What the Hell is CRM?

Dr. V.J. SIVAKUMAR

 MM To CRM
• Push  Pull
• For the customer  With the customer  By the
Customer (Jason Magidson, HBR, September 2002)
• Reactive Response  Proactive Anticipation
• Quality product/Service  Maximizing the `Joy-Of-Use’
• Mass Marketing  Individual Marketing
• Transaction value  Life Time Value
• Conquest Marketing  Retention Marketing
• Transaction  Learning Relationship
• Product Life Cycle  Customer Life Cycle
 MM To CRM
• Brand Equity  Customer Equity
• Customer Satisfaction  Customer Loyalty
• Share of the Market  Share of the Customer
• Product Differentiation  Customer Differentiation
• Individual CRM  Functional Level CRM 
Enterprise Level CRM
• Fixed Time Marketing  24/7 Marketing
• Fixed Place Marketing  Ubiquitous Marketing
• CRM  CREE (Customer Experience Enhancement)
Push Vs Pull - The case of Dell

Packaging,, Software, All services...

For the customer  With the
customer  By the Customer

Shobika Textiles - Coimbatore

Tea tasting, hotels, supermarket…..
 Quality Product/Service 
Maximizing the `Joy of Use’

PLC
Reactive Response  Proactive
Anticipation

Beer&Diaper - Annapoorna (Sambar)

 Mass Production  Mass
Customization

Loop Bra, Biknis, National Bicycle, Lakme Make Up….

Tea blend, Make your own ice cream, fountain Pepsi - Elephant
Conquest Marketing  Retention
Marketing

Mani’s
• A cigarette that can’t be smoked
by a minor.

• A car that can’t be operated by

anyone except its owner.
• Sunglasses that answer you when
you call out to find where they are.

• An alarm clock that reminds you to

set it.
• Product packages that signal as
they’re being opened, automatically
updating your shopping list.

• Product packages that open

themselves when you tell them to.
• A condom with a microchip that will
play Beethoven if it leaks while in use.

• Pills that issue reminders to be taken

every day (or four times a day).
• A microwave meal package that sets
the microwave correctly all by itself.

•A winter coat that inflates its layer

of insulation when the
temperature drops.
 Customer Retention vs.
Acquisition
Cost to Acquire One new Customer - $20
Cost to Retain One Current Customer - $4

Acquisition Emphasis Retention Emphasis

Acquire 6 Customers - $120 Acquire 3 Customers - $60

Retain 5 Customers - $20 Retain 20 Customers - $80

Total Cost - $140 Total Cost - $140

Total customers - 11 Total customers - 23

Transaction Value  Life Time
Value
Maturity
Customer Profitability

Growth

Adoption

time
 Customer Satisfaction 
Customer Loyalty

The Death of Customer Satisfaction: CRM in

the Internet Age

Tony Zingale
Clarify
http://www.crmproject.com/wp/zingale.html
 Customer Satisfaction
A little boy went into a drug store, reached for a
soda carton and pulled it over to the telephone. He
climbed onto the carton so that he could reach the
buttons on the phone and proceeded to punch in
seven digits. The store owner listened to the
following conversation.
The boy said, "Lady, I want to cut your lawn". The
woman replied, "I already have someone to cut my
lawn". Lady I will cut your lawn for half the price of
the person who cuts your lawn now." The woman
responded that she was very satisfied with the
person who was presently cutting her lawn.
 Customer Satisfaction
The little boy found more perseverance and
offered,"Lady, I'll even sweep your curb and your
sidewalk, so on Sunday
you will have the prettiest lawn in all of North
Palm Beach, Florida." Again the woman answered
in the negative. With a smile on his face, the little
boy replaced the receiver.

The druggist walked over to the boy and said,

"Son I like your attitude, I like that positive spirit.
Son, I would like to offer you a job." The little boy
replied, "No thanks, I was just checking on the job
I already have."
 Customerare
Loyal customers Loyalty
the key to profitability

Referrals
Company Profit

Reduced
operating
costs

Increased
purchases
and higher
balances

Base Profit

1 2 3 4 5 6 7

Customer Loyalty
Frederick Reichheld, The Loyalty Effect
 Product Differentiation 
Customer Differentiation

Research by Professors Cooper and Kaplan at the

Harvard Business School has shown that in a large
number of companies 20 percent of customers
account for 225 percent of profits and the 80 percent
`lose’ 125 percent of profits.

But the trouble is that most companies do not know

which customers make up the 20 percent and which
make up the 80 percent.

Vegetable vendor
 Marketing to Customer
Segments
Spend Service
Your Best Customers - GOLD Dollars Here
80% of Revenue

Your Best Hope for New Spend Marketing

Move Up
Gold Customers Dollars Here

1% of Total Reactivate or
Revenue These may be losers
Archive
Product Life Cycle  Customer
Life Cycle
Enquiries

Prospects First-time Repeat Advocates

Clients
customers customers

Partners
Inactive or
ex-customer
Source: Marketing Management
Philip Kotler
Transaction  Learning
Relationship
 Transaction  Learning
Relationship
• The customer tells the enterprise what he wants, with
interaction and feed-back. (tailor, hair-stylist …)
• The enterprise meets these specifications by
customizing its products or services and it remembers
these specifications. (Barber)
• With more interaction and feed-back enterprise learns
more about the individual.
• The customer will get locked in as the switching cost
become too high.
 Share of the Market  Share of the
Customer
From ice cream to soft drinks to tea to restaurants to computer
training to ….
Needs Satisfied

Needs Satisfied

Customers Reached Customers Reached

 Share of Customer
Approach
Cradle to the Grave
• The expenditure on diaper for a baby is of the
order of $3000 or more over a three year period.
• Enter into a deal with new mother for supply to
the house every week. Also give a free gift of
changing table and a bike.
• Then start offering baby foods, baby clothes,
baby powder, baby wipes, toys and so forth…..
• Then school uniform, books, video games ...

Fruit vendor
 Individual CRM  Corporate
Memory

Once you have an interaction with an individual,

you carry your memory into your next interaction.
You would be pretty frustrated if you have to start
from scratch every time you interact with a
company.

Hair stylist, Air-conditioner buying

Fixed Time Marketing  24/7
Marketing
Brand Equity  Customer Equity

BRAND EQUITY
-Brand Recognition
-Brand Image
-Brand Personality

CUSTOMER EQUITY
VALUE EQUITY •LTV of the Customer Base
•Access to Raw Material(s) •Brand Experience
•Distribution Network •Emotional attachment with the
•Production facilities brand/company
•Core competence •Trust and long-term relationship

© Dr. M J Xavier
Fixed Place Marketing 
Ubiquitous Marketing

Shares,
Travel,
leisure..
 CRM  CREE (Customer
Relationship Experience
Enhancement)

Disney Land, Queue

Hotel - Windsor Manner
Moments of Truth - Marriott
•Mass Produced
•Mass
•Personalized
communicated
using
communication
•Mass Media
•One-to-one basis
•Mass Distributed,
•Customized
resulting in
products
•Mass
Consumption
Pepper and Rogers Website: http://www.1to1.com/
 Customer Need
Assessment and
Acquisition

Customer Retention Customer Development

and referrals for new through personalization and
customers customization

Customer Equity
Leverage through
Cross Selling and Up
Selling
© Dr. M J Xavier
 Customer Need
Assessment and
Acquisition

Customer Retention Customer Development

and referrals for new through personalization and
customers customization

Customer Equity
Leverage through
Cross Selling and Up
Selling

© Dr. M J Xavier
The Customer-Centric Model

With CRM, the customer is at the heart of the enterprise’s strategy and becomes the center
of all potential interactions.

CRM
CRMisiscomprised
comprisedofofthree
threetechnology
technologycomponents:
components: Technology
TechnologyEnabled
Enabled
Marketing
Marketing (TEM), Technology Enabled Selling (TES), Customer Service&&Support
(TEM), Technology Enabled Selling (TES), Customer Service Support
(CSS).
(CSS).
Gartner Group
 A Broader Perspective - ERM
(Enterprise Relationship
Management)
Shareholder Value
Creation

Supplier Relationship Employee Relationship Customer Relationship

Management Management Management
 The breadth of products within the CRM
market contributes to its tremendous growth
potential.
Worldwide Front-office Applications
Vendor Revenue in $B (Software and Services)

$20

$16

$12

$8

$4

$0
1998 1999 2000 2001 2002 2003

Global
GlobalCRM
CRMmarket
markethas
hasreached
reached$17
$17billion
billionby
by2003
2003and
andisisexpected
expectedto
toreach
reach$50
$50billion
billion
in 2010.
in 2010.
Source: GartnerGroup
Oracle Corporation
 CRM Websites
• http://searchcrm.techtarget.com/?
Offer=GoCRM1 (Comprehensive and
unbiased coverage. Good case studies)
• http://www.cio.com/resources/ (Excellent
source on IT Applications - Good articles)
CRM applications are purchased (and projected to
be purchased) evenly across vertical markets, with
Healthcare leading the way.
Domestic CRM Applications
Vendor Software Revenues (1997 - 2002)

Healthcare
12% n
Telecommunications
Other
39% 10%

Insurance
8%

Process mfg
Wholesale 8%
Retail Financial services Business/legal svcs
4% 5% 6% 8%

U.S.
U.S.revenues
revenuesfor
forCRM
CRMapplications
applicationssoftware
softwaretotaled
totaled$1.4B
$1.4Bin
in1998.
1998. The
Themarket
markethas
has
expanded to $6.7B in 2002 and is expected to grow to $50B in 2010.
expanded to $6.7B in 2002 and is expected to grow to $50B in 2010.

Source: IDC’s Corporate Computing Group, Software and Systems Vertical Views Program, 1998 (Software Vendor’s Guide to U.S.
Vertical Markets, Part 1: Applications, IDC #17246)