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CUSTOMER RELATIONSHIP MANAGEMENT

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Definition

• CRM is a competitive strategy and process of acquiring, reacting and partnering with selective customers to create superior value for the company and the customer.

- Parvatiyar and sheth

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Why is CRM important ?• Competition• Consumer expectation• Technology• Diminishing impact of advertising

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Scope of CRM

• Build long term and profitable relationship with chosen customers.

• Getting closer to the customers at every point of contact with them.

• By fostering customer's loyalty, the company spends less time acquiring new customers and saves then time on other projects.

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Piece of software solution. Sales tactics Call center servicesAnother buzzword like ERP /

BUSINESS PROCESS MANAGEMENT.

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Amul

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Relationship Orientation

• A relationship is composed of a series of interactive episodes between dyadic parties over time.– Making a purchase– Enquiring about a product– Making a sales call– Negotiating terms– Dealing with complaints

• Independence to Dependence to Interdependence

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Change within relationship

• Awareness• Exploration • Expansion• Commitment• Dissolution

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Exploration

• Attraction• Communication and bargaining• Development and exercise of power• Development of norms• Development of expectation

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Trust

• Calculus-based trust• Knowledge-based trust• Identification based trust

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Commitment

• Trust, Shared values and belief• Trustworthy partners• Size of investment

Negatives• Opportunism• High termination cost• Search cost and learning cost

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Transaction Vs Relationship

• Transaction: Trade of values between parties.–Monetary– Non-Monetary

• Relationship orientation: Treating customers in an individualized way.– Long term–Mutually beneficial

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Exchange map

Boeing FedEx

1. Good quality, durable planes2. Fair price3. On-time delivery4. Good financing terms5. Prompt service and availability of spares

1. Good price2. Timely payment3. Good Word Of Mouth

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Transaction Vs. Relationship Marketing

Transaction

• One off exchanges• Brand management• Short-term focus• Mass communication• Isolated market research• Market share• Profitabilty• Brand equity

Relationship

• Ongoing exchange• Customer management• Long-term focus• Personal communication• Ongoing dialogue• Mind share• Lifetime value of customer• Customer equity

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Why companies want relationship with customers?

• Reduce marketing cost• Better customer insight• Lifetime value: Present day value of all net

margins earned from a relationship with a customer, customer segments or group of customers.

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The customer journey

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Why companies do not want relationship with customers?

• Loss of control• Exit cost• Resource commitment• Opportunity cost

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Why customers want relationship with suppliers?

• B2B Context– Product complexity– Product strategic significance– Service requirement– Financial risk

• B2C Context– Recognition – Personalization– Status and affiliation

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Why customers do NOT want relationships with suppliers?

• Fear of dependency• Lack of perceived value in the relationship• Lack of confidence in the supplier• Customer lacks relational orientation• Rapid technological changes

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Customer satisfaction, loyalty & business performance

• CRM aims to improve the Business performance by enhancing Customer Satisfaction and driving up Customer Loyalty.

Customer’s Need and expectation Identification & fulfilment Satisfied customer Repurchase Business Process increases.

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… continued

• Satisfaction Profit Chain

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Customer satisfaction

• Customer Satisfaction is the customer’s fulfilment response to a customer experience or some part thereof.

• Satisfaction is measured by comparing the customer experience with the customer expectations.

• This is called Expectation – disconfirmation model of Customer Satisfaction.

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… continued

Expectation – disconfirmation model• If experience meet expectation then customers

are Satisfied.• Experience > expectation = Positive

disconfirmation.• Experience < expectation = Negative

disconfirmation.• At times experience meets expectation but still

unsatisfied because of low expectation.

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Customer loyalty

• Loyalty can be defined and measured by two major approach.– Behavioural loyalty.– Attitudinal loyalty.

• Behavioural loyalty is measured by reference to customer purchase behaviour and loyalty is expressed in continued buying.

• Many companies use RFM measures of Behavioural variables.

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… continued

R – Recency of purchase (time since last purchase)

F – Frequency of purchases (No. of purchase in a given period)

M – Monetary value of purchase.

• Attitudinal loyalty is measured with reference to Belief, Feeling and purchasing intention

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… continued

• Two dimensional model of customer loyalty

Based on Relative attitude & Repeat purchase behaviour.

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Business performance

• Measured in two ways– Quarterly profit(or) Earnings/share– Balanced score card(leading companies)

• Four Key performance Indicator(KPI)– Financial– Customer– Process– learning & growth

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… continued

• Implied Connection B/w Indicators is People(learning & Growth) do things (process) for customers(Customer) that have affects on business performance(Financial).

• Drivers of Business performance:– Customer outcomes of satisfaction– Loyalty

• Share of customer is the popular measure of CRM.

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