Customer Relationship Management

1. Customer Relationship ManagementThe Quality of Life is the Quality of Your Relationships - Antony Robbins1Explosion of CRM in MarketingAcademics & Practitioners follow CRMConferences, Journals - Specific issuesAssociations & ForumsCenters for CRMIT Solutions: Siebel, E. piphany, Oracle, SAP, Sage CRM, Microsoft Dynamics, Sugar CRM4Objectives to UnderstandThe CRM Explosion Reasons of growth of CRMCriticality of Customer RelationshipWhy business should adopt CRMImplementing CRMEvolution of Customer relationshipsBenefits of CRMTransaction vs. Relationship orientationTheories & thoughts on CRMDefining CRM3RELATIONSHIP IN BUSINESS THEORITICAL PERSPECTIVEI. Social Penetration Theory (Irvin Altman & Dalmas Taylor): Relationship closeness dynamics occurs through a gradual process of self-disclosure. Stages are:Orientation: follow only standards of social desirability & normsExploratory Affective: Start revealing self & personal attitudesAffective Stage: Graduate to private & personal matters. Criticism & arguments riseStable Stage: Maturity . Share personal things & emotional reactionsDe-penetration: Cost > Benefits, withdrawal of disclosures etc.II. Social Exchange Theory: Social change & stability as a process of negotiated exchange on cost-benefit & alternative comparison analysis for greatest profits.Outcome = Benefits CostsSatisfaction = Outcomes Comparison LevelDependence = Outcome Compared level of Options

RELATIONSHIP IN BUSINESSIII. Equity Theory: John Stacey Adams (1965)Relations developed & maintained on distribution proportion of rewards to the costs. Individuals Outcomes Relational partners Outcomes ------------------------------ = ------------------------------------- Individual's own inputs Relational partners inputsRewards < demanded Equity = Dissatisfaction leading to exit relationship

IV. Attraction Theory: Four major factors of attractionAttractiveness (physical appearance & personalityProximityReinforcementSimilarity

STAGES OF RELATIONSHIPRelationship StagesContactInvolvement:Increased contactfrequency Intimacy: Depth of RelationshipDeteriorationREPAIRDissolutionSix Stage Model:(Devito, Joseph 1993)

Relationships development takes time

REBONDMarketers try tounderstand & exploiteach stage ofrelationship forcross-selling &up-selling.TYPES OF RELATIONSHIPRELATIONSHIP: Different Forms & Types Different time & Circumstances

KARYESHU DASI, KARANESHU MANTRI, BHOJESHU MATA, SHYANESHU RAMBHA,ROOPESHU LAKSHMI, KSHAMAYESHU DHARITRI,SATKARMA NARI, KULDHARMA PATNITYPES OF RELATIONSHIPParent ChildTeacher StudentLeader followerComrade-at-armsFellow-enthusiastConfidentIdol to be worshippedCasual FriendSoul mateOld FlameSeek out to escape from monotonySCHOOLS OF THOUGHT ON RMAnglo-Australian Approach: RM as a Confluence of Quality Mgmt, Customer relationship economics & Service marketing concepts.

Nordic Approach: a Confluence of interactive theory, customer relationship economics and service marketing concepts.

North American Approach: Contrast Organizations environment decides the relationship between buyer and seller. Changing Landscape From:To:Product SupplierSolution ProviderMultipliers SupplierFunctional OrientationVertical IntegrationMarket SegmentationSales People as Relationship ManagersCustomer SatisfactionPreferred PartnersValue Chain OrientationOutsourcingCustomer SegmentationCross Functional Teams as Relationship ManagersCustomer Loyalty/commitmentA shift in thinking Transaction Learning relationshipMass Marketing Individual marketingTransaction Value Life time valueConquest Marketing Retention marketingProduct Life Cycle Customer Life CycleCustomer Satisfaction Customer LoyaltyShare of the market Share of the customerProduct differentiation Customer differentiationTransaction vs. Relationship Marketing?DIMENSIONSTRANSACTION MARKETINGRELATIONSHIP MARKETINGFOCUSOne Off ExchangesOngoing ExchangesTIME DIMENSIONShort-term FocusLong Term FocusCOMMUNICATIONMassPersonalFEED-BACK MECAHNISMIsolated Market ResearchOngoing DialogueMARKET SIZEMass /Segmented MarketingPersonalized MarketingSUCCESS CRITERIAMarket ShareMind & Heart ShareCRITICAL MATRIXProfitability of TransactionLife Time Customer ValueEQUITYBrand EquityCustomer EquityEvolution of Customer RelationshipsRelationship OrientationHighLowPre-Industrial EraRelationship centric - Small scaleIndustrial EraProduct Centric Information EraRelationship Centric Large ScaleWhy to Adopt CRMDemand SideRising customer expectationsRising affluence in emerging economiesGreater awareness & media explosionIncreasing customer diversitySupply SideTechnological advancementProduction: CAD/CAM, JIT etc.Distribution: Computer Aided Logistics (CALS)E-commerceEDI for facilitationsDeclining cost of ICT supporting technology led CRM initiativesRevenue Distribution exponential then cost which is linear with customer size15Criticality of CRMNon-traditional competitionNew Entrants from outside the industrySubstitute TechnologySuppliers as competitors - forward integrationBuyers As competitors - backward integrationMarket maturityFrom capacity creation to capacity utilizationGrowth of emerging marketsUnderstanding customers critical to successMaturing markets forcing firms towards customer oriented.Misalignment between revenue & profitsInefficiencies through subsidizationRevenue distribution is exponential then cost which is linear with customer size16Whats a relationship?Can an organization have a relationship with a person?Emphasis on CRM is the notion of a learning relationshipKnowledgeIntentTrustDefining CRMAttracting, maintaining & enhancing customer relationship (Berry, 1983)Establish, maintain & enhance relationships with customers & other partners, at a profit through mutual exchange & fulfillment of promises (Gronroos, 1990)RM puts the customer 1st from (telling & selling) to genuine customer involvement) (communicating & sharing knowledge (McKenna, 1991) CRM: Database marketing (Bickert, 1992)Promotional aspects of marketing ltd. to database effortsCRM: Customer Retention (Vavra,1992) After -marketing efforts for customer bonding & staying in touch with customers after sales is madeCRM: Application of IT to focus on 1 to 1 customer relationship to integrate retention & growth strategy (Peppers & Rogers, 1993)

Defining CRM contdCRM: All marketing activities directed towards establishing, developing & maintaining successful relationships (Morgan & Hunt, 1994)CRM: Establishment, development, maintenance & optimization of a long term mutually valuable relationship between consumer & organization. (CRM UK Ltd. 2000)

Ongoing managing process of cooperation & collaborative activities & programs with immediate & end user customers to create & enhance mutual economic value at reduced costDefining CRM contdCommon: IssuesProcess of interaction over a period of timeCollaborative & cooperative nature of relationship for long-term mutual benefits &Metrics of relationship performance include enhanced value.Management approach of identifying, establishing, maintaining & enhancing lasting relationships with customersCreating a competitive advantage by best understanding, communicating, delivering & developing existing customer relationships, in addition to creating & keeping new customersEnablers/Reasons for CRM GrowthEmergence of Service Economy,GDP Service Sec,: Advanced nations- 80%, India-58%Hotel/airlines/banking/finance/telecom /retailing ...Emergence of Market EconomyDeregulations & reforms in economies & industriesGlobal Orientation of BusinessesIntegration of world economy lowering barriersEmergence of trading blocksAging population of Advanced economies ApolloCriticality of CRMNon-traditional competitionMarket maturityMisalignment between revenue & profits21CRM CYCLEObtain Info. From CustomersCreate Superior Customer ValueBuild Loyal CustomersAcquire New CustomersRaiseProfitabilityCRM CYCLECRM CYCLE - ACURA MODEL ( American Express).AcquireCross - sellUp-sellRetainAdvocacyCRM CYCLESTAKEHOLDERS IN CRM CustomersEmployeesSuppliersPartnersSignificance of CRMPerpetual Source/Stream of RevenuePositive referral CreationProvides PremiumCustomer RetentionLowers Transaction CostsHelps understand CBOpportunities to Cross-sell & Up-sellLowers Marketing timeHelp Rationalize Channel CostsSupports Business Process Re-engineering Six Markets Framework of CRMInternal MarketsReferral MarketsInfluence MarketsRecruitment MarketsSuppliers MarketsCustomer MarketsCRM, Marketing & Relationship Marketing Investment in relationship with various stakeholders is very important. CRM is the domain of relationship management with customers. Industrial Revolution: This is what I make, wont you please buy it? Customer Revolution: This is what I need, Cant you please make it. Companies have to turn from a make & sell philosophy to sense & respond philosophy. Relationship HierarchyShared ValueRelationship

Emotional Connect Relationship

Satisfaction Based Relationship

Transactional Relationship

Cost Mgmt.Operational ExcellenceExperiential Mgmt.Co-partneringValue ChainPremiumBasic MinimumLOYALTY PYRAMIDCommitted Buyer: Champion & Spokespersonfor brand

Likes the Brand:Considers it as a friend

Satisfaction Buyer:No reason to break off relations but will switch on inducements

SWITCHERS: No Feeling for Loyalty

Cost Mgmt.Operational ExcellenceExperiential Mgmt.Co-partneringValue ChainPremiumBasic MinimumNine Truths of Relationship Marketing TRUTH # 1: Customers are no longer loyal. TRUTH # 2: Customers do not really want a relationship but companies do. Your Best Customers Can LeaveYour Marginal Customers Can MoveConsumers Can Become Customers TRUTH # 3: Customers want information. TRUTH # 4: Customers not only want to be thanked for their patronage, they expect it.Nine Truths of Relationship Marketing TRUTH # 5: Customers control the selling process.TRUTH # 6: The Lifetime Value of a customer is not relevant. TRUTH # 7: Do not overcomplicate the program. TRUTH # 8: Keep reporting simple & focused on the customer. TRUTH # 9: WHAT IF? Ask it often. Experiment every chance you get & dont call it testing.Types of CRM Proactive vs. Reactive CRM

Operational, Collaborative and Analytical CRMPersonalizationTypes of CRM Mapped on Degree of PersonalizationResponsive/ ReactiveCustomer Interactive ManagementCustomer Facing Business ProcessesInteractiveProactiveCustomer Data AnalyticsTYPES OF CRMOPERATIONAL

Contact Mgmt ToolChannel Mgmt. ToolContent Mgmt. ToolANALYTICALPattern DiscoveryProduct AnalysisCustomer AnalysisSorting & FractationCustomer Value EvaluationCOLLABORATIVE2 way Interaction throughChannel partnersMid level Info Transformation 1. Operational CRM Front office CRM: Direct Interaction b/w customer & marketer via customer touchpoint (POS, Call centers, web etc.). Face to face touchpoints: Sales/Service/Channel/Events/Stores/Promotions Database driven touchpoints: Telephones/Email/Mail/SMS/Fax/Loyalty Cards/ATMs Mass Media: Advertising/PR/Websites Touchpoints: Any Transaction can take place through these. Functional level managers interact at this stage & process the information to the mid level managers2. Collaborative CRM Two way dialog b/w a company & its customers through a variety of channels (business partners, agents, brokers, intermediaries) to facilitate & improve the quality of customer interactions for maintaining a long term profitable relationship. Performed by Mid level managers & transform the information to Top Level & Decision Makers.

3. Analytical CRM AKA Back-office or Strategic CRM: Understanding customer activities that occurred in the front office. Mass data (using IT) is transformed into business knowledge (behavior patters, preferences, values of customers).Top Level & Decision Makers establish the process & convey the message to the mid & low level managers for implementation.

Attributes of CRMService Quality (Persuraman -1985): satisfaction as function of expectation (E)about perceived performance (PP)PP=>E Satisfied otherwise dissatisfied- Reliability- Responsiveness- Competence- Access- Courtesy- Communication- Credibility- Security- Understanding &- TangiblesClassification of Attributes of Service Organization- Product itself- Psychology relatedUni-dimensional View of CRMIntrinsic (motivators) Factors when PP=E (Satisfaction) : PP< E no satisfactionExtrinsic (maintenance) Factors - When PP E (No Dissatisfaction) CRM Key IssuesShifting Paradigm: from Transactions to RMFocus: Maximizing LCV of target CustomersDevelop & enhance relations with 6 key markets.Quality, Customer Service & Marketing: closely related. Goal of CRMBuild Strong, Long Term & Valuable relationship with chosen customers

EnhancingRetainingSatisfyingAttractingGet closer to these customers at every point of contact with themCRM SUCCESS FACTORSGood Hue (2002)Top Mgmt. Support VisionWillingness to Change Process Willingness to Share DataWilson (2002)Determine the intentAccess the contextDescribe the contentConstruct the intervention processManage the intervention process Siebel (2004)Integration of b/o. processesSoftware customizationCRM strategy CommunicationChen & Chen (2004)Top Management System IntegrationKnowledge Mgmt. Alignment of ITKing & Burgess (2007)Top Mgmt. SupportCRM Strategy CommunicationKM capabilitiesData/Process share willingness Technological readinessCultural/Customer ChangeProcess ChangeSystem Integration capabilitiesBenefits of CRMMarketing Benefits CRM:Information, knowledge customized promotionsProductivity gains: low cost media, improved targeting & higher conversion ratesService Benefits of CRM:96% unhappy customers hardly complain but dont turn up70% of complaining customers if cared timely redo business Each satisfies customer tells to around 6 peopleEach dissatisfied customer tell s to 14 more peopleBenefits of CRM to customers:Satisfaction leads to loyalty, Simplify buying & consuming tasksSimplify information processingReduce perceived risksMaintain cognitive consistency & state of psychological comfortCustomers: profitable over time & varies differentially

CRM Comprehension & Implementation ModelKEY TO RELATIONAL LONGIVITY Conceptual Clarity, Emotional Maturity & Mental StabilityTHERE IS ONLY ONE BOSS THE CUSTOMERWho can fire everyone from the Chairman on down, by simply spending his money somewhere else. .Sam Walton, Founder WAL-MARTOnly those figuratively & literally will survive, who became attached to their customers Tom PetersW/o a doubt, to be successful in future, the game is CRM. If you are successful at CRM game, you are able to acquire more customers & convert them on other products.Success in CRM is the only game in town moving forward George Awad, Sr. VP CRM, GE Capital41CRM COMPREHENSION Typical Service Process Identify Customers comfort levelLeverage TechnologyTrain EmployeesService InnovationEmphasis on sustained CRM practiceSUCCESSCRM COMPREHENSION MODEL 1. MARKETING PROGRAMMEOffers Tangibles & Intangibles (7Ps),Service Delivery, People behaviour,Grievance handling, Customers handling

Customers Evaluation Process2.Customers Expectations3.Perceived PerformanceCUSTOMERS COGNITIVE ABILITY4. COMPETITORSOFFERPP>E Customers SatisfactionRepeat Purchase, Positive Referral, Cross selling & Up selling

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