CUSTOMER RELATIONSHIP

MANAGEMENT (CRM)
CII Institute of Logistics
Session map
Session1
Introduction
The new focus on customer loyalty
CRM and Business Intelligence
CRM Marketing initiatives
Session 3
Understanding and integrating CRM
with the business process
Tools for CRM
Choosing the CRM tool
Putting the CRM to work
Session 2
CRM in e-business
Partner relationship management
Planning CRM programme
Preparing CRM business plan
Session 4
CRM through new product development
Channel management and CRM
Catalytic measures to improve CRM
Best practices in outsourcing CRM
 Session 2
1. Recap session 1 8. Customer loyalty framework and
characteristics
2. Preparing CRM business plan
9. Rewards types
3. Shift in focus Marketing to Customering
10. Summary
4. Customer segmentation What, Why and
How?
5. Product and customer strategies
6. CRM maturity levels
7. Customer satisfaction and behavior type
Preparing CRM business plan
Define objectives (measurable)
Increase customer satisfaction by 10%
Increase repeat customers by 20%
Increase word of mouth score by 30%
Increase high value customers by 5%
Increase market share by 10%

Establish the CRM framework (Purpose, Processes,

Technology, People and Programme)
Never forget budget (Finance team has a say always)
How business is done - Now

Loyalty & Life time

Promotion &
Repurchase
Awareness &
purchase
Quality, Service,
Value

Products & Services

* Refer lifetime value excel sheet
Traditional marketing focus
Marketing the past
1
8
Market 2
New Marketing Segment Research
Campaign Existing
Product/
Service
7 3
Corporate /
Rewrite Plan.
Set Departmental Deliver into
>Goals Objectives Market

6 4
Reward/ 5 Sell to meet
Punish BP Goals
Quarterly
Promotional
Push - to meet nos
The competitive enterprise of the future

Customers Clustered by
Value & Needs

P P Products & Processes Designed

to serve each Cluster Uniquely

Underlying Technology Infrastructure Mix to support unique

deliverables, business rules, communications, by Cluster
Todays segmentation
Today, most firms categorize their customers into
groupings (Segments) based on the types and volume of
products they consume.

Neither margin of profit, LTV, nor needs and wants are

tracked.
The future combines tracking Micro segments and
Individual customers based on Value and Needs.
Customer experience focus
Customering the future (now)
1
8 2
Micro
Redesign Segment Research
How
7 3
Redesign
Learn Customer
Delivery

6 4
5
Customize Sell
Listen
Assess by (emotional) needs

FAMILY MONEY
CONSCIOUS
CONSCIOUS

SECURITY
CONSCIOUS

ADVENTURE
SEEKING
Fit product / service to needs group

FAMILY
CONSCIOUS
Different
Portfolio MONEY
CONSCIOUS
Different
Portfolio
ADVENTURE
SEEKING
A Different SECURITY
P/S
Portfolio CONSCIOUS

A Unique
Product/Service
Portfolio
Further rank/valuate in quintiles/ deciles

Strategic

Another Customer Another Customer

Major Provider Needs Cluster
Needs Cluster

Diversified/Sustaining

Niche/Component

Transactional/Cost
One Customer Needs Cluster
And then you will know
1. Most Valuable Customers whos needs you can
continue to meet
2. Most Growable Customers whos needs you can
meet, plus cross-sell, up-sell
3. Below Zero Customers

Retain the customers who will continue to buy

Manage - asset-allocation on a profit potential basis
Segmentation Matrix
SWEET SPOT

Reinvent Deliver Killer

Low Cost Value Propositions Value Propositions

Focus Needs
Elsewhere Subsegmentation

LOW HIGH
Profitability/Value
The Goal -
To Reach the Optimal Number of Segments for maximum return on profitability with minimum effort

O
Optimum

Diminishing
Returns
Greater
Refinement
Opportunity

FEW MANY
Number of Customer Segments
 Superior customer segmentation is 5 step
process
1. Group all customers into
quintiles (deciles) by profitability
2. Study customer behavior within
profitability deciles to understand
why some custs are more profitable than others

3. Use this understanding to define needs-based segments

4. Divide each of these segments into profitability deciles

5. Based on experience over time, redefine or

subdivide segments again and again
Product and customer strategies
Product-centric strategies Customer-centric strategies

Mission
Increase
customer
Reduce cost, Organization Competition profitability
cycle time

Environment
 The strategies of CRM
Retain customers
e.g.,
Acquire new customers listening
adaptability
e.g.,
new products
differentiation
customer service
innovation
loyalty program

Increase customer profitability

e.g.,
bundling
cross-selling, up-selling
maximizing high-value /low-cost customers
 Determining the CRM "maturity levels"
Characterize product and customer centricity
and then map the intermediate steps
PRODUCT CUSTOMER

mass or niche markets competitive focus on building lasting

competitive advantage derived from customer relationships
cost, quality, cycle time management of customer knowledge,
data mining

The evolutionary path to CRM maturity is defined arbitrarily into four levels
 Evolving business processes to customer
centricity

CUSTOMER -CENTRIC
MARKET
Customer
CUSTOMER OF value
PRODUCT NICHE ONE
Select MASS VERSIONS creation
MARKET
markets

Perform
product-centric FULLY LARGELY LARGELY FULLY Customer-centric
PRODUCT -CENTRIC

business PRODUCT PRODUCT CUSTOMER CUSTOMER business

FOCUSED FOCUSED FOCUSED FOCUSED
functions functions

Deliver
product or STANDARD VARIATIONS VARIATIONS Customer
BY BY ESTABLISH
service CUSTOMER HIGH VALUE knowledge
FEATURE
CUSTOMERS management
The inter-related aspects of CRM
People

Programmes

Customer
Applications

Infrastructure
Process Technology
The core CRM areas
PROCESS AREAS CORE CRM AREAS
Sales
PROCESS
Marketing
activities dedicated to the running of the business
Service & Support

PEOPLE Organization

organizational enablers to the CRM processes Human resources

TECHNOLOGY Infrastructure

technological enablers to the CRM processes Applications

RELATIONSHIPS
Specific CRM processes
relationship and customer value management
Developing the Maturity Model
 Profit in business comes from repeat customers, customers that boast about your product
and service, and that bring friends with them ( cited in Lowernstein, 1995)

Relationship Marketing
Relationship Marketing
Focuses on getting and keeping customers
Concerned with customer loyalty
Aimed at developing long-term, cost-effective links between an
organization and its customers
All customer relationships are worth keeping
Customer retention
Impact on profitability and past research has claimed that it can be 5
times more expensive to obtain a new customer.
The Pareto rule
 Customer satisfaction and Behaviour type
Proliferation of Loyalists Promoters
Possibility of
Loyalist
(expectation < experience)

Whove had Bad Experiences Passive

with the Company (Expensive to Acquire,
& Quick to Depart)
The Company didnt respond to them.

Detractors Competitors discounts

offering or benefits

1 2 3 4 5
Strong dissatisfaction so so (10~50%)
Strong satisfaction

Source :Keki R. Bhote, Beyond Customer Satisfaction to Customer Loyalty, 1996

Why customers leave even they are satisfied?

In US, survey of CS about Cars, Almost 90% of answers are satisfied.

Repurchase rate of same brand car company is below 30%.

Hard for finding rule of relationship between CS and customer break away.
CS does not guarantee repurchase of customers
Customer loyalty is needed.
 CS strategy
Step #1
Issue Discovery
Customer DB
analysis/ Define Step #2
marketing
issues Value Identification
Customer
investigation/analysis Step #3
Needs Differentiation
Customer Segmentation Customers needs Step #4
finding / customer
value segmentation
Customization
Product/service,
channel, reward
strategy
What is loyalty?

In a business context loyalty has come to describe a customers commitment to

do business with a particular organization, purchasing their goods and services
repeatedly, and recommending the services and products to friends and
associates. (Barnett,2000)

Loyal Customer can mean a consistent source of revenue over a period of many
years. However, this loyalty cannot be taken for granted. It will continue only as long
as the customer feels they are receiving better value than they would obtain from
another supplier.
How to build customer loyalty?
Framework of building Loyalty

Degree of
Drivers Phased Elements
Relationship

Improving
Customer Attitude,
Core Products/Service
Satisf action not Action
Innovation of Channel Mgmt.

Reward Program Repurchase Action, not Af finity Customer

CRM /Continuing Campaign / Cross-selling (Artif icial Loyalty) Loyalty

Recognition
Trust/
(CR Strategy) of Relationship,
Intimacy Ref erral
Loyalty program: Reward
The plan objectives for this program are:
1. Effectiveness, cost savings, profitability, etc.
2. Develop a greater sense of concern and loyalty about the company or brand
3. Strengthen communications between customers and companies.
4. Provide financial rewards to customers who have demonstrated performance or contribution
5. Enhance the Companys ability to meet or exceed its target goals.

Campaign and Reward

Discrete Communication Model Continuous Communication Model

Loyalty
Individual Approach Mass Approach
Reward types

Continuity
Directly
Type of reward

Supports Promotion Airline Mileage, Reward

Value (Price) Coupon
Proposition

Other Multi-product
Lotteries
indirect
(Instant Scratchies) Frequent-buyer
Types
of reward Immediate Delayed

Timing of Reward

Dowling.,Mark Uncles, 1997

 4 characters to differentiate
4 Attributes

(Accomplishment) (Continuity) (Attraction) (Acquisition)

Points acquisition Not for short term events Based on customer needs For acquiring
Reward offering cycle and Induce repurchase for offering rewards new customer
Getting Reward gifts Offering diverse For acquiring customers
Reward options from competitors
Session summary
To become customer centric, firms should shift focus from
product to customer
Customer segmentation helps in identifying profitable
segments and deliver high value
Enterprises can gradually move up in CRM maturity levels
Customer satisfaction does not guarantee loyalty
Continuous efforts a necessary to refocus on customer
needs to be successful and profitable in competitive
market