Customer Relationship Management- Concepts

Of the people, by the people,

and for the people

Customer Centric
Philosophy
Comprehensive strategy to
interact with customers
Combination of processes,
people and technology
Mutual exchange and
fulfillment of promises for
longer duration

Customer Centric
organization
Customer Orientation
Solutions mindset
Advice Orientation
Customer Interface
Business Processes
Organizational Linkages and

metrics

Market share Vs Share of customer

Traditional marketing

1 to 1 strategies

Increasing
returns

Customer
needs
satisfied

Diminishing
returns

Customers
reached

Journey to Customer
Centricity
Customer centric

operating models
Advanced segmentation
and data analytics
Harnessing digital to
better engage with
customers at lower cost
Develop a culture of
Innovation

Customer centricity
model

Practical steps to customer

centricity

Tips towards customer centricity

Definition of CRM
CRM is a business strategy that
seeks to create, develop and
enhance relationships with carefully
targetted customers in order to
maximize
customer
value,
corporate profitability and thus
shareholders value.

Customer Relationship Management

Model
Create a database
Analysis
Customer selection

Customer Targeting
Relationship
Marketing
Privacy Issues
Metrics

Getting more customer interaction

Customer Interaction

Interaction frequency

Direct

High

Low

Indirect

Customer Retention
Programs
Customer
service

Community
Building

Customization

CRM:
Satisfacti
on

Reward
programs

Loyalty
program/freque
ncy

Principles of CRM
The overall processes and applications of CRM
are based on the following basic principles:
Treat customer individually
Acquire and Retain customer loyalty through
personal Relationship
Select Good customer instead of Bad
customer based on life time value of the
customers
Thus Personalization, loyalty and lifetime
value are the key principles of CRM

Barnes 4 Rs

The CRM Advantage

Increases
Market
Share

Better
Customer
Knowledge

Creates Up
and Cross-Selling
Opportunities

Quicker Cash Flow

Increased
Product
Acceptance

15

Forms of CRM

Types of CRM

Customer Portfolio Management

Use CRM tools to develop metrics
Classify customers into groups

Segmentation Techniques
Behavioral
Enterprise
Value
Lifecycle
Other
Other
Segmentation Segmentation Segmentation Segmentation Segmentations
Segmentations
RFM

Geographic
Demographic
Psychographics

Customers
How valuable
expectations and
the customers
Are and can be to the needs change
over the course
Company LTV
Of the Lifecycle

Segmentation

Criteria for segmenting business

market
International standard Industrial classification: goods and service

provider
Dispersion: Geographically concentrated or dispersed
Size
Account status: Global, National, Regional
Buying processes: tender, internet, decentralized, centralized
Buying criteria: continuity of buying, product quality, price,
customization, just in time, service support before or after sale
Propensity to switch: satisfied with current suppliers, dissatisfied
Share of customer spend in the category: sole supplier, majority,
minority, non supplier
Geography: City, region, country
Buying style: risk averse, innovator,

Customer Portfolio

What next?
Profit laggards Identify cause of

nonprofitability and control costs

Revenue laggards Valuable opportunity to
readjust packaging and positioning of
products
Unprofitable customers
What makes them unprofitable?
Any Plan of Action to make them profitable

What to do with them?

More specific suggestions

Fiocca Model : step 1

High

Difficulty in
managing
account

Low
High

Low
Strategic
importance of
account

Fiocca step 1: Strategic importance

Strategic importance is related to
value/volume of the purchases
potential and prestige of the customer
customer market leadership
general desirability in terms of diversification
of the suppliers markets, providing access to
new markets, improving technological
expertise, and the impact on
otherrelationships

Fiocca step 1: Difficulty of

managing relationship
Difficulty of managing the customerrelationship is
related to:
product characteristics such as novelty and complexity
account characteristics such as the customers needs
and requirements, customers buying behaviour ,
customers power, customers technical and
commercial competence and the customers
preference to do business with a number of suppliers
competition for the account which is assessed by
considering the number of competitors, the strength
and weaknesses ofcompetitors and competitors
position vis vis the customer

Fiocca step 2
Assess key easy and key difficult accounts:
The customers business attractiveness
The strength of the buyer/seller relationship

Fiocca step 2: customers business

attractiveness attractiveness
Market factors
Size of key segments served by customer
Customers share of key segment
Customers growth rate
Customers influence on the market
Financial and economic factors
Customer margin
Barrier to customers entry or exit

Competition in the customers market

Customers position and strength
Vulnerability to substitute
Technological factors
Ability to cope with change
Depth of customers skills
Types of technological know how

Socio political factors

Ability to adapt and fit

Fiocca step 2: Strength of relationship

the length of relationship
the volume or dollar value of purchases
the importance of the customer (percentage

ofcustomers purchases on suppliers sales)

personal friendships
co-operation in product development
management distance (language and culture)
geographical distance

Fiocca step 2: strategic options

Customer Portfolio Models

Campbell and Cunningham (1983)
Step 1: Focuses on nature and attractiveness of the
customer relationship using customer life cycle
stage on one axis and various customer data on the
other.
Customer life cycle is divided into : Tomorrows
customers, todays special customers, todays regular
customers and yesterdays customers
The other dimension of analysis, involvs sales
volume, use of strategic resources, age of
relationship, supplier's share of customer's
purchasers and profitability of customer to supplier

Step 2 of analysis focuses on the customer's

own performance as an important aspect of

customer portfolio planning
The customer's share of its own market is
combined with the customer's demand for the
supplier's product and is used to produce a
second two-by-two matrix classification
Few
No of buyers

Many

Many

Few
No of Suppliers

The third, and final, step involves the selection

of the key customers for analysis. Another twodimensional grid is proposed for this stage with
growth rate of customer's market (high,
medium, low and decline) on the vertical axis
And competitive position, (relative share of
customers purchases ) on the horizontal axis
Companies are placed on the matrix and
represented by a circle that represents their
sales volume

Shapiro et als customer classification

matrix
High
Net Price

Low
Low

Cost to
serve

High

How costs vary between customers

Pre-sale costs

Production
costs

Distribution
costs

Post-sale costs

Geographic
location: close v.
distant

Order size

Shipment
consolidation

Training

Prospecting

Set-up time

Preferred
transportation
mode

Installation

Sampling

Scrap rate

Back-haul
opportunity

Technical support

Human resource :
management v.
reps

Customization

Location: close v.
distant

Repairs and
maintenance

Service: design
support,
applications
engineering

Order timing

Logistics support
e.g. field inventory

Supplier Classification Matrix (Krapfel, Salmond and Spekman, 1991

High

Interest
Commonality

Low
High

Low
Relationship value

RVi=f(Cj,Qj,Rj,Sj)
RVi is the value of the relationship to the
seller
Cj is the criticality of the goods purchased by
the buyer
Qj is the quantity of the sellers output
consumed by this buyer
Rj is the replaceability of this buyer (i.e. the
switching cost of accessing other buyers)
Sj is the cost savings resulting from the
buyers practices and procedures

Types of Loyalty
Monopoly Loyalty
Cost of change of loyalty
Incentivized loyalty
Habitual Loyalty
Committed loyalty

Advantages of Customer Loyalty

Business
Growth

Reduced
Marketing
expenditur
e

Profitability
Loyalty
Advantag
es

Business
Ambassado
rs

Drivers of Customer
Loyalty
Loyalty
Drivers

Attitude

Emotional
Rational
Entreprene
ur
Inertia

Technology

High End of
value chain

Product/Servi
ce

Multi-product
Differentiation
High service
component

Supplier
Culture

Human
Resource

Loyalty strategy
High
profitability

Low
profitability

Butterflies

True friends

Strangers

Barnacles

Short term
customers

Long term
customers

Matrix: Customer Satisfaction and

Loyalty
High

Retrospe
ct

Leader

Lost

Trapped

Satisfaction

Low
Low

Loyalty

high

Service Profit Chain

Steps to design Loyalty

Program
Outlining LP objective
Identify Target group
Developing a budget
Determining loyalty program

eligibility/Registration
Selecting LP Rewards
IT support
Communication
Evaluate the success
Corrective Action