PIVOTAL ROLE OF CUSTOMER RELATIONSHIP MANAGEMENT DEVELOPING A CRM STRATEGY CRM Levels CRM Strategy Development CRM ImplementationVALUE CREATION PROCESS Customer Value Value Received by the Organization CRM and Value Chain StrategyCRM AND STRATEGIC MARKETING Implementation Performance Metrics Short-Term Versus Long-Term Value Competitive Differentiation 4-3
CUSTOMER RELATIONSHIP MANAGEMENTCRM is a cross-functional core business process concerned with achieving improved shareholder value through the development of effective relationships with key customers and customer segments. CRM Recognizes That Customers: Vary in their economic value to the company Differ in their expectations toward the firm 4-4
4-3 CUSTOMER LIFETIME VALUECustomer lifetime value (CLV) calculates past profit produced by the customer for the firm – the sum of all the margins of all the products purchased over time, less the cost of reaching that customer To this is added a forecast of margins on future purchases (under different assumptions for different customers), discounted back to their present value. This process provides an estimate of the profitability of a customer during the time span of the relationship. The CLV calculation is a powerful tool for focusing marketing and promotional efforts where they will be most productive. 4-5
4-4PERSPECTIVES TOWARD CRM STRATEGIC- THE ENTIRE COMPANY REQUIRED THE CUSTOMER MARKETING FUNCTIONS 4-6
4-5 THE STEPS IN DEVELOPING A CRM STRATEGYGain enterprise commitment Build a CRM project team Business needs analysis Define the CRM strategySource: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & Sons, Inc.), 2006, 39. 4-7
4-6 DEFINE THE CRM STRATEGY Value Proposition 1 5 2 Other Business Stakeholders CRM Case STRATEGY Enterprise 4 3 CustomerTransformation Plan Strategy Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006, 42. 4-8
4-7 IMPLEMENTATION DANGERSImplementing Without Developing a Customer StrategyFailing to Initiate Necessary Organizational ChangeAllowing Technology to Dominate the CRM ProcessFocusing on the Wrong Customers 4-9
4-8 VALUE CREATION PROCESSValue Received by Value Received by the the Customer Organization THE VALUE EXCHANGE Successful Value Exchange 4-10
4-9METRICS How General Electric Co.FEATURE Measures Customers’ ExperienceHappy (And Not-So-Happy) CustomersGeneral Electric is a big user of the “Net Promoter” concept of customersatisfaction, popularized by Fred Reichheld of Bain & Co. Below, questionssimilar to those on which GE’s Capital Solutions unit asks customers to rate theunit’s performance on a 0 – 10 scale. • How willing are you to recommend us to a friend or associate? • How would you rate our ability to meet your needs? • How would you rate our people? • How would you rate our processes? • What is your impression of our market reputation? • How would you rate the cost of doing business with us? • How would you rate the overall value of our product or service as being worth what you paid? Source: Kathryn Kranhold, “Client-Satisfaction Tool Takes Root,” The Wall Street Journal, July 10, 2006, B3. 4-11
4-10 CRM AND VALUE CHAIN STRATEGY The Perfect Customer Experience“The perfect customer experience, which must be affordable for thecompany in the context of the segments in which it operates and itscompetition, is a relatively new concept. This concept is now beingembraced in industry by companies such as TNT, Toyota’s Lexus,Oce, and Guinness Breweries, but it has yet to receive muchattention in the academic literature. Therefore, multi-channelintegration is a critical process in CRM because it represents thepoint of co-creation of customer value. However, a company’s abilityto execute multi-channel integration successfully is heavilydependent on the organization’s ability to gather and deploycustomer information, from all channels and to integrate it with otherrelevant information.” Adrian Payne and Pennie Frow, “A Strategic Framework for Customer Relationship Management,” Journal of Marketing (October 2005), 173. 4-12
4-11CRM AND STRATEGIC MARKETING CRM STRATEGIC MARKETINGFrom the perspective of strategic marketing, there are severalreasons why CRM is important and why there should be extensivemarketing involvement in decisions about CRM. Importantly, anorganizational perspective is needed in guiding the CRM strategy. 4-13
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