Customer Relationship Management (CRM)

Learning contents
Define CRM
Understand the importance of CRM
Explain the determinants of CRM and the key stages in its
development.
Discuss the various models of CRM.
Stages in the development of a customer relationship
Views of CRM.
Functions of customer relationship management
Potential costs of CRM systems
Discuss the management of customer relationships.
 What is CRM!?
 CRM is basically strategic customer relationship management through
an enterprise-wide, integrative software package. It is a seamless
software implementation which creates Front and Back office
integration. It provides interface integration on many levels, such as
product and service data, order management, and customer service.

 CRM is “the development and maintenance of mutually beneficial,

long-term relationships with strategically significant customers”
 CRM is “an IT enhanced value process, which identifies, develops,,
integrates and focuses the various competencies of the firm to the
‘voice’ of the customer in order to deliver long-term superior,
customer value, at a profit to well identified existing and potential,
customers”.
 Definitive Definition of CRM

A business enterprise, organization, or firm must focus on both getting

and keeping customers. It is the marketer’s job to use the resources of
the entire organization to create, interpret, and maintain the relationship
with the customers.
CMR system is a process to compile information that increases
understanding of how to manage an organization’s relationships with its
customers.
Customer relationship management (CRM) is a business strategy that
uses information technology to provide the enterprise with a
comprehensive, reliable, and integrated view of its customer base so that
all business processes and customer interactions help maintain and
expand mutually beneficial relationships.
 The purposes of CRM

 Creating value for the customer and the company

over the longer term.
 When customers value the customer service that
they receive from suppliers, they are less likely to
look to alternative suppliers for their needs .
 CRM enables organisations to gain ‘competitive
advantage’ over competitors that supply similar
products or services
 CRM Advantages
Smart, long-term customer relationship management will help you establish optimal
customer focus across departments and foster internal departmental collaboration.
Pool the resources of your teams so they can focus on your customers. At the same

time, you get to know your target group better and make more accurate forecasts.
With an optimal linking of processes in marketing, sales and service as well as

personalized interaction, you strengthen customer relationships, promote customer

loyalty and increase satisfaction.
They invest equally in potential new customers and in the long-term maintenance of

existing customer contacts.

The strategic orientation from the very beginning enables better planning. In addition,

you can adapt your CRM system to future developments in your company without
much effort.
The success of your measures becomes measurable and, with the help of intelligent

analyses, can be incorporated into further customer work in order to continuously

improve it.
CRM enables you to interact successfully not only with customers, but also with

colleagues, suppliers, stakeholders and partners.

 The role of Customer Relationship
Management

The role of Customer Relationship Management is to

identify, establish, maintain and enhance relationships with
customers and other stakeholders, at a profit, so that the
objectives of all other parties involved are met, and that this
is done by a mutual exchange and fulfillment of promises.
CRM, at the least, strives to assure customer retention and a
secure customer base to combat competitor activities. CRM
aims to push your business ahead of the game. It achieves
this through proper technological alignment with the
customers and the environment.
 AN OVERVIEW OF CRM CONCEPT DEVELOPMENT:
A Model of CRM: According to Gartner group 1999, the CRM marketing process can be broadly classified
into four
processes.
Fig 1.3.1 A model of CRM given by Gartner group

Marketer Customer Value based Optimization Simulation

Value analysis Segmentation models and test plans

Data Customer Business

marts Value mea-
surement

Informat- Campaign
Campaign
Data ion colle- CRM Manage- Planning
ction ment
warehouse

Customer Content
Interaction
Channel Manage- development
feedback ment

Channel
Management

off to channels Customer Rule driven Action Hands

Management Interaction Triggers selection
 Stages in the development of a Customer
Relationship

The Pre-relationship Stage

The event that triggers a buyer to seek a new business partner.

The Early Stage

Experience is accumulated between the buyer and seller although a great
degree of uncertainty and distance exists.
The Development Stage
Increased levels of transactions lead to a higher degree of commitment and
the distance is reduced to a social exchange.
The Long-term Stage
Characterised by the companies’ mutual importance to each other.

The Final Stage

The interaction between the companies becomes institutionalized.
 Determinants of CRM
In addition to trust and value, salespeople must:

Understand customer needs and problems;

Meet their commitments;

Provide superior after sales support;

Make sure that the customer is always told the truth

(must be honest); and

Have a passionate interest in establishing and retaining a long-

term relationship (e.g., have long-term perspective).
 Functions of Customer Relationship
Management

Direct functions (are the basic requirements of a company that are

necessary to survive in the competitive marketplace)
Profit;
Volume; and
Safeguard

Indirect functions (are the actions necessary to convince the

customer to participate in various marketing activities).
Innovation:
Market;
Scout: and
Access.
Models of Customer Relationship Management
The Evans and Luskin (1994) model for effective
Relationship Marketing

Relationship marketing inputs

•Understanding customer expectations
•Building service partnerships
•Empowering employees
•Total quality management
Relationship marketing outcomes
•Customer Satisfaction
•Customer loyalty
•Quality products
•Increased profitability
Assessment state
•Customer feedback
•Integration
(Evans and Luskin, 1994)
 Models of Customer Relationship Management
The Brock and Barcklay (1999) model of selling
partner relationship effectiveness
Independence

Mutual trust Selling partner

relationship
Cooperation
effectiveness

Relative influence
 Characteristics of Excellent CRM
The following characteristics are associated with
delivery of excellent CRM:
Reliability


Responsiveness
  Properly trained Front Office staff
 Proper data and good use of it
Accessibility


 Proper workflow processes

Safety

 Proper integration of Front Office
Courtesy
 and Back Office
 Proper software to support the
Consideration


strategy
Communication

 Full support of top management
Recognising the customer


Competence

 Views of CRM

Five Views of CRM

 Marketing Automation
 Sales Automation
 Service and Service Fulfillment
 Customer Self-Service
 E-Commerce
 Five Views of CRM

• Marketing Automation
– …designed to get the right mix of the company’s products and
services in front of each customer at the right time.
• Sales Automation
– Collaborative tools that enable all parties to the transaction to
interact with one another
• Service and Service Fulfillment
– Serving existing customer base through problem resolution
systems, workflow automation and field service dispatch systems
 Five views of CRM

• Customer Self-Service
– e-CRM. Capabilities that can be directly invoked by
the customer on the internet via PC and wireless
devices.
• E-Commerce
– capabilities such as shopping, marketplace, transaction
and payment processing, and e-commerce security
 Benefits of Effective CRM
There are significant business benefits which accrue from an
effective, integrated Customer Relationship Management
approach. These include:

reduced costs, because the right things are being done (ie., effective and
efficient operation)

increased customer satisfaction, because they are getting exactly what
they want (ie., exceeding expectations)
ensuring that the focus of the organisation is external


growth in numbers of customers



maximisation of opportunities (eg., increased services, referrals, etc.)



increased access to a source of market and competitor information



highlighting poor operational processes



long term profitability and sustainability


 The Works and Ways

• Sales Force Automation

– Must provide a linking to other relevent IT/Enterprise
systems
• Sales Management
– Must graphically provide management with an overview of
all sales info in real time
• E.g., historical data, back office, sales force performance…
• Marketing Management
– Must organize, execute, track and analyze all campaigns
 The Works and Ways
• Document Management
– Requires Common…
• storage and linking area
• templates for quick document generation
• Tracking and logging of changes
• Sending and Tracking of all customer communication
• Data Management
– Must quickly mine effective data out of system into
hands of decision makers.
• Improves time to reaction
 The Works and Ways
• Project Management
– Must be linked to marketing module for cost and resource tracking
• Knowledge Management
– Must collect, organize, and analyze knowledge about customers
• Action management
• Questionnaires
• Telemarketing Management
– Must have complete tech support
• Customer Self-Service Capabilities
– Must have account insight, detailed inventory information, service
details/status, contact information...at the least.
 Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with
the customer.

Initiating the relationship

Engage in strategic prospecting and qualifying;
Gather and study pre-call information;
Identify buying influences;
Plan the initial sales call;
Demonstrate an understanding of the customer’s needs;
Identify opportunities to build a relationship; and
Illustrate the value of a relationship with the customer
 Managing Customer Relationships
The global salesperson must be involved in the following activities in
order to initiate, develop and enhance the process that is aimed at
building trust and commitment with the customer.
Developing the relationship
Select an appropriate offering;
Customise the relationship;
Link the solutions with the customer’s needs;
Discuss customer concerns;
Summarize the solution to confirm benefits; and
Secure commitment.
 Managing Customer Relationships
The global salesperson must be involved in the following activities
in order to initiate, develop and enhance the process that is aimed at
building trust and commitment with the customer.
Enhancing the relationship

Assess customer satisfaction;

Take action to ensure satisfaction;
Maintain open, two-way communication; and
Work to add value and enhance mutual opportunities.
 Information Technology and CRM

• Technology plays a pivotal role in CRM .

• Technological approaches involving the use of databases, data

mining and one-to-one marketing can assist organisations to
increase customer value and their own profitability

• This type of technology can be used to keep a record of

customers names and contact details in addition to their history
of buying products or using services
 Information Technology and CRM

• This information can be used to target customers in a

personalised way and offer them services to meet their
specific needs
• This personalised communication provides value for the
customer and increases customers loyalty to the
provider
• Phone calls, emails, mobile phone text messages,
Having access to customers contact details and their
service or purchase preferences through databases can
enable organisations to alert customers to new, similar
or alternative services or products
 POTENTIAL BENEFITS OF CRM
SYSTEMS FOR CUSTOMERS

 First, the continuity derived from a relationship with the

same seller simplifies the buying process. Continuity
implies a stable connection or linkage.
 Buyers become regular customers because they want to do
business with organizations that will provide a consistent
level of product or service quality (Hairdressers or barbers
examples).
 In an age when personalization is rare, CRM information
technology is bringing it back. Personalization implies
that the organization knows the customer by name, knows
the customer’s normal purchasing routine, and can forecast
the customer’s need for variety as well
 POTENTIAL COSTS OF CRM SYSTEMS
FOR CUSTOMERS

 For the customer, over the time, the CRM system should increase the value
of the relationship, increase satisfaction, reduce the risk associated with
interactions, and thereby increase the safety and comfort of having needs
met. Customers may benefit from feeling special and enjoy being recognized
as an important entity to the organization.
 Perhaps the most obvious cost of the widespread adoption of CRM systems
by organizations is the inevitable loss of privacy for customers.
 Organizations want to know which people purchase which products in which
colors on which days of the week with which credit card.
 Another intangible cost to the customer of developing a sole-source
relationship with an organization is the opportunity cost associated with
ignoring other offers from competitive sources. If customers take the time to
search, they may find a better price for the same features or find options that
better beet the original need.
 LIFETIME VALUE OF THE
RELATIONSHIP

 Whether the final customer is a business or a household, CRM

systems are formed to facilitate exchanges and interactions over time.
It may be helpful to recall at this early stage of the text that a
customer can be an organization, another supplier, or a household.
 CRM systems represent the logical next step in improving lifetime
value for organizations and customers within the system.
 The lifetime value of the relationship can be simply defined as the
net benefit to each party in an exchange over the length of time that
interactions occur.
 A focus on lifetime value does not ignore the fact that costs accrue,
grow, but rather it emphasizes the need to view the long-term
potential in the exchange.
 LIFETIME VALUE OF
THE RELATIONSHIP

CRM systems may offer customers

better service at more reasonable prices
as well. The basic idea is to have
disparate organizations and people
function with the same ultimate goal-to
satisfy each other as they maximize the
value of exchanges over a lifetime.
 Customer Development Process

5.5 30
 Customer Development Process
1. Suspect: Suspect is everyone who might conceivably buy the product or
service.
2. Prospects: Prospects are those people who have a strong potential interest in
the product and the ability to pay for it. The company rejects the disqualified
prospects because they have poor credit or would be unprofitable.
3. First time customers: The company wants to convert the qualified prospects
into first time customers.
4. Repeat customers: The company wants to convert satisfied first time
customers into repeat customers. First time and repeat customers may also
buy from the competitors.
5. Clients: The company then tries to convert repeat customers into clients.
Clients are those people who buy only from the company.

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 Customer Development Process
6. Advocates: The next step is to convert the
clients into advocates. Advocates are those
people who speak good about the company and
encourage others to buy from it.
7. Partners: The ultimate goal of the company is
to convert advocates into partners. After
reaching this stage, the customer and the
company work actively together.

Some customers may become inactive or may drop

out due to many reasons leading to end of the
relationship. The challenge is to re-activate
dissatisfied customers through customer win
back strategies
 SUMMARY

CRM systems help organizations improve the

profitability of their interactions with current and
potential customers while at the same time making
those interactions safer and friendlier through
individualization and personalization.
The system’s goals are to enhance customer service,
improve customer satisfaction, and ensure customer
retention.