A FRAMEWORK FOR CUSTOMER RELATIONSHIP MANAGEMENT

CUSTOMER RELATIONSHIP MANAGEMENT PRESENTED BY VISHAKH.S VIVEK GOPAN NITIN NAIR ZAKARIYA. KCustomer relationship management(CRM) is a system formanaginga company's interactions with current and future customers. It often involves using technology to organize, automate and synchronize, sales, marketing, customerservice and technical support.

Different Perspectives On Buyer-Seller Relationship

The Economics Of LoyaltyWhy loyal customers are more profitable ?Acquisition CostBase ProfitRevenue GrowthOperating CostsReferralsPrice premium.A FRAMEWORK FOR CUSTOMER RELATIONSHIP MANAGEMENTMeans different things to different people

May be salesforce contact software like the ones sold by salesforce.com

May be telephone call centers for contact management

May be loyalty programs

CUSTOMER RELATIONSHIP MANAGEMENT MODEL1.

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7.Many companies use CRM as a key source of competitive advantageE.g.: UPSCREATING THE DATABASECUSTOMERCHARACTER-ISTICSPURCHASEHISTORYCONTACTSRESPONSEVALUE1.2....nCustomer Information File (CIF)Repository of information about customersBasis for identifying and targeting current and potential customersAsses value to the firm of each customer & develop relationship programs customized in content and intensity

CUSTOMER INFORMATION FILE

5 AREAS OF CONTENT IN CIFImportant 3rd dimension TimeCIF has to contain information on these dimensions over timeIdentify customers becoming better and worseGETTING MORE CUSTOMER INTERACTIONHIGH

LOW DIRECTINDIRECTInteraction FrequencyCustomer Interaction Upper left quadrant: relatively easy to develop CIF

2 quadrants on the right have to work harder to collect informationCIF key source of competitive advantage e.g.: UPSCompanies create special programs and eventse.g.: Kellogg's EET & ERNManagement consultant firms host free seminars in specialized topic areas information about prospective clientsAnother challenge Multiple touch pointsAcxiom centralized databaseANALYZING THE DATABASEData mining segments, purchasing patterns, trends etc.

LIFETIME CUSTOMER VALUE (LCV)

Purchase information + information about profit margin on each product purchase projected profit implication of each customer or row in CIF.Ultimate goal is to place a monetary value on each customer and make resource allocation decisions

BERGER & NASR, 1998Uses available purchase information in the CIF to calculate each customers cumulative profitability in the past. Customer Profitability = [(P C) - MC]Wheret = the number of past and current rime periods measuredj = the number of products purchased in a time periodk = the number of marketing tools used in a time periodP = PriceC = CostMC = cost of marketing tool t j ki j k The formula can be used for purposes other than computing profitability:

Increasing P & j by cross selling or upsellingReducing market cost over time as customer loyalty will increaseIncreasing the number of time periods t that the customer is purchasing.Gupta & Lehmann, 2003Margin multiple = r/(1+i-r)In this formula r is the retention rate i is the discount rate Discount rate

RetentionRate10%12%14%16%60%1.201.151.111.0770%1.751.671.591.5280%2.672.502.352.2290%4.504.093.753.46LCV- CUSTOMER ACQUISITION COST PERSPECTIVEProfit acquisition cost = customer value.Take into account time value of moneyGives an idea of how much we would spend to retain a customer

Customer SelectionCustomer Profitability Analysis can be used to separate the customer who provide long term value to the firm.80-20 ruleHelps in decision making:Which customer to keepHow much money to spend on them

Customer TargetingAfter selecting targeted customerDirect Marketing approach often referred to as 1 to 1 marketing.Special promotion, prices, perks, products and other offers are made through telemarketing, direct mail and personal sales callsRelationship Marketing ProgramsCustomer Satisfaction

Requirements of customer loyalty is satisfaction.Customer Satisfaction ModelCustomer Satisfaction ScaleCustomersat.com & Zoomerang.com are customer satisfaction software sold via web.

Customer Satisfaction Model

Customer Satisfaction Scales

Customer ServiceCustomer Satisfaction Customer ServiceLevel of Customer Service delivered is equivalent to product quality.Have to go beyond expectation by offering levels of customer services that competitors cannot match.Service GuaranteesService RecoveryCUSTOMER LOYALTYLOYALTY PROGRAMSOne of the Major trends in marketing is the ubiquity of loyalty programs.Ex: Frequent-flier programs.Technology is changing the way. Smart cards- Microprocessor built in to them. Several issues of Loyalty Programs.Making the reward too high.Ubiquity.What kind of loyal customers are you actually getting?Lack of inspiration.Lack of communication with customers.Insufficient analysis of data.When Loyalty programs seem to work bestThe programs support and is consistent with the brand value proposition.The programs add value to the product or service.Lifetime customer value is high.

MASS CUSTOMIZATIONCustomer retention and loyalty are also being affected by a marketing process called mass customization.It imparts a feeling that the products was made especially for the customer.Most of the attention on mass customization has been in the Manufacturing sector.Ex: Dell online ordering system.Four Different Approaches to Mass CustomizationCollaborative CustomizersAdaptive CustomizersCosmetic CustomizersTransparent CustomizersCommonality: All realize that customers are heterogeneous and want different combination of product features and benefits.COMMUNITY BUILDINGThe main challenge for marketing managers is to create a sense of affinity to their companies and brands in their customers.Share information between the customers and the company.Online communities offer real opportunities.