Chapter 01 : Fundamentals of CRM

Todays Agenda
How marketing function is changing?
The causes necessitating a change in marketing method.
The manner in which customer service is rendered.
The importance of CRM for todays managers

Changing nature of Marketing and customer services

Changing Social trends
Lesser Government control
Rising income level
Threats from new entrants
Increased demand by empowered customers
Easy access to information

Changing Social trends

Packaged food
Washing Machine
Children's game
Social meet

Lesser Government control

Example: USE OF UBER IN

BANGLADESH!!!!!!!!!!

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Raising income level
Greater affluence and increased spending power has transformed the
customers psyche and resulted in demand for exotic offerings.

Examples of new product demand

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Emerging trends in Marketing
Shorter product life cycle
Emergence of permission marketing
Experiential marketing
Offering complete solutions
Rewarding loyal customers
Disruptive innovations

Disruptive innovations
A disruptive innovation is an innovation that creates a new market
and value network and eventually disrupts an existing market and
value network, displacing established market leaders and alliances.
The term was defined and phenomenon analyzed by Clayton M.
Christensen beginning in 1995.

Disruptor Disruptee
1. Personal computers 1. Mainframe and mini
2. Mini mills computers
3. Cellular phones 2. Integrated steel mills
4. Community colleges 3. Fixed line telephony
5. Discount retailers 4. Four-year colleges
6. Retail medical clinics 5. Full-service department
stores
6. Traditional doctors offices

Disruptive innovation

Cloud Computing:
The practice of using a network of remote servers hosted on the
Internet to store, manage, and process data, rather than a local server
or a personal computer.
Software-as-a-service (SaaS)

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A method of software delivery that allows data to be accessed from any
device with an Internet connection and web browser. Companies dont
have to invest in extensive hardware to host the software, and this in
turn, allows buyers to outsource most of the IT responsibilities typically
required to troubleshoot and
maintain the software.

The changing nature of

customer Services

Challenges in modern day

customer services
24/7, 365
Switching
Door-to-Door
Customized

Emerging trends in services Marketing Mix

HubSpot as an example, which was founded in 2006; Hubspot has

8,000+ customers in 56 countries and sells software. What does their
marketing mix look like?

1. Products/Services: Integrated toolset for blogging, social media,

website, email and lead intelligence tools.
2. Prices/Fees: Subscription-based monthly, Software-As-Service
model based on number of contacts in database and number of users
of the service.
3. Place/Access: Online. Network of Partners, Country User Groups.
4. Promotion: Directors speak at events, webinars, useful guides that
are amplified by SEO and effective with SEO. Social media advertising,
e.g. LinkedIn.
5. Physical Evidence: Consistent branding across communications.
6. Processes: More sales staff are now involved in conversion.
7: People: Investment in online services.

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Customer Experience - The new differentiator

Sense
Feel
Think
Act
Relate

Managing Service Beier

Type of service
Nature of relationship shared by the customer with the service
organization.
The method of service delivery.
Type of demand and supply for the service.

Extent to which service provider has to exercise judgment for

customization.

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 CHAPTER 02 : CRM - The Basic Concepts
RM and CRM same/ different?
Customer relationship
management
CRM is an approach to
managing a companys
interaction with current and
future customers. The CRM
approach tries to analyze
data about customers'
history with a company, in
order to better improve
business relationships with
customers, specifically
focusing on retaining
customers, in order to drive
sales growth. One important
aspect of the CRM approach
is the systems of CRM that
compile information from a
range of different channels,
including a companys
Relationship marketing
RM was first defined as a form of
marketing developed from direct
response marketing campaigns
which emphasizes customer
retention and satisfaction, rather
than a dominant focus on sales
transactions. With the growth of
the internet and mobile platforms,
relationship marketing has
continued to evolve and move
forward as technology opens more
collaborative and
social communication channels.
This includes tools for managing
relationships with customers that
goes beyond simple demographic
and customer service data.
Relationship marketing extends to
include
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website, telephone, email , l inbound marketing efforts, (a
live chat , marketing combination of search
materials, social media, and optimization and strategic
more. content), PR, social media and
application
development.

Definition of CRM

Economics of building customer relationships

CLV: Customer lifetime value is defined as the dollar value of a

customer relationship, based on the present value of the projected
future cash flows from the customer relationship. It encourages firms to
shift their focus from quarterly profits to the long-term health of their
customer relationships. It represents an upper limit on spending to
acquire new customers.

How to calculate: (Average Value of a Sale) X (Number of Repeat

Transactions) X (Average Retention Time in Months or Years for a
Typical Customer)

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An example: the lifetime value of a gym member who spends $20
every month for 3 years. The value of that customer would be: $20 X
12 months X 3 years = $720 in total revenue (or $240 per year)

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Economics of building customer relationships
Customer equity: CE is defined as the total of the discounted lifetime
value of all the firms customers.
Drivers of customer equity
Value equity: the customers objective evaluation of the firms
offerings. (quality, price and convenience)
Brand equity: the customers subjective view of the firm and its
offerings. (brand awareness, attitude and perception of brand ethics).
Relationship equity: the customers view of the strength of the
relationship between the customer and the firm (loyalty program,
special recognition, affinity, community program,
knowledge building program).

Operational and analytical CRM

Operational CRM Analytical CRM

Front office involvement
Aim- better customer experience
Focus on actual customer interfaces
Back office involvement
Aim- Understanding customer
behavior
Focus on analysis of customer
transactions

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Helps to gather information to be Depends on operational CRM for
used for analytical CRM getting the input data on which
analysis is done

Strategically Significant Customers

Strategically Significant Customers

Strategically Significant Customers

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Strategically Significant Customers Markers of Strategically
Significant Customers.

Key Customers
Loyal Customers
Competitive customers
Switchable customers
Competitors loyal customers.

Strategies for key customers

Develop personal trust ( meeting commitments, satisfy need,
offering good value for money, prompt action for service failure,
social meeting with customers)
Create Entry barriers (Highly competitive price, innovative
features in product that difficult to duplicate, developing
expertise in many area of value chain)
Reinforce exit barriers (dependant, long term loyal customers)
Strategies for key customers
1. Single customer view personalization
2. Cross-selling and up-selling
3. Multi-channels
4. Sales-force automation
-Comprehensive picture of the sales situations
-Enabling sales with the power of automation
-Analysis of sales
-Comprehensive access to all desired materials
Issues concerning multi-channel selling initiatives

Type of channel Issues of consideration

Retail shops Continuous training
Collating data from different
channel and accessibility of
employee
Conflicts among branches

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Online-internet Ensuring updated data from
website different channels
Security issues
Integrating online task with offline
tasks
Call center/telephony Proper and continuous training
enabled channels Ensuring updated data from
different channels
Heavy dependence of verbal
communication
Kiosk/automated Minimum technology to get
machines maximum customer acceptance
Strategic Location
Ensuring constant functionality

Campaign Management
Proper segmentation and qualification of the database. (I.e.
Demographic and psychographic variables)
Steps to follow for effective campaign management:
Actions tailored to segment needs
Decision of product variety, communication channel and
distribution channel based on segment characteristics.
Lesson from previous campaigns feedback
Metrics to measure campaign results.
Types of campaigns:
1. Single stage campaign
2. Multi-stage campaign
3. Single channel campaign
4. Multi-channel campaign
5. Trigger based campaign

Metrics to Measure Campaign

Sales
No. of prospects, new customer, retained customer
Close and renewal rate
No. of sales call made
Sales cycle duration etc.
Marketing
No. of campaigns, campaign response and purchase
Revenue generated by campaign
No. of customer referrals
No. of webpage visits etc.
Service
No. of calls handled, cases closed per day,
No. of customer call back

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 Average call handling time etc.
Benefits of CRM

Information technology and CRM

Example:

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Face to face CRM

Implementing CRM

Stages in implementing a CRM system

Peppers et al. (1999) proposed four phases in this process:
Identify end-user customers in detail (particularly their habits
and preferences);
Differentiate them (on the basis of their value to the firm and
their own needs);
Interact with customers (through affordable channels that
yield more information about their value and needs); and
Customize products and services (on the basis of what has
been learnt).

Yuan and Chang (2001) identified three phases in implementing a CRM

system:
Integration (output-centralized customer data from difference
sources);
Analysis (a deeper understanding of customer behavior and
needs); and
Action (a positive impact on customer relationships).
IDIC: FOUR IMPLEMENTATION TASKS FOR CREATING AND
MANAGING CUSTOMER RELATIONSHIPS

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Stages in implementing a CRM system
Winer (2001) proposed seven components in implementing CRM:
Creating a database of customer activity;
Analyzing the database;
Considering which customers to target
Targeting the customers;
Building relationships with the targeted customers;
Respecting privacy issues with regard to customers
information; and
Measuring the success of the CRM program.
Kim et al. (2003) divided the implementation of the CRM system into
different stages:

Customer knowledge (CK);

Customer interaction (CI);
Customer perception (CP)
Customer satisfaction (CS); and
Customer value (CV).

CHAPTER-
3 Customer Building Blocks

Agenda
Why Do Companies Work at Being Customer- Centric?
Types of Buyer-Seller Exchanges
What Characterizes a Relationship?
Relationship Development Process
Relationship Building Blocks
Levels of Relationships

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 Customer Loyalty: Is it an Attitude? Or a Behavior
Role of trust in CRM
Why Do Companies Work at Being Customer-Centric?

Customers are scarce

Customers are the sole
source of all a
companys revenue
Customers create value
in two ways

- Return on customer (ROC)

"How much value can I
create per customer?"
- Return on investment(ROI)
"How much value can I
create per dollar?"
What Characterizes a Relationship?
Characteristics of a Genuine Business Relationship

Require Mutual
s
s a
a
change
change
in
behavio Unique
behavio
r
r of
of
both
both
parties
parties

Providin
Providin Requir
g
ongoing es and
ongoing produc
benefits
benefits
to both es
parties trust

Interat Interac
ive tive

Transaction VS relationship marketing

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Types of Buyer-Seller Exchanges

A business alliance is an agreement between businesses, usually

motivated by cost reduction and improved service for the customer.
Alliances are often bounded by a single agreement with equitable risk
and opportunity share for all parties involved and are typically
managed by an integrated project team.
E.g. code sharing in airline alliances.
Types of Buyer-Seller Exchanges
Five basic categories or types of alliances:
Sales
Solution-specific
Geographic-specific
Investment
Joint venture
Sales Alliance: A sales alliance occurs when
two companies agree to go to market together
to sell complementary products and services.

Solution-specific: A solution-specific
alliance occurs when two companies agree
to jointly develop and sell a specific
marketplace solution.

Geographic-specific: A geographic-specific alliance

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Is developed when two companies agree to jointly
Market or co-brand their products and services in a
specific geographic region.

Investment Alliance: An investment

alliance occurs
When two companies agree to join their
funds for
mutual investment.

Joint venture: A joint venture is an alliance that

occurs when two or more companies agree to
undertake economic activity together.

A strategic alliance is an agreement between two or more parties to

pursue a set of agreed upon objectives needed while remaining
independent organizations. Partners may provide the strategic alliance
with resources such as products, distribution channels, manufacturing
capability, project funding, capital equipment, knowledge, expertise, or
intellectual property.
Typology of strategic alliances:
According to Michael Porter and Mark Fuller,
Technology development alliances
Operations and logistic alliances
Marketing, sales and service strategic alliances
Multiple activity alliances

Other form of strategic alliances are:

Cartels (an association of manufacturers or suppliers with the
purpose of maintaining prices at a high level and restricting
competition- OPEC)
Franchising (the right to use its trademark or trade-name as
well as certain business systems and processes, to produce and
market a good or service according to certain specifications)

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 Licensing
Industry standard groups (is a system for classifying
industries by a four-digit code)
Outsourcing
Affiliated Marketing

Some examples of different form of strategic alliances In R & D

- Microsoft and Nokia a software partnership for Nokias windows

phone.
- CISCO systems agreement with China's biggest on-line commercial
company Alibaba, to explore business services for SEMs.
Manufacturer
- Chrysler-Fiat partnership to build compact and subcompact jeeps.
- GSK Dr. Reddy Labs: the Indian company manufactures nearly 100
products mainly under GSK brand name for sale in some emerging
countries.
Marketing
- WIPROGE joint venture to distribute approximately 85% of GEs
healthcare products and solution in India.

Some examples of different form of strategic alliances Market

Entry
- Transcend Information Inc, a global player in many telecom
accessories has an agreement with BharaI Teletech to distribute the
entire portfolio of transcend products in India.

For sales
Nestle and General Mills (US) agreement whereby the product
Honeynet Cheerios was made in General Mills US plants, shipped in
bulk to Europe for packaging at a Nestle plant and then marketed in
France, Spain and Portugal.
Equity (Participation) alliance
- Fords 33.4% share in Mazda
- Daimler Chrysler's acquisition of 34% in Mitsubishi

Relationship Development Process

Dwyer, Shurr, and Oh suggest that business-to-business (B2B)
relationships evolve through
five general phases:

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Relationship Building Blocks

1. Trust (Shared values, Interdependence, Quality , communication,

Non opportunistic behavior)
2. Commitment (Input, consistency and durability) Calculative
commitment, Affective commitment
3. Satisfaction
4. Uncertainty and Dependence
degree of uncertainty in the environment
degree to which rela4onship members are dependent upon
each other.
5. Fairness
Distributive fairness (focused on outcomes)
Procedural fairness (focused on behaviors)
6. Symmetry : Rela4onship symmetry - the degree of equality
between relationship
members (such as, information sharing, dependence and power)
Symmetric rela4onships- discourages the development and
expression of conflict
Asymmetric rela4onships - diverging interests and greater
motivation to engage in conflict

Levels of Relationships
Intimate relationships
Face-to-face customer relationships
Distant relationships
No-contact relationships

Customer Loyalty: Is it an Attitude ? Or a Behavior ?

The attitudinal definition of loyalty implies that loyalty

is a state of mind. Customers are loyal to a brand or a
company if they have a positive, preferential attitude
toward it.
The behavioral definition of loyalty relies on a custom-
ers actual conduct, regardless of the attitudes or prefe-
rences that underlie that conduct. By this definition, cus-
tomers are loyal to a company if they buy from it and
then continue to buy from it. In the behavioral definition,
loyalty is not the cause, but the result of brand

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preference.

THE TRUST EQUATION: GENERATING CUSTOMER TRUST

Trust = (C + R + I)/S
where:
C = credibility. Credibility has to do with words; I can trust
what he says about. . . Other related terms include believability
and truthfulness.
R = reliability. Reliability has to do with actions; I can trust
that hell do. . . . Other related terms include predictability and
familiarity.
I = intimacy. Intimacy has to do with perceived safety; I can
trust talking with him about. . . . Security and integrity are
related to intimacy.
S = self-orientation. Self-orientation has to do with focus; I
can trust that hes focused on me. . . . A low level of self-
orientation on the part of the enterprise enhances the customers
trust, while a high level of self orientation destroys trust.

Myths about building trust

Myth 1. Intimate customer relationships require time and

proximity.
Myth 2. Trust takes time.
Myth 3. More customized contact is better.
Myth 4. People trust companies.
Myth 5. People like to be asked their opinion.

CHAPTER 4 IDENTIFYING CUSTOMERS

Agenda

Identifying the customer

Steps involved in customer identification
Customer identification activities
Customer identification in B2B & B2C settings
What data we need when we identify customers.

IDENTIFYING CUSTOMERS
The essence of managing customer relationships is treating different
customers differently; therefore, the first requirement for any
enterprise to engage in this type of competition is simply to know
one customer from another. Identifying individual customers is not an
easy process, and usually not a perfect one.

STEPS INVOLVED IN CUSTOMER IDENTIFICATION

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STEP 1: HOW MUCH CUSTOMER IDENTIFICATION DOES A
COMPANY ALREADY HAVE?

Take an inventory of all of the customer data already available in

any kind of electronic format.

Find customer-identifying information that is on file but not

electronically compiled.

STEP 2: GET CUSTOMERS TO IDENTIFY THEMSELVES.

Sales contests and sponsored events are often designed for the
specific purpose of gathering potential and established customer
names and addresses.

Analyzing past behavior is probably the single most useful

method for modeling a customers future value, customer
differentiation.

Frequency marketing programs provides not only a mechanism to

identify customers, but also a means to link customers, over
time, with the specific transactions they undertake.

CUSTOMER IDENTIFICATION ACTIVITIES

Define
Collect
Link
Integrate
Recognize
Store
Update
Analyze
Make available
Secure

CUSTOMER IDENTIFICATION IN DIFFERENT SETTING B2B

Who will be on the other side of the relationship.

Will it be the purchasing manager or the executive who signs the
purchase order?
Will it be the financial vice president who approved the contract?

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 Or will it be the production supervisor who actually uses the
product?

CUSTOMER IDENTIFICATION IN DIFFERENT SETTING B2C

Can we identifyand recognize againmillions of customers?

The technology-driven CRM movement has only recently made it
possible even to conceive of the possibility of managing
individual consumer relationships.
New technologies have made it possible to identify customers
without their active involvement.

WHAT DATA WE NEED WHEN WE IDENTIFY CUSTOMERS

1. Behavioral data, such as purchase and buying habits, click

stream data, interactions with the company, communication
channels chosen, Language used, product consumption, and
company share of wallet.
2. Attitudinal data, reflecting attitudes about products, such as
satisfaction levels, perceived competitive positioning, desired
features, and unmet needs, as well as lifestyles, brand
preferences, social and personal values, opinions, and the like.
3. Demographic (i.e., descriptive) data, such as age, income,
education level, marital status, household composition, gender,
home ownership, and so on.

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