Emerging concerts in crm

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Emerging concerts in crm

  1. 1. EMERGING CONCEPTS IN CRM CONCEPTUAL FRAMEWORK & WINNING MARKETS
  2. 2. What is CRM ?• Narrow viewpoint is that CRM is database marketing and or customer retention using aftermarket tactics to achieve customer bonding• Berry in 1995 proposed that relationship marketing “attracting, maintaining and – in multi- service organizations – enhancing customer relationships”• Focus on cooperative and collaborative relations between customers and firms, and/or other marketing actors
  3. 3. Emergence of CRM practice• Developing customer relationships was there even in the pre-industrial era but in recent times de-intermediation process in many industries has accelerated the evolution of CRM• Airlines, banks, insurance, computer program software, and household appliances are using computer and telecommunication technology to directly interact end-customers• Databases and direct marketing tools give industries the means to individualize their marketing efforts
  4. 4. RECENT SUCCESSSES• On-line Banking• Charles Schwab and Merrill Lynch’s on-line investment programs• Direct selling of books, automobiles and insurance• Growth of service economy and total quality management have driven adoption of CRM• Partner relationship with suppliers and customers for TQM, JIT and MRP seen at Toyota, GM , IBM, Ford and Motorola
  5. 5. ERA OF HYPERCOMPETITION• Marketers are forced to be more concerned with customer retention and loyalty• Retaining customers is less costly and a more sustainable competitive advantage as against acquiring new ones• On supply side also it pays to develop closer relations with few suppliers than developing more vendors• With new technology and advanced product features and services customer expectations are rising every day ! And to keep track of this relationship building with customers is the only way forward
  6. 6. CRM FORMATION PROCESS• Identify and differentiate individual customers• Define the objectives of CRM, selecting customer partners for appropriate programs, and developing relational activity schemes• Overall purpose of CRM is to improve marketing productivity and enhance mutual value for relationship partners• Objectives can be financial, marketing, strategic and operational goals
  7. 7. CRM FORMATION• Purpose would be increased effectiveness and efficiency• Programs could include Account Management, Retention marketing, Coop Agreements, and Strategic partnerships• Partners based on criteria and process• Management by team structure, role. Planning, process, monitoring, communication and employee motivation and training• Relationship performance to be gauged• Evolution of this effort could lead to enhancement and improvement
  8. 8. CRM PROGRAMS• Continuity Marketing for mass markets with After-marketing, Loyalty and Cross-selling programs• For distributors continuous replenishment, efficient consumer response programs• For B-2-B markets it would need special sourcing arrangements• One-to-one marketing is based on account-based marketing and involves permission marketing, personalization, Key Account and Global account programs• Partnership/ Co-Marketing involves co-branding and affinity partnering e.g. Delta Airlines and American Express have co- branded Sky Miles Credit Card
  9. 9. CRM Governance Process• Programs for distributors and business customers need to involve both parties• Degree of governance in responsibilities will depend on the perception of norms among the relational partners• Issues to be addressed are Role specification, communication, common bonds, planning process, process alignment, employee motivation, and monitoring procedures• Proper monitoring helps to safeguard against failure and manage conflicts in relationships
  10. 10. CRM PERFORMANCEEVALUATION• Periodic assessment of results in CRM is needed to make corrective actions and to evaluate the programs• Balanced Scorecard which combines a variety of measures based on the defined purpose of each program• Another global measure used is the measurement of relationship satisfaction and customer loyalty
  11. 11. CRM EVOLUTION• With time CRM programs can change as also with maturity• Extraneous factors like acquisition, mergers, or divestment can cause changes in relationship marketing programs• Also when senior corporate executives and senior leaders move the CRM programs can undergo changes
  12. 12. IMPLEMENTATION ISSUES • Today companies interface with customers through a variety of channels like sales people, service personnel, call centers, Internet websites, marketing department , and business development agents etc. • All these agencies work separately but need to share information on a real-time basis to avoid gaps in communication
  13. 13. IMPLEMENTATION ISSUES• Challenge is to develop an integrated CRM platform which collects relevant data input at each customer interface and simultaneously provides knowledge output on strategy and tactics to win business and loyalty• If call center personnel cannot differentiate a high value customer and fail to up-sell or cross-sell it would be a tremendous opportunity loss• CRM solutions need to be based on interactive technology and processes• Since CRM implementation has significant IT component many companies hand over the responsibility of CRM implementation to IT Department which installation becoming the focus rather than strategy or programs in place
  14. 14. CRM RESEARCHDIRECTIONS• Relationship marketing research as per Wilson can be classified into 3 levels – concept level, model level and process research• Concept level identifies, defines and measures successful predictors measuring constructs like trust, commitment, shared values, interactions, adaptation, power imbalance, interdependence and mutual satisfaction, etc.• Model level presents integrative ideas to explain how relationships are developed e.g. Hakansson has studied 300 industrial marketing relationships to build the IMP Interaction model, Network model uses the social network for strengthening relationships
  15. 15. PROCESS LEVEL RESEARCH• Partner selection• Key account management programs and strategic partnerships• Performance of hospitals• Convergence of CRM and other paradigms in marketing are happening now• Many tools like TQM, Process reengineering, mass customization, EDI, value enhancement and activity-based costing are being used for CRM
  16. 16. ANDERSON CONSULTINGSTUDY• The number of firms citing customer retention as a critically important measure in the next 5 years has jumped to 60%, as they shift focus from attracting new customers to retaining their more profitable ones• By 2002 , 83% of companies expect to have customer data warehouse from a level of 40% in 2001• Companies predict their use of the Internet to collect customer data will surge 430% in next two years
  17. 17. TRY TO BE NEXT• Rather than trying to be better, companies need to try to be next• Offer more customized solutions and tailored customer experiences from traditional and new channels• For wealth creation you would need in today’s world imagination, experimentation, and agility• Driven by short cycle times, increased pressure to cut costs, and increased customer orientation business processes need to be upgraded all the time
  18. 18. TRADITIONAL CRMAPPROACH• Customer contact by phone, mail, in person• Personal Selling• After Sales Service• Complaint Handling• Account Management• Customer Care and Satisfaction
  19. 19. WEB-ENABLED INTEGRATEDCRM• Customer information system• Customer Database• Electronic point of sale Sales Force• Automation of Customer Support Processes• Call Centers• Systems Integration• Lifetime Value of Customer
  20. 20. USE OF TECHNOLOGY INCRM• EPOS (Electronic Point of sale) – Retail scanners are accurate and timely and can provide sales rate, stock levels, stock turn, price and margin, demographics, socio-economic and lifestyle characteristics• This drives choice of products, allocation of shelf space, and number of facings, etc.• Sales Force Automation has improved sales to shorten the sales cycle and increase productivity by efficient tracking of leads, contacts and sales forecasting
  21. 21. TECHNOLOGY IN CRM• Customer Service Helpdesk can provide more information on product and improve skills to use them, also deal with customer problems, enquiries, suggestions and software can raise the quality of response• Call Centers can be integrated to automatic phone systems like EPABX to allow automatic routing to agents, self-service Interactive Voice Response systems – specially used by banking, telecom and hospitality• Systems Integration of CRM solutions at the front office and ERP at back office for automating the key functions• Every business can now electronically link with end customers
  22. 22. CUSTOMER CONTACT• Internet is helping improved communications with consumers• Collaborative design with suppliers allows much faster turnaround of new designs• This causes earlier introduction of products and generates higher satisfaction of getting state-of- the-art products• Connecting Supplier-Manufacturer Intranets into functioning Extranets has been notably a success
  23. 23. PERSONALIZINGINTERACTION• Help customers make informed purchasing decisions• Customer communities can be targeted on line in chat rooms and the word of mouth is very rapid way of marketing• It is a special form of differentiation• It helps customers to become co-creators of the content of their experiences
  24. 24. ACHIEVING SUPERIORCUSTOMER EXPERIENCE• CRM is about managing customer life cycle through all points of customer contacts ensuring every interaction leads to value addition in relationship• All points should thus be empowered to be responsive and offer superior experience• Experiences connect the company and the brand to customer’s lifestyle• Good one will deliver service product and peace of mind
  25. 25. ACQUISITION VS RETENTION• Bristol-Myers Squibb, a pharma company spends 85% of marketing dollars on acquisition• BCG study in 1999 showed Internet companies spend 33% on building awareness, 55% on acquisition and only 12% on retention• Annual churn rate of cellular subscribers in USA is 25% as in 2003• High switching costs can hugely impact industry fortunes, and each percentage point increase in churn costs enough to reduce the total market value of cellular companies by $ 150 million
  26. 26. ECONOMICS OF LOYALTY• British Airways missed the point on London-San Francisco flight by not giving the passenger a seat in the business class for avoiding the smoking rows• Lifetime customer value was lost as passenger said he would never fly with BA again• 100% retention is impossible but advertising agency industry finds increase from 80 to 85% results in increase of 95% in the net present value of average customer’s billings• Loyal customers stimulate growth, are less expensive to serve, refer new customers to company and are often willing to pay price premiums
  27. 27. ACQUISITION COST• American Express must send number of direct mail pieces to make telemarketing pitches to obtain new customers• Longer a customer is retained, longer is the base profit earned• Customers increase purchase quantities over time e.g. you might prefer to buy life or home insurance from your auto insurance company• Existing customers have better knowledge of company’s systems and procedures and so cost less• Referrals are made to friends and neighbors• Price premium comes from loyal customers who become price insensitive• Framework for CRM model needs to be structured carefully
  28. 28. CRM MODEL• Constructing a customer database• Analyzing the database• Based on analysis, selecting customers to target• Target the selected customers• Develop relationship programs with customer target groups• Consider privacy issues• Measure the impact of the CRM program
  29. 29. CREATING DATABASE• Customer Information File or CIF is made up of 5 major areas• Firm demographics and contact names and addresses• Purchase history – products bought, channels utilized, prices paid and margins• Contact history- Any recordable contact with customer service ?• Response information – prior response to direct marketing and promotional offers, or other traceable marketing activity• Value of customer – estimate of monetary value of the customer to the firm
  30. 30. FREQUENCY OFINTERACTION• Direct and high for Banks, Telecom, and Retail• Direct and low for PCs, Internet infrastructure, etc.• Indirect and high for Airlines, Packaged Goods, Drugs, etc.• Indirect and low for Furniture, Autos, etc.

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