CUSTOMER RELATIONSHIP MANAGEMENT

PRESENTED BY

VISHAKH.S

VIVEK GOPAN

NITIN NAIR

ZAKARIYA. K

• Customer relationship management (CRM) is a system for managing a company's interactions with current and future customers. It often involves using technology to organize, automate and synchronize, sales, marketing, customer service and technical support.

Different Perspectives On Buyer-Seller Relationship

The Economics Of Loyalty

Why loyal customers are more profitable ?

• Acquisition Cost

• Base Profit

• Revenue Growth

• Operating Costs

• Referrals

• Price premium.

A FRAMEWORK FOR CUSTOMER RELATIONSHIP MANAGEMENT

• Means different things to different people

May be salesforce contact software like the ones sold by salesforce.com

May be telephone call centers for contact management

May be loyalty programs

CUSTOMER RELATIONSHIP MANAGEMENT MODEL

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Many companies use CRM as a key source of competitive advantageE.g.: UPS

CREATING THE DATABASE

CUSTOMER CHARACTER-ISTICS

PURCHASEHISTORY

CONTACTS RESPONSE VALUE

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2.

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n

Customer Information File (CIF)• Repository of information about customers• Basis for identifying and targeting current and potential customers• Asses value to the firm of each customer & develop relationship programs –

customized in content and intensity

CUSTOMER INFORMATION FILE

5 AREAS OF CONTENT IN CIF

• Important 3rd

dimension – Time• CIF has to contain

information on these dimensions over time

• Identify customers becoming better and worse

GETTING MORE CUSTOMER INTERACTION

HIGH

LOW

DIRECT INDIRECTIn

tera

ctio

n F

req

uen

cy

Customer Interaction

Upper left quadrant: relatively easy to develop CIF

2 quadrants on the right have to work harder to collect information

CIF – key source of competitive advantage e.g.: UPS

• Companies create special programs and events

e.g.: Kellogg's “EET & ERN”

• Management consultant firms host free seminars in specialized topic areas –information about prospective clients

• Another challenge – Multiple touch points

Acxiom – centralized database

ANALYZING THE DATABASE

• Data mining – segments, purchasing patterns, trends etc.

LIFETIME CUSTOMER VALUE (LCV)

Purchase information + information about profit margin on each product purchase projected profit implication of each customer or row in CIF.

Ultimate goal is to place a monetary value on each customer and make resource allocation decisions

BERGER & NASR, 1998

• Uses available purchase information in the CIF to calculate

each customers cumulative profitability in the past.

Customer Profitability = ∑[∑(P – C) - ∑ MC]

Where

t = the number of past and current rime periods measured

j = the number of products purchased in a time period

k = the number of marketing tools used in a time period

P = Price

C = Cost

MC = cost of marketing tool

t j ki j k

The formula can be used for purposes other than computing profitability:

Increasing P & j by cross selling or upselling

Reducing market cost over time as customer loyalty will increase

Increasing the number of time periods t that the customer is

purchasing.

Gupta & Lehmann, 2003

Margin “multiple”

= r/(1+i-r)

In this formula ‘r’ is the retention rate

‘i’ is the discount rate

Discount rate

RetentionRate

10% 12% 14% 16%

60% 1.20 1.15 1.11 1.07

70% 1.75 1.67 1.59 1.52

80% 2.67 2.50 2.35 2.22

90% 4.50 4.09 3.75 3.46

LCV- CUSTOMER ACQUISITION COST PERSPECTIVE

-100

-50

0

50

100

150

1 2 3 4 5 6 7 8 9 10

Customer Life Cycle Profit Pattern in the Credit Card Industry

Annual profit

AGE OF ACCOUNT( IN YEARS)

Profit – acquisition cost = customer value.

Take into account time value of money

Gives an idea of how much we would spend to retain a customer

Customer Selection

• Customer Profitability Analysis can be used to separate the customer who provide long term value to the firm.

• 80-20 rule

• Helps in decision making:

– Which customer to keep

– How much money to spend on them

Customer Targeting

• After selecting targeted customer

• Direct Marketing approach often referred to as 1 to 1 marketing.

• Special promotion, prices, perks, products and other offers are made through telemarketing, direct mail and personal sales calls

Relationship Marketing Programs

Customer Satisfaction

• Requirements of customer loyalty is satisfaction.

• Customer Satisfaction Model

• Customer Satisfaction Scale

• Customersat.com & Zoomerang.com are customer satisfaction software sold via web.

Customer Satisfaction Model

Customer Satisfaction Scales

Customer Service

• Customer Satisfaction Customer Service

• Level of Customer Service delivered is equivalent to product quality.

• Have to go beyond expectation by offering levels of customer services that competitors cannot match.

• Service Guarantees

• Service Recovery

CUSTOMER LOYALTY

LOYALTY PROGRAMS

• One of the Major trends in marketing is the ubiquity of loyalty programs.

Ex: Frequent-flier programs.

• Technology is changing the way.

• Smart cards- Microprocessor built in to them.

Several issues of Loyalty Programs.

• Making the reward too high.

• Ubiquity.

• What kind of loyal customers are you actually getting?

• Lack of inspiration.

• Lack of communication with customers.

• Insufficient analysis of data.

When Loyalty programs seem to work best

• The programs support and is consistent with the brand value proposition.

• The programs add value to the product or service.

• Lifetime customer value is high.

MASS CUSTOMIZATION

• Customer retention and loyalty are also being affected by a marketing process called mass customization.

• It imparts a feeling that the products was made especially for the customer.

• Most of the attention on mass customization has been in the Manufacturing sector.

Ex: Dell online ordering system.

Four Different Approaches to Mass Customization

• Collaborative Customizers

• Adaptive Customizers

• Cosmetic Customizers

• Transparent Customizers

Commonality: All realize that customers are heterogeneous and want different combination of product features and benefits.

COMMUNITY BUILDING

• The main challenge for marketing managers is to create a sense of affinity to their companies and brands in their customers.

• Share information between the customers and the company.

• Online communities offer real opportunities.