Module II

Module II : Introduction to CRM and its Fundamentals

 Strategic framework of CRM – CRM continuum, Five
generic interrelated process model, Strategic
operational , analytical model, Buttle’s CRM value chain

 CRM Cycle,

 Customer Segmentation as a prerequisite to CRM.

 Types of CRM.

 E-CRM

 Customer Touch points management

• Strategic framework of CRM – CRM
continuum, Five generic interrelated process
model- already done In 1st reading…
 Types of customers
• Based on the unique behavioral attributes,
intensity of satisfaction & dissatisfaction
(attitude), and ability to act on their
satisfaction or dissatisfaction (competitive
market dynamics), customers behave in four
different ways:
• Apostles
• Terrorists/defectors
• Mercenaries
• hostages
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 Types of customers
1.Loyalist and Apostles
– Completely satisfied customer
– Keep returning to company
– Their needs match with companies offering very
well
– Customer experience> customer expectations
– Positive Word Of Mouth

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 Types of customers

2. Defectors and Terrorists

– More than dissatisfied, quite dissatisfied and
Neutral.
– Spread Negative WOM
– Merely satisfied customers also show defection
Ready to switch
– Through service recovery they can be converted
into very satisfied

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 Types of customers

3.The Mercenaries-
– Defies Satisfaction- Loyalty rule
– Maybe completely satisfied but not loyal
– Expensive to acquire, quick to depart
– Chase low prices,
– Pursue Fashion trends
– Buy on Impulse

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 Types of customers

4.The Hostages
– Customers are stuck in virtual Monopoly
– They usually belong to companies operating in
monopolistic environment.
– Or Habitual of particular brand
– Shows inertia in brand switching
– Complain frequently,
– Create low morale with employees

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Customer satisfaction and
Behaviour type
Hostages Possibility of
Loyalist
(expectation <
Terrorists experience)

Who’ve had Bad Experiences

Mercenaries
with the Company (Expensive to Acquire,
& Quick to Depart)
The Company didn’t respond to them.

Competitors’ discounts
Defectors offering or benefits

1 2 3 4 5
Strong dissatisfaction so – so (10~50%)Strong satisfaction

Source :Keki R. Bhote, “Beyond Customer Satisfaction to Customer Loyalty”, 1996

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 Customer Groups
Type Satisfaction Behavior Cost

Loyalist / Staying and

High Low
Apostle Supportive

Defector / Leaving or Left

Low to Medium High
Terrorist Unhappy

Coming and
Mercenary High Medium
Going

Unable to
Hostage Low to Medium Low
Switch
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 Types of customers on basis of
profitability

Butterflies True friends

high
profitab
ility
Low Strangers Barnacles
profitab
ility

Short term
Long term
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 Customer Groupings
Butterflies True Friends
(high profit;short term) High profit- long term
 Milk these accounts 
as long
Invest maximum time and effort
Customer Profitability

as they are active

to serve these customers
 The Key is to recognize
 Communicate frequently,
when to stop investing in the
respond promptly in case of
relationship
issues

Strangers Barnacles
(Low profit-short term) Low profit –long term

 Do not invest in these Analyze the size of potential
customers business
 Maximize the profit on each  Cross sell if potential is large; else
transaction minimize investment

Period of Association
– The Reinartz & Kumar Model
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 Type of relationships
1. price centered relationship -mercenaries go for
best deal in terms of prices
2. Need centered relationship- when personalization
is done, it is with apostles in favorable
circumstances & with defectors in case of service
failure.
3. Value centered relationship- a collaborative
relationship between firm & customer, only with
apostles.
4. Product centered relationship -focuses on delivery
of customized products, services & solutions. Need
to segment precisely. Involve customers in product
designing. with apostles or hostages

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 Types of CRM
• Operational CRM
• Analytical CRM
• Collaborative CRM
• E-CRM allows customers to access company
services electronically
• M-CRM allows customers or managers to
access the systems for instance from a mobile
phone or PDA with internet access, resulting
in high flexibility.

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 1. Operational CRM

• The goal of Operational CRM is to provide

electronic support for the "front office"
business processes, which include all
customer contact (eg. sales, marketing and
service).
• it aims to deliver customer-centric business
processes and operations

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 Business Benefits

• Operational CRM provides the following

benefits:
– Enables a 360-degree view of each customer
– Each employee from sales people to service
engineers can access complete history of all
customer interaction with the organisation
regardless of the initial point of contact
– Delivers personalised and efficient marketing,
sales, and service

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 Components of Operational CRM
• Sales force automation (SFA) automates critical
sales and sales force management functions. It
requires a well designed database in order to store
and retrieve customer details & customer preference
tracking.  

• Enterprise marketing automation (EMA)  provides

information about the business including
Competitors & industry trends.

• Customer service and support (CSS) automates

service requests, Complaints, product returns,
information requests. It includes call-centre support
for customer inquiries also.
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 2.Analytical CRM
• To develop insight into customers’ needs.
• To determine what other products and
services you can sell to your customers in
order to increase the Average Revenue Per
User (customer) ARPU.
• It helps in segmentation of customers to feed
into enterprise marketing (EMA) systems
• Identifies customers in danger of churning
• Aids Decision Making

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 Customer segmentation

It is useful to segment customers for targeted

marketing campaigns:
– Customers most and least likely to repurchase
product)
– Profitability analysis (which customers lead to the
most profit over time)
– Personalisation (the ability to market to individual
customers based on requirements)

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 3. Collaborative CRM
• Collaborative CRM's ultimate goal is to use
information collected from all departments to
improve the quality of customer service
• This requires a clear contact management
strategy which enables everyone in an
organisation to see who is talking to who

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 Business Benefits

• Enables efficient productive customer

interactions across all communications
channels
• Enables web collaboration to reduce customer
service costs
• Integrates call centres enabling multi-channel
personal customer interaction

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 Aim of collaborative CRM
• Collaborative CRM aims to get various
departments within a business, such as sales,
services and marketing, to share the useful
information that they collect from interactions
with customers.
• Feedback from a technical support center, for
example, could be used to inform marketing
about specific services and features requested
by customers.

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 Aim
• Collaborative CRM facilitates interactions with
customers through all channels (personal,
letter, fax, phone, web, e-mail) and supports
co-ordination of employee teams and
channels.
• It is a solution that brings people, processes
and data together so companies can better
serve and retain their customers. E.g.
customers to check in for their flights by SMS

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 CRM Value Chain
CRM value chain identifies five key steps in the
development and implementation of a CRM
strategy :
These five primary stages of the CRM value
chain represent three main sequential
phases of CRM strategy: analysis, resource
development and implementation.
1. customer portfolio analysis,
2. customer intimacy,
3. network development,
 . Customer portfolio analysis
• This involves an analysis of the actual and
potential customer base to identify which
customers you want to serve in the future.
• Top of the list will be strategically significant
customers, including those that will generate
profit (value) in the future.
 Customer intimacy
• you will get to know the identity, profile,
history, requirements, expectations and
preferences of the customers that you have
chosen to serve
• Customer portfolio analysis (CPA) and
customer intimacy (CI) are primarily analytical
activities. CPA involves using customer and
market data to decide which customers to
serve; CI involves getting to understand
customers and their requirements.
 Network development
• you will identify, brief and manage
relationships with your company's network
members.
• These are the organizations and people that
contribute to the creation and delivery of the
value proposition(s) for the chosen customers.
• The network can include external members
such as suppliers, partners and
owners/investors, as well as one important
internal party, employees.
 Value proposition development
• this involves identifying sources of value for
customers and creating a proposition and
experience that meet their requirements,
expectations and preferences.
• Network development and value proposition
development are focused on building or
acquiring resources to create and deliver
value to customers.
 Manage the customer lifecycle
• The customer lifecycle is the customer's
journey from 'suspect' towards 'advocate
status'.
• Managing the customer lifecycle is about
implementing CRM by acquiring and retaining
customers, and developing their value.
• Managing the lifecycle requires attention to
both process and structure: 
- process: how will the company go about the
important processes of customer acquisition,
• These steps are iterative and reflexive. They
are iterative in the sense that the five-step
process is repetitive and continuous.
• It is not a one-time process that leads to a
strategy that is serviceable for ever.
• In a dynamic environment in which
competitors keep improving their value
proposition it is important to review
periodically which customers to serve, what to
serve them and how to deliver the value.
• The process is reflexive in the sense that there
is backwards and forwards interdependence
between the five stages.
• Analysis at stage 1 (customer portfolio
analysis) leads to a decision about which
customers the company will serve.
• This decision determines the composition of
the value proposition (stage 4).
• If the company does not have the
competencies to deliver, either alone or in
partnership with other organizations, the
proposition that customers want, then the