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