Group 6:

Bibhu
Utkarsh
Akshay
Priya
Shruti
 Earlier, CRM applications were used to
maximise the profitability quotient of all
individual customers.
 The trend then soon shifted to Total
Customer Portfolio Management:
◦ Eliminating loss making customers by shifting sole
focus to Platinum level customers
 Notable Shift from traditional product centred
view of marketing to co-creating customer
experiences by providing each loyal customer
‘unique value’
 Egg Card – British Internet Banking Firm fired
7% “unprofitable customers” from its 2 Million
Cardholders in the UK in 2008.
 In 2004, AT&T decided to focus more on the
commercial market and less on residential
customers.
 TXU – Texas largest Power Provider, pulled
the plug on late-paying customers & then
charged them expensive reconnect fees. It
offered perks to those who paid on time.
◦ As a result, it reduced its “bad debt” from
nonpaying customers and enjoyed productivity
increases among employees
 The Insiders Club – Filene’s Basement’s Loyalty
Program to award ‘Regular’ Customers.
 Offers, Events, and Experiences were provided to
Insiders Club members
 Customers and Employees regularly come
together during such events to share ideas and
information.
 Filene’s earlier CRM strategy included collective
customer participation and involvement in
improving service quality.
 Data Collection via record keeping of purchases
cross referenced with Customer ID proof
 Customer divestment, whereby a company
stops providing a product or service to an
existing customer.
 The story of Norma – how a Filene’s Regular
became a threat to the company
◦ Excessive involvement facilitated by management
◦ Feeling of Entitlement
◦ Return Policy
◦ Misuse of Complaints handling System
◦ Change in Top Management
 Interpretation of Filene’s decisions based on
four key variables:
◦ Brand Reputation
◦ Revenue Impact
◦ Morale
◦ Redefining Customer Targets
◦ Service Delivery Changes

• Key Metric of Measuring CLV = m*L-AC

◦ With excessive returns and sales force commitment
for Norma, the VC was very high for her leading to
low Contribution Margin.
 Two primary reasons:
◦ Resource Commitment: Companies have to decide
whether it is better to allocate resources to
customer management or some other area of the
business
◦ Opportunity Cost: If you commit resources to
customer A, you may have to give up the possibility
of a relationship with customer B, even if that does
seem to be a better proposition.
 Reassertion of Value Proposition to weed out
bargain hunters like Norma.
 Follow the AT&T Example – focus on passive
relationship termination by changing target
customer base based on the Customer
Profitability Pyramid.
 Re-educate Unprofitable Customers & Phase
them out gradually in due course of time to
avoid poaching.