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Customer Relationship
Management
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What is Customer Relationship Management(CRM)?
The approach ofidentifying, establishing,
maintaining, and
enhancing lasting
relationships with
customers.
The formation ofbondsbetween a company and
its customers.
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Benefits of CRM
Quality and Efficiency
Decrease in Overall Costs
Decision Support
Customer Attention Increase Profitability
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Reasons of CRM
Three Key Phases: Customer Acquisition
Customer Retention
Customer Extension
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Four Stages of Brand Loyalty in a
Consumer
Cognitive loyalty perception from brand
attribute information that one brand is preferable
to its alternatives
Affective loyalty developing a liking for the
brand based on cumulatively satisfying usage
occasions
Conative loyalty commitment to rebuying thesame brand
Action loyalty exhibiting consistent repurchase
behavior
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Customer-Firm Relationship
Database Marketing: Involves the use of technology by delivering
differentiated service levels to consumers and subsequentlytracking the relationship.
Interaction Marketing: Usually in B2B context where people and
the social process also add mutually beneficial value.
Network Marketing: Common in B2B context where companies
commit resources to develop positions in a network of
relationships with the stakeholders and relevant agencies.
Todays marketers seek to develop long-term relationshipswith customers. Relationship marketing includes:
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Types of Relationships with
Customers (Table 12.1)
Type of Relationship--Firm and
Customer
Nature ofService Delivery
Membership No formal relationship
Continuous Cable TV Radio station
Insurance Police
College enrollment Lighthouse
Discrete transactions Subscriber phone Pay phone
Theater subscription Movie theater
Warranty repair Public transport
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What Makes Loyal Customers
More Profitable? Tend to spend more as relationship develops
customers balances may grow
may consolidate purchases to one supplier
Cost less to serve less need for information and assistance
make fewer mistakes
Recommend new customers to firm (act asunpaid sales people)
Trust leads to willingness to pay regular prices
vs. shopping for discounts
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Basic Segmentation Issues:
Building an Appropriate Customer Portfolio
Target customers whose needs match firms
capabilities
Focus on value of prospective customerswithin each segment, not justnumbers
Avoid targeting customers who might abuse:
our employees, facilities other customers
Create a mix of segments to reduce risks of
volatility during swings of economic cycles
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Service-Relevant Segmentation
Variables
Timing of service use (e.g., by hour, day,
season)
Level of skill and experience as co-
producer/self-server
Preferred language in face-to-face contact
Access to electronic delivery systems (e.g.,
Internet)
Attitudes toward use of new service
technologies
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Identifying and Selecting Target
Segments
User characteristics demographics
psychographics
geographic location
benefits sought
User behavior
when, where, how services used
quantity/value of purchases frequency of use
profitability of relationship
sensitivity to marketing variables
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Portfolio of Professional Assignments
Analyt ical Work on Project Data
Bread and Butter Projects
Signif icant Projects
Pacesetters
Major, State-of-the-art challenges for the firms
principals that give the firm high visibility
Demanding client assignments offering a
learning experience for the firms most
experienced associates
Routine client projects shared
among principals and associates
Entry-level tasks for new
associates or for research
assistants & paraprofessionals
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The Customer Pyramid (Fig. 12.5)
Lead
Iron
Gold
Which segment sees high value in
our offer, spends more with us over
time, costs less to maintain, and
spreads positive word-of-mouth?
Which segment costs us in time,
effort and money, yet does not
provide the return we want?
Which segment is difficult to dobusiness with?
Platinum
Good RelationshipCustomers
Poor Relationship
Customers
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How Customers See Relational Benefits in
Service Industries
Confidence benefits
less risk of something going wrong, less anxiety
ability to trust provider
know what to expect
get firms best service level
Social benefits
mutual recognition, known by name
friendship, enjoyment of social aspects
Special treatment benefits
better prices, discounts, special deals unavailable to others
extra services
higher priority with waits, faster service
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The Customer Satisfaction-Loyalty
Relationship (Fig. 12.6)
0
20
40
60
80
100
1 2 3 4 5
Loyalty(Reten
tion)
Very
dissatisfied Dissatisfied
Neither
satisfied
nordissatisfiedSatisfied
Very
Satisfied
Satisfaction
Near Apos t le
Zone of Defect ion
Zone of Ind if ference
Zone of Affect ion
Terrorist
Apos t le
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The Wheel of Loyalty (Fig. 12.7)1. Bui ld a
Foundat ion
for Loyalty
2. Create Loy altyBonds
3. Reduce
Churn Drivers
Customer
Loyal ty
Be selective in acquisition
Conduct churn diagnosticSegment the market
Use effective tiering
of service.
Deliver quality
service.
Deepen the
relationshipGive loyalty
rewards
Build higher
level bonds
Implement complainthandling & service
recovery
Address key churn drivers
Increase switching
costs
Enabled through:
Frontline staff
Account
managers
Membership
programs
CRM
Systems
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Drivers of Service Switching
Service
Switching
Service Encounter Failures Uncaring
Impolite
Unresponsive
Unknowledgeable
Response to Service Failure Negative Response
No Response Reluctant Response
Pricing High Price
Price Increases
Unfair Pricing
Deceptive Pricing
Inconvenience Location/Hours
Wait for Appointment
Wait for Service
Competition
Found Better Service
Ethical Problems Cheat
Hard Sell
Involuntary Switching Customer Moved
Provider Closed
Value Proposition
Others
Service Failure / Recovery
Core Service Failure Service Mistakes
Billing Errors
Service Catastrophe
Unsafe
Conflict of Interest
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Common CRM Applications
Signifies the whole process by which relationshipswith customers are built and maintained.
CRM as an enabler, offering a unified customer
interface and allow firms to better understand andsegment the customers etc. Applications include:
Data collection
Data analysis
Sales force automation
Marketing automation
Call center automation
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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 atbuilding 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 customers needs;
Identify opportunities to build a relationship; and
Illustrate the value of a relationship with the customer
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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 atbuilding trust and commitment with the customer.
Developing the relationship
Select an appropriate offering;
Customise the relationship;
Link the solutions with the customers needs;
Discuss customer concerns;
Summarize the solution to confirm benefits; and
Secure commitment.
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Managing Customer Relationships
The global salesperson must be involved in the following activities inorder to initiate, develop and enhance the process that is aimed atbuilding 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 enhancemutual opportunities.
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The customer perception
Keys to changing customer perception
Develop customer profile
Look at your business with customer
perspective Be aware of over promising (Avoid if not
necessary)
Do not cheat your customer - Just to sell the
Product Your Image Representing Your company
Problem great opportunity to win a customer
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