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Relationship Management
Means maintaining relationship over long run.
Relationship between customer & firm does not end after the 1 st transaction (sale).
Relationship management is a term that refers to practices, strategies and technologies that
companies use to manage and analyze customer interactions and data throughout the customer
lifecycle, with the goal of improving business relationships with business partners.
First, consider the word “comprehensive” CRM does not belong to just sales or marketing. It is
not the sole responsibility of customer service group or an IT team; i.e. CRM must be a way of
doing business that touches all the areas. When CRM is delegated to one area of an organization,
such as IT, customer relationship will suffer. Likewise, when an area left out of CRM planning,
the organization puts at risk the very customer relationships it seek to maintain.
The second key word in our definition is “approach”. An approach, according to Webster, is “a
way of treating or dealing with something.” CRM is a way of thinking about and dealing with the
customer relationship. When you implement your CRM strategy, you will capture and analyze
data about your targeted customer and their buying habits.
Understanding CLV can help your business answer these critical question:
1. How much can we comfortably spend on marketing and sales for customer acquisition?
2. How much should we spend on customer service to retain an existing customer?
3. Who are our most valuable customers and how can we better target this demographic for
future sales?
Identify the touch points where the customer creates the value
Integrate records to create the customer journey
Measure revenue at each touch point
Add together over the lifetime of that customer
RFM Score
RFM is acronyms of
R-Recency of Purchase
F-Frequency of Purchase
M-Monetary Value of Purchase
Organizations with sophisticated CRM systems often have databases that record a customer’s
RFM score. RFM is a strategy for analyzing and estimating the value of a customer.
Majority Fallacy
Majority fallacy is the name given to blind pursuit to the largest, most easily identified or most
accessible market segments.
This segment attracts intense competition and prove to be least profitable.
Majority fallacy is the strategy error which leads to mistaken belief that largest segment of the
market is the most profitable one.
Firms shouldn’t target or spend money on undesirable customers because these segments
have a poor purchase history and low expectations of any purchases in future.
Mass customization implies that an organization can communicate with target audiences at a
mass or segment level, but is also able to offer customized value propositions for individual
customers.
Mass customization is widespread in service industries serving end consumers. This is largely
because of the insuperability of service production and consumption. The interaction between
consumers and service producers during the service encounter lets customer influence both the
service delivery process and the outcome.
Key issues for CRM strategies are:
Do customers want customization?
What degree of customization is required?
Are customers willing to pay a “premium”?
The “Touch points” where the customer interacts with the firm in multiple channels.
Example, help desk, terminal of payment, /payment counter, company website, advertisement
etc.
Touch-points allow customers to have experiences every time they “touch’ any part of the
product, service, brand or organization, across multiple channels and various points in time.
It is a point where customers and business engage to exchange information, provide service, or
handle transactions.
Data warehouse: is a large reservoir of detailed and summery data regarding business
activities and dimensions.
It describes organization’s activities
It facilitates easy retrieval of information.
Data Mart is a subset of data warehouse that has been developed to meet the needs of
particular group of users.
Data mining describes how the user extracts previously unknown information from the
large reservoir of the data warehouse.
Customer 1. Order
entry system
2. Inventory
system
4. Accounts 3. Billing
Receivable
System system
Accounts
Customer Inventory
Receivable
Master File Master File
Master File
There are two approaches to define and measure loyalty, one based on attitude and other on
behavior.
Building customer loyalty is the basic platform of relationship formation. In a highly competitive
and challenging business environment, organization are really blessed if they are fortunate to
have loyal customers in their customer inventory.
A customer loyalty program is based on a simple premise: as a company develops stronger
relationship with their best customers, these customers will stay with the company longer and
become more profitable.
Defining loyalty as “attitudinal” implies that loyalty is a state of mind. In other words,
customers are “loyal” to a brand or company if they have a positive, preferential
attitude toward it.
(i) Inertia loyalty has also been called spurious loyalty to indicate that behavior
appears to be bogus, because there is no strong attitudinal influence. Spurious
loyal have high levels of repeat purchase but weak relative attitude. The behavior of
these customer can be driven by habit.
(ii) Latent loyalty-customer have strong attitudes, but repeat purchase is low.
Customer Satisfaction
Customer satisfaction is a post-purchase or post-choice evaluation
The extent to which product’s perceived performance match with buyer’s expectation.
So, Customer satisfaction is a post-purchase or post-choice evaluation that results from a
comparison between those pre-purchase expectations and actual performance.
Confirmation-If performance match with the expectation. Fulfilment of an expectation
is confirmation
Dis-confirmation-Performance does not match with expectation.
Effective marketers try to understand if the discrepancy between expectations and performance
is large or small.
Delightful experience-When performance exceed expectation.
Describe situations in which customer receive fulfilment that exceeds the satisfaction
of unexpected needs or wants.
If the product’s performance falls short of the customer’s expectations, the buyer is
dissatisfied.
If customer dissatisfied, the following problems may be occurred.
o Customer may make complain
o Customer may stop buying from your firm.
Your satisfied customer moving toward the competitors. Satisfaction does not guaranteed loyal
customer. Satisfaction is pre-condition of customer loyalty. One explanation is, there are various
level of satisfaction. According to experts, most of the customers have a zone of tolerance
regarding satisfaction. Satisfaction is ranked on a 5-point scale ranging from 1 for completely
dissatisfied to 5 for completely satisfied.
5—Strongly Satisfied
4—Satisfied
3-Neutral
2—Dissatisfied
1—strongly dissatisfied
At levels two to four, customers are fairly satisfied but still find it easy to switch when a better
offer comes along, at level five, the customer is very likely to repurchase and even spread good
work of mouth about the company. Up to Level four there is a chance of customer to leave the
brand but from level five customer satisfactions is proportional to the customer loyalty.
It found that customers who rated their satisfaction as 4 were six times more likely to switch to a
competitive offering than those who marked 5 were.
Emotional Bonding
Emotional bonding means attachment or affinity of the customers with the brand /company.
Over time customer loyalty requires emotional bonding. Customers have a positive brand affect,
which is an affinity with the brand, or they have a company attachment, which means they like
the company.
In many circumstances, consumers may identify with and become emotionally attached to mental
images that a company or a brand develops or acquires.
For example, many customers identify with Polo Ralph Lauren. They identify with the
brand because the brand identifies them and their friends. From a consumer’s perspective
Trust:
Trust the third component of the model, is interrelated with emotional bonding. Trust exist when
one party has confidence that he or she can rely on the other exchange partner.
Trust can be defined as the willingness of the customer to rely on the organization or brand to
perform its stated function.
Trust reduces uncertainty/risk and is viewed as a carefully thought out process, whereas brand
affect may be an instantaneous response.
In many situations, trust means a customer believes that the marketer is reliable and has integrity.
In many personal selling situations, trust means that a customer has confidence that the sale
representative is honest, fair and responsible and that his or her word can be relied on. If a
delivery date is given the buyer has confidence that the product will be shipped on time.
There can be a switching cost associated with change to the unfamiliar, the untried or new. There
may be a cost in time, money and personal risk.
Friendly Systematic
Companionship Mass
Trust personalization
Discounts
Product Upgrades Personal Management
Awards Insights Mass
Prizes Recognition Personalization
Mutual Cultivation
affection Simulation
Financial Incentives
Financial Incentives are discounts, product upgrades, or prizes that serve as rewards for
customers who are loyal or make repeat purchase (Frequently purchase).
For example, season ticket holders for professional hockey games or the opera receive discounts
for establishing a relationship with organization.
Example in Bangladesh: GP star customer get 15% discount on Bill amount of all food items
(except beverage & water)
Drawbacks
Competitor can easily copy this programs
Customer may become loyal toward the incentive, not to company or brand.
Social Bonding
The formation of social bond between the organization and its customers may create a stronger
relationship.
Welcome Strategy
A welcome is kind of greeting designed to introduce a person to a new place or situation, and to
make them feel at ease. The term can similarly be used to describe the feeling of being accepted
on the part of the new person.
Cognitive dissonance
A psychologically uncomfortable post-purchase feeling especially negative feelings or “buyer’s remorse”
In the field of psychology, cognitive dissonance is the mental discomfort (psychological stress)
experienced by a person who holds two or more contradictory beliefs, ideas, or values.
The discomfort is triggered by a situation in which a person's belief clashing with new evidence
(facts) perceived by the person. When confronted with facts that contradict beliefs, ides, and
values, people will find a way to resolve the contradiction to reduce their discomfort.
Festinger’s (1957) cognitive dissonance theory suggest that we have an inner drive to hold all our
attitudes and behavior in harmony and avoid disharmony (or dissonance). When there is an
inconsistency between attitudes or behaviors (dissonance), something must change to eliminate
the dissonance.
For example, when people smoke (behavior) and they know that smoking cause cancer
(cognition), they are in a state of cognitive dissonance.
Definition
“Complaint is defined as statement that is something wrong or not good enough, which shows
customer dissatisfaction about the company and the product”.
Complaints management is about resolving individual complaints and identifying opportunities to make
systemic improvements.
Keep in
touch and
listen to
customer
Followup
Be
and
customer
prevent
centric
recurrence
Complaint
Management
Express Resolve
regret conflict
1. Be customer centric-
Focus your customer
Listenting attentively and displaying sensitivity to customer’s position conveys
respect and communicate the message tha the organization is customer centric.
2. Express regret:
A simple apology can go a long way.
Just saying I am truly sorry this problem occur?” may turn an angry customer n to
appeased customer
3. Resolve conflict
Conflict is a disagreement in which the views of the customer and the organization appear
to be compatible. So making amends of the conflicts immediately and appropriately is the
must.
From the organization’s perspective, there are several way to resolve the conflict:
i) Accommodation: Accommodation is a settlement of conflict that emphasize
cooperative behaviour. When the customer or customer’s lifetime value is more
Win-back consists of identifying which customers have been lost or are about to terminate their
relationships, reasons for losing high-value customers, effective methods for re-contacting lost
customers and offers that communicate the benefits of reactivation.
1. Identify who are about to terminate: The best time to win back a customer is before the
customer terminates the relationship. In the best win back strategies, the company acts
rather than reacts. The sooner a company realizes that a customer is about to defect, the
better able the company is to win back the lapsing customer.
2. Consider lifetime customer Value: Some customers have a low lifetime value and the
organization may not want to reestablish relationships with those who demand too much
service without a corresponding amount of revenue. Thus an initial aspect of win back
strategy is to profile customers by lifetime future value. A win back strategy should
identify and focus on high value customers who show the greatest potential to respond to
win back efforts. It is not worthwhile to try to win back low value customers.
Life Time Value=Past Purchase+ Future purchase-Cost.
3. Establish why customers terminate: Customers may switch brands for-
Variety, Competitor’s better relative advantage, performance below their expectations,
lower price, unhappy with customer service etc.
Methods of knowing the reasons--
i. The customer exit interview is an attempt to ask, “Why are you leaving us?” In
business to business markets, a senior executive may visit the lost customer a
month or two after the relationship has been terminated.
Concept of SFA
Sales Force Automation (SFA) has offered technological support to sales people and
managers since the beginning of the 1990s.
The word “Sales Force” means employee who engage in sales.
It is seen as a “comparative imperative” that offers ‘competitive parity’
Sales force automation is the application of computerized technologies to support sales people and
sales manager in the achievement of their work-related objectives.
Sales force automation (SFA) is an integrated application of customizable customer
relationship management (CRM) tools that automate and streamline sales inventory,
leads, forecasting, performance and analysis.
Benefit of SFA
There are three parties who are benefited from SFA. They are-
Sales People:
Shorter sales cycle
More closing opportunity.
Higher win rate
Time Saving
Sales Manager:
Accurate reporting
Improved sales person productivity
Improved customer relationship
Reduced cost of sales
Senior Management
Accelerated cash flow
Increased sales revenue
Market share growth
Improved profitability
Sales force automation (SFA) is a specific type of CRM (customer relationship management)
software, used primarily by B2B companies to support sales teams by managing the data and tasks
involved in lead generation, opportunity tracking, sales activity, etc.
SFA Ecosystem
The SFA ecosystem is made up of three major groups:
SFA solution provider.
Hardware and infrastructure vendors
Service provider
Services
The services component of the SFA ecosystem is very diverse.
SFA project leaders might buy services from providers that re-engineer selling processes, manage
projects, train salespeople, consult on organizational structure or conduct customer portfolio
analysis.
During implementation External support is needed, e.g., outsourcing of call centre.
Call Centers
A company’s call center is an organizational unit that supports direct customer interaction
via telephone, well configured information technology and capable service personnel.
The origins of call centres dates back to the 1960s with the UK-based Birmingham Press and
Mail, which installed Private Automated Business Exchanges (PABX) to have rows of agents
handling customer contacts. During the 1990s, call centres expanded internationally and
developed in all over the world.
Call Routing:
Guiding each customer’s call to the customer service representative who is most capable of
helping is the concept of call routing.
In many instances call routing software directs the call to an interactive voice response system
rather than a person to allow the computer to handle the entire call.
Caller ID System
It is a system to send incoming phone numbers to data warehouse, where the number is matched
with individual customer record.
Simple caller ID systems, such as those in households, provide the name, number, date and time
of call.
Sophisticated caller ID systems trigger information about the entire history of interactions and
purchase of the customer with organization.
“Measurement is the beginning of science, until you can measure something, your knowledge is meager
and unsatisfactory” Lord Kelvin.
What is metrics?
Metrics are internal and external indications of accomplishment.
They are used to justify, monitor, and track CRM success.
They serve as the feedback mechanism for the continuous development of your CRM strategies
and tactics.
Sales Metrics
Number of prospects
Number of new customers
Number of retained customers
Number of open opportunities
Close rate
Renewal rate
Number of sales calls
Number of sales call per opportunity
Amount of new revenue.
Service Metrics
Customer satisfaction level
Complaint time-to-resolution
Propensity for customer defection
Average time to resolution
Average number of service calls per day
Number of service calls
Marketing Metrics
Number of campaigns
Number of new customers acquired by campaign
Customer retention rate
Number of customer referrals
One of the primary areas of growth for an organization is the acquisition of new customers.
Customer acquisition involves identification of potential customers, understanding their
strengths and weaknesses, risk assessment and formulation of an acquisition strategy.
Customer acquisition is the process of acquiring new customers for business or converting
existing prospect into new customers.
Customer acquisition is the process of finding and persuading prospective customers to buy from
your business in a way that is both measurable and repeatable—not random.
1
A USP could be thought of as “what you have that competitors don't.” A unique selling proposition (USP) refers
to the unique benefit exhibited by a company, service, product or brand that enables it to stand out from
competitors such lower price, high quality, durability etc. For example, GP has good network coverage, Robi is better
for internet package, and Banglalink is for lower call rate. The unique selling proposition must be a feature that
highlights product benefits that are meaningful to consumers. The USP theory states that such campaigns made
unique propositions to customers that convinced them to switch brands.
Relative advantage means the degree to which a product appears to be superior to another
existing product. The rate of acceptance of a new product or service is directly
proportional to the relative advantage of the product, i.e. greater the advantage for that
product, greater will be its acceptance by the target consumer and vice versa.
Relative advantage exists when a product/ brand/service offers the target consumers
either of the following:
o Improved performance when compared to other options
o Savings in time and effort
o The possibility of immediate reward
Google Wallet, an app that converts a smartphone into a payment device, offers a relative
advantage over traditional means of payment.
All customers are not equal and should be treated differently, because-
Variation in customer need
Importance of customers to the firms
Customer Portfolio Management (CPM) aims to optimise business performance – whether that
means sales growth, enhanced customer profitability, or something else - across the entire
customer base
It does this by offering differentiated value propositions to different segments of customers
Strategically significant customers are those customers who create great value for the company
and in order to retain them for the long period of time, the company has to build some strong
possible strategies. 20-80 rules is applicable here as you know 20 % of total customer base generate
80% of total revenue for the company so simply we can say that those 20% are strategically
Definition
Customer experience is the cognitive and affective outcome of the customer's exposure to, or interaction
with, a company's people, processes, technologies, products, services and other outputs.
A good customer experience means that the individual's experience during all points of contact
matches the individual's expectations.
IKEA is a Swedish-origin Dutch-headquartered multinational group that designs and sells ready-
to-assemble furniture, kitchen appliances and home accessories, among other useful goods and
occasionally home services. They offer some special features such as price tag/description of the
product, one way route, packaging, home delivery, restaurant in the outlet, payment method for
better customer experience.
Mystery Shoppers: The Company can recruit paid shoppers to understand consumer’s
experience. The company recruit them for comparative shopping (to understand gap with the
competitive firm.)
Experience Mapping-Understand chart and improve what happen in the touch point. An
Experience Map is useful tool for capturing and presenting key insights that occur across user
experiences with a particular product or service. Ways of collecting customer experience are-
Face to face interview
Focus group discussion
Telephonic interview