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TEXT BOOKS
1. G.Shainesh, Jagdish, N.Sheth, Customer Relationships Management Strategic
Prespective, Macmillan 2005.
2. Alok Kumar et al, Customer Relationship Management : Concepts and applications,
Biztantra, 2008
REFERENCES
1. H.Peeru Mohamed and A.Sahadevan, Customer Relation Management, Vikas
Publishing 2005.
2. Jim Catheart, The Eight Competencies of Relatioship selling, Macmillan India, 2005.
3. Assel, Consumer Behavior, Cengage Learning, 6th Edition.
4. Kumar, Customer Relationship Management - A Database Approach, Wiley India,
2007.
5. Francis Buttle, Customer Relationship Management : Concepts & Tools, Elsevier,
2004.
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Unit I
Definition
“Customer Relationship Management is a comprehensive strategy and process of
acquiring, retaining and partnering with selective customers to create superior
value for the company and the customer.”
- Parvatiyar and Sheth
What is CRM ?
Customer Relationship Management (CRM) is a business strategy that enables:
organizations to get closer with their customers,
to better serve their needs,
improve customer service to enhance customer satisfaction, thereby
maximizing customer loyalty and retention.
Definitions;
“CRM” as a business strategy designed to optimize profitability, revenue and customer
satisfaction. - defined by Gartner
History of CRM:
1980s: Database marketing emerges.
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1980s: Database helped larger organizations rather then small who only got survey
type info.
1990s: CRM appears as a two-way communication device.
1990s: CRM leads to programs such as frequent flyer miles and bonus points on
credit cards.
2000s: Internet has helped expand from stagnant database and allows off-site
information storage.
2000s: Used most frequently in financial services, high tech corporations and the
telecommunications industry.
What it does...
Builds a database that describes the customers and the relationship they hold with
the company.
Database: a collection of information that is organized in a way that allows it to be
easily accessed, managed and updated.
Provides enough detail so that the company can offer the client the product/service
that matches their need the best
May contain information about their past purchases, who is involved with the
account and a summary of all conversations.
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CRM Pyramid :
Make sure the program doesn't offer more then you need.
Compare with other companies of equivalently the same size who have purchased
the same CRM software and examine their results.
Benefits of CRM:
Research has shown that companies that create satisfied, loyal customers have more
repeat business, lower customer-acquisition costs and stronger brand value.
This equals better financial performance.
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CRM may...
Help marketing departments identify and target their best customers, manage
campaigns as well as discover qualified leads.
Qualified Leads: prospects who seem most likely to buy because of some
information known about them.
Give employees information needed to improve customer service and also to better
understand customer needs
It also...
Is a fast way to identify and handle potential problems.
Provides all employees with product specs, product use information and technical
assistance.
CRM quickly manages the scheduling of follow-up sales calls to assess the
satisfaction of customers and their repurchase probabilities (when and how much).
CRM leads to...
Identifying prospects and helps them become customers.
Closing sales more effectively and efficiently.
Customer Service
Helps make call center more efficient.
Aids in cross and up selling products.
Cross Selling: Provide additional products / services.
Up Selling: Upgrade existing products/services.
Helps sales staff close deals faster.
Simplifies marketing and sales processes.
Allows companies to discover new customers.
It even ties into BI…
(Business Intelligence)
CRM is closely related to business intelligence because both methods involve using
technology to gather, analyze and organize data in order to develop relevant
information.
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CRM is just a more specific form of BI that concentrates strictly on customer’s
behaviors and actions, for both past and future information.
Technical Functionality
Scalability: CRM may be used on a large scale while also being able to be reliably
contracted/expanded to whatever scale is necessary. So.. the data is flexible and
won’t distort when adjusted.
Multiple communication channels: the ability to interface with users via many
different devices (phone, WAP, internet etc.) Basically, you can get what you want,
when you want wherever you are.
What is CRM
a) CRM is about Strategy
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Competition: Globalization
Whether the customers are current / potential / selected CRM is about acquiring,
retaining, partnering, personalizing relationships with them
CRM helps businesses use technology and human resources to gain insight into the
behavior of customers and the value of these customers.
Concepts of CRM
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Customer relationship management (“CRM”) is a term that refers to two things:
A company’s strategy for managing leads and customer data
Software that manages that data
In its simplest form, CRM is a database where sales and marketing teams store
critical account data:
Contact & account information (contact names, emails, phone numbers,
SIC code, address, etc.)
Source of the lead
Sales rep name and activity history (calls, emails sent, inquiries, etc)
Purchase history
Projected revenue by customer
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Marketing campaign data
CRM can also be an important reporting tool. For example, it can be used to:
Generate revenue projections for a product, a sales rep, and your company
as a whole
Tie revenue to the original marketing campaign
Pull up lists of leads and activities by sales rep
View the number of leads you have at each step in your sales process
Track your progress against your goals
Manage marketing campaigns
Capture leads from your website
Minimize the time your team spends creating manual sales & activity reports
Stages of CRM
1. The Pre-relationship Stage : The event that triggers a buyer to seek a new
business partner.
2. The Early Stage : Experience is accumulated between the buyer and seller
although a great degree of uncertainty and distance exists.
3. The Development Stage : Increased levels of transactions lead to a higher
degree of commitment and the distance is reduced to a social exchange.
4. The Long-term Stage : Characterised by the companies’ mutual importance
to each other.
5. The Final Stage : The interaction between the companies becomes
institutionalized.
Help Desk
Field Service
Marketing Automation
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CRM – the ‘customer’ thread
Whether the customers are current / potential / selected CRM is about acquiring,
retaining, partnering, personalizing relationships with them. CRM helps businesses
use technology and human resources to gain insight into the behavior of customers
and the value of these customers.
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TRUTH # 1: Customers are no longer loyal.
TRUTH # 2: Customers do not really want a relationship but companies do.
- Your Best Customers Can Leave
- Your Marginal Customers Can Move
- Consumers Can Become Customers
TRUTH # 3: Customers want information.
TRUTH # 4: Customers not only want to be thanked for their patronage, they
expect it.
TRUTH # 5: Customers control the selling process.
TRUTH # 6: The Lifetime Value of a customer is not relevant.
TRUTH # 7: Do not overcomplicate the program.
TRUTH # 8: Keep reporting simple and focused on the customer.
TRUTH # 9: WHAT IF? Ask it often. Experiment every chance you get and don’t
call it testing.
Evolution of CRM
Buyer and Seller Relationship over the Ages
Barter Age
Customized Product Age
Mass Production Age
- Customer
- Consumer
Customization Age: one to one Relationship
***Industrial Revolution: “This is what I make, won’t you please buy it?”
***Customer Revolution: “This is what I need, Can’t you please make it.”
Companies have to turn from a ‘make and sell’ philosophy to ‘sense and respond’
philosophy.
In recent years several factors have contributed to the rapid development and
evolution of CRM. These include the growing de-intermediation process in many
industries, due to advent of sophisticated computer and telecommunication
technologies that allow producers to directly interact with end-customers.
Eg. Airlines, banks insurance computer program software.
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The de-intermediation process is fast changing the nature of marketing and
consequently making relationship marketing more popular. Databases and direct
marketing tools give them the means to individualize their marketing efforts. As a
result, producers don’t need those functions formerly performed by the middlemen.
Even consumers are willing to undertake some responsibilities of direct ordering,
personal merchandising and product use related services with little help from the
producers.
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Some Key CRM Marketing Initiatives
Behavior prediction:
Propensity-to-buy analysis:
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Understanding which products will be purchased with other products
Determining the optimal price for a given product, often for a given
customer or customer segment.
Types of CRM
I. Proactive versus Reactive CRM
II. Operational, Collaborative and Analytical CRM
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Any Transaction can take place through these touchpoints. Low level
managers interact in this stage and process the information to the mid level
managers
2. Collaborative CRM: Two way dialog between a company and its customers
through a variety of channels (business partners, agents, brokers,
intermediaries) to facilitate and improve the quality of customer interactions
and maintain a long term profitable relationship.
Performed by Mid level managers and transform the information to the top
level managers and decision makers.
Top Level managers and decision makers establish the process and convey
the message to the mid level and low level managers for implementation.
Sales-force automation:
Sales-force automation (SFA) was the original form of CRM. It applies technology
to the management of a company's selling activities. The selling process can be
decomposed into a number of stages such as lead generation, lead qualification,
needs identification, development of specifications, proposal generation, proposal
presentation, handling objections, and closing the sale. Sales-force automation
software can be configured so that is modeled on the selling process of any industry
or organization.
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available in a timely fashion to salespeople through various media such as desktops,
laptop and handled computers, personal digital assistants (PDAs) and cell-phones.
Sales force automation software has several capabilities, including opportunity
management, contact management, proposal generation and product configuration.
Operational CRM :
Also known as “front-office” CRM
Involves the areas where direct customer contact occurs.
Two types of touch points: inbound and outbound contact
Analytical CRM :
Also known as “back-office” or “strategic” CRM
Involves “understanding” the customer activities that occurred in the front
office.
Provider
Direct Agent Intermediate Partners
Broker
Collaborative
CRM Marketing Sales Service/Support
Application Integration
Analytical
CRM
Customer data
Analytical Customer mart Product data mart
Business activity data mart
Intelligenc
e
Customer generic data warehouse
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CRM is about Strategy
The answers on the questions below will help to decide on a good CRM Strategy
What products and services are being offering now and in the future?
In what markets?
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- Processes
Company Analysis
Step 1: Define the existing customer relationship management processes
within the company
STRATEGY
Choosing and implementing a system is a major undertaking. For enterprises of any
appreciable size, a complete and detailed plan is required to obtain the funding, resources,
and company-wide support that can make the initiative successful.
Benefits must be defined, risks assessed, and cost quantified in three general areas:
PROCESSES: Though these systems have many technological components,
business processes lie at its core. It can be seen as a more client-centric way of
doing business, enabled by technology that consolidates and intelligently
distributes pertinent information about clients, sales, marketing effectiveness,
responsiveness, and market trends.
Therefore, before choosing a technology platform, a company needs to analyze
its business workflows and processes; some will likely need re-engineering to
better serve the overall goal of winning and satisfying clients. Moreover, planners
need to determine the types of client information that are most relevant, and how
best to employ them.
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PEOPLE: For an initiative to be effective, an organization must convince its staff
that change is good and that the new technology and workflows will benefit
employees as well as clients. Senior executives need to be strong and visible
advocates who can clearly state and support the case for change. Collaboration,
teamwork, and two-way communication should be encouraged across hierarchical
boundaries, especially with respect to process improvement.
TECHNOLOGY: In evaluating technology, key factors include alignment with
the company’s business process strategy and goals; the ability to deliver the right
data to the right employees; and sufficient ease of use that users won’t balk.
Platform selection is best undertaken by a carefully chosen group of executives
who understand the business processes to be automated as well as the various
software issues. Depending upon the size of the company and the breadth of data,
choosing an application can take anywhere from a few weeks to a year or more
Implementation Issues
Dramatic increases in revenue, higher rates of client satisfaction, and significant
savings in operating costs are some of the benefits to an enterprise. Proponents
emphasize that technology should be implemented only in the context of careful
strategic and operational planning. Implementations almost invariably fall short when
one or more facets of this prescription are ignored:
Poor planning: Initiatives can easily fail when efforts are limited to
choosing and deploying software, without an accompanying rationale,
context, and support for the workforce. In other instances, enterprises
simply automate flawed client-facing processes rather than redesign them
according to best practices.
Poor integration: For many companies, integrations are piecemeal
initiatives that address a glaring need: improving a particular client-
facing process or two or automating a favored sales or client support
channel. Such “point solutions” offer little or no integration or alignment
with a company’s overall strategy. They offer a less than complete client
view and often lead to unsatisfactory user experiences.
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Toward a solution: overcoming sliced thinking. Experts advise
organizations to recognize the immense value of integrating their client-
facing operations. In this view, internally-focused, department-centric
views should be discarded in favor of reorienting processes toward
information-sharing across marketing, sales, and service. For example,
sales representatives need to know about current issues and relevant
marketing promotions before attempting to cross-sell to a specific client.
Marketing staff should be able to leverage client information from sales
and service to better target campaigns and offers. And support agents
require quick and complete access to a client’s sales and service history.
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More effective marketing campaigns to targeted prospects. Faster feedback from
Sales results by linking campaign to sale. More effective marketing materials for the
sales person.
Financial perspective: CFO/Controller/Accounting Manager
Happier customers pay their bills- less time in the collection and credit memo
process. Reduction in costs of Administrative personal
Less employee turnover. Reduction in paper documents and filing system.
Improved efficiency using known business operational processes More sales revenue
and net profit.
The IT department
A scalable system that can grow and not have to be replaced in a few years
A reliable and relational database backend that reduces the time for support and
troubleshooting.
A Crystal reporting system for easier report modification and creation.
A highly configurable system that also has visual customization tools build
on Microsoft technology.
A highly configurable security system to meet your business needs.
All other employees
Increase in productivity by using one main system that has the information
and processes they need for a consistent customer experience.
Boost to employee satisfaction
UNIT – 2
Customer Information Database
Collecting and using data about customers and market helps the firm to gain
a better understanding of the market which leads to utilize the sales and
marketing techniques in a effective way.
Understanding customer
The customer knowledge and feedback developed thru database helps the
firm to develop an effective strategy for long term customer retention
Quality, Price, delivery, convenience are some of the factors that could
explain why a customer continues to buy from a company
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Managing customer service
Understanding the customer is the first step to develop positive, long term
relationship with them
The customer information database can be used for :
To improve customer handling by making info available to staff responsible
for sales, enquiries, help lines, complaints etc
To improve understanding of customers purchasing lifecycle
Knowledge Management
CRM starts with in-depth knowledge of customers, their habits, desires and
their needs by analyzing their cognitive, effective behavior and attributes.
CRM applies this knowledge to develop and design marketing strategies to
cultivate long lasting mutually beneficial interaction and relationship with
customer.
Customer knowledge and customer interaction on the basis of this knowledge
are the two pillars of any CRM design.
KM….. with focus on CRM
As markets and product change with
accelerating pace,
marketing and sales people,
….. product / service design people must assimilate and apply current information
about their markets, their competition and the solution they can offer to the
customers.
Marketing, sales, after-sales people would be the knowledge workers
Forward looking companies have realized that their front office work force
could be more productive if they could utilize customer knowledge
Successful companies not only possess customer knowledge but also able to
make critical business decision
Concept of KM
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People
Process and
Technology
KM - Conceptual frame
An KM architecture can be developed if we know the following:
Organizational structure
Informational flow
Information usage and storage
Existing automation levels
Existing data warehouse solutions
Existing messaging systems
Internet applications
Any other legacy systems
KM Implementation
This approach may be adopted in 4 phases:
1. Evaluation
2. System Analysis, design and
development
3. Deployment
4. System evaluation
CRM-Value chain
Customer Data > Customer Information > Customer knowledge >Wisdom to
completely satisfy customers
Implementation of CKM
Resource Analysis
Aligning CKM & business strategy
CKM architecture design based on KM
CRM knowledge and analysis
CKM team foundation
CKM team organization blueprint
Develop the CKM system
CKM deployment
Organizational culture
CKM performance and evaluation
Customer Expectation
Truly successful business position itself for fully satisfying both current and
future customer needs
The foundation of such a positioning is a precise understanding of customer
expectations
In B2B setting, the customer expectation can be typically on following
dimensions
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1. Supply reliability and flexibility
2. Supply lead time
3. Quality
4. Price
5. Technical support
6. Integration with customers processes and systems
Explanation
The Market Intelligent Enterprise (MIE) must validate such an
understanding with other information on the customer and the market.
It is necessary for the MIE to identify the drivers for customer expectation to
be able to anticipate shifts in expectation
A mapping of customer expectation should lead to identification of discrete
customer segments that buy similar products and services, and demand
similar service levels
BROAD SPECTURM
A typical Enterprise has a board spectrum of customers, right from
“terrorists”-extremely dissatisfied/alienated customers who actively erode
the brand equity of the enterprise.
To “advocates”-delighted customers who actively work to strengthen the
market presence of the enterprise.
Objective of managing customer experience for an enterprise is to convert
key customers to advocates and address the issue of the “terrorists” &
”rejecters” to minimize the negative impact on brand equity.
Terrorist -> Rejecters -> Prospects / Conquest / Defectors -> Vulnerable -
>Supporter ->Advocate
Building loyalty starts with taking right marketing approach. Relationship
marketing is a very effective approach in a B2B setting, where the focus is on
building and reinforcing a long term relationship with the customer with
every interaction
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Life time value i.e., what the customer contributes to the enterprise
over his life time
Strategic importance i.e., how much the customer contributes to
maintaining the competitive edge of the enterprise
Customer Perception
Perception is the second major psychological factor
Perception can be described as “how we see the world around us”. All the
time we are receiving messages through our five organs viz., eyes, ears, nose,
mouth and skin, The different sights, sounds, smells, tastes and sensations
that we feel are knows as stimuli.
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Each person recognize, selects, organizes and interprets these stimuli in his
own individual manner based on his needs, values and expectations and this
is knows as perception. Since each individual’s need, motives and
expectations are unique therefore each individual’s perception is unique.
Customer Profiles
Demographics - age, income, gender, ethnicity, education level, etc.
Geo-Demographic Clusters - there are many clustering databases available.
Some are industry specific, others are general. They often include data on
interests, lifestyles, purchasing behavior, attitudes and more.
Survey Data - based on data available for purchase or gathered through
primary
Acquisition
Acquisition is nothing but making profits by attracting the users to purchase
our product
It emphasis on both sales promotional programs as well as service during the
time of purchase.
Acquisition refers the process of attracting the new customers, making them
initial purchase and trying to incur gain for its investment on acquiring the
new customers.
Objectives
Setting objectives should take into account the cost of Customer Acquisition.
The following steps can be taken to identify the investment requires to win a
new customer and to track the return on investment.
1. Establish a system to enumerate all costs of acquiring new customers
2. Divide the total cost of acquisition by the number of new customers gained in
a given time period to determine the average cost of acquiring a customer
3. Determine the number of months the organizations must keep a customer in
order to provide a pay back on investment
4. Evaluate the average new customer profitability and set customer acquisition
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objectives.
Process of Acquisition
The acquisition process constitutes the following stages:
Enquiry
- The prospective buyer undertakes a detailed enquiry with regard to several
aspects pertaining to the organization, product, nature of transaction and all
other related aspects.
Interaction
- Where the customer interacts with the organization and obtains additional
information, clarifies and ensures already collected information
Exchange
- Terms of exchange, mode of delivery and other things related to exchange
are settled at the exchange stage.
Co-ordination
- Further coordinated effort on either side would lead customers to…
Adoption
- Moving adoption of the product or service concerned and that completes the
acquisition process.
PROCESS OF ACQUISITION
The acquisition process are influenced by:
Type of buying.
Type of product.
Type of customers.
Economic Environment.
Contextual Operations.
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Customer retention is the process of keeping customers in the customer
inventory for an ending period by meeting the needs and exceeding the
expectations of those customers.
It is approach of converting a casual customer into committed loyal
customers.
Customers come in a fold of an organization in following ways:
Customer by chance.
Customer by occasion.
Customer by choice.
Customer by repetition.
Customer by loyalty.
They makes every effort to convert a customer by chance into customer into
loyalty.
RETENTION STRATEGY
A plan identifying what basic retention objectives will be pursued & how will
be achieved in the time available is considered to be a customer retention
strategy.
The welcome.
Reliability.
Responsiveness. (wanted to treat right)
Recognition. (special attention ,appreciation)
Rewards. (redeemable points)
TYPES OF LOYALTY
Loyalty towards brands. (hard-core loyalists, soft-core loyalists ,switchers)
Loyalty towards stores. (developed with reference to the point of purchase)
Loyalty towards an organization. (accept product or service by the orgn)
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Loyalty towards sales persons. (salesperson of a store of an orgn)
MARKET IDENTIFICATION
For the purpose of market identification, the organization may go in for a
marketing audit programme.
Marketing audit is a purposeful examination of marketing environment,
marketing activities & its effectiveness.
It is a systematic approach to review the activities of marketing functions
towards reaching marketing goals.
Marketing audit enables to find appropriate markets.
The orgn in terms of its market share is expected to play any of the following
roles:
A market leader (largest market share)
Market challenger (close competitor orgn)
Market follower (follower of market leader)
Market niche( a small player- Nichers confine their operations in a much-
limited way)
PROSPECTIVE CUSTOMERS
In the target market, potential customers would be identified by means of a
systematic approach.
The method of getting prospective customers may be any one or a
combination of more than one method:
->Referral letters.
->Through friends& relatives.
-> Various directories.
->Through trade associations.
->Advertisements.
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->Blind telephone calls.
-> Developing database.
-> Cold canvassing.
-> Follow-up of the competitor’s customers.
-> Customers of related products. Etc.
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Attempt to track losses: To understand the cumulative impact
MODULES IN CRM
The CRM applications are a convergence of functional components ,
advanced technologies and channels.
Functional components : It include sales applications, marketing automation,
and customer service and support applications.
Channels include the web, call centre's, phones and mobile services.
SALES APPLICATIONS
The cornerstone of CRM is SFA (sales force automation).
The SFA is automating the fundamental activities of sales professionals, both
internally and in the field.
Common applications include:
Calendar &scheduling.
Contact& account management.
Compensation.
Opportunity & pipeline management.
Sales forecasting.
Proposal generation & management.
Pricing.
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Territory assignment& management.
Expense reporting.
MARKETING APPLICATIONS
They form the newest breed of applications complement SFA applications
and provide capabilities unique to marketing.
Common applications include:
Web-based/ traditional marketing campaign planning, execution & analysis.
Collateral generation & marketing materials management.
Budgeting & forecasting.
A marketing encyclopedia (a repository of product, pricing & competitive
information)
REGAIN STRATEGIES
Three relevant strategies that a service provider could look into in order to
regain lost customers, customization, differentiation and “wow” strategy.
Customization: It is an extension of one-to-one marketing where customers
are treated as individuals and not as account numbers.
It provide the latitude of the customer would enjoy and feel empowered to
choose & customize its options.
DIFFERENTIATION STRATEGY
Differentiation is the ability to provide unique and superior value to the
consumer in terms of service quality, special features, or after-sales services.
It allows a firm to command a premium price or premium market position
which leads to higher profitability.
As customers are segmented, hence it is utmost important that different
segments should be addressed and dealt with accordingly.
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