Introduction to Customer

Relationship Management
(CRM)

Prof Kunal Gaurav

ICBM-SBE, Hyderabad

What is CRM?

CRM is a business strategy that aims to understand,

anticipate and manage the needs of an organisations
current and potential customers.

It is a comprehensive approach which provides

seamless integration of every area of business that
touches the customer - namely marketing, sales,
customer services and field support through the
integration of people, process and technology.

CRM is a shift from traditional marketing as it focuses

on the retention of customers in addition to the
acquisition of new customers.

Definition of CRM

CRM is concerned with the creation,

development and enhancement of
individualised customer relationships with
carefully targeted customers and
customer groups resulting in maximizing
their total customer life-time value.

The purpose of CRM

The focus [of CRM] is on creating value for

the customer and the company over the
longer term.

When customers value the customer service

that they receive from suppliers, they are
less likely to look to alternative suppliers for
their needs.

CRM
enables
organisations
to
gain
competitive advantage over competitors
that supply similar products or services.

Why is CRM important?

Todays businesses compete with

multi-product offerings created
and
delivered
by
networks,
alliances and partnerships of many
kinds. Both retaining customers
and building relationships with
other value-adding allies is critical
to corporate performance.

The adoption of C.R.M. is being

fuelled by a recognition that longterm relationships with customers
are one of the most important
assets of an organisation.

Why did CRM develop?

CRM developed for a number of reasons:

The 1980s onwards saw rapid shifts in

business
that
changed
customer
power .

Supply exceeded demands for most

products.

Sellers had little pricing power.

The only protection available to

suppliers of goods and services was in
their relationships with customers.

Strategically Significant
Customers

Customer
relationship
management
focuses
on
strategically significant markets.
Not all customers are equally
important.

Therefore, relationships should be

built with customers that are likely
to provide value for services.

Building
relationships
with
customers that will provide little
value could result in a loss of
time, staff and financial resources.

Markers of strategically
significant Customers

Strategically significant customers

need to satisfy at least one of three
conditions:
1. Customers

with high life-time

values (i.e. customers that will
repeatedly use the service in the
long-term)

2. Customers

who
serve
as
benchmarks for other customers

3. Customers who inspire change in

the supplier

Phases of Customer Life Cycle

Benefits of CRM

CRM enables an organization

to:

Provide better customer service

Make call centers more efficient
Cross sell products more
effectively
Help sales staff close deals
faster
Simplify marketing and sales
processes
Discover new customers
Increase customer revenues

Customer Relationships Today

Customer
Relationships
Branding

Product

Pricing

Distribution

Community

Communication

Next Generation CRM Trends

The
multi-channel
integrated
experience

Back Office

Front Office

Customer

Web

Partners

The rise of the call

center
as
a
multipurpose
customer
contact
point

Purchases

History

Operations

Listening
portals:
Next-generation CRM
capabilities
CRM portals, sales
force
ASPs,
and
hosted applications

Marketing

Billing

Application Integration

Customer Service
and Billing

E
Mailrs

Marketing and
Fulfillment

Sales
Cross-sell
Up-sell
TeleSales

Loyalty &
Retention
Programs
Field Sales
and Service

Touch Points

Call
Center
SFA

POS
Direct
Mail

Wireless

Customers

CRM Ecosystem

Operational
Collaborative
Analytical

Operational Aspect
Operational aspect of CRM is automation to Customers
processes including front office sales / service and
marketing representative.
Any customer interaction is recorded by CRM, so that any
one can retrieve the customer information at anytime
without having to interfere about interaction history.
One of the main benefits of this contact history is that
customers can interact with different people or different
contact channels in a company over time without having
to repeat the history of their interaction each time.

Collaborative Aspect
Direct interaction with customers
without
interference
of
sales
representative. Cost reduction and
better customer services through
automated voice response, email
feedbacks, SMS, IVR etc.

It can generally be equated with

self service.

Analytical Aspect
Analysis of Customer Data for purposes like
optimizing marketing effectiveness, customer
retention, behavioral analysis, decision making.
Analytical CRM analyses customer data for a
variety of purposes including
Design and execution of targeted marketing campaigns to

optimize marketing effectiveness.

Design and execution of specific customer campaigns,
including customer acquisition, cross-selling, up-selling,
retention.
Analysis of customer behavior to aid product and service
decision making (e.g. pricing, new product development etc.).
Management decisions, e.g. financial forecasting and
customer profitability analysis.
Prediction of the probability of customer defection (churn).
Analytical CRM generally makes heavy use of predictive
analytics.

Tangible Components of
CRM
1.
2.
3.
4.
5.
6.
7.

Key Areas of Any CRM System

Multi Channel Marketing
Database/Data Warehouse/Data
Mart/Data Mining
Touch Points
Call Center
Sales Force Automation
360 Degree View

1. Key Areas of Any CRM System

2. Multi Channel Marketing

A report has predicted that over 50% of customers

typically high value customers - will be using
multiple channels for shopping and purchasing
including
store,
teleshopping,
ATM,
Kiosk,
Catalogue & Internet based shopping.

Convenience is the most important trigger for

Multi Channel Marketing.

The challenge to companies today is to build

systems that will integrate field, phone, ATM/Kiosk,
Catalogue and Online sales while avoiding 3E trap:
Everything to Everyone, Everywhere.

3. Database/Data Warehouse/Data
Mart/Data Mining

Adatabaseis an organized collection ofdata.

The data are typically organized to model
relevant aspects of reality in a way that supports
processes requiring this information.

The data warehouse contains data from the

customer, company, and outside sources and is
used to extract multiple patterns of Customer
Behavior.

All of the best data in the world is useless if

it cannot be reported and analyzed quickly
and efficiently.

4.Touch Points

Point of Contact that a Customer

has with the Company.

ATM, Sales Staff,

telephone etc.

Touch point possibilities are endless.

Store,

Internet,

5. Call Center

6. Sales Force Automation (SFA)

A SFA, typically a part of a companyscustomer relationship

management system, is a system that automatically records
all the stages in a sales process. SFA includes acontact
management systemwhich tracks all contact that has been
made with a given customer, the purpose of the contact, and
any follow up that may be needed. This ensures that sales
efforts are not duplicated, reducing the risk of irritating
customers.

SFA system is an important subset of CRM system because the

provide;
Management of the sequence of sales activities.
Management of Sales Territories
Management of data across and within a companys client
organization
Management of leads and Opportunities
Management of the building of items into a total package
for customers

7. 360 Degree View

This suggest that companies should treat customers

throughout the business cycle based on their lifetime
profitability.

Understanding the customer experience is at th

Customers are making buying decisions based on more
than just the four Ps of marketing (product, place, price and
promotion).

Key influencers also include such variables as service

quality, recognition, brand relevance and customer
support-factors for which competitive differentiation may
actually be easier to achieve. Indeed, delivering
consistently on these latter factors will bring about high
levels of customer satisfaction. e center of the CRM
universe.

Important Constructs of
CRM

Customer Lifetime Value & Second

Lifetime Value
Privacy
Customization Versus Personalization
RFM (Recency, Frequency & Monetary
Value)

Company Customer Relationship

Intimate Relationship
Face to Face Customer Relationship
Distant Relationship
No Relationship

Typology of Customers
Short Term
Orientatio
n
Butterflies

High
(Maximize
Profitabilit Transactional Profit)
y
Low
Strangers
Investment)
Source: W J Reinartz and(No
V Kumar
(2002)
Profitabilit
y

Long Term
Orientatio
n
True
Friends
(Invest on
Relationship Building)

Barnacles
(Cross Selling/Trading
Up)

Types of Customers

Loyalist (Brand Ambassadors)

Mercenaries (Loyal to low
price/fashion/novelty items)
Hostages (Stuck with the firm for some
reasons)
Defectors (Highly dissatisfied
customers)

What to do for effective

Implementation of CRM

The Organization must adopt a Relationship Marketing Philosophies

across all functional areas.
The organization must detail and communicate the benefits of CRM
orientation.
Top executives support must be obtained and maintained
throughout the CRM development.
Business strategies must drive CRM development rather than the
other way around.
If separate quick results CRM projects are being implemented as
opposed to an all encompassing CRM suite, then these separate
projects must be integrated and functionally aligned.
Include both IT and Business unit managers in CRM start up team.
Customer data must be integrated and maintained.
Build a Business Case and conduct a business analytics before
deciding upon CRM solution.
Develop success metrics to assess the effectiveness of CRM effort.

Thank
You!