Customer Relationship Management (CRM)

Learning Objectives

Definition
Importance of CRM;
Explain the determinants of CRM and the key stages in its development;
Discuss the main functions and various models of CRM;
Explain the role of salespeople as relationship developers
Discuss the management of customer relationships.

Chapter 15: Customer Relationship Management (CRM)

Customer Relationship Management (CRM)

CRM is the development and maintenance of mutually beneficial

long-term relationships with strategically significant customers
(Buttle, 2000)

CRM is an IT enhanced value process, which identifies, develops,

integrates and focuses the various competencies of the firm to the
voice of the customer in order to deliver long-term superior
customer value, at a profit to well identified existing and potential
customers.
(Plakoyiannaki and Tzokas, 2001)

Chapter 15: Customer Relationship Management (CRM)

Understanding Customer Relationship Management (CRM)

CRM is a business philosophy based on upon individual customers
and customised products and services supported by open lines
of communication and feedback from the participating firms that
mutually benefit both buying and selling organisations.
The buying and selling firms enter into a learning relationship,
with the customer being willing to collaborate with the seller and
grow as a loyal customer. In return,, the seller works to maximize
the value of the relationship for the customers benefit.
A competitive advantage by embracing customer needs
and building value-driven long-term relationships.

TYPES
OPERATIONAL
ANALYTICAL
COLLABORATIVE

Chapter 15: Customer Relationship Management (CRM)

Determinants of CRM
Trust
The willingness to rely on the ability, integrity, and motivation of
one company to serve the needs of the other company as agreed
upon implicitly and explicitly.
Value
The ability of a selling organisation to satisfy the needs of the
customer at a comparatively lower cost or higher benefit than
that offered by competitors and measured in monetary,
temporal, functional and psychological terms.

Chapter 15: Customer Relationship Management (CRM)

Determinants of CRM
In addition to trust and value, salespeople must:
Understand customer needs and problems;
Meet their commitments;
Provide superior after sales support;
Make sure that the customer is always told the truth
(must be honest); and
Have a passionate interest in establishing and retaining a longterm relationship (e.g., have long-term perspective).

Chapter 15: Customer Relationship Management (CRM)

Stages in the development of a Customer Relationship

The Pre-relationship Stage
The event that triggers a buyer to seek a new business partner.

The Early Stage

Experience is accumulated between the buyer and seller although a great
degree of uncertainty and distance exists.

The Development Stage

Increased levels of transactions lead to a higher degree of commitment and
the distance is reduced to a social exchange.

The Long-term Stage

Characterised by the companies mutual importance to each other.

The Final Stage

The interaction between the companies becomes institutionalized.

Chapter 15: Customer Relationship Management (CRM)

Stages in the Development of a Key-Account Relationship

High

Synergistic KAM
Partnership

Degree of
involvement

Mid-KAM
Early-KAM

Low

Pre-KAM
Transactional

Collaborative
Nature of customer relationship

(Millman and Wilson, 1995)

Chapter 15: Customer Relationship Management (CRM)

A Relationship Life Cycle Model

High cooperation
Low competition

Prerelationship
stage

Development
stage

Maturity
stage

Decline
stage

Low cooperation
High competition
Time
(Wilkinson and Young, 1997)

Chapter 15: Customer Relationship Management (CRM)

Class Exercise

What should the focus and main activities of a global

salesperson be in each stage of the relationship
development process?
Why? (Please justify your answer)

Chapter 15: Customer Relationship Management (CRM)

Functions of Customer Relationship Management

Direct functions (are the basic requirements of a company that are
necessary to survive in the competitive marketplace)
Profit;
Volume; and
Safeguard
Indirect functions (are the actions necessary to convince the
customer to participate in various marketing activities).
Innovation:
Market;
Scout: and
Access.

Chapter 15: Customer Relationship Management (CRM)

Functions of Customer Relationship Management

Value Creation Process

Management
Decision
Process
Customer sensitivity
Diversity
Information
Differentiated
offering

Technology delivery process

R&D
Technology integration
Efficiency, effectiveness
learning

Product delivery process

Concept to launch
Manufacturing process
Customer delivery process
Supply chain
Distribution
Infomediation (distribution
of information)

Value-based
Strategies
Pricing
Communication

(Sharma et. al., 2001)

Chapter 15: Customer Relationship Management (CRM)

The role of salespeople as relationship builders and promoters

Salespeople by:
identifying potential customers and their needs;
approaching key decision makers in the buying firm;
negotiating and advancing dialogue and mutual trust;
coordinating the cooperation between the customers and
their company;
encouraging the inter-organisational learning process;
contributing to constructive resolution of existing conflicts; and
leading the customer relationship development team
are the individuals in any organisation who act both as relationship
builders and as relationship promoters.

Chapter 15: Customer Relationship Management (CRM)

Models of Customer Relationship Management

The Evans and Luskin (1994) model for effective
Relationship Marketing
Relationship marketing inputs
Understanding customer expectations
Building service partnerships
Empowering employees
Total quality management
Relationship marketing outcomes
Customer Satisfaction
Customer loyalty
Quality products
Increased profitability
Assessment state
Customer feedback
Integration
(Evans and Luskin, 1994)

Chapter 15: Customer Relationship Management (CRM)

Models of Customer Relationship Management

The Brock and Barcklay (1999) model of selling
partner relationship effectiveness

Independence

Mutual trust
Cooperation

Relative influence

Selling partner
relationship
effectiveness

Chapter 15: Customer Relationship Management (CRM)

Managing Customer Relationships

The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.

Initiating the relationship

Engage in strategic prospecting and qualifying;
Gather and study pre-call information;
Identify buying influences;
Plan the initial sales call;
Demonstrate an understanding of the customers needs;
Identify opportunities to build a relationship; and
Illustrate the value of a relationship with the customer

Chapter 15: Customer Relationship Management (CRM)

Managing Customer Relationships

The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.

Developing the relationship

Select an appropriate offering;
Customise the relationship;
Link the solutions with the customers needs;
Discuss customer concerns;
Summarize the solution to confirm benefits; and
Secure commitment.

Chapter 15: Customer Relationship Management (CRM)

Managing Customer Relationships

The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.

Enhancing the relationship

Assess customer satisfaction;
Take action to ensure satisfaction;
Maintain open, two-way communication; and
Work to add value and enhance mutual opportunities.

Chapter 15: Customer Relationship Management (CRM)

Managing Customer Relationships

Qualifying prospects for relationship building
High

Use a non
customized
approach

Build a strong
and lasting
relationship

Opportunities
for adding value

Seek better
opportunities
elsewhere

Focus on
loyalty-building
program

Low
Low

Potential profitability of customer

High

Chapter 15: Customer Relationship Management (CRM)

Relationship networks
The ultimate outcome of a successful CRM strategy is the creation
of a unique company asset known as a relationship network.
A relationship network consists of the company and its major
customers with whom the company has established long and
enduring business relationships.
The additional aspects of a global salespersons job are to:
Manage customer value;
Act as customer advocate; and
Enhance customer loyalty and build a health and
profitable network of relationships.

Chapter 15: Customer Relationship Management (CRM)

Summary
CRM is a new business philosophy based on trust and value;
The core function of CRM is the value creation process;
Customer relationships develop over time;
The role of global salespeople in the process is that of both
relationship builders and relationship promoters; and
The basic premise of CRM is to offer superior value to
customers in an effort to turn prospects into
customers, customers into loyal customers, and
loyal customers into partners.

CRM Measurement Frameworks

Brand-building
Customer equity building
Customer behavioral modeling
Customer value management
Customer-facing operations
Marketing operations
Sales force operations
Service center operations
Field service operations
Supply chain and logistics
Web site operations
Leading indicator measurement
Balanced scorecards
Customer knowledge
management

Technology centric
Customer lifecycle centric
Strategy centric
Customer lifecycle has four phases:
Attracting
Transacting
Servicing and supporting
Enhancing

Uses for CRM measurement systems are:

To influence or validate decision making
To guide ongoing activities or tactics
To predict future states

Hard ROI
approach

In this approach, companies develop a return-on-investment model that seeks

to deliver actual cash benefits to the company. These approach identifies
cost savings, provable productivity improvements, or well-tested revenue
generation opportunities.

Intangible
benefits/assets

In this approach, so-called softer benefits or intangible assets are identified

and quantified. For example brand equity or knowledge capital are two
forms of intangible assets that companies do try to measure and quantify and
correlate to future company performance.

Competitive
assessments

This approach measures how competitors are interacting with customers and
decisions are made to either seek parity or exceed a competitors capabilities.

Value-driven

This approach measures economic value delivered to and/or derived from a

customer. This style involves building a model of customer value exchange.

Instinct and
experience

This approach uses managers individual experiences and intuitions about

what CRM solutions to execute that may or may not be informed by
additional facts.

Depending on the companys

business model and the business
unit within the company, these
measurement frameworks vary.
Some categories include:
Brand performance measures
Customer asset management
Customer behavior
Marketing performance
Sales force performance
Service center performance
Field service performance
Supply chain and logistic
performance
Web site performance