Understanding Relationship

Marketings Financial Impact

Unfolding financial outcome of relationship
marketing programs
Sales-based Outcomes Profitability-based
Sales growth Outcomes
Price levels
Sales diversity (number
Selling costs
of different products /
Aggregate Outcomes
services sold)
Lifetime value
Sales volatility (variability
ROI measures
of sales over time)
Knowledge-based Outcomes
Share of wallet
Patents
New customers Time to market
Retention rates New product success
CRM - definitions
CRM - Customer Value perspective

CRM is the practice of analyzing and using

marketing databases and leveraging
communication technologies to determine
corporate practices and methods that maximize
the lifetime value of each customer to the firm.
 CRM from strategy perspective
CRM is the strategic process of selecting
customers that a firm can most profitably
serve and shaping interactions between a
company and these customers.
The ultimate goal is to optimize the current
and future value of customers for the
company.
 CRM - Definition
CRM, also more recently called customer
management, is a business approach that seeks to
create, develop and enhance relationships with
carefully targeted customers in order to improve
customer value and corporate profitability and
thereby maximize shareholder value.

CRM is often associated with utilizing information

technology to implement relationship marketing
strategies.
 CRM evolution four stages
First Generation (Functional CRM)
Sales force automation (SFA)
Customer service and support (CSS)
Second Generation (Customer- Facing Front-End
Approach) - goal was to create a single view of all interactions with customers,
Third Generation (Strategic Approach)
Integration of front end systems with back end systems
Fourth Generation (Agile and Flexible Strategic CRM)
Agility, flexibility, and low fixed costs are key.
On demand functionality
 Todays days are of Mobile & cloud based CRM
Engage
Analyze
CRM Evolution

Transact
The CRM continuum
Many times CRM is criticized ..
 But many times organizations often view CRM
from a limited perspective or adopt CRM on a
fragmented basis
the lack of a widely accepted and clear definition of
its role and operation within the organization
an emphasis on information technology aspects
rather than its benefits in terms of building
relationships with customers
the wide variety of tools and services being offered
by information technology vendors, which are often
sold as CRM.
Confusion about CRM terminology
Customer relationship management is often used
interchangeably with the terms
relationship marketing,
customer relationship marketing,
enterprise relationship marketing (ERM),
technology enabled relationship marketing (TERM),
customer managed relationships (CMR) or
customer management (CM).
It is also used to refer to a specific IT solution such as a data
warehouse or
a specific application such as campaign management or sales force
automation.
 Reason behind failure of CRM projects .

Most of the time the reason is half hearted (not considered strategic) , compartmentalized (disintegrated),
poorly executed (not able to create right organizational culture) CRM.
 What is not CRM?
Piece of software solution
Sales tactics
Call center services
Empowerment to pass goodwill waivers
Relationship building by software attributes of
a contact person
CRM (piece of software & consulting industry)
as a business segment

CRM a career option!!!

 Trends in CRM industry

CRM vendors other than the Big 4, this

group grew its collective market share
from 46 percent in 2007 to 58 percent
in 2015.

According to Gartner, the CRM software

market reached $26.3B in 2015, showing a
12.3% annual growth. The analyst firm
forecast the CRM market reaching $36.5
billion by 2017.
 Trends in CRM industry
Gartner previously positioned IBM as the
number 5 CRM vendor, however, now positions
Adobe number 5.
Not only is the CRM industry growing at a rapid
pace, but
Mobile CRM is expected to grow by 500%,
CRM growth is driven by cloud service revenue,
which, in the application space, uses SaaS as
the major delivery model
 Customer relationship
Management
Session 2
Customer Value creation & delivery
 Strategy is the art of creating value.
It provides the intellectual frameworks,
conceptual models and governing ideas that
allow a companys managers to identify
opportunities for bringing value to customers
and for delivering that value at a profit.

In this respect, strategy is the way a company

defines its business and links together the
only two resources : knowledge and
relationships or an organizations
competencies with customers.
 Demystifying value creation process

Three key elements:

Determining what value the company can provide
its customers with (the value customer receives);
determining the value the organization receives
from its customers (the value organization
receives); and,
successfully managing this value exchange,
maximizing the lifetime value of desirable
customer segments.
 Questions to be asked ..
1. How can we create and deliver value to our customers?
2. How should we maximize the lifetime value of the
customers that we want?

However, the emphasis in many companies is on second

question
how much money can we extract from the customer?
how can we sell them more of the existing products and
services they are buying?
how can we cross-sell them new products and services?
 The value the customer receives
The value the customer receives from the
supplier organization is the total package of
benefits, or added features that enhance the
core product.
Customers do not really buy products or
services when they buy they expect benefits
and value from the total offer the company
provides.
Product Levels Customer value hierarchy

In planning its market

offering, the marketer
needs to think through five
levels of the product.
Each level adds more
customer value, and these
five levels constitutes a
customer value hierarchy.

The value the customer receives

 Customer value hierarchy .
The value the customer receives

Core
Product / Basic Expected Augmented Potential
Core Product Product Product Product
benefit
A set of Encompasses all
The attributes and the possible
fundamental Marketer must conditions A product that augmentations
service or turn the core
benefit that the benefit into a buyers normally exceeds and
expect when customer transformations
customer is basic product.
they purchase expectations the product might
really buying
this product. undergo in the
future.

Hotel guests
A hotel guest is Hotel
minimally expect
buying rest and room includes a
sleep. The a clean bed,
bed, bathroom,
purchaser of a fresh towels,
towels, desk,
drill is buying working lamps,
dresser, and
holes. and a relative
closet.
degree of quiet.

Value additions through features

 Applying it to Indian Hotels
The value the customer receives

Taj is slotted in the

luxury space.
Vivanta by Taj in the
upper upscale
segment.
Gateway in upscale.
Ginger in economy.
 In Levitts words
The value the customer receives

The new competition is not between what

companies produce in their factories, but
between what they add to their factory
output in the form of packaging, services,
advertising, customer advice, financing,
delivery arrangements, warehousing, and
other things that people value.
 Thus the total value offer highlights the importance of
extending the core offer but does not provide much guidance on
how to do it.

The supplementary services model

 The value the customer receives
Christopher Lovelock,
operationalizes the total value
offer by providing specific
guidelines on where to seek
value enhancement for
customers.
His model identifies eight key
elements of supplementary
services that can be used to add
value to the core product or
service.
 The value the customer receives
information (e.g. Fedex)
consultation (e.g. Advertising agency, Accenture)
order taking (accepting applications, orders and reservations e.g. Retail loans)
hospitality services (taking care of the customer. e.g. Disneys, Ritz Carlton)
safe keeping (e.g. packaging, pick up and delivery, assembly, installation,
cleaning and inspection)
exceptions (group of supplementary services that fall outside the routine of
normal service delivery)
billing (faster, detailed billing)
payment.
 We discussed above how the core and augmented product offer adds
value. A brand adds to this offer in ways that differentiate it from other
similar products, ways that are important and of value to the customer.
 The value the customer receives
How brands add value
affect customer confidence in the purchase
decision
both perceived quality and brand associations can
enhance customers satisfaction with the use
experience
Building brand value through relationships
Harley Davidson
 Co-creating value
e.g. Dewalt (insight community), Disney, Bose
 Customer Co-Creation@DHL
Smart glasses and augmented reality, co-
created with DHL customer Ricoh, to improve
inventory and warehouse picking efficiency by
25%.

Parcelcopter
A quadrocopter remotely controlled DHL
drone transporting medicines
Maintenance on demand (MoDe), co-
created with DHLs customer Volvo
Trucks, uses sensors that automatically
send back vehicle and component
performance to identify when and
where truck maintenance will be
required.
 Formulating Value preposition (Example
Dominos Pizza)
The target customers (Convenience minded
pizza lover)
The benefits offered to these customers
(Delivery, Speed & Quality)
The price charged relative to the competition,
(15 percent premium over competition)
A formal statement of the value proposition
(good quality pizza delivered at your doorstep
within 30inutes).
 A checklist for value preposition
1. Is the target customer clearly identified?
2. Are the customer benefits explicit, specific, measurable and
distinctive?
3. Is the price, relative to competition, explicitly stated?
4. Is the value proposition clearly superior for the target customer
(superior benefits, lower price or both)?
5. Do we have, or can we build, the skills to deliver it?
6. Can we deliver it at a cost that permits an adequate profit?
7. Is it viable and sustainable in the light of competitors and their
capabilities?
8. Is it the best of several value propositions we considered?
9. Are there any impending discontinuities (in technology, customer
habits, regulation, market growth, etc) that could change our
position?
10. Is the value proposition clear and simple?
 Value assessment
Traditional means of customers assessment
of value (Customer survey)
Requests respondents to rank particular
features or service attributes on a four or five
point scale from very satisfied to very
dissatisfied or very important to very
unimportant
trade-off analysis
Trade off analysis - Example
The value the organization receives
Fundamental to the concept of customer
value are two key elements.
First, determining how existing and potential
customer profitability varies across different
customers and customer segments.
Second, understanding the economics of customer
acquisition and customer retention and
opportunities for cross-selling, upselling and
building customer advocacy.
 Customer profitability analysis
The value the organization receives

The profitability of customers varies considerably whether we are

examining this at the customer segment or individual, or one-to-one,
customer level.
 Why customers differ in their real profitability
The value the organization receives
Customers profitability may vary
because
different customers often buy a
different mix of products with different
gross margins.
Also, there will usually be substantial
differences in the costs of servicing
individual customers.
 Organization may adopt one particular
technology too rapidly; focus
insufficiently on building customer
relationships; or resist the use
of new technologies for improved CRM.

Rather than concentrate immediately on a

technology solution, managers should first
consider CRM in the context of their
organizations overall strategy
development.
Steps in Developing a CRM
Strategy
Steps in Developing
a CRM Strategy
Strategic CRM involves multiple areas within a company.
Key to get support from all departments involved (e.g., sales,
marketing, finance, manufacturing, distribution) and use their
valuable input while developing the companys CRM strategy.
The involvement of multiple departments promotes both
cooperation and wider acceptance.
Generally, enterprise-wide commitment thus needs:
Top-down management commitment
Bottom-up buy-in from system users
A dedicated full-time project team
Budget allocation for the total solution
Keep all the departments informed during the development
and implementation phases.
Steps in Developing
a CRM Strategy

CRM project team, whose members will take responsibility for

making key decisions and recommendations and
communicating the details.
The most effective CRM project team should contain active
representatives from at least the following work groups,
Management (provide leadership, motivation, and supervision)
Information services/technical personnel
Sales, marketing, and service groups (often are the final users of the CRM
system)
Financial staff (can provide critical analyses of the proposed CRM strategy)
External CRM expert
Other internal and external members (PR team, HR department, etc)
Steps in Developing
a CRM Strategy

CRM strategy must be based on the firms business

requirements.

This step needs a series of sessions and surveys to canvass top

sales, marketing, and customer service managers to gather
their expectations; a consensus should be formed as the
result.

Company-wide goals should be defined, along with objectives

for each department and work group.
Steps in Developing
a CRM Strategy

One way is to design CRM survey questionnaire to

capture information crucial information from different
departments such as
Functions they perform
Data they use
How they interact with customers?
What data they need to improve
customer relationships further?
How can you improve your
communication with customers and
management?
How can you reduce administrative
and scheduling requirements that
detract from the time available to
build relationships?
How involved are you in outreach
activities such as telemarketing
and direct mail?
What are your reporting needs
and requirements?
How are you involved in lead
tracking, lead follow-up, data
transfer, and other daily actions,
and how can these processes be
improved?
Steps in Developing
a CRM Strategy

This step (collection of business requirement) should facilitate

following ten steps
1. Identify the services and products being supported.
2. Map current workflows, interfaces, and interdependencies.
3. Review existing technologies, features, and capabilities.
4. Discuss the vision for the business and the operational plan.
5. Define business requirements.
6. Develop enhanced business workflows and processes.
7. Identify gaps in technology functionality.
8. Map functionality to business processes.
9. Develop a new technology and functionality framework.
10. Develop a conceptual design and prototype plan.
 From an analysis of business
needs, the firm can identify the functions that
need to be automated, as well as discover the basis for determining which technological features
are required.
Steps in Developing
a CRM Strategy

A good CRM strategy should address five areas

Thank you