What is CRM?

CRM – Customer Relationship Management is a system for coordinating the business strategies, organisational structure and culture of companies with customer information and IT in order to satisfy customer needs at every contact and thus achieve business advantages and profit.

Microenv. enablers of CRM

Rapid technological developmentAdoption – TQMEmpowerment of teams & individualsCustomer retention - due to intensity of

competitionGrowth of service

Evolution of CRM

Relationship

Pre Industrial

Industrial Era

Information Era

High

1. evolution CRM – Advances in Tech

• Customer needs thru manufacturing, delivery & customer service

• Mass marketing – reduced costs all but marketing

• Lack of effective and interactive modes of customer contact

• Lack of Consolidated information

2. evolution CRM – Intensive Competition

• Profitable to retain existing customer• Costs upto 6-8 times to attract new

customer• Satisfying their needs

3. evolution CRM – Growing Importance of Service Sector

• Service Sector contributes over 2/3 to the GDP.

• Direct interaction between marketer and buyer

• Better understanding

4. evolution CRM – TQM programmes

• Quality products – work closely with customers

• Demanding customers for high quality work – competitive advantage (not replicated)

1. Benefits of CRM

Customers are profitable over period of timeInitial acquisition cost exceeds gross margin while retention costs are lower(1% increase in sales – existing customer – profit increase 17%; new customer 3%)

Probability of selling to new prospect 15%, existing customer – 50%

Source: Bain & Co

2. Benefits of CRM

Customer profitability is skewed

• Top 20% customers contribute 150% profits bottom 60% just break even

• Programs developed to retain and build stronger bonds with top 20%

• Analysing – shift from bottom to potential

3. Benefits of CRM

Marketing Benefits• Gradually reduce dependence on periodic surveys• Customised promotions – no wasteful mass

promotions• Customer centric products

4. Benefits of CRM

Service Benefits of CRM

• Customers don’t complain they go elsewhere• Customers patronise a brand as long as they are being

serviced

Trust and Commitment

TrustWillingness to rely on an exchange partner in whom one has confidence

• Honesty• Competency• Overcome insecurity and doubt• Rational in nature

CommitmentEnduring desire to maintain a valued relationship

• Personal – will to continue the relationship

• Moral – sense of obligation• Structural – no escaping from this

• Psychological concept because of social environment

• Emotions

Relationship Steps•Aware of each other•Exploration or sounding out•Growth Phase•Commitment or Saturation•Decline

Conventional marketing

Absence of stiff competitionPrice pressure was lessInformation dissemination process was not

in place

retention

acquisition

Functional marketing Cross functional marketing

transactional

relationship

Transactional vs RelationalTransactionMarketing

RelationshipMarketing

One off exchange Focus Ongoing exchanges

Brand Management Customer Management

Short term focus Time perspective Long term focus

Isolated Markets Customer feedback Ongoing dialogue

Market Share Market Size Market of one

Profitability of transaction

Central Metrics Lifetime value of customer

Brand equity Customer equity

Transactional vs RelationalTransactional Relationship

Importance of Employees

Low High

Internal Marketing importance

Low Relatively high

Intensity of contact Interpersonal; High Impersonal; Low4P 7P

Levels of Marketing

Price Preference based

Feelings based – Birthday, Recognition

Structure oriented – value policies & systems are changed. Individual is not important

Schools of Thought

• Anglo Australian Approach

• North American Approach

• Nordic Approach

Anglo Australian Approach

Relationship Marketing

Services Mktg

Customer relationship

Quality Management

Nordic Approach

Relationship Marketing

Services Mktg

Customer Relationship Economics

Interactive network theory

North American Approach

Organisation Environment

BuyerRelationship Manager

Six markets Framework

Internal Markets

Supplier Market

Recruitment Market Influence Market

Referral MarketCustomer Markets