1. CRM – Customer Relationship
Management

2. Learning Outcomes
Concept of customer value
Limitations of CRM
Role of Technology in CRM
Importance of Retaining customers
Difference between Transaction & Relation
Transaction – a one time activity
Relation – several transactions lead to a relation
Transactional marketing – acquiring new customers
Relationship marketing – retaining existing customers

3. Relationship Marketing
Attracting
Developing
Retaining customer relationships
Creation of customers who enjoy service, feel valued and who
will be loyal.
Create win-win situations.
BENEFITS OF CRM > COST INVOLVED (money + time + effort
involved)
Revenue for Supplier > Financial cost of attracting the customer
+ establishing relationships + executing each transaction.

4. CRM
Relationship – Long Term
Value Proposition to Customer
Short term – benefits, discounts, preferred booking
Long term – benefits in the long run example –
frequent flyer
Technology Enablers ( ATM, Phone banking, Online booking, Account
balances on mobiles).
For a customer, Value = (Perceived benefits in dealing with you –
Perceived costs in dealing with you.)

5. CRM
Success of CRM is not dependent on technology alone.
Why ?
Lack of personal touch in services that are backed by
technology (Phone banking vis-à-vis a personal visit to the
branch).
Customer Loyalty defines CRM.
For a new firm, customer acquisition is important
For established companies, customer retention is
important.

6. Defectors
Customers who go to competitors
Price as a reason for defection – Cell Phone, Airlines
Product as a reason – Aspiration to have a superior product (may be
a perception) examples – Internet connection of BSNL, Airtel, MTS.
Service is bad – Hotels, Couriers, Restaurants
Market Defectors – Customers may move from one city to another
or one locality to another so they will prefer the nearest available
service.
Technology defectors – Mobile Phone, Computers, Laptop, MP3
Players, IPOD players.
Social defectors – under peer pressure, family influence causes
defection.

7. Solutions to handle defectors
• Talk to customers – exit interview
• Find out reasons for defection
• Use a survey to identify strong points
• Benchmark against competition –intelligence gathering,
market surveys
• Dealing with change (Change management) is important.

8. Customer value, always
dynamic

9. Customer value
• Predicting customer value is complex –
unpredictable
• Credit has to be given for customer
referrals
• Generally customer value is computed
over a period of time (5 to 7 years)
• Loyalty demands a value

10. GOOD
CUSTOMER
S
ADVOCATE
S
BRAND
AMBASSADO
RS

11. Ladder of Loyalty
ADVOCATE
SUPPORTER
CLIENT
CUSTOM
ER
PROSPE
CT
Emphasis on
developing &
enhancing
relationships
Emphasis
on new
customers
Customer
Retention
Customer
acquisition

12. Objectives of CRM
• Turn prospects to advocates
• Minimize defection rates by corrective and preventive
actions
• Build a large number of loyal customers over time.
• Maintain balance in the relationship – neither too close nor
too distant
• Cross selling : banks selling insurance policies under the
Bank assurance scheme.

13. Implementing CRM
Front line staff , performance important.
Provide customers with “moments of truth” during the service
encounters
Employees must feel part of the CRM process
Clear objectives
Staff empowerment – To take decisions
Understand the variable and intangible nature of service
customers
Product(Service) Innovations to augment service e.g. Surprise
Gifts at Planet M, On-board auctions within a flight

14. Implementing CRM (cont’d)
• Regular communication with customers
• Tangible benefits to reward loyalty
– Loyalty cards, Membership cards : Max,
Pantaloon(Green Card), Reliance Retail
– Treating unsolicited customer feedback with
respect and responding to it.

15. Success of CRM
Setting tough standards
Training
Make the customer feel important
Communicate reasons for failure instead of not
communicating at all
Giving importance to every encounter as though the entire
business depended on it
Constructive approach/ response even to the most
aggressive customer complaints

16. Why are some companies better at
CRM as compared to others
• Market driven approach
• Customer focus
• Deliver better value to customer
• Microsoft was the first international company to
exploit CRM – selling office suite and further
upgrades to an individual : they also had
differential pricing for corporate and individual
purchases.

17. CRM strategy
An effective CRM strategy starts with segmentation based
on what different groups value and what will make them
loyal.
Develop a blueprint to understand what a particular
segment seeks from a relationship with your company
Implement CRM
Measure and monitor the goal

18. Research by Coyles & Gokey
• Emotional loyalists are important
• Deliberators if influenced can yield rich
rewards
• Communicating benefits to customers
• Dealing with even a small level of
dissatisfaction is vital

19. Lifetime value in a CRM
Lifetime value = value of all future
revenues from a customer, based on their
current and future product holding.
Value is difference between revenue and
costs.
LTV – Life time Value
LTV= Total Revenues – Fixed Cost –
Variable Cost
Revenue = total of all orders placed
Costing – activity based costing/
accounting

20. LTV calculations
• Retain existing customers
• Find more customers who match the
profile of the most profitable customers
• Calculate which products/ product-service
combinations contribute most to profit
• LTV based on assumptions, Review
assumptions periodically.

21. Data Mining
• Profile the customer behavior to model the future
• Gives an indication of the propensity to buy for any given
market segment
• Examples – HDFC Phone banking, Customer ID – data
warehousing solution – all transactions of customer can be
viewed at the click of a button
• Warehouse pulls information from different transaction
systems and customer interface channels and centralises it in
a single database. This helps the bank in finding out the
profitability of a customer.

22. Quiz
• Segmentation of customers in CRM
relates to what dimensions of customers.

23. • Neither practical nor profitable to meet all
customer expectations
• Companies try to identify segments (tiers
of customers) – that differ in current and/or
a future profitability of a firm.
• This approach tracks costs and revenues
for segments of customers.
• Thus segmentation in CRM refers to
profitability of customers.