Chapter 1

Concept and Context of CRM

Buyer and Seller Relationship over the Ages

Barter Age Customized Product Age Mass Production Age

- Customer

- Consumer Customization Age: 1:1 Relationship

What is CRM

Strategy, Process, Software, Philosophy, Project???

a) CRM is about Strategy

CRM is about creating a competitive advantage bybeing the best at understanding, communicating, delivering and developing existing customer relationships, in addition to creating and keeping new customers (Strategic CRM)

Ask questions for a good CRM Strategy

What products and services are we offering now and in the future?

In what markets? What customer groups will these products and

services appeal to? Which of these are of greatest value to the

organization? In terms of expenditure, reliability, growth potential?

What additional needs do the most valuable customer groups have? Adiitional products? Additional services?

In what different ways can we do business to deliver to our customers better?

Designing a CRM Strategy

Cog Wheel Process: CRM (UK) Ltd.

(Four Key Areas of the Business)

- Strategy

- People

- Technology

- Processes

D4 Company Analysis

Step 1: Define the existing customer relationship management processes within the company

Step 2: Determine the perceptions of how the company manages their customer relationships both internally and externally

Step 3: Design the ideal customer relationship management solutions relative to the company or industry

Step 4: Deliver a strategy for the implementation of the recommendations based on the findings

What motivates companies to adopt CRM Strategies?

Competition: Globalization

Customer Expectation: e-Commerce

Technology: Touchpoints

Diminishing impact of advertising: Information through e-mail and web sites

What is CRM?

b) CRM – the ‘customer’ thread

Whether the customers are current / potential / selected CRM is about acquiring, retaining, partnering, personalizing relationships with them

CRM helps businesses use technology and human resources to gain insight into the behavior of customers and the value of these customers.

Concept of Personalization and Customization

Customization: Customization assumes that manufacturer will design / or enable designing a product to suit customer needs.

Personalization: Personalization is about customer becoming a co-creator of the content of their experience.

Relationship Hierarchy

Loyalty Pyramid

Nine Truths of Relationship Marketing

TRUTH # 1: Customers are no longer loyal. TRUTH # 2: Customers do not really want a

relationship but companies do.- Your Best Customers Can Leave- Your Marginal Customers Can Move- Consumers Can Become Customers

TRUTH # 3: Customers want information. TRUTH # 4: Customers not only want to be

thanked for their patronage, they expect it.

Nine Truths of Relationship Marketing

TRUTH # 5: Customers control the selling process.

TRUTH # 6: The Lifetime Value of a customer is not relevant.

TRUTH # 7: Do not overcomplicate the program. TRUTH # 8: Keep reporting simple and focused

on the customer. TRUTH # 9: WHAT IF? Ask it often. Experiment

every chance you get and don’t call it testing.

CRM, Marketing and Relationship Marketing

Investment in ‘relationship’ with various stakeholders is very important. CRM is the domain of relationship management with customers.

Industrial Revolution: “This is what I make, won’t you please buy it?”

Customer Revolution: “This is what I need, Can’t you please make it.”

Companies have to turn from a ‘make and sell’ philosophy to ‘sense and respond’ philosophy.

[Please look at the Table at Page No. 21]

Holistic Marketing Framework

The THREE dimensions (CRM, Relationship Marketing and Marketing) are extremely lucidly integrated in a concept called ‘Holistic Marketing’ framework.

The Holistic Management framework enables management to answers following questions:

1. How can a company identify new value opportunities for renewing its marketing – (Marketing Dimension)

2. How can a company create more promising new value offering? – (Stakeholders Relationship Dimension)

3. How can a company use its capabilities and infrastructure to deliver the new value offering efficiently? – (CRM Dimension)

Holistic Marketing Framework

The THREE dimensions (CRM, Relationship Marketing and Marketing) are extremely lucidly integrated in a concept called ‘Holistic Marketing’ framework.

Management Decision depends on: 1. How can a company identify new value opportunities for

renewing its marketing – (Marketing Dimension)2. How can a company create more promising new value offering?

– (Stakeholders Relationship Dimension)3. How can a company use its capabilities and infrastructure to

deliver the new value offering efficiently? – (CRM Dimension)

Three organizational functions will play the major role in the economy: the ‘demand management’ function, the ‘resource management’ function and ‘network (Relationship) management’ function.

Transaction VS Relationship Marketing

Transaction Marketing Relationship Marketing Functional Marketing Cross-functional marketing

Focus on a single sale Focus on customer retention

Orientation on product feature Orientation to customer values

Short time scale Long time scale

Little emphasis on customer service High emphasis on customer service

Moderate customer contact High customer contact

Quality is a concern of production Quality is everyone’s concern

Tangible Relationship (30 R’s)

1. Classic Market Relationship: Consisting of the relationship between the supplier and the customer, between the customer-supplier-competitor and the classis network distribution channels.

2. Special Market Relationship: Relationship via full time and part time marketers, interaction between customers and service providers, relationship in industrial and business marketing, e-relationship, green relationship (environment and health based, law based)

3. Mega Relationships: Personal and social network, mass media4. Nano Relationships: Relationship between internal customers

and internal suppliers, the relationship between operations management and marketing, relationship with the employee market.

First TWO considers as Direct market Relationship and Last TWO considers as Non-Market Relationships

Types of CRM

1. Proactive versus Reactive CRM

1. Operational, Collaborative and Analytical CRM

Proactive versus Reactive CRM

Operational, Collaborative and Analytical CRM

1. Operational CRM: Front office CRM. Interaction between the customer and marketer directly through customer touchpoint (POS, Call centers, web etc.).

Face to face touchpoints: Sales/Service/Channel/Events/Stores/Promotions

Database driven touchpoints:Telephones/Email/Mail/SMS/Fax/Loyalty Cards/ATM’s

Mass Media:Advertising/PR/Websites

Any Transaction can take place through these touchpoints. Low level managers interact in this stage and process the information to

the mid level managers

Operational, Collaborative and Analytical CRM

2. Collaborative CRM: Two way dialog between a company and its customers through a variety of channels (business partners, agents, brokers, intermediaries) to facilitate and improve the quality of customer interactions and maintain a long term profitable relationship.

Performed by Mid level managers and transform the information to the top level managers and decision makers.

Operational, Collaborative and Analytical CRM

3. Analytical CRM: Known as back-office or strategic CRM. It involves understanding the customer activities that occurred in the front office. Using technology, mass data is going to transformed into ‘business knowledge’ (behavior patters, preferences, values of customers).

Top Level managers and decision makers establish the

process and convey the message to the mid level and low level managers for implementation.