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Customer Relationships: Business Strategy for Competitive Advantage
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Customer Relationships: Business Strategy for Competitive Advantage


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    • 1. Customer FocusCustomer Focus was identified as the single mostimportant differentiator between the best and theworst companies in an industry in a survey of 100+senior executives. (Schmitt, 2003) (c) Kalpana Chauhan
    • 2. Customer Relationship ManagementCRM is a management approach that involves identifying,attracting, developing and maintaining successful customerrelation over time in order to increase retention of profitablecustomers. (Bradshaw and Brash 2001, Massey et al 2002)Requires alignment of business strategy, organization (relational)structure and processes, customer knowledge and technology insuch a manner, that all customer interactions can be organized tothe unique positive customer experience resulting value for theorganization. At its highest use, it is a competitive strategy. (c) Kalpana Chauhan
    • 3. CRM Focus0 Strategic marketing related processes and capabilities. (Day 1994,99,2000, 2003)0 KM and interaction process (Zablah et al, 2004)0 Customer loyalty, profitability, acquisition ,retention (Kumar & Shah, 1999; Reinartz & Kumar, 2003; Venkatesan, Dick & Basu, 2003; Stauss et al, 2004)0 Organizational culture, focused on creating quality (profitable) relationships (Ngai, 2005; Romano & Fjermestad, 2003)0 A technology providing integrated view of customers (Zikmund, McLeod, & Gilbert, 2003) (c) Kalpana Chauhan
    • 4. CRM as Differentiation Strategy0 Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation. (Kaplan, 2004)0 The value paradigm requires integration and real time optimization of the value chain between the customer, the firm and its extended enterprise. (Chan, 2005) (c) Kalpana Chauhan
    • 5. Proposed Conceptualization0 CRM as differentiation strategy could be conceptualized in terms of three components: 0 Customer Experience as a driver 0 Customer Centricity as a design 0 Relationship Management as a process (c) Kalpana Chauhan
    • 6. Customer Experience Facts0 86% of consumers quit doing business with companies because of a bad customer experience. (Harris Interactive, CEI Report, 2010)0 It takes 12 positive service experience to make up for one negative experience. (Ruby Newell-Legner)0 80% of the firms like to use customer experience as a form of differentiator. (Forrester: State of customer experience 2010) (c) Kalpana Chauhan
    • 7. Customer ExperienceAt this very moment, it is happening. Across channels and touch points,customers are experiencing every company. Whether interacting on theWeb, through a call center, on the phone, by way of e-mail or face-to-face,customers are experientially assessing the extent to which a companyvalues their patronage. Those experiences are collectively serving tostrengthen relationships—or, if the company is failing to fulfill its brandpromise and to delight customers, are instead weakening the bond betweenits customers and its business. (Peppers and Rogers 2009) (c) Kalpana Chauhan
    • 8. LiteratureFocus has been mainly on service quality and measuring customersatisfactionConsumption’s experiential aspects (Holbrook and Hirschmann 1982)Experience Economy (Pine and Gilmore 1999)experiential marketing, Customer Experience (Schmitt 1999, 2003) Meaning, creation strategy Meyers and Schwager, 2007, Verhoef2007Atmosphere Baker et al. (2002); Kaltcheva and Weitz (2006);Wakefield and Baker (1998)Price Baker et al. (2002); Dorotic, Verhoef, and Bijmolt (2008);Gauri, Sudhir and Talukdar (2008); Noble and Phillips (2004);Assortment Baker et al. (2002); Broniarczyk, Hoyer and McAllister(1998); Huffman and Kahn (1998); Janakiraman, Meyer, and Morales(2006)Channel Neslin et al. (2006); Patricio, Fisk, and Falcao e Cunha(2008); Sousa and Voss (2006); Verhoef, Neslin, and Vroomen (2007) (c) Kalpana Chauhan
    • 9. What is Customer Experience Management? Customer’s interpretation of his or her total interaction with the brand (Ghose 2007) As such, a service provider cannot avoid creating an experience every time it interacts with a customer (Thompson and Kolsky 2004) The process of strategically managing a customers entire experience with a product or company (Schmitt 2003) All interactions involved throughout the process and throughout the customer lifecycle culminate in a positive customer experience if customers go away feeling that their personal needs were met and they were treated with care. (c) Kalpana Chauhan
    • 10. What is Customer Experience Management?0 Customer experience is the internal and subjective response customers have to any direct or indirect contact with a company. (Meyer & Schwager, 2007) -Direct contact: generally occurs in the course of purchase,use, and service and is usually initiated by the customer. -Indirect contact: most often involves unplannedencounters with representations of a company’s products,services, or brands and takes the form of word-of-mouthrecommendations or criticisms, advertising, news reports,reviews, and so forth. (c) Kalpana Chauhan
    • 11. Customer Experience0 Requires Outside-in approach0 Can be seen from the traditional information- processing and decision oriented perspective and the experiential perspective. (c) Kalpana Chauhan
    • 12. Customer Centricity as Design 0 Amongst all CRM failure only 6% are due to technology, remaining are due to failure to change behavior, culture or organizational structure. (Richard 2008) (c) Kalpana Chauhan
    • 13. Customer Centricity0 ‘Putting customer as the center of business and activities’.0 It refers to the orientation of a company to the needs and behaviors of its customers, rather than internal drivers (such as the quest for short term profit).0 Requires alignment of operating model behind a carefully defined customer segmentation strategy and tailor business streams- product development, demand generation, customer care, supply chain etc. (Gummesson 2008) (c) Kalpana Chauhan
    • 14. Dimensions of Customer Centric Organization Dimensions Customer centric organizationBasic philosophy Serve customers: all decisions start with the customer and opportunities for advantageBusiness orientation Relationship-orientedProduct positioning Customer segment centers, customer relationship managers, customer segment sales team, e.g. high net worthOrganizational Highlight product benefits in terms of meetingstructure individual customer needsOrganizational Focus Externally focused, customer relationship development, profitability through customer loyalty, employees are customer advocatesPerformance metrics Share of customer wallet, customer satisfaction, customer lifetime value, customer equityManagement criteria Portfolio of customersSelling approach How many products can we sell to this customer? How do we co-create value?Customer Knowledge Customer knowledge creates a valuable asset (c) Kalpana Chauhan Shah et al 2006
    • 15. Customer Centricity1.Solve the customer’s problem completely by ensuring that all the goods and services work, and work together.2. Don’t waste the customer’s time.3. Provide exactly what the customer wants.4. Provide what’s wanted exactly where it’s wanted.5. Provide what’s wanted where it’s wanted exactly when it’s wanted.6. Continually aggregate solutions to reduce the customer’s time and hassle. (Womack and Daniel 2005) (c) Kalpana Chauhan
    • 16. Relationship Management as ProcessWhat is RM process?0 Customer relationship management as a core organizational process focuses on various activities that an organization perform in establishing, maintaining, and enhancing long- term associations with customers. (Berry 1995; Morgan and Hunt 1994; Srivastava, Shervani, and Fahey 1999)0 This major relationship management processes are the marketing communication, interaction and customer’s perception of value leading to relationship dialogues. (Gronroos, 2004) (c) Kalpana Chauhan
    • 17. Relationship Management as ProcessWhy RM processes?0 To derive strategic potential of relationships and pursue them as a differentiation strategy companies need to build relationship management capability. Capabilities are rooted in business processes and encompasses the value chain. (Leonard-Barton, D. 1992) (c) Kalpana Chauhan
    • 18. Levels of CRM processRelationship Management as process need to be dealt at-0 Macro level- process of building relationships with customers and include sub-processes like prospect identification, customer knowledge creation etc.(Srivastava et al 1999, Plakoyinnaki andd Tzokas 2002Reinartz et al 2003)0 Micro level- process to manage all customer interactions ( Day and Van den Bulte 2002, Kohli 2003, Holmlund 2004, Gronroos 2004) (c) Kalpana Chauhan
    • 19. Levels of CRM ProcessThere are three different possible levels:(1) functional,(2) customer facing, and(3) companywide.CRM process entails the systematic and proactivemanagement of relationships as they move from beginning(initiation) to end (termination), with execution across thevarious customer-facing contact channels. (c) Kalpana Chauhan
    • 20. Customer Relationships as Differentiation Strategy • Define the customer experience that customers value and Design the services (CE) CE • Engaging the employees • Alignment of all touch-points CC • Strategy development process • Multichannel integration process • Customer Information Management on ongoing basisRM-P (process) (c) Kalpana Chauhan
    • 21. Thanks Kalpana ChauhanFortune Institute of International Business New Delhi (c) Kalpana Chauhan