312MKT Customer Relationship

Management
Chapter 1 : Fundamentals of CRM
Prof : Manav Agarwal
9823962733
Mnaavs87@gmail.com
 Definition
CRM is a competitive strategy and process of
acquiring, reacting and partnering with selective
customers to create superior value for the company
and the customer.
- Parvatiyar and sheth

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 Why is CRM important ?

Competition
Consumer expectation
Technology
Diminishing impact of advertising

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 Scope of CRM

Build long term and profitable relationship with

chosen customers.
Getting closer to the customers at every point of
contact with them.
By fostering customer's loyalty, the company
spends less time acquiring new customers and
saves then time on other projects.

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 Relationship Orientation

A relationship is composed of a series of interactive

episodes between dyadic parties over time.
Making a purchase
Enquiring about a product
Making a sales call
Negotiating terms
Dealing with complaints
Independence to Dependence to Interdependence
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 Change within relationship

Awareness
Exploration
Expansion
Commitment
Dissolution

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 Transaction Vs. Relationship
Marketing

Transaction
One off exchanges
Brand management
Short-term focus
Mass communication
Relationship
Ongoing exchange
Customer management
Long-term focus
Personal communication

Isolated market research Ongoing dialogue

Mind share
Market share
Lifetime value of customer
Profitabilty
Customer equity
Brand equity

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 Why companies want
relationship with customers?
Reduce marketing cost
Better customer insight
Lifetime value: Present day value of all net margins
earned from a relationship with a customer,
customer segments or group of customers.

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The customer journey

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 Why companies do not want
relationship with customers?
Loss of control
Exit cost
Resource commitment
Opportunity cost

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Why customers want relationship
with suppliers?
B2B Context
Product complexity
Product strategic significance
Service requirement
Financial risk
B2C Context
Recognition
Personalization
Status and affiliation
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 Why customers do NOT want
relationships with suppliers?

Fear of dependency
Lack of perceived value in the relationship
Lack of confidence in the supplier
Customer lacks relational orientation
Rapid technological changes

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 Customer satisfaction, loyalty &
business performance
CRM aims to improve the Business performance
by enhancing Customer Satisfaction and driving up
Customer Loyalty.

Customers Need and expectation Identification &

fulfilment Satisfied customer Repurchase
Business Process increases.

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 continued

Satisfaction Profit Chain

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 Customer satisfaction

Customer Satisfaction is the customers fulfilment response to

a customer experience or some part thereof.
Satisfaction is measured by comparing the customer experience
with the customer expectations.
This is called Expectation disconfirmation model of
Customer Satisfaction.

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 continued

Expectation disconfirmation model

If experience meet expectation then customers are
Satisfied.
Experience > expectation = Positive disconfirmation.
Experience < expectation = Negative disconfirmation.
At times experience meets expectation but still
unsatisfied because of low expectation.

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 Customer loyalty
Loyalty can be defined and measured by two major
approach.
Behavioural loyalty.
Attitudinal loyalty.
Behavioural loyalty is measured by reference to
customer purchase behaviour and loyalty is expressed
in continued buying.
Many companies use RFM measures of Behavioural
variables.
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 continued

R Recency of purchase (time since

last purchase)
F Frequency of purchases (No. of
purchase in a given period)
M Monetary value of purchase.
Attitudinal loyalty is measured with reference to
Belief, Feeling and purchasing intention

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 continued

Two dimensional model of customer loyalty

Based on Relative attitude & Repeat purchase behaviour.

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 Business performance

Measured in two ways

Quarterly profit(or) Earnings/share
Balanced score card(leading companies)
Four Key performance Indicator(KPI)
Financial
Customer
Process
learning & growth
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 continued

Implied Connection B/w Indicators is

People(learning & Growth) do things (process)
for customers(Customer) that have affects on
business performance(Financial).
Drivers of Business performance:
Customer outcomes of satisfaction
Loyalty
Share of customer is the popular measure of CRM.

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Four types of CRM

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 Strategic CRM

It is a tool to differentiate between customers with

respect to their economic value to the firm as well as
their expectations from the firm
Operational CRM
It is known as the Front office CRM.
Customer TouchPoint
Face to Face Touchpoint
Database Driven TouchPoint
Mass Media
Transactions that can take place are as follows
Return of sale
Information Transaction
Complaint
Analytical CRM

It is known as the Back office CRM.

Its the fusion of Data and Intelligence.
The aim is to filter out the key facts from gathered
information and gain customer knowledge.
Customers' buying behavior is analyzed in Analytical
CRM.
Collaborative CRM

The approach in which various department of a

company such as sales, Technical support and
marketing, share any information they collect from
interactions with the customers.

The purpose of collaboration is to improve the

quality of customer service, and, as a result, increase
customer satisfaction and loyalty.
Misunderstandings About CRM

Misunderstanding 1: CRM is database marketing

Misunderstanding 2: CRM is marketing process
Misunderstanding 3: CRM is an IT issue
Misunderstanding 4: CRM is about loyalty schemes
Misunderstanding 5: CRM can be implemented by
any company
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 Defining CRM

CRM is the core business strategy that integrates Integrates

internal processes and function, and external network, to create
and deliver value to targeted customers at a profit. It is grounded
on high quality customer-related data and enabled by
information technology.

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 CRM constituencies
There are several important constituencies having an interest
in CRM:
Companies implementing CRM :many companies have
implemented CRM.
Customers and partners of those companies
Vendors of CRM software: such as Oracle, SAP, SAS, KANA,
Microsoft.
Vendors of CRM hardware and infrastructure:
Management consultants
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Commercial contexts of CRM

Banks

Automobile manufacturers

High-tech companies

Consumer goods manufacturers

The not-for-profit context
Most of this chapter has been concerned with CRM in the for-profit
context. CRM can also be found in the not-for-profit context. Universities
have deployed CRM to manage their student and alumni relationships.
For example, students who enjoy their experiences at a graduate school
of business may return there for executive education.
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 Models of CRM
A number of comprehensive CRM models have been developed.
We introduce five of them here.

1. IDIC Model
2. The QCI Model
3. The CRM value chain
4. Paynes five-process model
5. The Gartner competency model

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 IDIC Model
The IDIC model was developed by Peppers and Rogers, the consultancy fi rm, and
has featured in a number of their books. The IDIC model suggests that companies
should take four actions in order to build closer one-to-one relationships with
customers:
identify who your customers are and build a deep understanding of them
differentiate your customers to identify which customers have most value now
and which offer most for the future
interact with customers to ensure that you understand customer expectations and
their relationships with other suppliers or brands
customize the offer and communications to ensure that the expectations of
customers are met. 33
 QCI Model
The QCi model shown in Figure 1.1 is also a product of a consultancy firm.

The models authors prefer to describe their model as a customer management

model, omitting the word relationship .

At the heart of the model they depict a series of activities that companies need to

perform in order to acquire and retain customers.

The model features people performing processes and using technology to assist in

those activities.

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 The CRM value chain
Francis Buttles model was the subject of a recent book.
The model, as shown in Figure 1.2 , consists of five primary stages and four supporting
conditions leading towards the end goal of enhanced customer profitability.
The primary stages of customer portfolio analysis, customer intimacy, network
development, value proposition development and managing the customer lifecycle are
sequenced to ensure that a company, with the support of its network of suppliers,
partners and employees, creates and delivers value propositions that acquire and retain
profitable customers.
The supporting conditions of leadership and culture, data and IT, people and processes
enable the CRM strategy to function effectively and efficiently.

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 Paynes five-process model

The fourth comprehensive model was developed by Adrian Payne.

This model ( Figure 1.3 ) clearly identifies five core processes in CRM:
1. the strategy development process
2. the value creation process
3. the multichannel integration process
4. the performance assessment process
5. the information management process.
The first two represent strategic CRM; the multichannel integration process represents
operational CRM; the information management process is analytical CRM.

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 The Gartner competency model
The final comprehensive CRM model comes from Gartner Inc.
Gartner Inc. is a leading IT research and advisory company that employs some 1200 research
analysts and consultants in 75 countries, and has a significant place in CRM research.
Figure 1.4 presents Gartners CRM competency model.
The model suggests that companies need competencies in eight areas for CRM to be successful.
These include building a
1. CRM vision,
2. developing CRM strategies,
3. designing valued customer experiences,
4. intra and extra-organizational collaboration,
5. managing customer lifecycle processes,
6. information management,
7. technology implementation and
8. developing measures indicative of CRM success or failure. 39
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