OVERVIEW OF

Relationship Marketing

Market place has been evolving under the converging pressures of changing demographics, global politics, economics, technology and so on.

Prominent marketing scholars like Philip Kotler and Frederick Webster have expressed that there has been a shift from a transactions to a relationship focus.

Driving Forces • Customer orientation focus on profitability rather than sales

volumes and emphasis on market segmentation are gaining importance.• New trend in marketing has replaced “products and

“services” with “value”.• Relationship Marketing concept requires specific resource

resource commitments, key part of which is the use of marketing research

Paradigm Shift in Marketing

Themes for New MarketingThe 4Ps are also loosing credibility. They are more production than customer oriented and poses lot of flaws in its definition

A creative process to look at the market;• Understand potential customer needs and wants• Consider the basic capabilities of the firm; • Conceive potential product offerings based on

the present and potential capabilities;

• Design and develop products and services for their customers

Paradigm Shift in Marketing

Organisation’s Marketing activities:- Create customers(bringing buyers and sellers). - Firm’s success depends upon getting customers but keeping

customers is crucial. Retaining customer is challenging than acquiring customer.

Successful firms keep long term relationship with customers

Relationship Management : Interaction with customers over a long time period.

A Sale is not the end of marketing(courtship) process but beginning of relationship(marriage) with customer.

Customer is satisfied : receives more than what it expects from organisation. Will repeat purchase when it has been treated well in past.

Establishing relationship increases long term sales and reduce marketing costs.Marketers job – use resources to create, interpret and maintain relationship with customers.

Firm must focus on both getting and keeping customers.

Relationship Management

Traditional Marketing RM

Goal: Expand customer base, increase market share by mass marketing. Gaining more and more new customers

Goal: Establish a profitable, long-term, one-to-one relationship with customers; understanding their needs, preferences, expectations rather than isolated individual transactions

Product oriented view. Less attention to expectation, satisfaction etc.

Customer oriented view. Idea to develop loyal customer for the purpose of retaining them forever.

Does not focus long term perspective

Focuses long term perspective by retaining customers

Customer is viewed as an outsiders, less attention to customer service and commitments

Customer is insider to organisation, aims to long term never ending relationship with them.

Mass marketing / mass production Mass customization, one-to-one marketing

Standardization of customer needs Customer-supplier relationship

Traditional Marketing vs RM

Why Organisations Lose Customers ?• Price related reasons : mismatch in price and value• Product related reasons : technology. New brand making entry will be capable of offering better performance and will induce brand switch. • Service related reasons : not only the brand the accompanying

services at pre, during and post sales. • Benefit related reasons : appealing benefits offered by

competitors• Competitor related reasons : • Personal reasons : Organisation should analyze periodically reasons and accordingly develop customer retention plan which should be the basis for building a strong and

long term relationship with customer. Strategies for building relationship• People : all should work towards satisfying customers.• Process : need identification of customer till its fulfillment• Product : offered must be constantly provide value addition• Organisation : response must be faster than competitors• Setting satisfactory service standard : pre, during and post

services• Concentration on competitors :competitor performance,

Increase own strength and reduce weakness

Strategies for building relationship• Customer analysis : present consumers using products/service of

the organosation and prospective customers who are using competitors.• Cost analysis : without reducing quality• Concentration on the paying ability of customers : fixation of price• Knowledge on purchase behavior pattern : % of purchase decision

Purchase, Rejection, Postponement, Search for substitute, • Differentiation in price and quality standards• Focus on reducing dissatisfaction : complaints must be well

attended.• Attention on changing requirements of customers : • Concentration on Performance : in each stage of value chain• Training to supply chain employees : • Empowerment to service providers• Augmenting Intangible Benefits : courtesy, effective listening made

by service providers, point of purchase atmosphere, expertise services offered etc.

• Visit to point of usage of the product• Develop partnership with customers : buyback arrangements,

training employees, extending managerial support to customer organisation • Organizing customer clubs : would focus mutual belonging,

understanding, and sharing of common problems and emotions etc.

CRM “is a business strategy that aims to understand, anticipate and manage the needs of an organisation’s current and potential customers”

It is a “comprehensive approach which provides seamless integration of every area of business that touches the customer- namely marketing, sales, customer services and field support through the integration of people, process and technology”

CRM is a shift from traditional marketing as it focuses on the retention of customers in addition to the acquisition of new customers

“The expression Customer Relationship Management (CRM) is becoming standard terminology, replacing what is widely perceived to be a misleadingly narrow term, relationship marketing (RM)”.

What Is CRM

“CRM is concerned with the creation, development and enhancement of individualised customer relationships with carefully targeted customers and customer groups resulting in maximizing their total customer life-time value”

CRM system brings together lots of pieces of information about customers, characteristics, sales transactions, market trends etc.

An effective CRM describes customer relationship in sufficient detail so that all aspects of organisation can access information, match customer needs with satisfying product offerings, remind customers of service requirements, know what products a customer has purchased etc.

What Is CRM

Purpose of CRM

“The focus [of CRM] is on creating value for the customer and the company over the longer term”.

When customers value the customer service that they receive from suppliers, they are less likely to look to alternative suppliers for their needs.

CRM enables organisations to gain ‘competitive advantage’ over competitors that supply similar products or services.

Why is CRM important?

“Today’s businesses compete with multi-product offerings created and delivered by networks, alliances and partnerships of many kinds. Both retaining customers and building relationships with other value-adding allies is critical to corporate performance”.

“The adoption of CRM is being fuelled by a recognition that long-term relationships with customers are one of the most important assets of an organisation”.

Why did CRM develop?

CRM developed for a number of reasons:

• The 1980’s onwards saw rapid shifts in business that changed customer power.

• Supply exceeded demands for most products.• Sellers had little pricing power.• The only protection available to suppliers of goods and

services was in their relationships with customers.

Collect,warehouseand analyze data

Cultivate & develop interest,Trust, desire

Acquire Customer &Establish arelationship

CustomizePromotion, Information,interaction

RecognizeNeeds/wantsof definedsegments

CustomizeChannelOutlets,locations

Customize Offers, Products and Services

CRM Process as a hub of applied learning

Potential Returns of CRM Systems

Customers are different : bring different level of profit to the organizationSuccessful organisations : best customersROI in acquiring customer : comparison of revenue and costs

BenefitsCustomer focusCustomer retentionShare of customerLong term profitability

CostsInfrastructure- InvestmentsReactions to process

CostsPrivacyOpportunity

BenefitsContinuityContact touch pointsPersonalized serviceEnhanced satisfactionSafety

Organisation

Customer

Lifetime value of the relationship

Potential Costs and Benefits of CRM Systems

Benefits to the Organisation

Customer Focus : learn enough about the customer• Retention : firm satisfies customer and offer variety such that customer repeats transactions. It cost six times more to get a new customer than to retain one. Higher retaintion rates increases revenue and reduces costs.• Share of customer/wallet : -Cross selling : marketing complementary products to

existing customers-Bundling : -Up-selling : higher value customers to existing/new customers

• Long Term profitability : customer focus, retention of loyal customers and greater share of customer implies long term profit.

Potential Returns of CRM Systems

Potential Costs to the Organisation• IT Infrastructure : • Process Change : It is the people who implement and customers must appreciate, use them with ease, and feel safe in the process.

Potential Benefits for Customers• Continuity : Firm has to consistently meet customer’s need over time• Contact Point : customer communicate and explain their need, enabling the organisation to learn more about each customer’s need • Personalization : one-to-one marketing – tailor made offerings to individuals(increased customization of goods and personalisation of services. Potential Costs for Customers• Privacy : • Opportunity costs :

Potential Returns of CRM Systems

Customer is a member of household or organisation(suppliers, retail stores, wholesalers). Relationship focuses on net gain to each party in an exchange over time when interaction occurs. CRM may be expensive to implement, the long term benefit will be apparent as time progresses, repeat purchase occurs and customer loyalty deepens.

Relationship : Lifetime Value