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Customer Relationship Management

 CRM - Processes implemented by a company to handle
their contact with their customers
 Delivers better profitability
 Reduces customer Churn

 CRM means
 Direct communication (e-mails, phone calls etc.)
 Mass customization
 Technical Jargon (OLAP, CIC etc.)

 CRM Organization
 Customer facing Operations [Call centre, Boundary Spanners]
 Back Office [ IT, Marketing, Finance, Service Planning, Mfg.]
 Support Agencies [Vendors, Channel Partners]

 5% increased retention leads to 35% to 95% increase in

profits (Reichheld)
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Customer Relationship Management

Multivariate statistical
Methods Cluster Analysis,
Discriminant Analysis; CLV;
Click stream Analysis

Customer Database

Transactions, Customer
Contacts, Descriptive
Info, Response to Mktg.
Stimuli, Historical Data

Database Analysis

Customer Selection
Personalized E-mails (NBA,
South West Airlines),
Mailers, Coupons, RSS
feeds

Targeting Tools

Relationship Marketing

Irritation
Feeling of Violation
Fear
(Obtain consent before
Approaching customer)
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Highest Purchasing rates,

Greatest brand loyalty,
Attitudes, Interest, Lifestyle

Privacy Issues

CRM Metrics

Customer Service, Loyalty

Programs, Customization
(Dell, Auto Cos.), Cross
Promos, Community Devpt.

Acquisition cost, Conversion

Rate (Suspect, Prospect,
Customer), Retention /
Churn rates, Wallet Share

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Relationship Marketing Nine Big Mistakes

 Assuming Customers want a relationship
 Too many products & few solutions
 Provide solutions for customers to have relationships

 Assuming Customers are willing to work for you

 Complicated loyalty & frequency programs
 Build simplicity into programs (KISS)

 Assuming Customers to be fair

 One wrong act may spoil relations
 Try to provide the best customer service

 Customer Satisfaction is not enough

 Customer surveys do not reveal the truth
 Review frequently & raise the performance bar every time
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Relationship Marketing Nine Big Mistakes

 Tier Inflation
 Tier inflation without tangible benefits will be a disaster
 Create tangible benefits before introducing tier inflation

 Accidental disenfranchisement
 Going behind the elite may erode your base (Customer Apartheid)
 Think through what you are sacrificing before committing yourself

 Changing the rules in the middle of the game

 Changing goal posts can disrupt the game
 Get the rules right at the beginning. Be honest & reassuring when
you make a mistake

 Incrementality
 Implementation without homework can make you a laughing stock
 If you have 100 hours, sharpen the axe for 99 hours

 Confusing necessity with loyalty

 Loyalty builds barriers necessity welcomes competition
 Survey customers who have a necessity to convert them to loyalists
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Summary
WHY CRM?
 Retain profitable customers
 Reduce Customer Churn
 Cheaper to retain customers
 Opportunity to upsell &
cross-sell

WHAT CRM IS?

 A philosophy (Customer
centricity,
Process
orientation, Capabilities)
 Customer Centered Brand
Management
(need
fulfilment, experience)

WHY LOYAL CUSTOMERS?

 Repeat purchase
 Positive Word of Mouth
 Less price sensitive
(relatively)
 Brand Community builders

WHAT CRM IS NOT?

 Info Tech initiative
 CRM is not a plug & play
software
 Is not a functional initiative
 Hounding customers

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Discussion: Putting Relationship Back into CRM

Customer Relationship has translated into
Customer Profitability
Refocusing on the relationship
 Get to know customers as people
 Think beyond Loyalty
 Take responsibility for two-way relationships

Get to know customers

 Identify meaning of customers behaviour
 Changing rules, Appeasing, Privacy
 Use ethnography (H-D), ZMET (P&G)
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Putting Relationship Back into CRM

Think beyond Loyalty
 Deep, Long lasting vs
relationships
 Emotional vs Utilitarian
 18 relationship exemplars
 Friendship vs Marriage (H-D)

Superficial,

Fleeting

Two-way Relationships
 Firms encourage bad behavior (e.g. Best Buy)
 Best customer trap - creating expectation (e.g.
Filenes basement)
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Putting Relationship Back into CRM

Value in Customer Relationships
 Analyze relationship portfolio (Perceptual Map)
 Develop a relationship portfolio strategy (H-D
Friendship)
 Design appropriate strategies
 Track relationship health and performance

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