Customer Relationship

Management-Introduction
Some evidences
In 2003, Forrester, 22% of larger organizations had
someone in charge of the customer experience. 40% of
all data analytics projects is about customer experience.

Innovation might be the buzzword on everyones

lips but customer and design centricity is what will
win the day with customers according to Gartner.

Gartner, citing statistics garnered from social media

conversations. There were over 76,000 conversations on
CX design, over 146,000 conversations on CX channels,
over 163,000 on CX data and analytics and over 82,000
on CX strategy.

Marketing leaders who dont know how much their

customers are worth-66%
Potential increase in sales from identifying and maximizing
top value customers-17%
 Why focus on hypothetical average when you can
focus on a high value , real world customers.

The differences between distinct group of customers

is something to celebrate.

Peter Fader in his book

on Customer Centriciy
 Age of the customer Customer Era
2010
Relationship Era
2000
Information Age
Marketing Company Era

1960
Marketing Era
Marketing Era
1940
Automation &
Communication Age Sales Era
1920

2nd Industrial Age Simple trade & Production

1840

1st Industrial Age

1760

Innovation timeline Marketing Timeline

 Marketing History
1940: effort towards marketing of
manufactured goods
70-90:shift towards service based companies
2000:experience economy
 The paradigm shift since 1900s

Consumer
Durables B2B Services
packaged

60s 70s 80s-90s

Transaction or exchange Relationship

approach approach
 Marketing-definition-Evolution-AMA
Marketing is the performances of
business activities that direct the
flow of goods and services from
producers to consumers.
American Marketing
Association,1935
Marketing is the process of
planning and executing the
conception, pricing,
promotion, and distribution
of ideas, goods and services
to create exchanges that
satisfy individual and
organizational objectives.
American Marketing
Association,1985
Marketing is an organizational
function and a set of processes for
creating, communicating, and
delivering value to customers and
for managing customer
relationships in ways that benefit
the organization and its
stakeholders.
American Marketing
Association,2004
Marketing is the activity, set of
institutions, and processes for
creating, communicating,
delivering, and exchanging
offerings that have value for
customers, clients, partners and
society at large. American
Marketing Association,2007
2008 defn. includes the role marketing plays
within the society at large, and defines
marketing as a science, educational process
and a philosophy not just a management
system. It also expands the previous scope of
the term to incorporate the concept that one
can market something to do good.

9
 Understanding the shift
Exchange Paradigm Relational Paradigm

Time Perspective Short Prolonged

Mktg Function Marketing mix Interactive marketing

Quality Dimension Product quality, Quality of experience

customer satisfaction
quality

Metrics Market share Share of wallet focus

Interdepartmental Low High

support
Internal Marketing Negligible Very high
Is relation in business new phenomenon?

Relationship orientation of marketing in different era (Adopted from Sheth and

Parvatiyar, 1995)
 Paradigm Shift

Pre-industrial era-Trust, trade within clans, silk

route, early branding

Industrial era -IR, mass production, shift in

jobs,mktg institutions, metrics like sales, revenue,
MS, profitability.

Post industrial era -complex products, service

economy, KAM
 Paradigm shift in Marketing Orientation
Process

Relational
Perspective

Value distribution Value Creation

Exchange
perspective

Outcome
 Shift continues..
The 4-P paradigm involves The relationship marketing
marketing to anonymous paradigm in:
masses of customers industrial marketing
services marketing
managing channel
strategic alliances
B2B marketing
 Relationship Marketing
RM draws attention to the importance of retaining as well as
attracting customers, with emphasis being placed on the
development of long term relationships with customers.

Primary goal of RM is to build and maintain a base of

committed customers who are profitable for the organization.
 Marketing has come a long way

30 Rs

http://www.emeraldinsight.com/doi/pdfplus/10.1108/09564239410074
4Ps
4ps 349

Gummensson 1997
Customer Life Cycle
 Bonding for
Customer Relationship
Level 1: Financial bonds
Volume and frequency of rewards.

Level 2: Social Bonds

Personal relationships, continuous and social bonds.

Level 3:Customisation bonds

Customer intimacy mass customization

Level 4 Structural bonds

Joint investments shared processes and equipment

Berry & Parasuraman(1991)

 Customer Loyalty Exercise
Think of a service provider to whom you are
loyal.

What do you do (your behaviors, actions,

feelings) that indicates you are loyal?

Why are you loyal to this provider?

What factors have influenced the formation of

your loyalty?
 RM to CRM
CRM and Relationship Mktg. term used
interchangeably in academics.(Parvatiyar & Seth
2001)
CRM is more about
marketing.(Ryals & Payne 2001)
 Practitioners view
Forrester says
that CRM is the business processes and supporting
technologies that support the key activities of: targeting,
acquiring, retaining, understanding, and collaborating with
customers.
Customer relationship management (CRM) is a business
strategy with outcomes that optimize profitability, revenue
and customer satisfaction by organizing around customer
segments, fostering customer-satisfying behaviors and
implementing customer-centric processes. CRM
technologies should enable greater customer insight,
increased customer access, more-effective interactions, and
integration throughout all customer channels and back-
office enterprise functions. Gartner
 What researchers say
CRM is the core business strategy that integrates internal
processes and functions, and external networks, to create and
deliver value to targeted customers at a profit. It is grounded
on high quality customer related data and enabled by IT
Francis Buttle 2007
 Definition.
CRM is a comprehensive strategy and process of acquiring,
retaining and partnering with selective customers to create
superior value for the company and the customer. It involves
the integration of marketing, sales, customer service, and the
supply chain functions of the organization to achieve greater
efficiencies and effectiveness in delivering customer value.
(Parvatiyar & Seth 2001)
CRM is the practice of analyzing and utilizing marketing
databases and leveraging communication technologies to
determine corporate practices and methods that will
maximize the lifetime value of each individual customer to
the firm (V. Kumar,Werner J. Reinartz)
Link Between CRM and Customer
Value

Customer Value: The economic value

of the customer relationship to the
firm expressed on the basis of
contribution margin or net profit
 Customer Value Management

Benefits

Decrease in Costs
Maximization of Revenues
Improvement in Profits
Acquisition and Retention of Profitable Customers
Reactivation of Dormant Customers
Profit Generated by a Customer Over Time
Profit Impact of 5 Percent Increase in Retention
Rate

Source: F. F. Reichheld, Loyalty and the Renaissance of Marketing, Marketing Management, vol. 2, no. 4 (1994), p. 15.
Loyalty economics
The Customer Pyramid
 Misunderstandings about CRM
CRM is database marketing
CRM is marketing process
CRM is an IT issue
CRM is about loyalty schemes
 Explosion of CRM in Marketing and IT

In the 1990s, CRM started attracting attention of academicians

as well as practitioners from marketing and IT.

The early adopters of CRM in the B2C markets were financial

services, retailing, telecommunication, travel and hospitality,
utilities and automotive.

32
ENABLERS FOR THE GROWTH OF CRM

Emergence of service economy

Emergence of market economy

Global orientation of businesses

Aging /Changing population of the economically

advanced economies

33
THE CRITICALITY OF CUSTOMER RELATIONSHIPS

Non traditional
competition

Misalignment
between revenue
and profits

Market maturity

34
Market Maturity

35
Misalignment between Revenue
and Profit

36
Rising Customer Expectations

Aging
population (DC)

Individualism

Time scarcity

37
 Decreasing Customer Loyalty- Example

Number of different financial service providers that respondents are associated with
35
30.2 30.7
30
% of consumers

25
21.1
20
14.1 1996
15
10
5
0
1 2 3 4+
Number of financial service providers
Source: Unidex Report