Chapter 3 Customer Relationship Management and Building Partnerships PowerPoint presentation...

Chapter 3

Customer Relationship Management and

Building Partnerships

PowerPoint presentation prepared byDr. Rajiv Mehta

New Jersey Institute of Technology

Copyright © Houghton Mifflin Harcourt Publishing Company. All rights reserved. 3 | 2

Chapter Outline

• What Is CRM?• Relationship Orientations

and CRM• CRM and Repeat

Business• CRM, Customer Loyalty,

and Lifetime Value• CRM and Selling • Technology and CRM

Programs

Source: Flying Colours Ltd.


Learning Objectives

After reading this chapter, you should be able to do the following:1. Master the different ways sales companies deal with

customers.2. Build customer relationships that lead to repeat business.3. Relate customer loyalty to customer lifetime value.4. Apply customer relationship management (CRM) to the

selling process.5. Use technology successfully in CRM programs.


What Is CRM?

• Customer relationship management (CRM) is a systematic integration of information technology and human resources designed to provide maximum value to customers and to obtain maximum value from customers.

• CRM uses information to meet customer needs, for example, technology can be used to match up five million different promotional products with five million individual customers.


Relationship Orientations and CRM

3.Niche

marketing

3.Niche

marketing

2.Differentiated

marketing

2.Differentiated

marketing

1. Mass marketing

1. Mass marketing

4.One-to-one marketing

4.One-to-one marketing

CRMCRM

Niche marketing is offering a specialized product or small range of products to an individual customer segment with specialized needs.

Niche marketing is offering a specialized product or small range of products to an individual customer segment with specialized needs.

One-to-one marketing involves matching individual products with individual customers. The result is a product personalized for each customer in some way.

One-to-one marketing involves matching individual products with individual customers. The result is a product personalized for each customer in some way.

Mass marketing is a way of dealing with customers by offering the same product to the entire market.

Mass marketing is a way of dealing with customers by offering the same product to the entire market.

Differentiated marketing is selling to different groups of customers by offering a unique product for each group.

Differentiated marketing is selling to different groups of customers by offering a unique product for each group.


Production Versus Marketing Orientation

2.Marketing orientation

2.Marketing orientation

1.Production orientation

1.Production orientation

OrientationOrientation

Production-oriented companies focus on processes, allowing large-scale, efficient, and economic production.

Production-oriented companies focus on processes, allowing large-scale, efficient, and economic production.

Marketing-oriented companies focus on making what could be sold, not selling what is made. Market-oriented firms are customer-centric, where customers are the heart of the business process.

Marketing-oriented companies focus on making what could be sold, not selling what is made. Market-oriented firms are customer-centric, where customers are the heart of the business process.


CRM and Repeat Business

• CRM is based on the premise of serving customers over an extended period, thus generating repeat business.

transactional selling

transactional selling

Three levels of buyer-seller relationship interactions

Three levels of buyer-seller relationship interactions

relationship selling

relationship selling

strategic partnerships

strategic partnerships

lowlow mediummedium highhigh


Transactional Selling: Key Characteristics

• It attends to short-term customer needs.

• It requires more frequent sales calls.

• Buyers and sellers remain independent.

• It involves no long-term commitment or loyalty.

• It is more adversarial than cooperative.

• Price is a key consideration.

Source: © Jack Hollingsworth/Corbis


Relationship Selling:Key Characteristics

• Attracting new customers costs significantly more than reselling to current customers; thus the focus is on customer retention.

• In relational exchanges both the buyer and seller recognize that each transaction is merely one in a series of purchase agreements. – It involves a spirit of cooperation between buyer and

seller.– Firms seek to develop profitable, ongoing

relationships with customers– Firms focus on providing exceptional service.– It requires higher levels of trust.


Video on Relationship Selling

• To see a video on relationship selling practices, go to– http://www.sellingpower.com/video/index.asp?date=2

/26/2007


Strategic Partnerships: Key Characteristics

• Strategic partnerships result when the goals, strategies, and resources of buyers and sellers become so interconnected and intertwined that they develop an integrated, symbiotic relationship although still retaining their independent identities.

• involve firms that capitalize on the relative strengths of each partner

• are based more on inter-organizational collaboration

• involve collaborative decision making • require that firms share managerial

resources and expertise• depend on partners showing high levels of

collaboration• require equality among partners• involve firms that share vision, benefits, and

goals• involve extremely high levels of trust

Source: Triangle Images


Strategic Partnerships and Customer Loyalty

• To learn about how salespeople can build strategic partnerships, go to– http://www.1000ventures.com/business_guide/partnerships_mai

n.html

• To read interesting articles on generating value from strategic alliances and selling partnerships, see– http://www3.best-in-class.com/bestp/domrep.nsf/pages/0445A8

2C10671F2E8525710900563346!OpenDocument

• To read feature articles and learn about the 12 laws of customer loyalty, go to– http://www.marketingprofs.com/login/signup.asp?source=/4/griffi

n1.asp


Video on Boosting Customer Loyalty and Customer Retention

• To see a video how on to boost customer loyalty and retention, go to– http://www.sellingpower.com/video/index.asp?date=8/7/2007


Mechanisms That Govern Exchanges

• Governance refers to the mechanism that helps ensure the exchange is fair to all parties involved.

• Transactional exchanges are controlled by market forces.

• Relational exchanges are governed by contracts.

– They include arrangements for sharing information and tasks between the buying and selling firm, but fall short of spelling out specific obligations for each party.

• Strategic partnerships are governed by a mechanism known as relational governance.

• In all exchange relationships, opportunistic behavior may occur.

Source: Triangle Images


CRM, Customer Loyalty,and Lifetime Value

• CRM can lead to customer loyalty, which is important when a firm expects repeat business from a customer.

• Customer loyalty is a function of two components:

1. customer share– Customer share is the proportion of

resources a customer spends with one among a set of competing suppliers.

2. customer commitment– Customer commitment is the bond

between a customer and a sales firm. Source: Triangle Images


Computing the Value of a Customer

• Customer lifetime value (CLV) is a monetary amount representing the worth of a customer to a firm over the foreseeable life of a relationship.

where– CLV = the lifetime value of customer– R = the revenue gained from the customer in a time

period– C = the cost of the sales and service effort directed at

the customer

tt

p

ti CRCLV

1


Risks of Relational Selling

• Although relational selling and strategic partnerships have advantages, some disadvantages include these:

– increased dependency on a major buyer

– loss of flexibility to capitalize on future business opportunities with new customers

– growth of complacency with current customer(s) and decreased creativity

Source: Stockbyte


The Salesperson and Managing Customers

• Value is often narrowly used as a synonym for low price.

• Value is an individual’s selective perception of the worth of some activity, object, or idea.

• To create value, salespersons can do the following:

– gather important data about the customer and the market

– identify the types of data needed to give the customer better service

– provide input into how the CRM system should use data to create value for the customer

– manage the relationship between the firm and the customers to whom the salesperson is assigned

Source: Digital Vision


Product and Customer Portfolios

• A product portfolio contains a set of products a salesperson is responsible for selling.

• Customer portfolios are sets of customers that have common traits, for example, assigning salespeople based on medical specialties such as pediatrics or cardiology.


CRM and Production Systems

• There are two types of CRM systems:1. Analytical systems

• Analytical CRM focuses on aggregating customer information electronically, enabling the company to better identify target markets and opportunities for cross-selling.

2. Operational systems• Operational CRM is more focused on using information to

improve internal efficiencies, such as scheduling logistical and production operations.


Websites of Firms Specializing in Customer Relationship Management

• Peruse the websites of various firms that specialize in CRM, at– http://www.crmconsultantsinc.com/ – http://www.crmenterprises.com/ – http://thecrmconnection.com/ – http://www.crmmantra.com/ – http://www.customer.com/ccgsite/pages/program_development.

html


Technology and CRM Programs

• Web technologies and CRM– Web-based technologies have

increased the effectiveness of CRM systems by allowing the sharing of information between buying and selling firms.

– With push technology, e-mail can be sent to a particular customer or customer group that might be interested in purchasing products going on sale.

• Integrated web solutions– When firms take a relational approach or

become strategic partners, integrated Web solutions can give secure access to a strategic partner’s decision support system in dealing with inventory systems.o


Sales Force Automation

• Sales force automation (SFA) is an integrated system of computer software and hardware that performs routine sales functions.

• An integrated SFA system ties together some or all of the following functions:

• expense reports• presentation software• sales call scheduling • territory management• proposal generation• order entry• data entry• team selling materials• sales tracking


CRM Hardware

3.Data warehouse

3.Data warehouse

2.Database marketing

2.Database marketing

1. PDAs, laptops,

and servers

1. PDAs, laptops,

and servers

4.Data mining

4.Data mining

Types of codes of ethics

Types of codes of ethics

A data warehouse is an electronic storage center containing data records from diverse information systems that are shared across all functional departments.

A data warehouse is an electronic storage center containing data records from diverse information systems that are shared across all functional departments.

Data mining is an exploratory statistical analysis of data in the data warehouse whose objective is to identify relationships that enable customers to be targeted more accurately.

Data mining is an exploratory statistical analysis of data in the data warehouse whose objective is to identify relationships that enable customers to be targeted more accurately.

Database marketing refers to a computerized process for analyzing customer databases in a way that allows more effective selling by tailoring product and promotional offerings to a specific customer’s sales patterns.

Database marketing refers to a computerized process for analyzing customer databases in a way that allows more effective selling by tailoring product and promotional offerings to a specific customer’s sales patterns.


CRM Software

Multivariate statistical tools are necessary for CRM

3.Multiple

regression

3.Multiple

regression

2.Discriminant

analysis

2.Discriminant

analysis

1. Cluster analysis

1. Cluster analysis

4.Automatic interaction

detection

4.Automatic interaction

detection

CRM SoftwareCRM Software


Customer Relationship Management Software

• Peruse the following websites to learn about CRM software, at– http://www.netsuite.com/portal/products/crm_plus/mai

n.shtml– http://www.syspro.com/Corporate/US/CRM_Home_M

ain.Html

– http://www.oracle.com/crmondemand/index.html – http://www.microsoft.com/dynamics/crm/default.mspx– http://www.sas.com/solutions/crm/


Video on Best CRM Practices

• To see a video on the best CRM practices, go to– http://www.sellingpower.com/video/index.asp?

date=11/6/2007


CRM Successes and Failures

• Despite CRM’s popularity, its adoption is no guarantee of success.

• CRM is not for firms using a transactional approach.

• CRM is also not for firms whose customers won’t realize added value from the benefits provided by the CRM process.


Video on the Secrets to Successful CRM

• To see a video on the secrets of successful CRM adoption, go to– http://www.sellingpower.com/video/index.asp?

date=12/7/2006


Factors Contributing to CRM Success or Failure

• Some factors contributing to success or failure of CRM implementation include the following:– whether top management gives

its support– whether sales managers and

sales force buy in to CRM– confidence in CRM vendor– training– a well-defined sales process– expectations

Source: Digital Vision


CRM and Sales Force Automation (SFA) Adoption Hindrances

• Salespersons may feel less job security.– Sales managers can overcome this problem by convincing

salespersons the benefits of CRM—help them sell more and earn higher bonuses and/or commissions.

• Assure sales force that neither CRM nor the SFA components replace selling processes.

• These high-tech components merely enhance the activities of sales managers and salespeople.


Video on How to Define and Measure CRM Adoption

• To see a video on defining and measuring CRM adoption, go to– http://www.sellingpower.com/video/index.asp?

date=12/11/2006


Video on Customer-Focused CRM

• To see a video on the customer-focused CRM practices, go to– http://www.sellingpower.com/video/index.asp?

date=2/20/2007


Articles on CRM

• To read related articles on CRM, visit– http://www.destinationcrm.com – http://www.crm2day.com/crm_articles/– http://www.crm-guru.com/crm-articles/– http://www.destinationcrm.com/articles/default.asp?

ArticleID=2668 – http://www.business-software.com/crm/7-habits-of-highly-

effective-crm-consultants.php– http://blogs.msdn.com/jim_glass/archive/2007/05/09/a-plethora-

of-new-crm-articles.aspx– http://ezinearticles.com/?CRM-Application---Role-in-Improving-

Business-ROI&id=843928


Ethical Situation: What Would You Do?

Discussion Question:Your salespeople are making sales calls on prospects to sell multi-function video cell phones for the company’s customer service people. As a sales manager you are aware one of your phones’ features is not nearly as good as that of competitors. So you’re wondering whether you should not inform your sales team that they should skip that feature in their sales presentation … and especially the demonstration.

Chapter 3 Customer Relationship Management and Building Partnerships PowerPoint presentation...

Documents

Transcript of Chapter 3 Customer Relationship Management and Building Partnerships PowerPoint presentation...