BA 7015 CUSTOMER RELATIONSHIP MANAGEMENT

UNIT I INTRODUCTION
Definitions - Concepts and Context of relationship Management – Evolution - Transactional
Vs Relationship Approach – CRM as a strategic marketing tool – CRM significance to the
stakeholders.

Table of contents

1.1 What Is Customer Relationship Management? ................................................................................ 2

1.1.1.CRM - Why is it important?............................................................................................................ 3
1.1.2.Understanding Customer Relationship Management (CRM)? ...................................................... 4
1.1.3.Determinants of CRM .................................................................................................................... 4
1.1.4. Definitions of customer relationship management ...................................................................... 5
1.1.5.Stages in the development of a Customer Relationship ............................................................... 5
1.2.Concept and Context of Customer Relationship Management ........................................................ 6
1.2.1.CRM is about Strategy.................................................................................................................... 6
1.2.2. Designing CRM strategy ................................................................................................................ 6
1.2.3. What motivates companies to adopt CRM Strategies .................................................................. 7
1.2.4. CRM, Marketing and Relationship Marketing............................................................................. 10
1.2.5. Types of Customer Relationship Management........................................................................... 11
1.3. Evolution of Relationship Management ........................................................................................ 16
1.3.1. Left Hand, Meet Right Hand ....................................................................................................... 18
1.3.2. The Next Evolutionary Step ........................................................................................................ 20
1.4. Transactional Vs Relationship approach ........................................................................................ 21
1.4.1. Relationship Marketing Vs Transactional Marketing .................................................................. 21
1.4.2. Benefits of Relationship marketing over transactional marketing ............................................. 22
1.4.3. Trend towards Relationship Marketing ...................................................................................... 23
1.5. CRM as a strategic marketing tool ................................................................................................. 24
1.5.1. Pivotal Role of Customer Relationship Management ................................................................. 24
1.5.2. The Steps in Developing a CRM Strategy .................................................................................... 25
1.5.3. CRM and Value Chain Strategy ................................................................................................... 27
1.6. Stakeholder Value Returned from the Benefits of CRM ................................................................ 28
1.6.1. The business owner(s) ................................................................................................................ 28
1.6.2. The Sales People ................................................................................................................. 28

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Definition

“Customer Relationship Management is a comprehensive strategy and process of

acquiring, retaining and partnering with selective customers to create superior value for
the company and the customer.”

- Parvatiyar and Sheth

“Customer relationship management is about attracting, developing, maintaining and

retaining profitable customers over a period of time.”

- Massey, Montoya-Weiss & Holcom

1.1 What Is Customer Relationship Management? (2 mark)

Customer Relationship Management (CRM) encompasses activities and processes intended

to help an organization understand, communicate with, and service the needs of, customers
and prospects. The main driver for CRM is the underlying philosophy that successful
customer engagement, and therefore successful business, is based on the ability to build
‗meaningful relationships‘ with customers.

Of course, different companies have very different ideas about what a meaningful
relationship is. Nike doesn‘t know the names of all their millions of customers, but they have
a very good idea of their preferences across different market segmentations. They probably
also know a lot about shoe size distribution curves in different countries around the world.
They don‘t call people up and try to sell them a pair of shoes. They engage through mass
market media, and measure consumer responses to different marketing campaigns. On the
other hand a company that sells expensive sports cars to the super rich is likely to have strong
personal relationships with each individual customer, and not just related to the cars they buy,
built up through face to face interaction. CRM helps a business understand who their
customers are, how they like to interact with the company, how profitable they are, and what
their future value might be. In this way it helps an organization make critical decisions about
how to do business, such as what new products or services they should be developing, and
what sales and marketing channels they should invest in, or discard.

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Customer Relationship Management (CRM) is a business strategy that enables:

 Organizations to get closer with their customers,

 To better serve their needs,
 Improve customer service to enhance customer satisfaction, thereby maximizing
customer loyalty and retention.

Effective CRM therefore is about gathering information about customers, then analyzing and
interpreting it.

1.1.1.CRM - Why is it important?

CRM is the array of processes that help a company to understand the preferences or dislikes
of individual customers in order to build lasting relationships.

CRM solutions help to safely store volumes of customer data in an organized easy-to-access
manner. By analyzing this data, company can determine individual customer behavior,
analyze preferences and provide one-to-one services to maximize customer satisfaction.

Characteristics of CRM

Well-designed CRM includes the following characteristics:

1. Relationship management is a customer-oriented feature with service response based

on customer input, one-to-one solutions to customers‘ requirements, direct online
communications with customer and customer service centers that help customers
solve their questions.
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 2. Sales force automation. This function can implement sales promotion analysis,
automate tracking of a client‘s account history for repeated sales or future sales, and
also coordinate sales, marketing, call centers, and retail outlets in order to realize the
sales force automation.
3. Use of technology. This feature is about following the technology trend and skills of
value delivering using technology to make ―up-to-the-second‖ customer data
available. It applies data warehouse technology in order to aggregate transaction
information, to merge the information with CRM solutions, and to provide KPI (key
performance indicators).
4. Opportunity management. This feature helps the company to manage unpredictable
growth and demand and implement a good forecasting model to integrate sales
history with sales projections.

1.1.2.Understanding Customer Relationship Management (CRM)?

CRM is a business philosophy based on upon individual customers and customised
products and services supported by open lines of communication and feedback from
the participating firms that mutually benefit both buying and selling organisations.

The buying and selling firms enter into a ―learning relationship‖, with the customer
being willing to collaborate with the seller and grow as a loyal customer. In return, the
seller works to maximize the value of the relationship for the customer‘s benefit.

In short, CRM provides selling organisations with the platform to obtain a

competitive advantage by embracing customer needs and building value-driven long-
term relationships.

1.1.3.Determinants of CRM

 Understand customer needs and problems;

 Meet their commitments;
 Provide superior after sales support;
 Make sure that the customer is always told the truth (must be honest);
and
 Have a passionate interest in establishing and retaining a long-term
relationship (e.g., have long-term perspective).

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1.1.4. Definitions of customer relationship management
CRM is not just about the selling and marketing, but it touches all the areas of the
business, it could be, from customer services group to information and technology
team. Any one in these areas could be the internal champion of CRM in the
organization. It is most comprehensive approach of dealing with something.
- K.Anderson, C.Kerr
As defined by Anderson and Kerr: ―Customer relationship management is a
comprehensive approach for creating, maintaining and expanding customer
relationship.‖

Judith W. Kincaid gave a very broad definition of CRM, saying, ―CRM is the
strategic use of information, process, technology and people to manage the customer
relationship with your company (Marketing, Sales, Services and Support) across the
whole customer life cycle.‖

CRM is ―the development and maintenance of mutually beneficial long-term

relationships with strategically significant customers‖
- (Buttle, 2000)
CRM is ―an IT enhanced value process, which identifies, develops, integrates and
focuses the various competencies of the firm to the‗voice‘ of the customer in order to
deliver long-term superior customer value, at a profit to well identified existing and
potential customers‖.
- (Plakoyiannaki and Tzokas, 2001)

1.1.5.Stages in the development of a Customer Relationship

The Pre-relationship Stage
- The event that triggers a buyer to seek a new business partner.
The Early Stage
- Experience is accumulated between the buyer and seller although a
great
degree of uncertainty and distance exists.
The Development Stage

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 - Increased levels of transactions lead to a higher degree of commitment
and the distance is reduced to a social exchange.
The Long-term Stage
- Characterised by the companies‘ mutual importance to each other.
The Final Stage
- The interaction between the companies becomes institutionalized.

1.2.Concept and Context of Customer Relationship Management (16 mark)

1.2.1.CRM is about Strategy

CRM is about creating a competitive advantage by being the best at understanding,
communicating, delivering and developing existing customer relationships, in addition to
creating and keeping new customers (Strategic CRM).

1.2.2. Designing CRM strategy

Four Key Areas of the Business

- Strategy

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 - People

- Technology

- Processes

D4 Company Analysis

 Step 1: Define the existing customer relationship management processes within the
company
 Step 2: Determine the perceptions of how the company manages their customer
relationships both internally and externally
 Step 3: Design the ideal customer relationship management solutions relative to the
company or industry
 Step 4: Deliver a strategy for the implementation of the recommendations based on
the findings

1.2.3. What motivates companies to adopt CRM Strategies

 Competition: Globalization
 Customer Expectation: e-Commerce
 Technology: Touch points
 Diminishing impact of advertising: Information through e-mail and web sites

Concept of Personalization and Customization

 Customization: Customization assumes that manufacturer will design / or enable

designing a product to suit customer needs.
 Personalization: Personalization is about customer becoming a co-creator of the
content of their experience.

Relationship Hierarchy

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Loyalty Pyramid

Nine 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 Leave

- Your Marginal Customers Can Move

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 - Consumers Can Become Customers

 TRUTH # 3: Customers want information.

 TRUTH # 4: Customers not only want to be thanked for their patronage, they expect
it.

 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 and focused on the customer.

 TRUTH # 9: WHAT IF? Ask it often. Experiment every chance you get and don‘t call
it testing

1.2.4. CRM, Marketing and 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, won‘t you please buy it?‖

 Customer Revolution: ―This is what I need, Can‘t you please make it.‖

Companies have to turn from a ‗make and sell‘ philosophy to ‗sense and respond‘
philosophy.

Holistic Marketing Framework

The THREE dimensions (CRM, Relationship Marketing and Marketing) are extremely
lucidly integrated in a concept called ‗Holistic Marketing‘ framework.

The Holistic Management framework enables management to answers following

questions:

1. How can a company identify new value opportunities for renewing its marketing –
(Marketing Dimension)

2. How can a company create more promising new value offering? – (Stakeholders
Relationship Dimension)
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 3. How can a company use its capabilities and infrastructure to deliver the new value
offering efficiently? – (CRM Dimension)

The THREE dimensions (CRM, Relationship Marketing and Marketing) are extremely
lucidly integrated in a concept called ‗Holistic Marketing‘ framework.

Three organizational functions will play the major role in the economy: the ‗demand
management‘ function, the ‗resource management‘ function and ‗network
(Relationship) management‘ function.

Tangible Relationship

1. Classic Market Relationship: Consisting of the relationship between the supplier

and the customer, between the customer-supplier-competitor and the classis network
distribution channels.

2. Special Market Relationship: Relationship via full time and part time marketers,
interaction between customers and service providers, relationship in industrial and
business marketing, e-relationship, green relationship (environment and health based,
law based)

3. Mega Relationships: Personal and social network, mass media

4. Nano Relationships: Relationship between internal customers and internal suppliers,

the relationship between operations management and marketing, relationship with the
employee market.

1.2.5. Types of Customer Relationship Management

Proactive versus Reactive CRM

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  Operational CRM
 Analytical CRM
 Collaborative CRM

Strategic CRM
Five Steps for Customer Strategy
• Acquiring the right customers
• Crafting the right value proposition
• Instituting best processes
• Motivating employees
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 • Learning to retain customers

(i) Operational CRM

Goal of Operational CRM

Operational CRM: Front office CRM. Interaction between the customer and marketer
directly through customer touch point (POS, Call centers, web etc.).

 Face to face touch points: Sales/Service/Channel/Events/Stores/Promotions

 Database driven touch points:
Telephones/Email/Mail/SMS/Fax/Loyalty Cards/ATM‘s
 Mass Media:
Advertising/PR/Websites
Any Transaction can take place through these touch points.
Low level managers interact in this stage and process the information to the mid
level managers

Operational CRM provides the following benefits

1. Enables a 360-degree view of each customer
2. Each employee from sales people to service engineers can access
complete history of all customer interaction with the organisation
regardless of the initial point of contact
3. Delivers personalised and efficient marketing, sales, and service

Components of Operational CRM

 Sales force automation (SFA)
 Enterprise marketing automation (EMA)
 Customer service and support (CSS)

Sales force automation (SFA)

SFA automates critical sales and sales force management functions eg
– lead/account management
– contact management
– quote management

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 – Forecasting
– customer preference tracking
SFA requires a well designed database in order to store and retrieve customer details.

Enterprise marketing automation (EMA)

EMA provides information about the business including
– Competitors
– industry trends
EMA utilises Data Mining and OLAP Technologies which have been covered earlier
in this module.

Customer service and support (CSS)

CSS automates
– service requests
– Complaints
– product returns
– information requests.
call-centre support for customer inquiries has evolved into the customer interaction
centre (CIC) - uses multiple channels (Web, phone/fax, face-to-face, kiosk, etc).
CSS technology is database oriented and is underpinned by Service Level Agreements
(SLAs)

(ii)Analytical CRM
Goal of Analytical CRM
 Known as back-office or strategic CRM. It involves understanding the
customer activities that occurred in the front office. Using technology, mass
data is going to transformed into ‗business knowledge‘ (behavior patterns,
preferences, values of customers).

 Top Level managers and decision makers establish the process and
convey the message to the mid level and low level managers for
implementation.

Benefits
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  Segmentation of customers to feed into enterprise marketing (EMA) systems
 Identifies customers in danger of churning
 Aids Decision Making

Customer segmentation
It is useful to segment customers for targeted marketing campaigns:
– Customers most and least likely to repurchase product)
– Profitability analysis (which customers lead to the most profit over time)
– Personalisation (the ability to market to individual customers based on
requirements)

(iii)Collaborative CRM
Goal of Collaborative CRM
 Collaborative CRM: Two way dialog between a company and its customers
through a variety of channels (business partners, agents, brokers,
intermediaries) to facilitate and improve the quality of customer interactions
and maintain a long term profitable relationship.
 Performed by Mid level managers and transform the information to the
top level managers and decision makers.
Aim
• Collaborative CRM aims to get various departments within a business, such as
sales, services and marketing, to share the useful information that they collect
from interactions with customers.
• Feedback from a technical support center, for example, could be used to
inform marketing about specific services and features requested by customers.
• Collaborative CRM facilitates interactions with customers through all
channels (personal, letter, fax, phone, web, e-mail) and supports co-ordination
of employee teams and channels. It is a solution that brings people, processes
and data together so companies can better serve and retain their customers.

Business Benefits
• Enables efficient productive customer interactions across all communications
channels

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 • Enables web collaboration to reduce customer service costs
• Integrates call centres enabling multi-channel personal customer interaction

1.3. Evolution of Relationship Management

1960 :

ERA OF MASS MARKETING

1970 :

SEGMENTATION AND CUSTOMISATION

1980 :

NICHE MARKETING AND SFA

1990 :

RELATIONSHIP MARKETING, TELEMARKETING AND CALLCENTERS

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MONOPOLY MARKET

 Single Seller
 Seller‘s Market
 No Close Substitutes
 Barriers To Entry

PRESENT OF CRM

 Promotion Campaign
 Feedback Services
 Upgrade Services
 Brand

CRM must start with a business strategy, which drives changes in the organization and work
processes, which are in turn enabled by Information Technology. The reverse does not work.
Have you ever seen a company automate its way o a new business strategy.

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 The seeds of modern-day CRM were shown in the 1960s. Academic researchers
found that the ―4 Ps‖ marketing framework—product, price, place and promotion was less
valuable for industrial or service-centric business where ongoing relationships were critical.
By the 1980s ― The relationship marketing‖ was used to describe this new focus on
understanding customer segments, delivering ongoing quality services, and achieving high
customer satisfaction.

Relationship marketing was about ―putting the customer in the middle of the business
circle‖ in the words of Dick Lee, principal of St.Paul-based Hi_Yield Marketing. ―As part of
that early relationship marketing movement, we have untold frustration because we did not
have the technology to support what we are doing,‖ Lee says. ―It really was not until mid 90s
that we had technology we needed.

In the 1990s, computer systems were deployed to support sales and services
processes. Sales Force Automation systems quickly evolved from simple contact mangers,
while Customer Service and Support systems became the back bone of the automated call
centers.

By the mid-1990s, ―CRM‖ became the umbrella term as it became clear that sales and
service systems should share information.

More recently, Enterprise marketing Automation (EMA) application joined the CRM
fold, including systems for customer analysis and marketing campaign management.

By the late 1990s, the real action was outside the corporate firewall. Explosive growth
in Internet usage spawned a proliferation of e-business applications to mange online customer
and partner relationships, often called ―e-CRM‖ and ―Partner relationship management‖,
respectively.

Now, ―multi-channel CRM‖ systems were available to, theoretically, support direct,
Internet, and partner channels, while allowing users to use whatever mode of communication
they pleased.

1.3.1. Left Hand, Meet Right Hand

Much of what satisfies customers, of course is a company , is a company‘s ability to preserve
the ―single face‖ of a customer. Some companies are semantically confused and think that the

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customer wants to see the company‘s ―single face‖. Customer don‘t care about that. What
they want is for the company to always see their-the customers‘-full faces.

To see how it works, go to Amazon.com and click ―Your Account‖. The record of all
your transactions, your credit cards, your shipping and billing addresses, the status of all your
orders from last year to five minutes ago is there. Its like looking in a mirror. Talk to
anybody at Amazon at any time, and they can swiftly deal with your concerns because they
see your total dealings with their company. This is what is meant by ―single face‖, and there
is no better example of it than Amazon.com. You want every company you deal with to be
able to do this.

Unfortunately, that‘s rarely case. ―With the internet, companies in the present are still
pretty bad about presenting a single face to the customer‖, says Jeet Singh, CEO of
Cambridge-based ATG, Inc. ― The Internet has blown the multiple touch point issue to the
forefront, and in many firms, , the left hand does not know what the right hand is doing.‖
Customers might start researching product information on a website, then pick the phone to
get a crucial question answered, then do the actual buying with the local distributor or retail
outlet. The challenge now is for companies to present that single face in all these real world
sceneries.

Why is this so difficult? The root of the problem is simply the fossilized ways that
companies trat information – dump it in a ―silo‖ (otherwise known as a department, division,
or business unit) and then defined it from the rest of the organization.

If you figure out how to redesign workflow to make for happier customers, you‘re
taking a jackhammer to functional silos, creating a lot of stress in an organization that will
probably resist some changes. You also have to bend and reshape your internal technologies
to support customer-centric, rather than silo-centric, business process.

―This situation is driving interest to new CRM approaches with environments that can
offer greater central control or management‖, says Karen Smith, senior analyst with Boston
based Aberdeen Group. ―Organizations are demanding CRM solutions that provide greater
visibility into:

o Asset management

o Forecasting and inventory management

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 o Product development

o Procurement and order and

o Transaction management

Its clear that web is making the inefficiencies and inconsistencies of big companies
transparent o customers and partners. To win the battle for customer loyalty in the future,
companies must shift from stand-alone business technology approaches to systems that
support the total customer experiences and work across multiple enterprises.

1.3.2. The Next Evolutionary Step

If your relationships with customers are getting more important , so are your relationships
with your partners. ―The common assumption is that the Internet helps companies find
partners.

Our experience is that it helps less with finding new partner than allowing companies
with complex supply chains to maximize inter-enterprise relationships,‖ says Micheal Levin,
founder and CEO of e-steel. ―This is not like a cruise line for single to meet, it‘s a cruise line
for couple to have great time.

And, of course it‘s the internet that makes it all possible. ―Part of the evolution of
CRM from a focus on internal efficiency to more effective external relationships is the ability
to move information around about a customer which has become viable recently,‖ says Scott
Sims, partner with Chicago-based Anderson business consulting. ―The internet has also
ability to make alliance stronger. If you build a site that shows how your partnership benefits
the customer, you also can be benefit greatly.‖

―Everything needs to tie into your overall CRM strategy,‖ says Scott Creighton,
general manager of Siebel Systems echannel application Dallas office. ―However, you have
got companies with homegrown silo systems, their own internet tools for managing
marketing incentive funds, and partners have to use a call center which then places the order.
What companies are trying to do now, under increased pressure to perform, is to consolidate
all these tools into an internet based systems so that channel manger and their partners have
the tools to drive revenue.‖

Bear in mind that while customers expect to have their needs met, the character of the
relationship is not top of mind for a customer in the same way it must be for vendor at least
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until the relationship turn sour. It‘s incumbent upon the vendor not the customer to do
whatever it takes to keep the relationship in good working order.

Earlier ideas about customer satisfaction dealt with keeping the customer happy after
a purchase transaction took place. In this customer economy however waiting for the PO to
provide good service may be waiting too long.

And lets not forget, good collaboration starts close to home, in your company. ―In the
early days, says Keith Raffel, chairman and founder of Mountain view-based Upshot
Corporation, you‘d ask a sales rep if he did collaborative sales, and he‘d say he didn‘t. Then
you‘d walk him through all the steps internally that his sales has to hit, he‘d realize it‘s a very
collaborative process. ―Collaboration is just an essential inside the enterprise as it is for
channel partner system integrators, agents and so on.

1.4. Transactional Vs Relationship approach

Relationship Marketing is a relatively new concept in marketing. The concept is catching
more attractions by organizations day by day because of the longevity of relationship with
customers and low cost of retaining customers.

Marketing has moved from customer acquisition to customer retention to customer selection.
The importance of relationship marketing in retention of few profitable customers has
become even more important than ever. Smith and Taylor in their book ―Marketing
Communication: an integrated approach‖ are of the view that organizations today do not look
at customers as buying one can of beans, one car or photocopying machine but they think of
them as buying thousands of cans of beans, dozens of cars and photocopiers during their life
time. Today selling has moved away from short term, quick scale scenario and selling today
is more about ―partnering‖ and relationship building, you don‘t sell to people you partner
with them.

1.4.1. Relationship Marketing Vs Transactional Marketing

Transactional marketing is a business strategy that focuses on ―single point of sale‖

transactions. The emphasis is on maximizing the efficiency and volume of individual sales
rather than developing a relationship with buyer. On the other hand relationship marketing is
a business strategy that seeks to establish long term relationship with its customers rather than

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focusing on single transaction, not only does it focus on individual customers but on all the
stakeholders in order to manage a relationship that adds value to each person.

Varey and Lewis in their book ―Internal Marketing Directions for Management‖ describe in
detail how transactional marketing differs from relationship marketing.

 Focus: The transactional marketing focus on recruitment of customers for single sale;
Relationship marketing focus on customer retention
 Orientation: Transactional marketing is oriented on product features; Relationship
Marketing orientation is on product benefits and system solutions
 Time Horizon: Transactional marketing has short time horizon: Relationship
marketing has long term horizon
 Customer Focus: Transactional Marketing has little customer focus: Relationship
Marketing has high customer focus
 Information: Transactional Marketing information is content of communication;
Relationship Marketing information is product of communication.
 Contact: In Transactional Marketing there is low contact with customers; In
Relationship marketing there is high contact with customers

Egan in his book ―Relationship Marketing 3rd Edition‖ says that relationship marketing has a
dual focus both on customer retention and acquisition strategies. It has become underpinning
conviction of relationship marketing that it encourages retention marketing first and
acquisition marketing later on. The academics are of the view that customer retention offers
significant advantage than customer acquisition, particularly in saturated markets.

1.4.2. Benefits of Relationship marketing over transactional marketing

Relationship Marketing is rooted in the idea that it is cheaper to retain an existing customer
than to recruit a new one. There are many benefits of relationship marketing. The first and
foremost is that it focuses on providing value to its customers and places a great emphasis on
customer retention. Secondly relationship marketing approach is an integrated approach to
marketing, service and quality and therefore it helps in gaining competitive advantage. The
long term customer may do the word of mouth promotions and referrals and many studies
have revealed that cost to retain existing customer is just fraction of the cost to acquire new
customers. Mudie and Perrie in their third edition of their book ―Services Marketing

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Management‖ assert that relational customer also tend to increase their purchases overtime
either because they are consolidating their purchasing onto preferred supplier due to grown
business/ family and it has also been found that there is less need to offer price promotions to
this group as these customers are likely to be less price sensitive than others.

1.4.3. Trend towards Relationship Marketing

Nowadays more and more organizations are adapting relationship marketing approach. The
big examples in this case are Club Card by Tesco and Nectar Card by Sainsbury and other
partner organisation. The points scored are not only tempting to customers for repeat buying
but the data collected also gives the organizations an insight into the buying habits of their
customers. It helps in making a more customized marketing strategy directed at individual
customers and time to time customers are sent information on promotions and new products.
Some organizations go even further and send gifts and cards on birthdays or other such
special occasion of customers.

With time organizations have realized that the cost of attracting new customers is very high
and retaining customer results not only in increased profits but word of mouth marketing and
positive referrals also help in generating more business leads. Relationship marketing has
become the approach for 21st century and soon enough longevity of relationship with
customers will be key in determining success of businesses in today‘s highly competitive
environment.

Transaction Marketing Relationship Marketing

 Functional Marketing  Cross-functional marketing

 Focus on a single sale  Focus on customer retention

 Orientation on product feature  Orientation to customer values

 Short time scale  Long time scale

 Little emphasis on customer service  High emphasis on customer service

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  Moderate customer contact  High customer contact

 Quality is a concern of production  Quality is everyone‘s concern

1.5. CRM as a strategic marketing tool

Strategic Marketing

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation and Control

1.5.1. Pivotal Role of Customer Relationship Management

Developing a CRM Strategy

 CRM Levels
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  CRM Strategy Development
 CRM Implementation

Value Creation Process

 Customer Value
 Value Received by the Organization
 CRM and Value Chain Strategy

1.5.2. The Steps in Developing a CRM Strategy

Define the CRM Strategy

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How General Electric Co. Measures Customers’ Experience

Happy (And Not-So-Happy) Customers

General Electric is a big user of the ―Net Promoter‖ concept of customer satisfaction,
popularized by Fred Reichheld of Bain & Co. Below, questions similar to those on which
GE‘s Capital Solutions unit asks customers to rate the unit‘s performance on a 0 – 10 scale.

• How willing are you to recommend us to a friend or

associate?

• How would you rate our ability to meet your needs?

• How would you rate our people?
• How would you rate our processes?
• What is your impression of our market reputation?
• How would you rate the cost of doing business with us?
• How would you rate the overall value of our product or service as being worth what
you paid?

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1.5.3. CRM and Value Chain Strategy

The perfect customer experience, which must be affordable for the company in the context of
the segments in which it operates and its competition, is a relatively new concept. This
concept is now being embraced in industry by companies such as TNT, Toyota‘s Lexus, Oce,
and Guinness Breweries, but it has yet to receive much attention in the academic literature.
Therefore, multi-channel integration is a critical process in CRM because it represents the
point of co-creation of customer value. However, a company‘s ability to execute multi-
channel integration successfully is heavily dependent on the organization‘s ability to gather
and deploy customer information, from all channels and to integrate it with other relevant
information.‖

CRM and Strategic Marketing

From the perspective of strategic marketing, there are several reasons why CRM is important
and why there should be extensive marketing involvement in decisions about CRM.
Importantly, an organizational perspective is needed in guiding the CRM strategy.

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1.6. Stakeholder Value Returned from the Benefits of CRM
An integrated CRM (Customer Relationship Management) system is a component of business
improvement strategy focused around the customer.

It produces a multiplication of results throughout the organization.

The following is a listing of benefits to specific stakeholders in an organization.

1.6.1. The business owner(s)

Higher net profitability with increased net sales and reduced operating costs. A system that
can scale to your growing business. Business success and their vision achieved. Improved
ability to grow the business that is customer focused. The VP of Sales and Sales Manager.
Ability to view sales opportunities stuck at a milestone and needing sales coaching. Shorter
sales cycles for improved sales efficiency. Quicker to get new salespeople up to speed and
productive in selling

1.6.2. The Sales People

The Customer Service representatives

Ability to provide a personal touch using personal information and quick access to their
account information. Personal satisfaction- becomes a hero in the eyes of the customer.

Business Development/Marketing manager:

More effective marketing campaigns to targeted prospects. Faster feedback from Sales results
by linking campaign to sale. More effective marketing materials for the sales person.

Financial perspective: CFO/Controller/Accounting Manager

 Happier customers pay their bills- less time in the collection and credit memo process.
Reduction in costs of administrative personal. Less employee turnover and Reduction
in paper documents and filing system.
 Improved efficiency using known business operational processes.
 More sales revenue and net profit.

The IT department

 A scalable system that can grow and not have to be replaced in a few years
 A reliable and relational database backend that reduces the time for support and
troubleshooting.
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  A Crystal reporting system for easier report modification and creation.
 A highly configurable system that also has visual customization tools build on
Microsoft technology.
 A highly configurable security system to meet your business needs.
 All other employees
 Increase in productivity by using one main system that has the information and
processes they need for a consistent customer experience.
 Boost to employee satisfaction

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