Customer Relationship Management

What is Customer Relationship Management (CRM)?

The approach of identifying, establishing, maintaining, and enhancing lasting relationships with customers. The formation of bonds between a company and its customers.

Benefits of CRM

Quality and Efficiency Decrease in Overall Costs Decision Support Customer Attention Increase Profitability

Reasons of CRM

Three Key Phases: Customer Acquisition Customer Retention Customer Extension

Four Stages of Brand Loyalty in a Consumer

Cognitive loyalty perception from brand attribute information that one brand is preferable to its alternatives Affective loyalty developing a liking for the brand based on cumulatively satisfying usage occasions Conative loyalty commitment to rebuying the same brand Action loyalty exhibiting consistent repurchase behavior

Customer-Firm Relationship
Todays marketers seek to develop long-term relationships with customers. Relationship marketing includes:
Database Marketing: Involves the use of technology by delivering differentiated service levels to consumers and subsequently tracking the relationship. Interaction Marketing: Usually in B2B context where people and the social process also add mutually beneficial value. Network Marketing: Common in B2B context where companies commit resources to develop positions in a network of relationships with the stakeholders and relevant agencies.

Types of Relationships with Customers (Table 12.1)

Type of Relationship--Firm and
Customer Nature of Service Delivery
Membership Continuous Cable TV Insurance College enrollment Subscriber phone Theater subscription Warranty repair No formal relationship Radio station Police Lighthouse Pay phone Movie theater Public transport

Discrete transactions

What Makes Loyal Customers More Profitable?

Tend to spend more as relationship develops
customers balances may grow may consolidate purchases to one supplier

Cost less to serve

less need for information and assistance make fewer mistakes

Recommend new customers to firm (act as unpaid sales people) Trust leads to willingness to pay regular prices vs. shopping for discounts

Basic Segmentation Issues: Building an Appropriate Customer Portfolio

Target customers whose needs match firms capabilities Focus on value of prospective customers within each segment, not just numbers Avoid targeting customers who might abuse:
our employees, facilities other customers

Create a mix of segments to reduce risks of volatility during swings of economic cycles

Service-Relevant Segmentation Variables

Timing of service use (e.g., by hour, day, season) Level of skill and experience as coproducer/self-server Preferred language in face-to-face contact Access to electronic delivery systems (e.g., Internet) Attitudes toward use of new service technologies

Identifying and Selecting Target Segments

User characteristics
demographics
psychographics geographic location benefits sought

User behavior
when, where, how services used quantity/value of purchases frequency of use profitability of relationship sensitivity to marketing variables

Portfolio of Professional Assignments

Major, State-of-the-art challenges for the firms principals that give the firm high visibility Demanding client assignments offering a learning experience for the firms most experienced associates Routine client projects shared among principals and associates

Pacesetters

Significant Projects

Bread and Butter Projects

Analytical Work on Project Data

Entry-level tasks for new associates or for research assistants & paraprofessionals

The Customer Pyramid (Fig. 12.5)

Good Relationship Customers

Platinum Gold Iron Lead

Poor Relationship Customers

Which segment sees high value in our offer, spends more with us over time, costs less to maintain, and spreads positive word-of-mouth?

Which segment costs us in time, effort and money, yet does not provide the return we want? Which segment is difficult to do business with?

How Customers See Relational Benefits in Service Industries

Confidence benefits
less risk of something going wrong, less anxiety ability to trust provider know what to expect get firms best service level

Social benefits
mutual recognition, known by name friendship, enjoyment of social aspects

Special treatment benefits

better prices, discounts, special deals unavailable to others extra services higher priority with waits, faster service

The Customer Satisfaction-Loyalty Relationship (Fig. 12.6)

Apostle
100

Zone of Affection Loyalty (Retention)

80

Near Apostle
60

Zone of Indifference Zone of Defection

40

20

Terrorist 0

1
Very dissatisfied

5
Very Satisfied

Neither satisfied Dissatisfied Satisfied nor dissatisfied

Satisfaction

The Wheel of Loyalty (Fig. 12.7)

3. Reduce Churn Drivers
Conduct churn diagnostic

1. Build a Foundation for Loyalty

Segment the market Be selective in acquisition Use effective tiering of service.

Address key churn drivers

Enabled through: Frontline staff Account managers Membership programs CRM Systems

Implement complaint handling & service recovery Increase switching costs

Customer Loyalty

Deliver quality service.

Build higher level bonds

2. Create Loyalty Bonds

Give loyalty rewards

Deepen the relationship

Drivers of Service Switching

Service Failure / Recovery
Core Service Failure
Service Mistakes Billing Errors Service Catastrophe

Value Proposition
Pricing
High Price Price Increases Unfair Pricing Deceptive Pricing

Service Encounter Failures

Uncaring Impolite Unresponsive Unknowledgeable

Service Switching

Inconvenience
Location/Hours Wait for Appointment Wait for Service

Response to Service Failure

Negative Response No Response Reluctant Response

Competition
Found Better Service

Others
Involuntary Switching
Customer Moved Provider Closed

Ethical Problems
Unsafe Cheat Hard Sell Conflict of Interest

Common CRM Applications

Signifies the whole process by which relationships with customers are built and maintained. CRM as an enabler, offering a unified customer interface and allow firms to better understand and segment the customers etc. Applications include:
Data collection Data analysis Sales force automation

Marketing automation
Call center automation

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

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.

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.

The customer perception

Keys to changing customer perception
Develop customer profile Look at your business with customer perspective Be aware of over promising (Avoid if not necessary) Do not cheat your customer - Just to sell the Product Your Image Representing Your company Problem great opportunity to win a customer