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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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• 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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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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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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• 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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