CustomerRelationship

Management
Dr.KalpanaDube
Sr.Professor(Fin.&PPP)
IRITM/Lucknow

Definition of CRM
CRM is the
strategic process of
selecting the customers
a firm can most profitably serve and
shaping the interactions
between a company and these customers with the
objective of
optimizing current and future value
of customers for the company.
4

Indian Railways Programme 18/11/2009

Prof. Markus Christen

A Changing World Customers

Natureofexchange
Marketing
Focus
Buyersare
Powerlieswith
Productsandservices
Communication
Performancemetrics
6

Traditional
Approach

Todays
Approach

Transaction

Relationship

Customeracquisition

Customerretention

Products

Customers

Ill-Informed

Well-Informed

Sellers

Buyers

Standardized,
made-to-inventory

Customized,
made-to-order

Massapproach

Targetedapproach

Productprofit,volume,
marketshare

Customerprofit,life-time
value,loyalty

Indian Railways Programme 17/11/2009

Prof. Markus Christen

CRM Strategy: Objectives

Why do you want to engage in customer
relationship management?
Greater efficacy : Better customer insights enable a firm to
better match the right products and services with the right
customers at the right time for the right price in the right
quantities
Strategic CRM: hard to implement, requires substantial
changes, significant potential for improving business
performance

IT is only an enabler
11

Indian Railways Programme 17/11/2009

Prof. Markus Christen

CRM Strategy: Challenges

CRM: Better customer insights
What kind of data must be collected and analyzed to better
understand customers and develop a CRM strategy?
What are key implementation obstacles?
How big is the potential for improved performance?
What else is needed to develop lasting and profitable
customer relationships?

13

Indian Railways Programme 17/11/2009

Prof. Markus Christen

CRM Strategy: Basics

Relationship has to be mutually beneficial (win-win)
Value to the customer
Value from the customer

Business objective is to maximize value from the

customer
Without delivering superior value to the customer there is
no business

Indian Railways Programme 17/11/2009

Prof. Markus Christen

CRM Strategy: Objectives

Why do you want to engage in customer
relationship management?
Greater efficiency

: Do what you do at lower cost

Better allocate sales people

Replace snail-mail with e-mail, telephone access with Internet

access

Tactical CRM: can be implemented relatively quickly, but

has limited potential to improve business performance

Indian Railways Programme 17/11/2009

Prof. Markus Christen

Competitive Advantage With CRM

Competitive advantage can be defined as
a companys ability to outperform rivals in
.
terms of sustained profitability

18

Indian Railways Programme 18/11/2009

Prof. Markus Christen

Establishing Competitive Advantage

Competitive Advantage

Is it unique?

Profit-earning
potential of a
capability

Is it
sustainable?

How distinctive?

How embedded?
How imitable?
How substitutable?

Is it valuable?

How relevant?
How core?

21

Indian Railways Programme 18/11/2009

Prof. Markus Christen

Customer & Consumer Focus

Understand the consumer
Look for dissatisfied consumers across segments and
identify a new way to configure segments
Focus on the decision making process, including the
consumption stage
Identify the different members of the decision making unit
and understand the role they play and what drives their
decision making
Provide ONLY the features consumers want
The entire organization needs to be consumer focused
18

Customer-Focused Management

Customer
Behavior
Marketing
Mix

Market
Analysis

Organizational
Goals

Creating
Value

Understanding
Markets
Marketing
Strategy

Indian Railways Programme 17/11/2009

Prof. Markus Christen

Whatever CRM Is Firms Invest in IT

Approximate Worldwide CRM Investments
(applications, hardware and services)
47.5

40.0
34.6
29.7
25.9
23.7
20.0
13.5

Spendings
Year-to-Year Growth %
4

Indian Railways Programme 17/11/2009

Prof. Markus Christen

Decreasing Customer Satisfaction

American Customer Satisfaction Index (ASCI)
more than 50.000 consumes,
measuring overall satisfaction with products and services.
Scheduled
A irlines

H o useho ld
A ppliances
90

90

85

85

80

90

C o mmercial
B anks

P arcel D elivery

P ersonal
C omputers

90

90

85

85

85

85

80

80

80

80

80

75

75

75

75

75

75

70

70

70

70

70

70

65

65

65

65

65

65

-8.4%

60

-3.5%

-2.7%

60
60
1994 1996 1998 2000 20022004 1994 1996 1998 2000 2002 1994 1996

60
1998 2000 2002 1994

-2.5%
1996

1998 2000 2002

60

-9.0%

1994 1996 1998 2000 2002

90

60

P ublishing/
N ewspapers

-12.5%

1994 1996 1998 2000 2002

Source: http://www.theacsi.org, University of Michigan

Indian Railways Programme 17/11/2009

Prof. Markus Christen

What is Strategy?

What is Strategy?
An organizations approach towards long-term value creation (& capture)

Where to play?
(Scope)

How to win?
(Competitive Advantage)

External Environment
Organizational Resources & Capabilities

What really is value creation?

Customers

Willingness to pay (WTP): The value that the

buyer attaches to the product or service, i.e.,
the most he/she could ever pay for it

Company

Suppliers

Cost to Deliver (CTD): Opportunity cost of all

inputs (e.g., raw materials, capital and labor)
required to produce one unit of the product.

More on Willingness to Pay (WTP)

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