Customer

Relationship
Management(CRM)
Overview of CRM

Dr. Chhabi Sinha Chavan

MODULE 1
Marketing Vs. CRM
 Marketing strategy
 How do we take advantage of market
opportunities indicate competitive
threats?
 – Vision, market, position
 – Market definition and audit.
 – Analysis of strength and
weakness opportunities and threats.
 – Target market segments.
 – Objective for each market
segment
 – Penetration, development,
maintenance and productivity.
 – Measures market shares, brand
equity and market penetration
 – Based on product life cycle.
 CRM strategy
 How do we get closer to the customers
to deliver value to them and create
value for us.
 – Vision: customer experience
 – Customer definition and behavior
and requirement audit.
 – Capability analysis.
 – Target customer segments by
value.
 – Objective for each customer
segments, Acquisition, development,
retention and efficiency.
 – Measures: satisfaction, loyalty,
cost to serve and employee
satisfaction.
 – Base on the customer life cycle
Economics of customer
retention

“Winning back a lost customer can cost up to 50-100 times as much as keeping a
current one satisfied.”
Rob Yanker, Partner, McKinsey & Company

Understanding your customer is key to retention…..

Why CRM?
 It costs 6 times more to sell to a new customer than to
sell to an existing one
 A typically dissatisfied customer will tell 8 to 10 people
about his/her experience (mainly related to poor
customer service)
 The odds of selling to a new customer is 15% versus
50% to an existing customer
 70% of the customers complaining will do business
again with the company if the complaints are quickly
addressed
 90% of existing companies do not have integrated CRM
tools and platforms
 Why CRM is a Necessity

 “Some companies can boost profits by almost 100% by retaining just

5% more of their customers.” Harvard Business Review (Reicheld & Sasser)
 A recent McKinsey study showed that the average new customer
spends $24.50 at a given web site in the first 3 months as a shopper.
The average repeat customer spends $52.50 every 3 months.

 Most companies lose 50% of their customers in 5 years (Harvard University)

 On average only 15% of a site’s customers consider themselves loyal
to it. The loyalty rating among people who had experienced a problem
was only 6%. Customers who had not experienced problems indicated
a customer loyalty rating of 19%. The loyalty rating among customers
who had experienced problems but were satisfied with the way they
were handled: 21%. (Digital Idea)

 The web customer is ‘only 1 click away from your competition’.

What is CRM ?
Is it a…
 A strategy
 A process
 A software
 A philosophy
 A project(with clear objectives/fixed
activitiesand established beginning and end
dates
 A programmer
 Call centre support
How is CRM defined?
 As a software package,system or technology
 As data storage and analysis
 As cultural change within the organisation
itself
 As a strategy that focuses on current
customers
CRM Definition
 As a business strategy designed to optimize
profitability,revenue and customer
satisfaction(Gartner)
 As a business strategy that aims to
understand/appreciate,manage and
personalise the needs of an organization’s
current and potential customers(PwC
Consulting)
Continued..
 CRM is a comprehensive strategy and
process of acquiring,retaining and partnering
with selective customers to create superior
value for the customer and the company
(Parvatiyar and Sheth )
Transaction Vs Relationship
Marketing
 TRANSACTION Vs RELATIONSHIP MARKETING
TRANSACTION RELATIONSHIP
 Focus on a single sale Focus on customer retention
 Orientation on product Orientation to customer
Features values
 Short time scale Long time scale
 Little emphasis on customer High customer service
service emphasis
 Moderate customer contact High customer contact
 Value Exchange
Co-partenering
Shared value
Experimental relationship
management
Emotional connect
relationship
Operational Premium
exclusive Basic minimum
Satisfaction based relationship

Management
cost Transactional relationship
INDIAN CRM MARKET
 The CRM Industry, according to ASSOCHAM, was projected at $40
million in 2006 and was growing at an annual rate of 40 per cent.
 The CRM industry is highly fragmented, if we were to divide the CRM
Market players, then you have the ERP Centric, the Specialists, True
CRM players and Point Solution Providers
 The Indian Market in the infancy/growth stage
 Likely to grow despite the slowdown in the economy.
 Industries such as Manufacturing and Distribution are in the infancy
stage of Deploying CRM and may consider solution to address their
departmental requirements.
Continued..
 The Financial Services Industry (Mainly
Banking Insurance and Capital Markets) are
in the growth Phase of CRM deployment.
They are likely to replace their Departmental
or Point solutions by Enterprise CRM’s
 Functional Elements of CRM
Marketing Sales Customer Service
• Market Research • Sales Automation and • Customer Inquiry
Management
• Product Development • Customer product
• Customer Profiling support
• Market Assessment
• Account Management • Customer Information
• Market & Customer Management
• Opportunity Management
Segmentation
• Call Center
• Product Lifecycle • Product, Price, and Effectiveness
Management Contract Negotiation
• Trouble Analysis &
• Product Pricing and • Sales Alignment and Resolution
Profitability Incentives
• Billing

Customer Relationship Management Solutions

• Data Warehouse Management and Decision Support

• Integrated Customer Management Systems
Marketing Functionality
 "Half the money I spend on advertising is wasted; the
trouble is I don't know which half." John
Wanamaker, the department store pioneer, stated in
1886

 A CRM can greatly enhance a company’s marketing

efforts in the areas of :
 Market research
 Price planning
 Product development
 Market assessment
 Customer segmentation
 Product lifecycle
Marketing Functionality
Cont...
 Example: Hewlett-Packard
 Previously, HP sent out mass emails to update
customers on sales offers, new products, technical
support, etc.
 After implementing a CRM, these efforts become
much more customers specific
 85% of customers said they were satisfied with the
content of the emails and additional revenue
increase by $15M
Sales Functionality
 Common functions implemented:
 Provide the sales force with detailed and current
information, such as:
 Buying preferences
 Pricing

 Inventory levels
 Billing information

 Automate the sales processing activities (SFA).

Sales Functionality Cont...
 Example: Empire Blue Cross and Blue Shield
 Extremely complex and highly manual sales process
 33 redundant audit checks and took approximately 27
days
 On-line quote system developed
 Sales processing steps streamlined and automated
Service Functionality
 CRM can be used to capture such things as:
 Customer’s complaint history
 Outstanding customer services requests

 Billing information
 Customer preferences
 Tracking unresolved issues

 Service representatives are much more prepared to

service their customers
Service Functionality Cont...

 Example: Marriott International

 Collect data on customer preferences and spending

 Data shared by all Marriott Hotels nationwide

 Once you check in they already know your smoking
preference, which floor you prefer, any allergies,
complaint history, whether you drink, etc.
Types of CRM
 Operational CRM
 Today, the consumer approaches the business in far many ways than in the
past. Also known as front office CRM involves the areas where direct customer
contact occurs (Dyche 2002).These interactions are referred as customer
touchpoints.
 The customer touch points are classified into:
 Face to face touch points
 Sales/Service/Channel/Events/Stores/Promotions
 Database driven touch points
 Telephones/Email/Mail/SMS/Fax/Loyalty Cards/ATM’s
 Mass Media
 Advertising/PR/Website
Types of CRM
 Collaborative CRM
 Jill Dyche defines Collaborative CRM as a specific
functionality that enables a two way dialog between a
company and its customers through a variety of
channels to facilitate and improve the quality of
customer interactions. (Dyche 2002)
 The mandate of Collaborative CRM is to manage
various partners of the company be it business
partners, agents, brokers, OEM’s, intermediaries like
distributors, dealers, resellers and retailers. By
managing all these partners, it tries to in turn facilitate
the integration of various activities like Marketing,
Sales, Service/Support and quality.
Types of CRM
 Analytical CRM
 Also known as back-office or strategic CRM involves
understanding the customer activities that occurred in the front
office. (Dyche 2002)
 It Involves large amounts of cross-functional data., analyzes data
using data mining and other methods and in turn feeds the result
(knowledge gained) back to operational CRM. It also studies
consumer behavior patterns to help you know the products to
position for cross-selling/up-selling and the level and kind of
service to deliver to meet customer demand.
 Analytical CRM requires technology (to compile and process the
mountains of customer data to facilitate analysis) and new
business processes (to refine customer facing practices to
increase loyalty and profitability).
 Direct Kiosk Web/ E-
Interaction Voice Mail
ATM Chat

Multi-channel synchronization integration

Operational
CRM

Provider Agent Inter-

Direct Brokers mediaries Partners

Distribution Channel synchronization integration

Collaborative Service/
Marketing Sales Support
CRM

Application Integration

Analytical Customer Customer Product

Business activity data data mart data mart
Analytical mart
CRM Intelligence

Customer generic data warehouse

Fig. 2: Operational, Collaborative and Analytical CRM

Types of CRM mapped against
degree of personalization
Proactive

P
E Customer Data analytics
R
S
O
N
A Interactive
L
I
Customer Facing Business Processes
S
A
T
I
O
N Responsive

Customer interaction management

Type of CRM mapped against degree of personalization

Succeeding VS Failing
 Keys to Success
 Managing the data
 Managing the customer
 Business process before implementation
 All levels must buy in
 Flexibility on the company’s side
 Relationship vs database

Source: Rigby, Reichheld and Schefter, “Avoid the Four Perils of CRM ”
Succeeding VS Failing
Cont…
 CRM Mistakes
 Implementing CRM before creating a
customer strategy
 Rolling out CRM before changing your
organization to match
 Assuming that more CRM technology is better
 Stalking, not wooing, customers

Source: Rigby, Reichheld and Schefter, “Avoid the Four Perils of CRM”
Potential Benefits Of CRM
 Customer retention
 Share of customer or share of wallet
 Cross-selling
 Up-selling
Potential Costs Of CRM
 IT infrastructure
 Process change
Benefits Of CRM For Customers

 Continuity
 A contact point
 Personalisation
Steps to improve CRM
1. Build a database
2. Analyse, define types, profitability
3. Customer selection
4. Activities to delight selected customers
- discourage others
5. Analyse again to see how we’re doing
What should be in the database

 Demographics
 How do you get people to provide this?
 History of contacts
 Transaction history or summary
 Response to marketing communications
 How did you hear about us (this offer?)
Behavioral Patterns
 Behavioral patterns
 Consumption channel
 Benefit segments
 Degree of loyalty
 Permission
Analytically Derived Segments

 Analytically derived
 On-line analytical processing (OLAP)
 Customer lifetime value
 Intangible benefits
Advantages of CRM
 While company is quickly growing, customers are more satisfied as
well
 Service provided in a better way, and a quicker way
 Sales force automated
 Integrated customer information
 Certain processes eliminated
 Operation cost cut, and time efficient
 Brand names more quickly established
 A central database so that everyone in your company can keep
track of customer contacts
 Sales and marketing teams can benefit from having all this inside
knowledge about customers
 Lets you set up rules for distributing work throughout your company
 Lets you pick and choose the functionality that you want
 Disadvantages:
-Organizational wise change of priority to customers.
- Significant investment of time and money
- Threatens management’s control/power struggle
- Heightens people’s resistance to change
- Inappropriate integration leads to disaster
BMC “Learning from
Failure”
 BMC Software
 Systems-management software provider
 Based in Texas
 Failed Two Times Before Succeeding

Source: Rigby, Reichheld and Schefter, “Avoid the Four Perils of CRM”
BMC’s Successes
 Recreated the strategy
 Communicated benefits across the company
 Changed the culture not just the process

Source: Rigby, Reichheld and Schefter, “Avoid the Four Perils of CRM”
BMC’s Failures
 No research
 No top-management involvement
 Software would change culture

Source: Rigby, Reichheld and Schefter, “Avoid the Four Perils of CRM”
 Industry Uses
 Airlines
 AA
 Aadvantage Frequent Flyer Program
 Banks
 Barclays
 Realize profitability of customers
 Car Rental Companies
 Enterprise
 ECARS System

Source: Swift, “Accelerating Customer Relationships: Using CRM and Relationship Technologies”
 CRM EXAMPLES IN THE INDIAN
CONTEXT
Future group
 Take Future Group, for instance, which has
a host of brands under its umbrella, including
Pantaloons, Big Bazaar, Food Bazaar,
Central, HomeTown, eZone, Brand Factory
and Future Bazaar.
 Last year, Future Group and Payback, one of
India’s largest and Europe’s most successful
multi-partner loyalty programmes,entered a
strategic tie-up to bring out a dedicated,
single, loyalty card,
 The “one-card-several-benefits” concept now allowed the
company to have “crisper” consumer insight and a better
personality engagement.
 In just 10 months since the PayBack programme began,
the companyhas got 8 million customers.
 Every week since then, the group has added more than

a lakh consumers to its loyalty programmes.

 According to September 2012 data of the
company, almost 45 per cent of the group
level billing has come through customers
engaged in the loyalty programme.
 For Pantaloons, specifically, 70 per cent of

the billing comes from loyalty programme

customers.
 Future Group offers a mix of rewards to
its loyalty programme customers that
include free parking, a separate cash
counter, free home delivery, no fee on
exchange offers, premiere passes for films,
to name a few.
Jet Airways
 In 1994 it announced its JetPrivilege programme.
 It started the tier system for different categories of
members, thus allowing the airline to segment data
collected on the basis of regularity and volume of travel.
 The programme allowed for a unique ‘Dynamic Tier
Review System’, which allowed customers to get
benefits according to travel plans.
 The programme has several partnerships with banks,
hotels, credit card companies, restaurants, retail outlets
and publishing houses to make it appealing to the flier.
Shopper’s Stop
 Last year, about 72 per cent of the total
sales at Shoppers Stop came from loyalty
programme customers
 Shoppers Stop goes as far as categorising

its customers into two groups —those who

own loyalty cards, and with whom the company
communicates, and those who don’t.
 Shoppers Stop has a special app for
smartphone users to help track “personality
types” of its customers to integrate it with the
loyalty programme
MODULE 2
Three phases of CRM
 Acquiring New Relationships
 You acquire new customers by promoting
your company’s product and service
leadership.
 Enhancing Existing Relationships
 You enhance the relationship by
encouraging excellence in cross-selling and
up-selling, thereby deepening and
broadening the relationship.
 Retaining Customer Relationships
 Retention focuses on service adaptability –
delivering not what the market wants but
what customers want.
Managing the customer life
cycle

Acquiring Enhancing Retaining

new customers profitability of existing profitable customers
customers for life
Acquiring new customers
 Promoting the company’s product and
service leadership
 Redefine the companies competitive edge
and innovations
 Offer a superior product backed by an
excellent service
 Example: Browsing on the net, submitting a
request, receiving a phone call
 Model for a sales and service strategy
Enhancing profitability of existing
customers
 Encouraging cross-selling and up-selling
 Cross selling is used by suggesting alternative
products or up-selling by rendering the customer
more informed with the new products and
services.
 Broadening the relationship between the
company and the customers
 Providing a value proposition represented by
offering a greater convenience at low cost
(one-stop-shopping)
 Example: “Best Buy” an electronic retailer with
Retaining profitable customers
for life
 Retention focused on service adaptability
 Delivering not what the market wants but
what the customer wants
 Providing a value proposition that offers a
proactive relationship that works on the best
interest of the customer
 Example: customer retention is becoming a key
competitive strategy for many companies
 Type of customers
and Customer value
Types of customers
 Apostles:
 In most cases, a loyalist is a customer who is completely satisfied
and keeps returning to the company. Within the loyalist camp are
individuals who are so satisfied, whose experience so far exceeds
their expectations, that they share their strong feelings with others.
They are apostles.
 Terrorists/Defectors
 Defector’s ranks include those who are more than dissatisfied, quite
dissatisfied and neutral. The ‘merely satisfied’—many more than
most managers realize, defect too. These could be highly satisfied
customers who have encountered failures. But as articulated
through the service recovery paradox, when a company has strong
processes in place to redress such customers’ needs better, most of
them can be converted into highly satisfied customers.
Continued..
 Mercenaries
 Another customer who can make a company’s life
miserable is the mercenary. This individual defies the
satisfaction-loyalty rule. He may be completely satisfied
but exhibits almost no loyalty. These customers are often
expensive to acquire and quick to depart. They chase
low prices, buy on impulse, pursue fashion trends or
seek change for the sake of change.
 Hostages
 Such customers belong to those companies either who
operate in a monopolistic environment or they are
habituated to a particular brand and demonstrate inertia
in brand switching. Often these customers experience
the worst the company has to offer and must accept it.
HIG Mercenaries
H Happy and content customers who
are not loyal to the company and
tend to shop around and compare.
On a lookout for a better
opportunity.
Apostles
Highly content, loyal customers whose
contact with potential customers is more
valuable than any sales voice.

S
ati
sf
ac
tio
n

Hostages
Disgruntled customers. Due to certain exit
Terrorists/Defectors barriers, unable to change their service
Customers who are disappointed in their provider, though dissatisfied.
business relations with the company and
tell everybody about their bad
experience. Leave the services without
informing, virtually lost.

L
O
W
Linking profitability and loyalty
 High profitability and short term customers (Butterflies)
 Low Profitability and short term customers (Strangers)
 Long term customers and low profitability (Barnacles)
 High profitability and long term customers (True friends)
 Strangers
 – little fit between company’s offerings and customer’s needs
 – lowest profit potential
 Butterflies
 – good fit between customer’s offerings and customer’s needs
 – high profit potential
 Barnacles
 – limited fit between company’s offerings and customer’s needs
 – low profit potential
 True friends
 – good fit between customer’s offerings and customer’s needs
 – highest profit potential
Customer Types
 Platinum Heavy, reliable users, not price-sensitive,
try new products, loyal
 Gold Large users who push for price breaks, shop
around and not so loyal
 Iron Low volume or intermittent users; cost to serve
them is quite high
 Lead Demanding, want special attention but don’t
buy much and show no loyalty
Customer value
 Customer value is the customer’s
perceptions of what they want to happen (i.e.
the consequences) in a specific use situation
with the help of a product or service offering
in order to accomplish a desired
purpose/goal.
■ Tradeoff between benefits
received from offer versus
sacrifices to obtain
goods/services offer

■ Value creation occurs

when product/service and
user interact in particular
use situation

Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY

Customer value
 Another way of understanding different types
of customer value relates to the categories
defined by Kotler (Kotler 1990). These are:
 Product value
 Services value
 Personnel value
 Image value
Consumer’s definition of value

 Low price
 Whatever I want in a product or service
 The Quality I get for the price I pay
 What I get for what I give
Customer value (Defined by
Barnes)
-Choice based value
 Choices created in how customers
 deal with the company,
 how they can pay for their purchases
 how they want them shipped or
 how they receive information
Continued..
 Employee based value
Providing customers with value through their people element as
demonstrated by some companies like South West Airlines.
Max Health Care operates a Mentor Programme. Under this unique
program each patient is assigned a member (may be managers,
non medical people, executives or even doctors) who are the single
contact points for every requirement of the customer (either for
doctor, cleaning, food or may be even for general enquiry). A mentor
acts as the first touch point to the patient for every requirement and
his job is to get the work done.
 Information value
Providing customers with more information can increase value.
Continued..
 Association value
Customers derive value being associated with a certain
service provider with whom they associate positive
attributes or values.Especially true when companies are
perceived as good corporate citizens
 Relationship value
Value created when a firm makes its customers feel
better about dealing with the company. In fact
relationship marketing advocates supplier-customer
interaction and contends maintaining long term
relationships with a focus on customer retention
Continued..
 Customer unique value
This form of value is created for customers when
firms treat them as individuals.
Personalization will enable the inclusion of real-
time data from transactional details – in both
written and telephone communications–and the
ability to purchase preferences. This further
enhances customers’ perception of themselves
as a valuable and individual customer.
Continued..
 Experience value
-Experience is defined as exchange of stimuli,
information and emotions between company and
customer.
-Experiences are built around feelings, emotions,
smells, colours, spaces, sounds, human contact
and branding.
-Experience marketing is incorporating, building
and nurturing experiences and feelings before,
during and after purchase of goods and services
and creating an environment that facilitates this
process.
Example
 At Max New York Life, in order to achieve memorable customer
experience, all critical touch points impacting service experience are
mapped which include
 Agent servicing-Acquisition experience
 Medical tests experience
 Call Centre experience
 Website experience
 Complaint resolution experience
 Policy issuance (Policy pack experience)
 Renewals (Premium notice, payment, receipt) experience
 POS experience
 Refunds experience
 Claims experience
Continued..
 Product-for-price value
This is characterized by customers who equate
value with price and will switch to the
competition for a lower price.
 Access or convenience value

This form of value is created when firms make

it easy for customers to access their products
and services and to deal with them
The S-Q-I-P Approach
Value is a combination of:

-> Service , Quality , Image, Price

■ The service factor must reign supreme in value-

creating organization.

 The S-Q-I-P elements do not exist

independently; they involve tradeoffs
considering the costs of developing and
sustaining a leadership position
The SQIP Diamond
Service

Image VALUE Price

Quality
Value Calculus
Perceived product
or service
attributes

Perceived
substitute product
or service attributes
Perceived benefits
Value =
Perceived price
Perceived product
or service price

Perceived
substitute product
or service price
Value Creation Index
Innovation
Quality
Customer Relations
Management Capabilities
Alliances
Technology
Brand Value
Employee Relations
Environmental & Community Issues
Source: Kalafut, P. and Low, J. (2001) “The Value Creation Index”,
Strategy and Leadership, Vol. 20, No. 5, 9-15. 90
How Southwest Airlines Creates
Superior Value

Clear Service
Focus

Process Recruitment
Mastery and Training

Treat Employees
as Customers

Maverick
Teamwork
Culture
How Starbucks Creates Superior Value

Service
Consistency

Roasting Recruitment
Technology and Training

Create the right

Store Atmosphere

Brand Treat Employees

Consistency as Partners
 CRM and Customer loyalty
Defining customer loyalty
 As a deeply held commitment to rebuy or
repatronize a preferred product/service
consistently in the future thereby causing
repetitive same brand or same brand set
purchasing despite situational influences and
marketing efforts having the potential to
cause switching behaviour
Measuring customer loyalty in
India
 First major attempt in India by IMRB
International to measure customer loyalty
 The findings have been condensed into two
indices — the Customer Experience Index (CEI),
which is reflective of a brand’s performance in its
efforts to delight the customer on product, sales
and service, and true loyalty index (TLI), which
measures customers’ goodwill towards the
brand and their likely behaviour
Continued..
 A final sample of 23,000 successful interviews was
achieved.
 In this phase, metros (Delhi, Mumbai, Chennai,
Bangalore and Kolkata) and non-metros (Ahmedabad,
Pune, Hyderabad, Jaipur and Lucknow) were covered.
 Recruitment criteria were:
SEC A1/A2
18-55 years
Not interviewed for any market research related
purposes in the last three months
Continued..
 Customers answered a structured
questionnaire that covered their entire
relationship with the durable, service and the
company — including specific aspects
relating to purchase experience, dealership,
product features and performance, after-
sales service, complaint management and
resolution as well as an assessment of
overall images of the brand and loyalty
Loyalty based segmentation
 Loyalty Segmentation
Customers can be categorised into four segments, based on their responses to
attitudinal loyalty and behavioural loyalty.
Truly loyal customers are those who are high on attitudinal as well as
behavioural loyalty. These customers not only like dealing with the service
provider but are also highly likely to continue using their services in the near
future. The higher the truly loyal percentage, the better for the organisation.
Accessible customers are those who like dealing with the service provider
but are not very likely to use their services in the future. Customers could be
Accessible for a number of reasons. They may seek better value,
differentiated services with the changing market scenario and intense
competition.
Trapped customers are those who are not happy dealing with the service
provider and yet are forced to continue using the service provider in future
.High risk customers are those who do not like dealing with the service
provider and have decided to switch to another service provider. This tends
to be a lead indicator of future churn.
Customer loyalty
programmes
Aim of a loyalty program
 To create a bigger group of single brand loyal
customers
Types of loyalty program
 Flat as against tier membership
 Number of levels in tier membership
Loyalty programme :
Customer’s perspective
Five elements determine a program ’s value
-Cash value
-Choice of redemption options
-Aspirational value
-Relevance
-Convenience

Louise O’Brien and Charles Jones,

HBR 1995
Components of a loyalty
program
 Admission fee/free
 Points of redemption
 Ease of redemption
 Transferability
 Redemption options( Number of options,
additional points for using more than one
product or service).
Challenges of a loyalty
programme
 Customer is loyal to loyalty programmes
 If customers are already single brand
loyal,the scheme will already be sales
effective if it can induce customers to buy
more of the brand
 This is not easily achieved when so many
single brand loyal buyers are light users.
 Partner companies may also not be unique to
the loyalty programme
 MODULE 3
TECHNOLOGY IN CRM
Key CRM Providers
 PeopleSoft
 Siebel
 SAP
 Oracle
 Convergys
 Leading provider of enterprise applications  Headquarters:
that tie together customers' back-office Pleasanton, CA
operations
 2000 revenue: $1.7 billion
 Software addresses such tasks as accounting,
human resources, manufacturing, and supply  Customers: 4,600
chain management
 Employees: 8,000
 Services such as consulting, maintenance, and Worldwide
training account for about two-thirds of sales
 Customer relationship management software
has rekindled licensing sales growth and
helped offset a slowdown in the broader
enterprise software market, but it has also
exposed PeopleSoft to more direct
competition with companies such as Oracle
and Siebel Systems. (www.hoovers.com)
 World's leading provider of eBusiness  Founded: 1993
applications software  2001 revenue: $2.05
 Provides an integrated family of eBusiness billion
applications software, enabling  2001 net income:
multichannel sales, marketing, and
$255 million
customer service systems to be deployed
over the Web, in call centers, in the field,  Employees: 7,400+
through reseller channels, and across retail
and dealer networks
 Sales and service facilities are located in
more than 32 countries.
 29 Years in the Business of E-Business
 10 Million Users, 44,500 Installations,
1,000 Partners, and 21 Industry
Solutions.
 Founded in 1972 - recognized leader in
providing collaborative e-business
solutions
 Headquartered in Walldorf, Germany
 World's largest inter-enterprise software
company, and the world's third-largest
independent software supplier overall
 Employs over 27,800 people in more
than 50 countries
 2000 Sales (mil.): $5,881
1-Yr. Sales Growth: 14.3%
 2000 Net Inc. (mil.):
$596
1-Yr. Net Inc. Growth:
(1.6%)
 2000 Employees: 24,480
1-Yr. Employee Growth:
12.8%
 World's leading supplier of software  2001 Sales (mil.): $10,860
for information management, and the
world's second largest independent
1-Yr. Sales Growth: 7.2%
software company
 Headquartered in Redwood Shores,
 2001 Net Inc. (mil.):
California $2,561
 First software company to develop and
1-Yr. Net Inc. Growth:
deploy 100 percent Internet-enabled (59.3%)
enterprise software across its entire  2001 Employees: 42,927
product line: database, server,
enterprise business applications, and
1-Yr. Employee Growth:
application development, and decision 3.9%
support tools.
 (CVG) is a provider of Employees: 46,000
outsourced billing and Market Cap (Mil) $ : 5,155.226
customer management Complete Financials: Dec 2001
solutions, which Updated: 04/05/2002
encompass activities Revenues For the FY ended
12/31/01, increased 6% to
such as targeting, $2.32B.
acquiring, serving and Net income decreased 27% to
retaining customers on $138.8M.
behalf of its clients.
Mini-Case Studies
 Began in 1902 , is a market-leading supplier of electrical
distribution, industrial control and automation products
 A new safety switch with the company's new logo, a "D" (for Detroit)
inside a square became the industry standard and many customers
began asking for "the square D switches." The trademark was
developed in 1915 and the name Square D Company was formally
adopted in 1917. To this day, Square D is one of the few companies
ever named by its customers.
 On May 24, 1991, Square D Company merged with Schneider
Electric of Paris, France the world's leading manufacturer of
electrical distribution and industrial control and automation
products and systems, and the only manufacturer dedicated to the
distribution and control of electricity.
(www.squared.com)
 Information

Technology
Web server-enabled equipment for the plant floor
 Equipment, including power monitors and PLCs, can automatically alert
plant officials to emerging problems by audible alarm or e-mail
 Built-in server technology allows plant personnel to remotely monitor,
diagnose and correct equipment problems and remotely change set
points
 E-Way
 Online quote and order management system for distributor network
 Check pricing, stock availability, and obtain shipping information
 Digest Plus Selector
 Online product selection with more than 66,000 part numbers
 Search an electronic version of Square D's catalog based on the electrical
characteristics of the application
 Generates a bill of materials to send to the distributor of choice for
pricing and ordering

(http://www.controleng.com/archives/news/2000/july/gm0720a.htm)
 Information

Technology
An employee Intranet
 Powered by an Infoseek Corp. search engine. The site includes
everything from employee telephone directories to spec-writing tools
and news on customer-segment marketing activities. Employees can
access the site remotely
 Customer Information Center
 Uses sophisticated customer relationship management (CRM)
technology to give technicians instant access to a complete customer
history, and knowledge management and case management tools to
access a database of technical solutions to almost any question
 Links customer service representatives and technical experts around the
country in a virtual technical support center through Soft Phone
technology from Lucent.
 Extended nationwide in late 1999, the CIC now answers more than
13,000 calls each week from customers, distributors and employees.

(http://www.controleng.com/archives/news/2000/july/gm0720a.htm)
 Successful CRM
Implementation
 Began in 1993, after Schneider Electric acquisition
 Reorganized the company’s three basic business units around
customer segments - Industrial, Residential, Construction, and
OEM
 Only after internal systems were refocused on the customer did
Square D start using high-tech applications to upgrade its
customer-facing processes
 According to Chris Curtis, VP of US marketing, managers were
taken out of their line jobs for months at a time to understand
issues involved in implementing the software
 In 1996, $75 million was invested in an order-management
system that let sales engineers create proposals for customers
based on what the factory floor could deliver

(Harvard Business Review - Feb 2002)

• World leader in collaborative (CRM) solutions
that increase customer revenue, profitability, and
customer loyalty
• Transformed how organizations support their
customers, partners and associates at more than
500 organizations representing over 100,000
users.
• Relavis eBusinessStreams - CRM automation
that allows an organization to efficiently and
"A tremendous benefit from using
effectively interact with their customers,
OverQuota is that we are able to use
prospects, partners and internal associates existing infrastructure for workflow
• Received the 2001 IBM Beacon award for communications. We have been
using Lotus Notes in our worldwide
"Greatest Business Impact," and the 2001 Lotus
operations since 1998," said Lee
Beacon Award for "Best eBusiness CRM Chong Leong, telecommunications
Solution." Relavis is honored to have won the manager, Asia Pacific, Schneider-
Beacon Award seven times Electric.
 In 2001 Graybar selected the mySAP.com(R) e-
business platform to run its business systems
applications
 One of the largest ERP projects in U.S. industry
 Will deploy the entire suite of mySAP.com solutions
including
 mySAP(TM) Customer Relationship Management
 mySAP(TM) Supply Chain Management
 mySAP(TM) Human Resources
 mySAP(TM)Enterprise Portals
 mySAP(TM) Business Intelligence
 Graybar’s new platform will run on IBM hardware
 DeLoitte Consulting is assisting in implementation
 A Fortune 500 service provider of wholesale distribution
of electrical and comm/data equipment and integrated
supply services
 Serves contractors, industrial plants, telephone
companies, power utilities and commercial users
 One of the largest employee-owned companies in the US,
with approximately 9,500 employees and 275 stocking
locations
 In business 131 years
 Annual sales in 2001 - $4.7 billion
Graybar plans to go live with “just a sliver of mySAP CRM,” Graybar VP Beatty
D'Alessandro told CRMDaily. “We were advised by our implementation
partner, SAP and other companies in our industry that CRM
implementations can be a bear.”
"We seriously considered both companies," (Siebel) Beatty D'Alessandro, vice
president IT strategy for Graybar Electric, told CRMDaily.com. "But in the
final analysis we bought the whole mySAP suite."
D'alessandro added: "Our feeling was that a completely integrated solution was
preferable to a bolt-on (CRM) strategy."
Another consideration, he added, was that SAP appeared to be committing a
significant amount of corporate resources to its CRM product.
"So, in whatever areas there were perceived inequities between SAP and Siebel,
it was clear to us that SAP was spending the money to catch up with Siebel,"
D'Alessandro said.

(http://www.crmdaily.com/perl/story/16309.html)
Building blocks of
CRM
Gartner
Eight building blocks of CRM
 It help organizations see the big picture,
make their business case and plan their
implementation.
 It provides a template for assessment of
enterprises’ current and required CRM
capabilities, to help understand its current
and future strategy.
1. CRM vision: Leadership, Market Position, Value Proposition

2.CRM strategy: Objectives, Segments, Effective Interactions.

3.Valued customer 4. Organizational collaboration

experience.
-understand requirements
-monitor expectations
-satisfaction versus
competition
-collaboration and feedback
-customer communication
-culture and structure
-customer understanding
-people skills and competencies
-incentives and compensations
-employee communication
-partners and suppliers
5. CRM processes: customer life cycle, knowledge management

6. CRM information: data analysis, one view across channels

7. CRM technology: applications, architectures, infrastructure

8. CRM metrics: value, retention, satisfaction, loyalty, cost to serve.

Block 1 :CRM Vision
 To define for the organization
-the value proposition the company is offering.
-With which customer it wants to have what kind of relationship.
-Importance and benefits of CRM to the enterprise strategy.
-Nature of customer experience to be delivered.

 Vision starts with overall Customer Value Proposition (CVP), which

is supported with appropriate corporate brand values.
 CVP is a unique mix of a supplier’s capabilities that will attract
customers to buy. CVP is a mix of three elements.
 Cost: Dependent on the efficiency of the supplier.
 Product or Service Excellence: Dependent on innovation and
R&D capabilities of the supplier.
 Customer Intimacy: Efficiency/orientation of customer facing
processes/people.
Block 2 : CRM Strategy
 How to interweave with the marketing strategy and provide direction
to other operational objectives, such as IT/HR and Production. CRM
strategy is created by:
 Auditing the current position regarding customer’s value, loyalty and
satisfaction.
 Segmenting customers.
 Setting customer objectives with reference to acquisition, retention
and development.
 Defining metrics for monitoring the execution of the strategy (e.g.
satisfaction, loyalty and cost to serve etc.).
 Authorizing the strategy for the customization by product segment,
pricing, communication, contact channel, customer service and
segment management.
 Specifying the customer infrastructure required (e.g. skills,
organization, IT, analysis and data) to give direction to the other
operational strategies.
Block 3 : Valued Customer
experience
 To constantly assessing value creation from
customer’s point of view require systems and
processes that ensure the customer’s view point
is heard at the highest levels of the enterprise.
 This has to ensure processes and systems
developed and continuously refreshed based on
customer research and collaboration.
 Moving the customer experience up the value
chain at all interface points have to be
institutionalized.
Block 4 : Organizational
Collaboration
 To implement CRM that involves changing internal
processes, organizational structures, compensation
incentives and employees skills and behaviors.
 Change management of this scale needs involvement of
top management through a formal program of initiatives
since change is gradual and it may take years to
achieve. There has to be a sustaining framework to carry
this through.
 Suppliers and business partners are co-producers along
with the organization and have to be brought into the
shared vision.
Block 5 :CRM Processes
 Processes are required to
 Manage the customer life cycle.
 Create customer insight and leveraging the
same.
 Leverage intellectual assets of the organization
by a knowledge management framework.
 Effort is required to convert vertical functional
oriented processes and metrics to a horizontal
‘customer experience’ aligned process and
measurement system.
Block 6 : CRM Information
 Customer information has to be acquired,
stored, analyzed, distributed and applied
throughout the enterprise, business partners and
suppliers.
 It is important to consider what customer data is
required to support the desired insight
(analytics) and interactions (operational)
processes. Operational system data flows into
the analytical systems and processed data
needs to feedback the operational systems for
helping drive customer interactions.
Block 7 : CRM Technology
 CRM technology is deployed to enable necessary analytical insights
and facilitate operational interactions.
 From a fragmented technology base to achieve integration across
channels and business units an agreed architectural approach is
needed with policies and standards for sourcing application. What
performance, security and availability standards they should have,
how they should inter-operate and how and when they should be
refreshed.
 Consistency in the underlying hardware, software, networking and
telephony infrastructure is also required to aid integration, skills
management and commercial management.
 Integration is key within CRM applications, whether they are bought
or built. Integration is also important with non-CRM application,
financial system, supply chain management systems, legacy
systems and possibly business partner systems
Block 8 : CRM Metrices
 Measurable, specific CRM objectives and
indicators have to be set. These provide an
indicator of the level of service but also provide
the feedback mechanism for continuous
development of strategy and tactics.
 They have to be used to drive the change
management and link it to employee incentives
on CRM objective achievements.
Levels of Relationship
Strategies
Four levels of bonds
 Berry and Parasuraman (1991) have identified four levels of bonds,
 
 Financial Bonds: Volume and Frequency rewards, Bundle and
Cross selling, and Stable pricing,
 
 Social Bonds: Personal relationships, Continuous relationships and
Social Bonds among customers,
 
 Customization Bonds: Customer intimacy, Mass Customization
and Anticipation / Innovation,
 
 Structural Bonds: Integrated information systems, Joint
Investments, and Shared Processes and Equipment.  
Level 1 : Financial Bonds
 The financial bonds tie in the customer primarily through financial incentives, lower prices for
volumes or for customers who have been patronizing the firm over time.
Bundle and cross selling is seen in the case of magazine subscriptions, credit cards, telecom and
internet services in which customers can buy other services provided by the same provider or
someone else at a lower cost.
Companies also offer the assurance of stable prices or lower price increase than those paid by
new customers to retain their customers.

Examples

-Frequent flyer programs, rewards program of hotels and credit cards are examples of financial
bonding through volume and frequency rewards.

-The option of earning a higher interest rate given to ICICI Bond holders, whose bonds were getting
redeemed, if they invested the redemption amount in a fixed deposit is an example of stable
prices in a situation where the interest rates were going down.

Disadvantage

One of the biggest disadvantages of the financial bonds is that they can be easily imitated. Also,
it attracts a lot of price sensitive customers who switch to a cheaper option at the first opportunity.
Thus financial bonds are the weakest bonds.
Level 2 :-Social Bonds
 Marketers build social bonds with customers by viewing them as 'clients' who are not
merely nameless faces. They find ways to keep in touch with them and interact with
them to find their changing needs and offer solutions.
Continuous relationships are provided to customers when companies have stable,
long standing dealers who bring in the local market knowledge and maintain close
relationships with customers
Examples
 In several cases, social bonding develops among the customers instead of
relationship between the company and the customer. This can happen in services
where customers interact with each other e.g. a club, gym, library, etc.
 It can also be facilitated by the marketers like the Harley Davidson Owners' Club or
similar attempts by Hero Honda’s passport programme in India.
 Airtel's 'Friends and Family' rewards program also creates a kind of social bonding in
addition to the financial reward which the customer gets. These clubs create
opportunities for sharing common interests and activities that bring the customers
together and keep them from switching.
Social bonds are relatively more difficult to break and hence enduring.
Level 3 - Customisation
Bonds
  Intimate knowledge of customers and their needs developed through a
learning relationship is very useful in retaining valuable customers.
Customer intimacy connotes that the customer is actively sharing
information during interactions and contributing in the marketer's endeavour
to customize the products, services or any aspect of the marketing mix.
 Every member of the organisation uses each opportunity of interaction to
learn new things about the customer and add to the organisational
knowledge of the customer.

Examples
 Marriott Hotels knows the likes, dislikes and special habits of its over 5
million customers. This information is shared across its hotels worldwide. If
you have stayed at Marriott Delhi and are visiting Singapore with a
reservation at the Marriott, the receptionist will surprise you with your
favourite welcome drink. She may also give you your favoured room with a
view of the swimming pool ! This information came from the data keyed in
by the employees when you stayed at Marriott Delhi.
 MyCNN.com or MyBBC.com are examples of information services provided
over the internet which help the surfers customize the services to meet their
specific requirements
Level 4 –Structural Bonds
 Created by providing services to the client that
are frequently designed right into the service
delivery system for that client
 It includes

-Shared processes and equipment

-Joint investments
-Integrated information systems

 Structural bonds are the strongest bonds and

hence the most difficult to break.  
Continued..
Examples

  The partnership between Wal Mart and Procter & Gamble

described earlier is an example of structural bonding through
integrated information systems, joint investments and shared
processes.

P & G designed a system to gather electronic point of sale from

every cash register of WALMART.It then fed this information back in
virtual real time to the retailer & their suppliers to ensure stores have
the right stock on their shelves.
Cooperation between the buyer and the seller is aimed at producing
desirable results for both firms. For instance P&G actually manages
WalMart’s inventory of P&G products and it is P&G’s responsibility
to decide when Wal-Mart requires shipments. To do this, P&G has
complete access to Wal-Mart’s inventory. This arrangement is
beneficial for both parties and the benefits are passed on to the
consumer. WalMart can charge less because it does not have the
cost of tracking or storing inventory, while P&G has a much bigger
share of business and it does not have to compete with other
 APPLICATION OF CRM TECHNOLOGY IN
INDIAN CONTEXT

 Case of Domino Pizza

 Case of Yes Bank
Customer life cycle
Business Processes
 Organized around the Cust. Life Cycle
Business Processes -
Acquisition
 Acquisition is the process of attracting
prospects & turning them into customers
 Who are the prospects?
 Geographic expansion
 Product, service, pricing changes
 Competition changes
 Data Mining helps ID prospects
Business Processes -
Activation
 Filling out registration form (simple)
 Include credit check, reference checks,
transcripts, notary service, etc. (more
involved)
 Include physical exams (most involved)

 Next slide…
Business Processes –
Relationship Management

 Goal: Increase customer’s value to us

 Up-Selling – premium products & services
 Cross-Selling – other products & services
 Usage Stimulation – come back for more!!!
 Be careful with this
 Web-based communication (spam)
Business Processes - Retention
 Survival Analysis (Ch. 12)
 Churn Analysis Forcasting Engine
Business Processes - Winback
 Understand why customers leave
 Bring back valuable customers
 Incentives
 Product promotions
 Pricing promotions
 Utilize “save” teams to focus on this
Dimensions of Customer
lifetime value

 The duration of the ‘customer lifetime.’

 The firm’s share of wallet among its customers,
i.e. what portions of the customer’s purchases in
the firm’s offering categories are captured by the
firm as opposed to its competitors.
 The firm’s success in frequency, up and cross
selling to its customers so as to increase the
levels and monetary value of their purchases
over time
 The firm’s costs of acquiring, serving, selling to
and retaining its customers
What should make a
successful CLTV Method?
 Connect with overall strategy of the business.
 It should link with the loyalty that the company seeks to bring in.
 Referrals must be part of the component of the CLTV (True
Loyalty).
 Constant rate of retention and discount not feasible.
 Risk rate also to be associated.
 Dynamics of the different sector must be incorporated e.g.
Automobile from Airlines.
 Highly volatile sectors such as financial services and online
companies would have to have truly customized CLTV.
 It should link with Loyalty program
Calculating LTV
 Simply put then, the LTV of any given
customer can be expressed as:
 LTV = total revenues – (fixed costs +
variables costs).
Continued..
 CLV = Average transaction value * Frequency
of purchase * customer life expectancy
 Link between the customer retention rate and
the average customer lifetime
 Average customer lifetime (years)
 = 1/ 1-retention rate
 e.g. If the customer retention rate is 90 per cent
per annum (meaning that we lose 10 percent of
our existing customer base each year), then the
average customer lifetime will be ten years
CLTV using referrals
 Customer Lifetime Value (simplified formula)
 CLTV = D[(Rt-Ct)+Rf(Ac-Acr)]/(1+r)-AC
 Source : Edgar, Dunn & Company
 Where:
 t = Year
 Rf = Number of referrals generated by customer each year
 n = Length of customer relationship Ac = Full acquisition costs (for new
customers)
 D = Customer retention rate
 Acr = Reduced acquisition costs (for existing customers)
 R = Revenues earned from customer in year t
 r = Discount rate
 C1 = Cost of servicing customer in year t
 It is important to note that some of these variables – such as revenues
earned and acquisition costs are easily calculable and absolute, based on
historical data. However, others – such as average numberof referrals
generated each year – are less definite and may need to be estimated.
CLTV (Without referrals)
(a-1) a N
CLV = {(M a - Ca )r /(1 + i) } - AC
 a =1
Where
 N = the no. of years over which the relationship is calculated
 Ma = the margin the customer generates in year a
 Ca = the cost of marketing communications or promotions
targeted to the customer in year a
 r = the retention rate (r(a-1) is the survival rate for year a)
 i = the interest rate
 AC = the acquisition cost
 
Continued..
 The second approach which is the further simplification of the LTV formula
as developed by Prof. Sunil Gupta of Columbia Business School is done as
follows:
CLTV=m(r/1+i-r)
 Where
 M = margin or contribution for each customer in a given time period ,
 i = discount rate and r = retention rate
 Factor r/(1+i-r ) is the ‘margin multiple.’ This approach also suffers from a
drawback in that this approach is most suitable for developed countries
where the economy has a fixed ground. In a country like India where the
market is on rise the changes have to be incorporated very frequently. Also
the other drawback remains in terms of not accounting for referrals and the
contribution made by them. Nevertheless, in the absence of very organized
data management systems, this can be considered as the starting point for
calculating customer lifetime value.