2/6/2022

Customer Relationship
Management
University of Economics & Finance

UNIVERSITY OF ECONOMICS & FINANCE

CUSTOMER RELATIONSHIP MANAGEMENT

Lecturer: Phạm Quốc Luyến, PhD.M, PhD.Ed, DBA.

• Phone: 091 931 6865 093 899 6865

• Email: pqluyen@gmail.com
• FB: Colin Phạm

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UNIVERSITY OF ECONOMICS & FINANCE

CUSTOMER RELATIONSHIP MANAGEMENT

• Course ID: MGT1123E

• Course tittle: Customer Relationship Management
• Credits: 3
• Pre-requisite: Basic Marketing, Consumer behaviors

Materials
• Kumar, V., & Reinartz, W. (2018). Customer
Relationship Management, Concept, Strategy, and
Tools, 3rd Edition. Springer-Verlag Berlin Heidelberg
• Kumar, V., & Reinartz, W. (2012). Customer
Relationship Management, Concept, Strategy, and
Tools, 2nd Edition. Springer-Verlag Berlin Heidelberg
• Wu, X., & Kumar, V. (2009). The Top Ten Algorithms
in Data Mining, Taylor & Francis Group, LLC

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Requirements
• Before going to class, students must read
corresponding chapters in the textbook at home.
• Complete individual assignments and group
exercises.
• Participate in group activities to write reports and
deliver presentations on the given case study.

Group activities
• Each group consists of 6-7 students, led by a group
leader.
• Members must follow the direction/lead of the
leader. If the leader notices that any member of the
group is not contributing, the lecturer must be
informed so that it can be resolved in the second
week.
• Each member in the group will evaluate the other
members’ participation in group activities at the
end of the term.

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Group Mid-term and Final exercises

• The case study exercises will be assigned to each
group in class session 2.
• After receiving the case study, each group will study
and find additional documents (if any) during 6
weeks (from session 2 to 12). Students must spend
at least 2 weeks to study the Case Study by
themselves. Group discussion to understand the
content of the exercises is a prerequisite for
completing a quality exercise.

Course Evaluation

Class activities/Attendance (include business speaker session) 10%

Class activities/Participation: (Class session 13 – 14) 20%
• Presentation of the assigned case study (each member presents a part
assigned by the group leader) (10 minutes)
• Answer questions from other group (5 minutes)
• Raising questions /giving comments to other groups (5 minutes)
Midterm Test: (Class session 11 or 12) 20%

Final course examination 50%

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Now
• It is the time for setting up groups…
Content of the course
Part I CRM: Conceptual Foundation
• Chapter 1. Strategic Customer
Relationship Management Today
• Chapter 2. Relationship Marketing and
the Concept of Customer Value
Part II Strategic CRM
• Chapter 3. Strategic CRM
• Chapter 4. Implementing the CRM
Strategy
Part III Analytical CRM
• Chapter 5, 6. Customer Analytics
• Chapter 7. Data Mining
• Chapter 8. Using Databases
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Part IV Operational CRM
• Chapter 9. Software Tools and
Dashboards
• Chapter 10. Loyalty Programs: Design
and Effectiveness
• Chapter 11. Campaign Management
• Chapter 12. Impact of CRM on
Marketing Channels
• Chapter 13. Customer Relationship
Management Issues in the Business-To-
Business Context
• Chapter 14. Customer Privacy Concerns
and Privacy Protective Responses
Part V Advances in CRM Applications
• Chapter 15, 16. Applications of CRM in
B2B and B2C Scenarios
• Chapter 17. Future of CRM
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Chapter One
Strategic Customer Relationship
Management Today

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Overview
Topics discussed:
• From the marketing to the customer concept
• CRM and customer value
• The concept of CRM
• CRM from a business strategy perspective
• Relevance of strategic CRM
• Customer value management approach
• Evolution and growth of CRM

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From the marketing to the customer

concept
The marketing concept needs to make way for the
customer concept:
Development of
information
technology and
Marketing is defined as a distinct The customer concept is the conduct
the internet
organizational culture, represented of all marketing activities with the
by a fundamental shared set of belief that the individual customer is
believes and values that put the Time the central unit of analysis and
customer at the center of a firm’s action.
strategic and operational thinking
(Deshpande & Webster, 1989).

Main function: Main function:

Addressing the needs of customer Meeting individual customer needs
segments

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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 managing
customer relationships in ways that benefit the
organization and its stakeholders.
American Marketing Association (2004)

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CRM
• An Important part of CRM is to a) identify different
types of customers and b) to develop specific
strategies to interact with them.
• Examples of such specific strategies are:
• Better relationships with profitable customers
• Locating and enticing new customers that will be
profitable
• Finding appropriate strategies to deal with unprofitable
customers, including the termination of relationships

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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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Customer Value Based Approach to CRM

• Using a customer value-based approach to CRM
yields several benefits:

 Decrease in Costs
 Maximization of Revenues
 Improvement in Profits and ROI
 Acquisition and Retention of Profitable Customers
 Reactivation of Dormant Customers

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Conceptualizations of CRM
• Functional level: focuses on technology
• Developing sales force automation in the sales function
• Developing campaign management in the marketing function

• Customer facing front-end level: focuses on total customer experience

• Building a single-view of customers across contact channels
• Distributing customer intelligence to all customer-facing functions

• Strategy level: focuses on customer satisfaction

• Freeing CRM from technology underpinnings
• Describing CRM as a process to implement customer centricity in the market and build
shareholder value
• Understanding that knowledge about customers affects the entire organization

➔ Within this context CRM will be defined from a business strategy perspective

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CRM from a business strategy perspective

• CRM is the strategic process of selecting customers

that a firm can most profitably serve and shaping
interactions between a company and these
customers. The ultimate goal is to optimize the
current and future value of customers for the
company.

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Key components of CRM from a Business

Strategy Perspective
• Strategic process
• Activities are initiated from the top of the organization
• CRM activities span multiple organizational functions
• Continuous effort towards becoming customer-centric organization

• Selection
• Resource allocation is based on the economic value of customers

• Interactions
• Exchange of information and goods between customer and firm evolves
as a function of past exchanges

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Key components of CRM from a Business

Strategy Perspective (contd.)
• Customers
• Including end-users and intermediaries such as distributors
and retailers
• Greater fine-tuning of segmentation strategies to eventually
target individual customers with customized product offerings

• Optimizing the current and future value of customer

• Maximizing customer equity by maximizing profits over a
series of transactions

Caution: Managing fairness in the exchange process is important to sustain mutually profitable relationships

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Relevance of CRM
• Firms are facing changes with respect to:
• Consumers
• Marketplaces
• Technology
• Marketing functions

CRM is a response to these changes

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Changes with respect to Consumers

• Growing consumer diversity- due to demographic and
behavioral trends
• Ageing of the population in developed countries- “de-youthing”
• Increased diversity in ethnicity of population
• Increasing individualization

• Time scarcity
• Activities compete for customers’ time

• Value consciousness and intolerance for low service levels

• Rise in customer expectations
• Decline in consumer satisfaction level

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Time Scarcity and Value Consciousness-

Example

Average waiting time (in seconds) after which calls are abandoned by customers
60
55
55
51.3

50
Seconds

45
45 42.5 1998
1999
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30
UK Worldwide

Source: : Merchants International Call Center Report

Figure shows that customers are less and less satisfied with the treatment they get from corporate
call centers. The average time after which calls are abandoned fell by about 19% in just one year.

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Declining Customer Satisfaction- Example

Scheduled H o useho ld C o mmercial P arcel D elivery P erso nal P ublishing/

A irlines A ppliances B anks C o mputers
90
90 90 90 90 N ewspapers
90

85 85 85 85 85 85

80 80 80 80 80 80

75 75 75 75 75 75

70 70 70 70 70 70

65 65 65 65 65 65

-8.4% -3.5% -2.7% -2.5% -9.0% 60 -12.5%

60 60 60 60
60
1994 1996 1998 2000 2002 1994 1996 1998 2000 2002 1994 1996 1998 2000 2002 1994 1996 1998 2000 2002 1994 1996 1998 2000 2002 1994 1996 1998 2000 2002

(American Customer Satisfaction Index) with products and

services
Source: http://www.theacsi.org, University of Michigan

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Changes with respect to Consumers

(contd.)
• Information availability and technological aptitude
• Customers more knowledgeable in making purchase decisions
• More comparisons across providers and transactions

• Decrease in loyalty
• Diversification of holdings across service providers even within same household

Consequences
• Marketers should be wary of placing heavy time demands on consumers
• The major challenge facing companies has become meeting consumer demands
rather than cost reduction

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Decreasing Customer Loyalty- Example

Number of different financial service providers that respondents are associated with

35
30.2 30.7
30

% of consumers
25
21.1
20
14.1 1996
15
10
5
0
1 2 3 4+

Number of financial service providers

Source: Unidex Report

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Changes with respect to the Marketplace

• More intense competition between firms for customers

• Fragmentation of markets

• Diminishing product-quality differentiation

Consequences
− Value added to customers by offering customized product
and service propositions
➔ To maintain market share, need to realign business strategy
to become customer-centric

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Changes with respect to Data Storage

Technology
• Better technology, cheaper and larger storage units
• Huge increase in demand for data storage
• Increased popularity of data warehouses

Consequences
• Better information about customer behavior and attitudes
• Better prediction of customer buying behavior
• Too much data can lead to misapplication and wrong analysis

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Changes with respect to Marketing

Function
• Media dilution and multiplication of channels
• Proliferation of communication media focused on the
customer
• Direct-to-consumer channels - email, telephone

• Interactive media - internet, interactive TV etc

• Reduced need for techniques focused on price alone due to

• Availability of new data collection and communication tools

• Marketing processes such as loyalty programs

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Changes with respect to 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
• Decreased customer response
• Reduced value for advertising in any medium

Consequences
• 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
• Greater demand for learning about
• Customer preferences
• Product and service customization
• Focus on customer-centric instead of product-
centric strategies
• Marketers need a management approach that
• Realizes increasing customer heterogeneity
• Addresses marketing accountability
• Puts available data successfully into practice
• Uses customer profitability as a key objective function
➔ Customer value management
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Benefits of Customer Value Management

Approach
• A successful data-based CRM system, with customer
value as its driving metric, empowers a company to
perform ten actions leading to a strategic advantage:
1. Integrate and consolidate customer information
2. Provide consolidated information across all channels to assist
in timely and relevant communication with customers
3. Manage customer cases
4. Personalize the service and products offered to each
customer to meet expectations
5. Automatically and manually generate new sales opportunities

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Benefits of Data Based Customer Value

Management approach (contd.)
• A successful data-based CRM system, with customer value
as its driving metric, empowers a company to perform ten
actions leading to a strategic advantage:
6. Provide flexibility to adapt campaigns to take changes in customer
behavior or information into account
7. Yield faster and more accurate follow-up on sales leads, referrals
and customer enquiries
8. 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
9. Give top managers a detailed and accurate picture of all sales and
marketing activities
10.Instantly react to a changing business environment

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Evolution and Growth of CRM

Fig. 1.5 Timeline of the CRM evolution

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Evolution
and Growth
of CRM

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Evolution and Growth of CRM

Fig. 1.6 Integration of front-end customers

with back-end systems

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Further Growth of the CRM Industry

• The CRM industry represent a fast-growing sector
• CRM has been driven by a shift from transactional to
relationship-based markets
• Five further factors that are responsible for CRM’s
forward movement:
• Growing proof of profitable impacts of good customer
relationships
• Improved marketing communication effectiveness
• IT vendors and associated change management consultancies
• Falling costs of data capture storage
• Customer value management

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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
interactions between a company and these individual customers
• Assessing Customer Value is critical to CRM
• Rapid changes are taking place in the environment in which firms
operate with respect to customers, marketplaces, technology, and
marketing functions
• These changes have driven the marketplace to become
relationship-based and customer-centric
• CRM’s goal is to optimize the current and future value of the
customers for the company

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