Strategic Marketing

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control
 CHAPTER 4

STRATEGIC
CUSTOMER
RELATIONSHIP
MANAGEMENT

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 VITAL ROLE OF CUSTOMER
RELATIONSHIP MANAGEMENT

 DEVELOPING A CRM STRATEGY

 CRM Levels
 CRM Strategy Development
 CRM Implementation
 VALUE CREATION PROCESS
 Customer Value
 Value Received by the Organization
 CRM and Value Chain Strategy
 CRM AND STRATEGIC MARKETING
 Implementation
 Performance Metrics
 Short-Term Versus Long-Term Value
 Competitive Differentiation
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 CUSTOMER RELATIONSHIP
MANAGEMENT

 CRM is a cross-functional core business

process concerned with achieving
improved shareholder value through the
development of effective relationships
with key customers and customer
segments.

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 CRM AT FUNCTIONAL LEVEL

* Set of processes to execute

marketing functions like
sales force automation or
marketing campaign
management.

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CRM AT CUSTOMER-FACING LEVEL

* Set of activities that provide

a single-view of customer
across all contacts
channels.

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 CRM AT THE ORGANIZATIONAL
LEVEL

* Knowledge about
customers and their
preferences have
implications for the entire
organization.

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 CUSTOMER RELATIONSHIP
MANAGEMENT
CRM Recognizes That
Customers:

 Vary in their economic value to the

company
 Differ in their expectations toward
the firm

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 4-3

CUSTOMER LIFETIME VALUE (CLV)

 The lifetime value of a customer, or customer lifetime value (CLV), represents the

total amount of money a customer is expected to spend in your business, or on
your products, during their lifetime.

 This is an important figure to know because it helps you make decisions about how
much money to invest in acquiring new customers and retaining existing ones.

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 Example of CLV

* For example, the CLV of a Honda owner

might be as much as $100,000 if they are
happy with their car or minivan choice and
end up buying several through the years.
* Or the CLV of a regular coffee drinker
might be even higher than that, depending
on how many cups of coffee they drink a
day and where they buy it.

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 Example of CLV

* Conversely, someone who buys a home

twice in their life might only be worth, say,
$15,000 to a real estate agent, because
while the value of the purchase is huge,
the percentage paid to an agent is only a
fraction of that.

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 Calculating CLV

Average value of a Average

No. of times
CLV=
purchase
x the customer x length of the
customer
will buy each
relationship
year
(in years)

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 Example:

A marathon runner who regularly

buys shoes from your shoe store the
average value of purchase is $100
per pair of shoes and he buys 4
pairs per year for 8 years.
Calculate the CLV.

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 Calculating CLV

Average
Average value No. of times
CLV= of a purchasex the customer x length of the
customer
will buy each
relationship
year
=100 (in years)
4 8
CLV= $3,200
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 CALCULATE THE CLV

* And the mom of a toddler might

be worth:
* $20 per pair
* 5 pairs per year
* For 3 years

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 4-4

PERSPECTIVES TOWARD CRM

STRATEGIC-
THE ENTIRE
COMPANY

REQUIRED THE CUSTOMER

MARKETING
FUNCTIONS

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 4-5

THE STEPS IN DEVELOPING A CRM STRATEGY

Gain enterprise commitment

Build a CRM project team

Business needs analysis

Define the CRM strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & Sons, Inc.), 2006, 39.

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 4-6

DEFINE THE CRM STRATEGY

Value
Proposition
1

5 2
Other Business
Stakeholders CRM Case
STRATEGY

Enterprise 4 3 Customer
Transformation Plan Strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006,
42.

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 4-7

IMPLEMENTATION DANGERS
 Implementing Without Developing a
Customer Strategy

 Failing to Initiate Necessary

Organizational Change

 Allowing Technology to Dominate the

CRM Process

 Focusing on the Wrong Customers

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 4-8

VALUE CREATION PROCESS

Value Received by Value Received by the
the Customer Organization

THE VALUE EXCHANGE

Successful Value
Exchange

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 4-9

METRICS
FEATURE How General Electric Co. Measures Customers’
Experience
Happy (And Not-So-Happy) Customers
General Electric is a big user of the “Net Promoter” concept of customer
satisfaction, popularized by Fred Reichheld of Bain & Co. Below, questions
similar to those on which GE’s Capital Solutions unit asks customers to rate the
unit’s performance on a 0 – 10 scale.
• How willing are you to recommend us to a friend or
associate?
• How would you rate our ability to meet your needs?
• How would you rate our people?
• How would you rate our processes?
• What is your impression of our market reputation?
• How would you rate the cost of doing business with us?
• How would you rate the overall value of our product or
service as being worth what you paid?
Source: Kathryn Kranhold, “Client-Satisfaction Tool Takes Root,” The Wall Street Journal, July 10, 2006, B3. 4-21
 4-10

CRM AND VALUE CHAIN STRATEGY

The Perfect Customer Experience
“The perfect customer experience, which must be affordable for the
company in the context of the segments in which it operates and its
competition, is a relatively new concept. This concept is now being
embraced in industry by companies such as TNT, Toyota’s Lexus,
Oce, and Guinness Breweries, but it has yet to receive much
attention in the academic literature. Therefore, multi-channel
integration is a critical process in CRM because it represents the point
of co-creation of customer value. However, a company’s ability to
execute multi-channel integration successfully is heavily dependent
on the organization’s ability to gather and deploy customer
information, from all channels and to integrate it with other relevant
information.”
Adrian Payne and Pennie Frow, “A Strategic Framework for Customer Relationship Management,” Journal of Marketing (October 2005),
173.

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 4-11

CRM AND STRATEGIC MARKETING

CRM STRATEGIC
MARKETING

From the perspective of strategic marketing, there are several

reasons why CRM is important and why there should be extensive
marketing involvement in decisions about CRM. Importantly, an
organizational perspective is needed in guiding the CRM strategy.

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