Customer Relationship Management

Dr. Kalpana DubeSr. Professor (Fin. & PPP)

IRITM/Lucknow

Definition of CRM

CRM is thestrategic process of

selecting the customersa firm can most profitably serve and

shaping the interactionsbetween a company and these customers with the

objective ofoptimizing current and future value

of customers for the company.

Indian Railways Programme 18/11/2009© Prof. Markus Christen4

TraditionalApproach

Today’sApproach

Natureofexchange Transaction RelationshipMarketing Customeracquisition CustomerretentionFocus Products CustomersBuyersare Ill-Informed Well-Informed

Powerlieswith Sellers Buyers

Productsandservices Standardized,made-to-inventory

Customized,made-to-order

Communication Massapproach Targetedapproach

Performancemetrics Productprofit,volume,marketshare

Customerprofit,life-timevalue,loyalty

A Changing World – Customers

Indian Railways Programme 17/11/2009© Prof. Markus Christen6

CRM Strategy: Objectives

•Why do you want to engage in customerrelationship management?–Greater efficacy : Better customer insights enable a firm to

better match the right products and services with the rightcustomers at the right time for the right price in the rightquantities

–Strategic CRM: hard to implement, requires substantialchanges, significant potential for improving businessperformance

•IT is only an enabler

Indian Railways Programme 17/11/2009© Prof. Markus Christen11

CRM Strategy: Challenges

•CRM: Better customer insights–What kind of data must be collected and analyzed to better

understand customers and develop a CRM strategy?–What are key implementation obstacles?–How big is the potential for improved performance?–What else is needed to develop lasting and profitable

customer relationships?

Indian Railways Programme 17/11/2009© Prof. Markus Christen13

CRM Strategy: Basics

•Relationship has to be mutually beneficial (win-win)–Value to the customer–Value from the customer

•Business objective is to maximize value from thecustomer–Without delivering superior value to the customer there is

no business

Indian Railways Programme 17/11/2009© Prof. Markus Christen8

CRM Strategy: Objectives

•Why do you want to engage in customerrelationship management?–Greater efficiency : Do what you do at lower cost

o

o

Better allocate sales peopleReplace snail-mail with e-mail, telephone access with Internetaccess

–Tactical CRM: can be implemented relatively quickly, buthas limited potential to improve business performance

Indian Railways Programme 17/11/2009© Prof. Markus Christen9

Indian Railways Programme 18/11/2009© Prof. Markus Christen18

Competitive Advantage With CRM

•Competitive advantage can be defined as …

… a company’s ability to outperform rivals interms of sustained profitability .

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Profit-earningpotential of a

capability

Is it unique?

Is itsustainable?

Is it valuable?

How distinctive?

How embedded?How imitable?

How substitutable?

How relevant?

How core?

Establishing Competitive AdvantageCompetitive Advantage

Customer & Consumer Focus

18

• Understand the consumer– Look for dissatisfied consumers across segments and

identify a new way to configure segments– Focus on the decision making process, including the

consumption stage– Identify the different members of the decision making unit

and understand the role they play and what drives theirdecision making

– Provide ONLY the features consumers want– The entire organization needs to be consumer focused

Customer-Focused Management

CustomerBehavior

UnderstandingMarkets

CreatingValue

MarketAnalysis

MarketingStrategy

MarketingMix

OrganizationalGoals

Indian Railways Programme 17/11/2009© Prof. Markus Christen2

Indian Railways Programme 17/11/2009© Prof. Markus Christen4

Whatever CRM Is – Firms Invest in ITApproximate Worldwide CRM Investments

(applications, hardware and services)

47.5

40.0

34.6

29.725.9

23.720.0

13.5

SpendingsYear-to-Year Growth %

Indian Railways Programme 17/11/2009© Prof. Markus Christen5

ScheduledA irlines

65

60

85

80

75

70

90

1994 1996 1998 2000 20022004

-8.4%

H o useho ldA ppliances

65

60

85

80

75

70

90

1994 1996 1998 2000 2002

-3.5%

C o mmercialB anks

65

60

85

80

75

70

90

1994 1996 1998 2000 2002

-2.7%

P arcel D elivery

65

60

85

80

75

70

90

1994 1996 1998 2000 2002

-2.5%

P ersonalC omputers

65

60

85

80

75

70

90

1994 1996 1998 2000 2002

-9.0%

P ublishing/N ewspapers

65

60

85

80

75

70

90

1994 1996 1998 2000 2002

-12.5%

Source: http://www.theacsi.org, University of Michigan

Decreasing Customer Satisfaction

American Customer Satisfaction Index (ASCI)

more than 50.000 consumes,measuring overall satisfaction with products and services.

What is Strategy?

What is Strategy?

An organization’s approach towards long-term value creation (& capture)…

How to win?(Competitive Advantage)

Where to play?(Scope)

External EnvironmentOrganizational Resources & Capabilities

What really is “value creation”?

Willingness to pay (WTP): The value that thebuyer attaches to the product or service, i.e.,

the most he/she could ever pay for it

Cost to Deliver (CTD): Opportunity cost of all inputs (e.g., raw materials, capital and labor) required to produce one unit of the product.

Customers

Company

Suppliers

More on “Willingness to Pay” (WTP)…

Thank You