Assignment - 2

Customer Relationships Management

Diksha Vashishth
2019PBA9215
Q1 Phases of Customer Relationship Management (CRM)
Ans: Customer Relationship Management (CRM) is a strategy for managing an
organization’s relationships and interactions with customers and probable customers. The
goal is simple: Improve business relationships. Customer Support Services is the ingredient
of a company’s customer relationship management (CRM) department that interacts with a
consumer for their instant benefit, including components such as the contact center, the help
desk, and the call administration system. It helps companies stay connected to customers,
streamline processes, and improve profitability.

The three phases are as follows –

1. Acquire: Acquiring customers has always been the first important step in establishing
business relationships. CRM software tools and databases help acquire new customers
by doing a superior job of contract management, sales prospecting, selling, direct
marketing, and fulfillment. This knowledge allows for optimized targeting to avoid
bottlenecks and to facilitate relationship-building activities.
2. Enhance: CRM helps keep a customer happy by supporting superior services from a
responsive network team of sales and service specialists and business partners. A
simple perspective is that satisfying a customer during one buying experience
increases the likelihood of a follow-up visit.
3. Retained: CRM analytical software and databases help a company to retain and
expand their business via targeted marketing and relationship marketing programs.
Effective data analysis, regular and systematic follow-up communication with
contacts, and well-serviced accounts help you reduce your company’s churn rate.
Q 2 Customer Lifetime Value (CLV) in CRM
Ans: customer lifetime value (CLV) is a metric that represents the total net profit a company
makes from any given customer. CLV is a projection to estimate a customer's monetary
worth to a business after factoring in the value of the relationship with a customer over time.
CLV is an important metric for determining how much money a company wants to spend on
acquiring new customers and how much repeat business a company can expect from certain
consumers.

The customer lifetime value equation essentially views a customer as an income stream. So
instead of considering the customer’s purchases as single transactions, the marketing focus
becomes creating ongoing series of profitable transactions. These ongoing transactions are
created through customer relationship management practices and strategies – with the
success of CRM activities being measured by improvements in the firm’s customer lifetime
value.
If we use the banking sector as an example, a first-time customer to a bank is usually likely
only to open a savings or transaction account. While there are exceptions to this outcome,
this is generally the case for most first-time customers. Therefore, the bank will look to
grow the relationship with the customer – increasing the share of customer (known as share
of wallet in the banking sector).
To do this effectively the bank considers the customer’s profile, how long they have been a
customer, how valuable they are, and so on. They will then look to manage that relationship
and try to progress the customer to a more valuable relationship by selling them or
expensive or additional products/services.
However, this is not always the case, and some customers will remain low profit customers
ongoing. If the bank identifies that the customer is relatively unresponsive to the additional
offers, then they would probably increase the customer’s lifetime value by reducing the
bank’s marketing activities and support that are targeted at that consumer.
This highlights a direct relationship between the goals of customer relationship management
and customer lifetime value. With customer relationship management, we are considering
the customer (or a segment of customers) and determining the most appropriate course of
action – that is, various marketing activities and campaigns and people interaction – that
will enhance the relationship with the customer, so it becomes more profitable to the firm
and more beneficial and convenient to the customer. Typically, customer relationship
management should be a win-win scenario for both the firm and the customer.
Customer lifetime value is a key marketing metric that allows you to measure the impact
and outcomes of the firm’s customer relationship management strategies and tactics. As
highlighted in the banking example above, some customers may not be responsive to cross
selling activities. Therefore, increased up selling costs may result in a reduced customer
lifetime value.
Increasing customer lifetime value is not simply a matter of spending additional money in
customer acquisition, retention and up selling – rather spending the money appropriately
across those three areas, depending upon the value, potential and responsiveness of the
customers (segments) involved.