BWBB3053

Marketing Financial Services

Chapter 10
Customer Relationship
Management (CRM)
 Objectives
At the end of this session, you will …
● know what is customer relationship management
(CRM)
● appreciate why do organizations need CRM
● understanding today’s customer needs
● learn how to manage the customer needs
● learn how to organize enterprise-wide CRM
process
 What is CRM?
There are many interpretations depending on how one
views its purpose :
● “… those aspects of a business strategy which relate
to techniques and methods for attracting and
retaining customers.” (www.investorwords.com)
● “… concerns with the relationship between the
organization and its customers.”
(www.businessballs.com)
● “… includes the methodologies, technology and
capabilities that help an enterprise manage customer
relationships …” (www.wikipedia.com)
● “… is a process for businesses to approach customer
relations in a systematic and effectual way.”
(www.businesscreatorpro.com)
 What is CRM?

• CRM concerns the relationship between the

organization and its customers.
• Customers are the lifeblood of any organization
be it a global corporation with thousands of
employees and a multi-billion turnover, or a sole
trader with a handful of regular customers.
• Customer Relationship Management is the same
in principle for these two examples - it is the
scope of CRM which can vary drastically.
 CRM focuses on the relationship

Successful organizations use three steps to

build customer relationships:
● determine mutually satisfying goals
between organization and customers
● establish and maintain customer rapport
● produce positive feelings in the
organization and the customers
 CRM conditions
The organization and the customers both have
sets of conditions to consider when building
the relationship, such as wants and needs
of both parties;
● organizations need to make a profit to
survive and grow
● customers want good service, a quality
product and an acceptable price
Good CRM can influence both sets of
conditions
 How CRM impacts on the organization

CRM can have a major impact on an

organization through:
● shifting the focus from product to
customer
● streamlining the offer to what the
customer requires, not what the
organization can make
● highlighting competencies required for an
effective CRM process
 Why does organization need CRM?
● The ultimate purpose of CRM, like any
organizational initiative, is to increase profit
● In the case of CRM this is achieved mainly by
providing a better service to customers
● CRM not only improves the service to customers;
a good CRM capability will also reduce costs,
wastage, and complaints
● Effective CRM also reduces staff stress, because
attrition - a major cause of stress - reduces as
services and relationships improve
 Why does organization need CRM?
● CRM enables instant market research as well:
opening the lines of communications with your customers gives
you direct constant market reaction to your products, services
and performance, far better than any market survey
● Good CRM also helps a business grow:
 customers stay longer;
 customer churn rates reduce;
 referrals to new customers increase from increasing numbers
of satisfied customers;
 demand reduces on fire-fighting and trouble-shooting staff,
 overall the organization's service flows and teams work more
efficiently and more happily
 Features of good CRM

The old viewpoint in industry was:

● 'Here's what we can make - who wants to buy our
product?'
The new viewpoint in industry is:
● 'what exactly do our customers want and need?' and
● 'what do we need to do to be able to produce and deliver
it to our customers?'
This is a significant change of paradigm and a
quantum leap in terms of how we look at our
business activity.
 What do customers want?
● Most obviously, and this is the extent of many
suppliers' perceptions, customers want cost-
effective products or services that deliver
required benefits to them
Benefits are what the products or services do for the
customers
● Interesting to note that any single product or
service can deliver different benefits to different
customers
● Therefore it's important to look at things from
the customer's perspective even at this level
 What do customers want?
● More significantly however, customers want to
have their needs satisfied
● Customers' needs are distinctly different to and
far broader than a product or service, and the
features and benefits encompassed
● Customers' needs generally extend to issues far
beyond the suppliers' proposition, and will often
include
 the buying-selling process (prior to providing
anything),
 the way that communications are handled, and
 the nature of the customer-supplier
relationship
 A new look at customer

Modern CRM theory refers to the idea of 'integrating

the customer'.
This new way of looking at the business involves
integrating the customer (more precisely the
customer's relevant people and processes) into all
aspects of the supplier's business, and vice versa.
This implies a relationship that is deeper and wider
than the traditional 'arms-length' supplier-customer
relationship.
 A new look at customer

The traditional approach to customer relationships

was based on a simple transaction or trade.
Perhaps there would be only a single point of
contact between one person on each side.
All communication and dealings would be between
these two people, even if the customers'
organization contained many staff, departments,
and functional requirements (distribution, sales,
quality, finance, etc).
 A new look at customer

The modern approach to customer relationship

management is based on satisfying all of the needs
- people, systems, processes, etc - across the
customer's organization, such as might be affected
and benefited by the particular supply.
 Generating a customer focused CRM solution
So what is needed to make this quantum leap of
customer integration?
A new way of thinking:
 change in paradigm
 change in the messages sent and received
 change in the overall culture
And a new way of doing things:
 processes that are capable and effective
 structures and systems that support a business
centred on its customers
 connectivity (end-to-end processes) both internally
and externally (eg., with suppliers)
 Customer’s expectations

If an organization cannot at least meet its

customers' expectations it will struggle.

Ideally a business organization should

exceed its customers' expectations, thereby
maximising the satisfaction of its customers,
and also the credibility of its goods and
services in the eyes of its customers.
 Customer’s expectations

Customers normally become delighted when a

supplier under-promises and over-delivers. To
over-promise and under-deliver is a recipe for
customers to become very dissatisfied.
Rule No 1 - You cannot assume that you know
what a customer's expectations are ... You
must ask.
Rule No 2 - Customer expectations will
constantly change so they must be
determined on an on-going basis.
 Customer’s expectations
The expectations of different customers for the
same product or service will vary according to:
• social and demographic factors
• economic situation
• educational standards
• competitor products
• experience
Therefore, given all these variable factors, it is no
surprise that one size certainly does not fit all.
Customer’s expectations

Ask customers what is important to them.

Find out why your customers do business
with you.
There are a wide variety of relationship
drivers. For example:
• quality
• price
• product
• location
• customer service
Customer’s expectations
When you ask you might discover some
factors that you'd perhaps never even
considered, for example:
• health and safety support
• systems compatibility
• contract structure
• distribution flexibility
• technical support
• troubleshooting and problem-solving
What service features will keep your
customers loyal to you? Find out.
 CRM as a process

CRM can be regarded as a process, which has:

• identifiable inputs
• identifiable components
• identifiable characteristics, which define CRM for
your organization and customer base
• capacity for improvement and evolution over
time
 Managing customers

Why manage customers?

Customers are the usual source of income for an
organization.
(If not then they will certainly leverage your income, as in the
case of readers of a free publication which is funded by
advertising. As such there are two types of customers: the
readers and the advertisers).
Customers are also an exceptional source of
information - information which is vital to enable a
business to succeed; ie., giving customers what they
want.
 Managing customers
Managing customers entails:
• knowing what customers want and need - which
enables you to focus your production and service
efforts
• knowing which products or customers have most
growth potential - which enables you to focus on
developing highest potential
• knowing which products or customers are most or
least profitable - which enables you to focus on
maximising profit
• knowing which customers will be advocates and
supporters - which enables you to provide references,
case studies, and to safely test new products and
services
 Achieving good CRM

Achieving effective CRM requires many organizations

to adopt a new perspective.

Consider the following:

• traditional customer service is something you
'do to' the customer
• modern Customer Relationship Management
is 'done with' the customer
 Achieving good CRM
The second statement emphasises the big
differences between conventional traditional
customer service, and the modern progressive CRM
approach.
Your relationships with customers should be
ongoing, cooperative, and built for the long term.
Organizations who have many transitory
relationships with customers consequently have to
spend a lot of money on finding new customers.
The cost of keeping existing customers is a tiny
fraction of the cost of acquiring new customers.
 Pareto’s Law (‘The Pareto Principle’)
Pareto's Law is commonly known as the 80:20 rule.
Typically in any organization:
• 20% of customers account for 80% of your
turnover
• 20% of customers account for 80% of your profits
• 20% of customers account for 80% of your service
and supply problems
It is important to know is which customers fit into
which category and then to manage them
accordingly.
 Pareto’s Law (‘The Pareto Principle’)

Highly satisfied customers who perceive a

high value in your products and services
commonly make excellent advocates for your
organization - nurture these customers and
give the special treatment.
 Pareto’s Law (‘The Pareto Principle’)
Dissatisfied customers who perceive a low
value in your products and services are
potential saboteurs.
These customers could have little or no
loyalty and may actively 'engage' against your
organization.
Therefore you should seek to rebuild
relationships and trust, and a new basis for a
future relationship, or manage the separation
with dignity, professionalism and integrity.
 Focus on building relationships

The essential CRM focus of any organization

should be
1. on developing core competencies, and
2. an overall strategy of building customer
relationships.
 Focus on building relationships
In this way, all efforts in the organization can be
aligned to:
• customers and the culture of exceeding of
customer expectation
• understanding and managing the people impact
on the culture of the organization
• customers being recognised and treated as
partners
• the value of relationship-building being valued
• service being seen as a value-adding activity
• reward and recognition being based on customer
focus ie., 'going the extra mile‘
• evidence of corporate support for service activity
 Characteristics of excellent CRM
The following characteristics are associated
with delivery of excellent CRM:
• reliability
• responsiveness
• accessibility
• safety
• courtesy
• consideration
• communication
• recognising the customer
• competence
 People and CRM
As with any other business process your people
have a huge impact on the success of the CRM
process.
Successful and effective Customer Relationship
Management people tend to display the
following key characteristics:
• positive attitude
• people orientation
• organizational skills
• analytical skills
• customer focus
• understanding of the link between CRM and
profitability
 What is CRM?
On the subject of empathy:

Empathy is about understanding, not necessarily

agreeing. Effective customer focus enables the
organization and its staff to see both sides, and to
work with the customer to arrive at a mutually
satisfactory and sustainable solution. Agreement
alone amounts to capitulation, which is neither
practicable nor sustainable.
 Benefits of Effective CRM
There are significant business benefits which accrue from
an effective, integrated CRM approach.
These include:
• reduced costs
• increased customer satisfaction
• ensuring that the focus of the organization is external
• growth in numbers of customers
• maximisation of opportunities
• increased access to market and competitor information
• highlighting poor operational processes
• long term profitability and sustainability
Forward thinking organizations understand the vital need
to maintain a strategic focus on CRM and to resource and
manage it appropriately
 Integrating the Customer Data Base

HIS
HIS HIS
FAMILY
FAMILY RELATIVES
FRIENDS

HIS OFFICE
HIS OFFICE
COMPETITORS BANK CUSTOMER SUPPLIERS

HIS OFFICE HIS HIS OFFICE

COLLEAGUES OFFICE CUSTOMERS
 … stories of Customer Retention Program …
● British – … our customer retention program starts from
the time a person gets his first job until he retires …
● American – we have a comprehensive customer
retention program that starts right from the time a child
is born, enrols into college, graduates, gets a job and
starts a family until he dies.

● Japanese – … our customer retention program is much

more extensive. It covers marketing plans from the time
the parent to a child gets married, right through until
they get a child, he goes to college, gets a job, starts a
family, starts a business and until his retirement, right
up to his graveyard.
 … stories of Customer Retention Program …
● Philippines – we believe we have the most extensive
and comprehensive retention program.
Our program starts right form the time the parents were
courting and felt the first erection, got married,
conceived, got a baby, and the baby grew up, went to
school, got a job, started a family, retired, right until he
dies and were kept in the tomb. The program also takes
care of him up until his resurrection.