Module 2 CRM 22-24 Batch

5 Modules
Managing the customer Implementing CRM

CRM, its Fundamentals lifecycle
and Customer Operational, Analytical,
Relationship Collaborative CRM
Strategic CRM
1
KRISHNA KOPPA 22-24 Batch CRM
D2: 3
Managing Customer Lifecycle – Acquisition, retention and

developing customer value
Customer Acquisition: New customer – what Is it?; Portfolio
purchasing, Strategic Switching, Customer value estimates – The
conversion model, Prospecting – B2B lead sources, B2C acquisition
efforts*, KPIs of customer acquisition programs.
Managing the customer
lifecycle Customer Retention: Customer retention and economics of it,
Volume and Value retention, Strategies of customer retention –
Positive and negative strategies, KPIs of customer retention
programs, Role of research in reducing churn, Strategies for
customer value development, Strategies for termination of
customer relationships.
Developing customer value: Various sources of customer value.

2
What is
Customer
Lifecycle?

What is Customer Lifecycle?
= Customer lifecycle (CLC) = the customer lifecycle describes the various stages a consumer goes through
before, during and after they complete a transaction
What is Customer lifecycle Management?

= Management of 3 activities
1 2 3
Acquiring new Retaining existing Developing
customers customers customer value

What is
Customer
Acquisition?

1 Acquiring new customers
Acquisition plan must answer following imp questions
? Which prospects will be targeted?
? How will these prospects be approached?
? What offer will be made?

1 Acquiring new customers ? Which prospects will be targeted?
Who is a new customer?
New to the product category New to the company

- Customers who identified new - Customers who are won from
need OR competition
- Customers who have found a
new category of solution for
existing need
In matured stage of industry : Who would you focus on for acquisitions?

= New-to-company customers


Not all prospects have similar potential. Then, how would you chose whom to acquire?
 What is the estimated value of customer?

 What is the probability that customer will switch from current supplier?
 After switching, what will be your earning from that customer?

Key performance indicators of customer acquisition programmes
How many customers acquired?
What is cost per customer (CAC) acquisition?
What is the value of the acquired customer?

What is
Customer
Retention?

2 Retaining existing customers
Customer retention
= is the number of customers doing business with a firm at the end of a year, expressed as % of
those who were active customers at the beginning of the year
3 rates of Customer retention rates
Raw Customer retention rate = expressed in numbers of customers
Sales adjusted retention rate = expressed in Value of sales (Rs, $)
Profit adjusted retention rate = expressed in Value of profits (Rs. $)

Is it Customer Retention or Value retention?
Economic advantages of retention
1. Increasing purchases as tenure grows Which customers to retain?

2. Lower customer management costs over time = retain all customers who
3. Customer referrals create greatest strategic
4. Premium prices value (who are =
strategically significant
customers)

Who is a strategically significant customer? = Customers who create greatest value for the company
Types of Strategically Significant Customer
High CLTV
Benchmarks Inspirers Cost Magnets
Customers
= Customers = Customers that = Customers that = Customers that

who higher lead other create value for the absorb higher
CLTV for the customers for a company in terms of proportion of cost of
company company. Other new ideas the company
customers get (innovation, cost
influenced by them reduction)

Types of Customer retention strategies
Locking customers by
Positive retention rewarding them for
strategies remaining in
relationship
Negative retention Locking customers by - imposing high switching costs

penalising them to - Retained customers spread
strategies
avoid shifting negative word-of-mouth

1 Creating customer delight / pleasantly surprising customers

Positive retention CD = P>E
strategies CD=Cust Delight, P=Perceived customer experience, E=Customer expectations
2 Adding customer-perceived value

Loyalty schemes, Customer clubs, Sales promotion (Vouchers, Rebates, Free
premiums, Collection schemes,
3 Creating social and structural bonds

Social bonding = cultural bonding, geographical bonding etc
Structural bonding = suppliers and customers commit resources to relationship.
(Financial / legal / Knowledge based / technological etc)
4 Building customer engagement

Customer engagement
Customer Co-creation



3 Quality forms
Basic Qualities Linear Qualities Attractive Qualities

(Basic Needs) (Performance Needs) (Delighters / Excitement)

Kano’s customer delight model
Customer
P>E
delight High
High
High
Level of achievement Low
High
Low
Low
Low Customer
P<E dissatisfaction
Basic Qualities Linear Qualities Attractive Qualities

(Basic Needs) (Performance Needs) (Delighters / Excitement)
Positive retention
strategies
2 Adding customer-perceived value

Loyalty schemes, Customer clubs, Sales promotion (Vouchers, Rebates, Free
premiums, Collection schemes,

Positive retention
strategies
3 Creating social and structural bonds

Social bonding = cultural bonding, geographical bonding etc
Structural bonding = suppliers and customers commit resources to relationship.
(Financial / legal / Knowledge based / technological etc)

Positive retention
strategies
4 Building customer engagement

Customer engagement
Customer Co-creation
Locking customers by
Positive retention rewarding them for
strategies remaining in
relationship

strategies


strategies

Customer Switching costs = the costs that deter customers from

switching to a competitor’s product or service
Switching costs include customer’s
 Time
 Effort
 Knowledge
Negative retention
strategies that they invest in products /service and in relationships

Negative retention
strategies

Key performance indicators of customer retention programmes
Raw customer retention rates?

Sales-adjusted retention rates?
Profit-adjusted retention rates?
Cost of customer retention?
Share of wallet of the retained customers?
Customer churn rate per product category / geography / channel?

Profit and Retention Patterns for the Customers of a Credit Card Company

Customer Profit over Time for an Insurance Company

Percentage Increase in CLTV by Industry When the Churn Rate Is Reduced by 5%

Measure of Customer Loyalty
+ve A Customer Satisfaction / CSAT ( Ex: Scale 1-7, 1-5)

= Score is average of ratings the customers have given for a product /service
+ve or -ve B Net Promoter Score (NPS)

= % of promoters minus % of detractors
+ve C Customer Effort Score (CES)

= is average of scores the customers have given for how much they struggle
with the brand to get expected service

Developing
Customer Value

3 Developing customer value Customer development
= is the process of growing the value of retained customers
Customer development strategies
Up-selling Cross-selling
Selling higher priced Selling additional

or higher margin products to existing
products to existing customers
customers
Big Challenge is: Customers don’t respond positively to these methods of up-selling and cross-selling

3 Developing customer value Sources of Customer Value
Customer Value = Customer Benefits – Customer Sacrifices

Product /
Services
Price
Promotion
Marketing Mix
Place Customization
of 7 Ps
People
Processes
Physical
Evidence

Customization
Product /
Services
of 7 Ps
Product Innovation Product Synergies

Price
o Imitative
o Innovative
Promotion
Marketing Mix
Product-Service
Bundling
Place
Service Guarantees / Service level
agreements (SLA)
People Additional Benefits Service recovery programs
SERVQUAL
Processes
Branding
Physical
Evidence

Customization
Product /
Services
of 7 Ps
Price
Promotion
Marketing Mix
Place
People
Processes
Physical
Evidence

Customization
Product /
Services
of 7 Ps
Price Interactive/Co-creative Communications
Promotion
Marketing Mix
Place
People
Processes
Physical
Evidence

Customization
Product /
Services
of 7 Ps
Promotion
Marketing Mix
Place
People
Processes
Physical
Evidence

Customization
Product /
Services
of 7 Ps
Promotion
Marketing Mix
Place
People
Processes
Physical
Evidence

Customization
Product /
Services
of 7 Ps
Price
Un paralleled Convenience
Promotion
Marketing Mix
Place
People
Processes
Physical
Evidence

Customization
Product /
Services
of 7 Ps
Price
People as key differentiators
Promotion
Marketing Mix
Place
People
Vs
Processes
Physical
Evidence

Customization
Product /
Services
of 7 Ps
Price
Processes as key differentiators
Promotion
Marketing Mix
Place
People
Processes
Physical
Evidence

Customization
Product /
Services
of 7 Ps
Price Physical evidence consists of the tangible facilities,

equipment and materials that companies use to
communicate value to customers
Promotion
Marketing Mix
Place
People
Processes
Physical
Evidence

Product /
Services
Price
Promotion
?
Marketing Mix
Place Customization
of 7 Ps
People
Processes
Physical
Evidence

Termination
(Customer Divestment)

Why Terminate Customers (Customer Divestment)?
1 Declining Profitability
2 Lower productivity of employees

handling unprofitable customers
3 Changes in Capacity to serve large

volumes of customers
4 Shift in customer strategy

Customer Termination Framework
1 Why terminate (divest)?
2 When is divestment likely?
3 Managing the divestment process
4 Educate Customers
5 Renegotiate Value Proposition (Don’t just communicate it)
6 Migrate Customers
6 Terminate the relationship – Last resort

Customer Termination Strategies
1 Raise prices
2 Unbundle the offer
3 Re-specify the product
4 Reorganize sales, marketing and service

departments
5 Introduce ABC class service

= Customer lifecycle (CLC) = the customer lifecycle describes the various stages a consumer goes through
before, during and after they complete a transaction
What is Customer lifecycle Management?

= Management of 3 activities
1 2 3
Acquiring new Retaining existing Developing
customers customers customer value

D1: 1
Assessments 2
57
Customer
Journey
Mapping

Customer Journey
Pre-read material:
From Touch points to journeys: Seeing the world as customers do
Source:
https://www.mckinsey.com/business-functions/marketing-and-
sales/our-insights/from-touchpoints-to-journeys-seeing-the-world-
as-customers-do#

Customer Journey
= A customer journey is an entire experience a customer has while communicating with a brand.
 It considers the complete interaction roadmap from brand discovery to purchasing and beyond.
 The focus isn’t on transactions, but rather how the customer feels after interactions with the brand.

Customer Journey

Customer Journey Map (CJM)
= User Journey Map
= User experience Map (UX Map)
= is an insightful way through which businesses step into their customers' shoes so that they can gain a view
of brand performance from the customer's perspective
= is an illustrative diagram that depicts customers’ experience with your brand.
Why is it needed?
A customer journey map can help business teams align around solving known
problems, identifying new user pain points, and removing barriers to customer’s
(and therefore company’s) success.

Customer Journey Map (CJM): An example
63
Customer Journey Map (CJM) Benefits
 Identifying where customers interact with your business
 Determining whether the customer journey is logical
 Identifying and focusing on different needs at various stages of the buying

funnel
 Revealing gaps between the desired customer experience and the real customer
experience
 Allowing businesses to allocate expenditure on development priorities that

matter most

Customer Journey Map (CJM): Steps to create CJM
Set your Create a Create Decide on Plot the Take the

Identify all
objectives of team to Customer the type of customer customer
touchpoints
CJM develop CJM Persona map journey journey
65

Identify all
touchpoints
 Why are you making a customer journey map?

 What goals are you directing this map towards?
 What experience will it examine?
 Which type of customer will it follow?
66

Identify all
touchpoints
 Include all key stakeholders in the business

 Customer facing executives must be included; sales / service executive
 Marketing head
 CEO
 Finance / HR / IT executives
 Team must barnstorm on persona and list of touchpoints

67

Identify all
touchpoints
 Best ways to create your customer personas is to survey and test real-life people that have
engaged with your brand.
 One persona that represents most of your customers. (1 CJM for one kind of persona)
 Demographic, psychographic variables can be used to define persona
 Goals /aspirations, challenges customer has to be used
 Persona can be named based on the customer profile: Ex: Cool Karthik, Achiever Avinash, etc
68

Identify all
touchpoints
 Touchpoints are the that your customers can interact with brand
 Store
 Service point
 Delivery pont
 Website
 Mobile app
 Social media platforms
 etc
69

Identify all
touchpoints
 Current state: The most common type of map, the current state map allows you to visualize the
actions, thoughts, behaviors, and emotions your customers experience when interacting with
your brand right now.
 Day-in-the-life: This maps your customer’s day from morning to night. It details their habits and
activities, whether that includes interacting with your brand or not.
 Future state: These visualize what you predict will be the actions, thoughts, behaviors, and
emotions your customers will experience during future interactions with your brand.
70

Identify all
touchpoints
 Plot the customer journey step-by-step.

 At this stage, just focus on actions.
 What actions are your customers taking,
 and at what time?
 and where?
71

Identify all
touchpoints
 This is the crucial step

 Put on your customer’s shoes and work your way through the customer journey you plotted in
previous step. Take the customer journey yourself by analyzing the results.
 Take note of pain points (use emoticons, color codes etc),
 Pain points are the moments when you don’t get the information you need or the experience
you expected.
72
ANALYZING the Customer Journey Map (CJM):
 Look for points in the journey where expectations are not met.
 Identify any unnecessary touchpoints or interactions.
 Identify the low points or points of friction.
 Pinpoint high-friction channel transitions
 Evaluate time spent. In your journey map, provide time durations for the major
stages of the journey
 Look for moments of truth.
 Identify high points or points where expectations are met or exceeded


Expectations
are met
Moment
of truth
where
expectations are
not met
Point of
friction
with
channel
unnecessary interactions Point of friction 75


Customer Journey Map (Some examples of templates)

Develop a customer journey map for this company; identify clearly the positive and negative episodes
for the customer.

D2: 3
Managing Customer Lifecycle – Acquisition, retention and

developing customer value
Customer Acquisition: New customer – what Is it?; Portfolio
purchasing, Strategic Switching, Customer value estimates – The
conversion model, Prospecting – B2B lead sources, B2C acquisition
efforts*, KPIs of customer acquisition programs.
Managing the customer
lifecycle Customer Retention: Customer retention and economics of it,
Volume and Value retention, Strategies of customer retention –
Positive and negative strategies, KPIs of customer retention
programs, Role of research in reducing churn, Strategies for
customer value development, Strategies for termination of
customer relationships.
Developing customer value: Various sources of customer value.

80

Module 2 CRM 22-24 Batch

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Module 2 CRM 22-24 Batch

Uploaded by

Copyright:

Available Formats

5 Modules

Managing the customer Implementing CRM

Managing Customer Lifecycle – Acquisition, retention and

Developing customer value: Various sources of customer value.

KRISHNA KOPPA 22-24 Batch CRM

What is Customer lifecycle Management?

KRISHNA KOPPA 22-24 Batch CRM

KRISHNA KOPPA 22-24 Batch CRM

1 Acquiring new customers

Acquisition plan must answer following imp questions

? Which prospects will be targeted?

? How will these prospects be approached?

? What offer will be made?

KRISHNA KOPPA 22-24 Batch CRM

1 Acquiring new customers ? Which prospects will be targeted?

Who is a new customer?

New to the product category New to the company

In matured stage of industry : Who would you focus on for acquisitions?

KRISHNA KOPPA 22-24 Batch CRM

1 Acquiring new customers ? Which prospects will be targeted?

KRISHNA KOPPA 22-24 Batch CRM

1 Acquiring new customers ? Which prospects will be targeted?

 What is the estimated value of customer?

KRISHNA KOPPA 22-24 Batch CRM

1 Acquiring new customers ? Which prospects will be targeted?

Key performance indicators of customer acquisition programmes

How many customers acquired?

What is cost per customer (CAC) acquisition?

What is the value of the acquired customer?

KRISHNA KOPPA 22-24 Batch CRM

KRISHNA KOPPA 22-24 Batch CRM

2 Retaining existing customers

3 rates of Customer retention rates

Raw Customer retention rate = expressed in numbers of customers

Sales adjusted retention rate = expressed in Value of sales (Rs, $)

Profit adjusted retention rate = expressed in Value of profits (Rs. $)

KRISHNA KOPPA 22-24 Batch CRM

2 Retaining existing customers

Is it Customer Retention or Value retention?

Economic advantages of retention

1. Increasing purchases as tenure grows Which customers to retain?

KRISHNA KOPPA 22-24 Batch CRM

2 Retaining existing customers

Types of Strategically Significant Customer

= Customers = Customers that = Customers that = Customers that

KRISHNA KOPPA 22-24 Batch CRM

2 Retaining existing customers

Types of Customer retention strategies

Negative retention Locking customers by - imposing high switching costs

KRISHNA KOPPA 22-24 Batch CRM

2 Retaining existing customers

Types of Customer retention strategies

1 Creating customer delight / pleasantly surprising customers

2 Adding customer-perceived value

3 Creating social and structural bonds

4 Building customer engagement

2 Retaining existing customers

Types of Customer retention strategies

1 Creating customer delight / pleasantly surprising customers

KRISHNA KOPPA 22-24 Batch CRM

2 Retaining existing customers

Types of Customer retention strategies

1 Creating customer delight / pleasantly surprising customers

Basic Qualities Linear Qualities Attractive Qualities