Upload
augustus-cain
View
216
Download
1
Tags:
Embed Size (px)
Citation preview
SyllabusUNIT I
Customer Relationship Management Fundamentals- Theoretical
perspectives of relationship, Evolution of relationship marketing,
Stages of relationship, Issues of relationship, Purpose of
relationship marketing, Approach towards marketing: A
paradigm shift, Historical Perspectives, CRM Definitions,
Emergence of CRM practice:, CRM cycle, Stakeholders in
CRM, Significance of CRM, Types of CRM, Success Factors in
CRM, CRM Comprehension, CRM Implementation
Theoretical Perspective of RelationshipI Social Penetration Theory:
This theory was formulated by professors Irwin Altman and
Dalmas Taylor.
The social penetration theory states that this
process occurs primarily through self-disclosure
and closeness develops if the participants proceed
in a gradual and orderly fashion from superficial to
intimate levels of exchange as a function of both
immediate and forecast outcomes
Developing Relationship through Social Penetration goes through following stages:
ExampleAn insurance agent does not start the sales
call with immediately starting the benefits of
the policy or need of insurance. Instead, he
first tries to develop some informality by
talking something very general and gradually
moves towards becoming personal in the
number of issue he discusses. It is only after
this that he starts introducing his offer and the
rationale of it.
II. Social Exchange Theory: This theory explains social change and stability as a process of negotiated
exchanges between parties. Social exchange theory states that all human relationships are formed on the basis of a subjective cost-benefit analysis and the comparison of alternatives.
ExampleLot many salespeople visit a customer, but the customer subscribes
only where he thinks he is at the maximum benefit. Similar is the trend observed in many of the services industries as insurance, telecom and tour and travel.
Outcome is defined to be the difference between the benefits and the costs:Outcome = Benefits – Costs
Satisfaction is defined as the difference between the outcome and the comparison level:
Satisfaction = Outcome - Comparison Level Dependence is formalized as the difference between the outcome and the
"comparison level of alternatives":Dependence = Outcome - Comparison Level of Options
III. Equity Theory:
Equity theory was developed in 1963 by John Stacey Adams, who
emphasized that employees seek to maintain equity between the
inputs they bring to a job and the outcome that they receive from it
against the perceived inputs and outcomes of others (Adams, 1965).
Inputs are defined as each participant’s contributions to the
relational exchange and are viewed as entitling him/her to rewards
or costs.
Outputs are defined as the positive and negative consequences that
an individual perceives a participant has incurred as a consequence
of his/her relationship with another.
IV. Attraction Theory:
This theory postulates that one is attracted to others on
the basis of four major factors:
(i) Attractiveness (physical appearance and
personality),
(ii) Proximity
(iii) Reinforcement and
(iv) Similarity
Evolution of relationship marketing
Transaction-based marketingBuyer and Seller exchanges characterized by
limited communications and little or no ongoing relationship between the parties
Relationship marketingDevelopment and maintenance of long-term,
cost-effective relationships with individual customers, suppliers, employees, and other partners for mutual benefit
The Shift from Transaction-Based Marketing to Relationship MarketingShift away from production-oriented
marketingEmphasis on individual sales and
transactionsLimited communicationNo ongoing relationshipLimited in some markets, such as
residential real estate
10
The Shift from Transaction-Based Marketing to Relationship Marketing
Shift toward relationship marketingViews customers as equal partners in
transactionsEncourages long-term relationships,
repeat purchases, and multiple brand purchases from the firm
Leads to increased sales and low marketing costs
11
Relationship MarketingFocuses on long term rather than short term
Emphasizes retaining customers over making
a sale
Ranks customer service as a high priority
Encourages frequent customer contact
Fosters customer commitment with the
firm
Bases customer interactions on cooperation
and trust
12
Elements of Relationship Marketing
• Firms build long-term relationships in four ways– Gather information about their
customers– Analyze the data and use it to
modify the marketing mix– Monitor interactions with
customers– Use customers’ preferences and
knowledge13
Internal Marketing
14
Three Levels of Relationship Marketing
15
First Level: Focus on Price
• Most superficial level, least likely to
lead to long-term relationships
• Marketers rely on pricing to
motivate customers
• Competitors can easily duplicate
pricing benefits
16
Second Level: Social Interactions
• Customer service and
communication are key
factors
• Example: A wine shop
holding a wine-tasting
reception17
Third Level: Interdependent Partnership
• Relationship transformed into structural
changes that ensure partnership and
interdependence between buyer and seller
• Example: Canadian software marketer
Corel chose a cloud-based approach
– Its tech-help agents can now answer customer
queries via chat, telephone, the Web, or social
media
18
THE RELATIONSHIP MARKETING CONTINUUM
• Firms try to move buyer-seller relationship from the lowest to the highest level of the continuum of relationship marketing to strengthen the mutual commitment between them.
How Marketers Keep Customers
Retaining customers is more profitable
than losing them
Customer churn - Customer turnover
Is expensive for a company
Firms generate more profits with each
additional year of a relationship
20
How Marketers Keep Customers
Frequency marketing - Frequent-
buyer or -user marketing programs
that reward customers
Affinity marketing - Solicits
responses from individuals who
share common interests and
activities21
Database MarketingUse of software to analyze data about
customers
Helps firms to:
Identify their most profitable customers
Calculate the lifetime value of each customer’s
business
Build relationships and encourage genuine
brand loyalty
Improve customer retention and referral rates
22
Database Marketing
Reduce marketing and promotion
costs
Boost sales volume per customer or
targeted customer group
Expand loyalty programs
23
Database MarketingPossible sources of data
Credit card applications
Software registration
Product warranties
Point-of-sale register scanners
Customer opinion surveys
Websites
Telecom companies database
24
Database Marketing
25
Grassroots marketing - Connecting
directly with existing and potential
customers through nonmainstream channels
Viral marketing - Satisfied customers
spread the word about products to other
consumers
Buzz marketing - Gathers volunteers to try
products and then relies on them to talk
about their experiences
26
Approach towards Marketing: a Paradigm Shift
Marketing Phase One: Practices in
the agricultural Economy
Marketing Phase Two: Practices in
the Industrial Economy
Marketing Phase Three: Practices in
the Post-industrial Economy
CRM: A Historical Perspective• CRM is often considered as database marketing primarily linking
marketing of the organisation with the database of the customers.
• Some theorists have been considering it as an exercise for customer retention as many theories and studies have been emphasising on the rationale for keeping the customers. This requires a variety of techniques, especially post-sale initiatives, to keep the customers for life. This was believed to be a mechanism to keep the existing customers happy so that they remain with the organisation and may, if possible, generate positive referral for the company's products and services.
• Shani and Chalasani (1992) define relationship marketing as "an integrated effort to identify, maintain and build up a network with individual consumers and to continuously strengthen the network for the mutual benefit of both sides, through interactive, individualised and value-added contacts over a long period of time".
• Similarly, Jackson (1985) applies the individual account concept in industrial markets and sees CRM as, "marketing-oriented towards strong, lasting relationships with individual accounts".
•29
Definition
31
• "Enterprise approach to understanding and influencing customer behaviour through meaningful communications in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability".
(Swift 2001)
• CRM is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and for the customers.
(Sheth and Parvatiyar 2001)
• CRM is considered as “strategic, process oriented, cross-functional and value creating for buyer and seller and a means of achieving superior financial performance”
(Lambert, 2004)
• The practice of CRM is described as the process for achieving a continuing dialogue with customers across all available touch points to offer them customized treatment, based on their expected response to available marketing initiatives, such that the contribution from each customer to overall profitability is maximized.
(Bohling et al., 2006)
•
Based on the understanding available of Customer Relationship Management, it can be defined as ;
“Customer Relationship Management is a
continuously updated process of
identifying relative value of customers
and designing customized company
interaction to delight them so that they
do not just remain with the company
profitably but also be the company’s
ambassador. Full involvement and
empowerment of employees and
appropriate technology are two
essentials for successful CRM.”
The above definition tries to lay the foundation of CRM along with the objective for which it should be designed. The definition implies:
• CRM is a process
• It needs continuous revision and updation.
• Customer value identification is a must
• Company interaction requires customization
suiting to the exclusive profile of the customer.
• It strives for customer delight.
• CRM process aims at Profitable relation with the
customers.
• It also aims to convert them to act as a company’s
brand ambassador.
• Employees involvement and Empowerment is a
must for its successful implementation.
• Adequate technological support is also an essential
for successful CRM.
CRM
Emergence of CRM Practice• Sheth and Parvatiyar (1995) had observed that developing
customer relationship had been there since pre-industrial days.
• The earlier businesses were between the agriculture producers and their customers. They used to have direct interaction.
• Similar was the case with the people of other industies which were primarily cottage-based and have been making other essential items such as cloth and handicrafts. They have offered customised products to the customers.
• Since, in most of these cases, there was direct interaction between the seller and the buyer, some of relationships tend to be built. The indirect form of marketing came only when the concept of mass production started and a mass production society was created. This process separated the production and consumption functions, leading to the emergence of middlemen in the marketing function.
CRM Cycle
The Customer Relationship Management cycle
consists of those stages that conform to the
objectives laid down in its definition. That is,
from acquisition of customers by creating value
to them to learning from the customers, going by
the route of earning profits from them for the
organization on a sustained basis.
Customer life cycle management:
Stakeholders in CRM
There are four principal stakeholders who play a major role in the entire process of Customer Relationship Management:
1. Customers: Customers, of course, are the most important persons in the CRM design for whose delight the whole exercise is conducted.
2. Employees: They are the set of people who execute the CRM design. They include those right from the frontline staff who actually executes to the top management who designs the CRM.
3. Suppliers: They are the part of system who provide input to a company's value chain.
4. Partners: They are the creators of additional value for the customers.
Significance of CRM• Perpetual stream of revenue: A better served and
delighted customer gradually becomes loyal. Once
customer loyalty is built, the customer remains with
the company and proves to be a perpetual source of
revenue and profit often increasing over a period of
time.
• Positive referral creation: A satisfied customer
often spreads positive things about the company to
the would be customers. Such positive opinion proves
to be more reliable and authentic than companies'
propaganda, including advertisements and
consequently, brings in more customers.
• Provides premium: A customer satisfied with
the service of a particular company is found to be
ready to pay a little premium on the
products/services and does not want to take risk
with a new company.
• Helps customer retention: One of the biggest
advantages of CRM is that through personal and
effective customer care and service, it helps the
company keep customers for life. Retaining
customers with the company helps in many ways
and contributes straight away to the
company's bottom line.
• Lowers cost of sale: A satisfied customer does
not require to be lured every time by the company
and, hence, his subsequent acquisition cost to the
company decreases. This helps the company lower
cost of sales.
• Helps understanding consumer behaviour: By
providing personal service to its customers, the
company understands the consumers and can
adapt itself to their changing requirement. This
also helps companies offer a complete set of
personalised solutions to customers.
• Provides opportunity to cross-sell and up-sell: A
satisfied customer is expected to come back to the same
company for repeat purchases. In case of any cross-sell
and up-sell, he again comes back to the same company
and with no extra expense, the company is able to get
him for more products.
• Reduces marketing time: Through positive referrals
and opportu nities to cross-sell and up-sell, the customer
acquisition becomes easier and consequently leads to
reduced marketing time.
CRM Success Factors:
Wilson et al. (2002) described five groups of success factors within
which he identified specific factors for success
1.determine the intent,
2.access the context,
3.describe content,
4.construct intervention process and
5.manage intervention process)
Siebel (2004) found the CRM success factors as:
1.Integration of back office processes
2.software customization,
3.clear communication of the CRM strategy.
CRM Comprehension
Company’s Marketing Program
CustomerCognitive
Ability
Customer Satisfaction
Customer Dissatisfaction
PerceivedPerformance(PP)
Customer Expectation(CE)
Customer Evaluation Process
Negative PublicityLoss in SaleCustomer Dissonance
When PP>CE
When PP<CE
Offers
Physical Facilities
Service Delivery
Employee Behavior
Grievance Handling
In
Input
feedback
feedback
Customer
Company's marketing programme: This consists of five
important determinants of the company's offering, viz. the offer,
tangibles, services delivery, employees and their approach
towards customers and its requirements, and the company's
grievance handling mechanism.
Customer expectation: The expectation created by the company
about the service also plays an important role in satisfaction
determination. If hype is created about the product, customers tend
to expect more and if the expectation is not fulfilled, it leads to
greater dissatisfaction. The same level of service may at one point
in time result into satisfaction but at another point in time may lead
to dissatisfaction. This depends upon what service expectation
level it generates in the minds of the customers.
Perceived performance: This is largely guided by the
customer's cognitive ability. So, it is important for the companies to
realise that the service has got not just to be the best but it has to
be perceived as the best as well. It is this perception of the service
that determines if it would lead to satisfaction or dissatisfaction
Competitors' offers: These play an important role in determining
customer satisfaction. They normally act as a benchmark for measuring
the strength of the offer, i.e. the cost, the service guarantee, the fringe
benefits etc. The growing service level of the competitor also increases
the service expectation of the customer. If it remained at the same
service level it might experience loss of sale not because of its lowering
of services but by the increase in service level of competitors.
Customer's resultant behaviour: Based on the analysis of the
components discussed above, the customer would decide upon his
further behavior regarding the company and its offers. One option
could be that he may become the brand ambassador in addition to
the regular benefit he delivers to the customers, the other extreme
may be that he starts propagating negative publicity about the
company and its offers.
Designing a CRM Implementation Model
The following is the process proposed for effective and
successful implementation of CRM in an organization. The
process goes in the sequence shown in figure below:
48
Designing a CRM. . . Contd. Customer segmentation based on CLV
Customer profiling
Offer customization
Matching service cost and revenue
Employee participation in CRM design
Motivating employees for effective implementation
Making CRM an enterprise wide activity
Adequate technology support for CRM
implementation
Consistency testing of CRM programs
CRM practice evaluation
49
CRM Value ChainCustomer data
Customer information
Customer knowledge
Wisdom to satisfy
CRM Value Chain