Customer Relationship Management

Session-3

Customer life cycle management

Customer life cycle management

The stages a customer goes through from the time of before deciding to do business with an organization until he or she decides to stop being a customer is called Customer life cycle

Customer life cycle management

Another view

Pre-Purchase Pre-Purchase

Purchase Purchase

Usage Usage

Re-Purchase Re-Purchase

Winning back Winning back

Customer life cycle management

Role of CRM in pre purchase Campaigning

Mass media advertizing, Direct mailing, Telephonic Solicitation Non intrusive Permission marketing
Website, Retail stores, Call centers, Email responses to enquiries, Home visits by service personnel Comparison with competitive products; queries on usage, service, warranty, guaranty etc. Home appliances, food products, computer software

Easy access to right information

Comprehensive information in suitable formats

Product demonstrations & trials

Customer life cycle management

Role of CRM in purchase Purchase options

Variety of purchasing avenues

Cash Cheque Credit/Debit card E-payment Mobile-payment

Easy Procedures

Home loans

Customer life cycle management

Role of CRM in purchase (cotd..) Access to hire purchase

Loans EMIs Product cum installation At suitable time & place

Complete solution

Installation & training at customers convenience

Customer life cycle management

Role of CRM in Usage stage Easy access to after sales service

Provide multiple access methods like

Toll free service helpline Website space for registering service requests Email id This access information should be readily available for consumer

Quick trouble shooting

Promptness of service desired

Understand what is customers idea of quick service?

Spare parts easily available & affordable

Customer life cycle management

Role of CRM in Usage stage (cotd..) Updated features

Software patches, upgrades Website Social media : Face book, twitter etc. Events Activations : Contests

Engaging customers

Customer life cycle management

Role of CRM in Re-purchase Easy disposal of old products

Buy new sell old Frequent flyer scheme Loyalty cards Understand gaps in existing product Find out unfulfilled expectations of customers New product should take care of these aspects Eg: Frost free refrigerator

Loyalty bonus

New products with useful value addition

Customer life cycle management

Role of CRM in Winning back lost customers

Keeping track of the churn

Alert should be sounded when loyal customer stops making purchases. By tracking

Regularity of purchases Value of purchases

Analyze the cause of departure through

Interviews with customers (in person, telephone) Interviews with concerned sales person Analyzing transactions. Locating gaps in service delivery or unattended complaints

Customer life cycle management

Role of CRM in Winning back lost customers (contd..)
Make

relevant offers

Offer should be attractive Should acknowledge worth of customer Reassure about the issues that led to departure
Follow-up

Understand why customer hasnt responded Maybe he seeks something different

Let us discuss a Case of a Telecom operator

Customer Market Segmentation

Customer Lifetime Value

Customer Lifetime Value

Expected profit that a customer/s brings to the firm during its lifetime

Customer Lifetime Value

Most Basic models

RFM model based on

Recency of purchase Frequency of purchase Monetary : Customers avg. purchase size

Avg. value per purchase X No. of purchases per year X No. of years of customer life time Revenue generated/yr X Profit margin % X Avg. life time

Customer Lifetime Value

An example
Toothy, a 20 yrs old female brushes her teeth daily twice a day. She wants to live really long & healthy so dentist has advised her to change her brush every quarter in order to ensure good cleaning which will lead to a life expectancy of 100 years!! Toothy likes to play with colours. Her favorite colours are red, blue, green, yellow & recently neon pink. She likes to buys brushes also in same colours. The cost of a brush is dependent on the colour so a red brush costs as low as 10, where as blue & green 20, a yellow 25 & the latest neon costs 50 Rs. As brushing is such an important activity for her, Toothy wants to budget her life time cost. Please help her.

Customer Lifetime Value

Adding a little complexity making it more realistic

As time value of money reduces over a period so adjusting future profit margins by discount rate So formula looks like :

m = Profit obtained in that year i = WACC OR rate of borrowing funds OR rate of inflation etc. t = No. years to wait before receiving the payments

Customer Lifetime Value

Little more complexity

As there will be loss of few customers so let us account for customer retention rate (r) So now formula becomes :

Customer Lifetime Value

Factors impacting CRM
Add value

Reduce Value

Life time Avg. value of purchase Frequency of purchase Discount rate of purchase value Cross-selling & up-selling Network effect (eg. Word of mouth, communities)

Cost of acquisition Cost of retention Cost of marketing activities Cost of returns

Group Assignment

Group Assignment Topics

Groccery & household products

Big Bazzar, Reliance mart, More, Haiko, Dmart

Shoppers Stop, Westside, Pantaloons, Lifestyle

Fashion & lifestyle retailer

Electronics & digital

Croma, Ezone, Reliance digital

Vodafone, Airtel, Idea Jet, Indigo, Go Air... ICICI, Citibank (India), HDFC.

Telecom service provider

Airlines

Banks

Insurance

Group Assignment Areas to be covered

CRM practices

Model, Best practices, failure, evolution, learnings etc.

Your analysis of practices good/bad, why? Data, facts, figures wrt. CRM CRM software used Org. structure wrt. CRM CRM in comparison with competitors Anything else which contributes to CRM course

Group Assignment rules

10 groups 5-6 members each 15 minute of content (You need to manage time) 2 presentations every class Starting next tuesday ie. 4th march Hardcopy of the presentation should be given to me before-hand Presentations should be already loaded in the system List of groups with First & second topic preference and order of presentation should reach me by Thursday night.

Thank you, Have a good day!!