AMA definition of Marketing
Marketing consists of performance of Business activities
that directs the flow of goods and services from Producer
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.
Marketing is an organizational function and set of
processes for creating, communicating and delivering value
to customers by managing customer relationships in ways
that benefit the organization and its stakeholders
Reasons for Increasing Importance and
Growth of CRM
Emergence of service Economy
Emergence of Market Economy
Globalisation of Business
Growing Consumer Diversity
Time Scarcity, Technology Aptitude
Value Consciousness and Decreasing Loyalty
Intolerance for Low Services (Low patience of young)
Availability of Information
Customer Relationship Management : A Genesis
Customer Relationship management is the strongest and the most
efficient approach in maintaining and creating relationships with
Customer relationship management is not only pure business but also
ideate strong personal bonding within people.
Development of this type of bonding drives the business to new levels of
Most of the organizations have dedicated world class tools for
maintaining CRM systems into their workplace.
Some of the efficient tools used in most of the renowned organization
are Batch Book, Sales force, Buzz stream, Sugar CRM etc.
CUSTOMER RELATIONSHIP MANAGEMENT
A System or concept
A Call Centre Support
A continuous Activity
What is CRM
Customer Relationship Management is all the tools,
technologies and procedures to manage, improve, or
facilitate sales, support and related interactions with
customers, prospects, and business partners
throughout the enterprise.
Customer Relationship Management is focussing on
the goal of the system is to track, record, store
databases, and then determine the information in a
way that increases customer relations.
In this unit we will Discuss about:
Terms of customer value
Customer relationship management
Link between CRM & Database
Marketing & Customer Value
CRM takes the practice of database marketing
principles to increasingly ultimately focusing
relationship with individual customers.
Customer value is defined as economic value of the
customer relationship to the firms output on the basis
of contribution margin or net profit .
An important part of CRM is identifying the different
types of customers and then developing specific
strategies for interacting with each customer
“CRM is a philosophy and a business strategy supported by a system and a
technology designed to improve human interactions in a business
Paul Greenberg, CRM Magazine, October 2003
“CRM an enterprise wide business strategy designed to optimize
profitability, revenue and customer satisfaction by organizing the
enterprise around customer segments, fostering customer-satisfying
behaviours and linking processes from customers through suppliers.”
“CRM is the business strategy that aims to understand,
anticipate, manage and personalize the needs of an
organization’s current and potential
customers” PWC Consulting
CRM is the practice of analyzing and utilizing marketing
database and leveraging communication technologies
to determine corporate practices and methods that
will maximize the lifetime value of each customer to
CRM is a strategic process of selecting the customers
a firm can most profitably serve and shaping the
interactions between a company and these
A customer value-based approach
When does it pay to go after a customer loyalty?
How do you link loyalty to customer profitability?
How do you compute the future profitability of a
How do you measure customer lifetime value?
How do you optimally allocate marketing resources to
maximize customer value?
How do you maximize the return on marketing
A customer value-based approach
to benefits of CRM
Maximization of revenue
Improvement in profits and ROI
Acquisition and retention of profitable customers
Reactivation of dormant customers
Customer get best price and services for money
Customer problems will be solved with no time
Customer satisfaction increases
Customer loyalty towards products and companies.
Defining scope of CRM
CRM aims to look at all aspects that will enable an organization
capability to manage and nurture its 1:1 relationship with its consumers.
Customer Relationship Management, or CRM, is broadly defined as the
business process of understanding, collecting and managing all of the
information in a business environment relating to a customer. The goal
of CRM is to more effectively communicate with customers and improve
customer relationships over time.
James Wong, President, Avidian Technologies.
True customer intimacy – the backbone of a successful rewarding
relationship- requires a deep understanding of consumers in which
products and services are used in the course of customers day to day lives
Customer Values through CRM
Customer Unique Value
Access or Convenience Value
1. Functional level
CRM process can be practiced along with a strong
technology orientation evolving out of the need for
vendors to position their particular product.
For some of the vendors/buyers functional CRM is
synonymous to technology.
2. Customer facing front-end level
This focuses on the total customer experience
The goal is to build a single view of the customer
across all contact channels and to distribute customer
intelligence to all customer facing functions
Marketing to customers throughout their purchasing
3. Strategic level
Its objective is to free the term CRM from any
technology underpinnings and from specific Strategic
customer management techniques
These definitions describe CRM as a process to
implement customer centricity in the market and
build shareholder value through strategies
What motivates companies to adopt
Competition :- Differentiation difficult
Consumer expectations :- Demanding consumers
Technology: - Cost of CRM technology has dropped
Diminishing impact of advertising :- With CRM you
can target your message more precisely, hold peoples
attention better and retain customers longer
With the raising cost of acquisition of new customer ,Customer Life
time Value (CLTV) is emerged as powerful metric. This shows the
Importance or value and keeping present customers compared to
acquiring new customers in a highly competitive market.
“Acquiring users with CLTVs greater than the cost per Retaining(CPR)
is not only a strong indicator of effective marketing, it is essential to the
long-term success of an company and a brand.”
The reason to know the CLTV of your existing players is to predict the
net profit one can expect from the entire future relationship with a new
Customer retention refers to the activities and
actions companies and organizations take to reduce
the number of customer defections. The goal
of customer retention programs is to help companies
retain as many customers as possible, often
through customer loyalty and brand loyalty
Reasons for Customer Defections or
Loss of Customer or Customer Left out
Decline in Brand Value
Poor Customer Relationship
Poor Customer Service
Changing Trends and Fashions
New Product Development by Competitor
Lack of Fairness in Business Deals
New Technology or Approach of Competitor
Price, Quality and Reputation of Competitor
Customer perception about Risk to continue with firm
The customer retention definition in marketing is the
process of engaging existing customers to continue
buying products or services from the business. It’s
different from customer acquisition or lead
generation because you’ve already converted the
customer at least once.
The best customer retention tactics enable you to form
lasting relationships with consumers who will become
loyal to your brand. They might even spread the word
within their own circles of influence, which can turn
them into brand ambassadors.
Determinants of Customer Retention
According to the market evidences following are the
main determinants of customer retention:
1.Delivered quality of products and services vs
2.The Value or worthiness of a particular product or service.:
The worthiness of a particular product or service does not
only depend on its own merits. It is only worth and useful if
it meets all customers’ expectation
3. Uniqueness and suitability of products: Most customers
prefer unique and different product. Identical or same type
products normally decrease the probability of selling.
Determinants of Customer Retention
4. Loyalty: It is necessarily required for an organization to
interact and communicate with customers on a regular
basis to increase customer loyalty.
5. Easy availability: Some of the products in market are not
easily available. This may be because of poor marketing
strategy or less retail stores.
6. Customer service: Customer service could be considered
as the most important aspect of customer retention.
7.Exit barrier: Organizations which are successful in
creating an exit barrier can obviously retain customers. For
example, by providing rewards and concessions to
continuously buying .
Example: Insurance products 5yrs lock in period by IRDA
Customer loyalty is the result of consistently positive
emotional experience, physical attribute-based
satisfaction and perceived value of an experience,
which includes the product or services. Consider who
you yourself are loyal to.
Customer loyalty indicates the extent to which
customers are devoted to a company’s products or
services and how strong is their tendency to select one
brand over the competition.
Customer loyalty is positively related to customer satisfaction as
happy customers consistently favour the brands that meet their
needs. Loyal customers are purchasing a firm’s products or services
exclusively, and they are not willing to switch their preferences over
a competitive firm.
Brand loyalty stems out of a firm’s consistent effort to deliver the
same product, every time, at the same rate of success.
Organizations give special attention to customer service, seeking to
retain their existing current base by increasing customer loyalty.
Often, they offer loyalty programs and customer rewards to the
most loyal customers as an expression of appreciation for doing
repeat business with them.
Customer loyalty is a measure of how likely your
customers are to do repeat business with you.
Different industries have various ways of measuring
loyalty, but the most basic way is to look at the number
of purchases over a customer’s lifetime in your
Repeat buyers are your most valuable customers.
Though they may not be big purchasers, it is likely
that over time, the revenue from them will top revenue
from big one-time buyers.
Attitudinal vs Behavioural Loyalty
Attitudinal loyalty is loyalty due to the customer's
attitude towards the brand. Behavioural
loyalty refers to customers who are loyal out of habit.
When customers trust and depend on the brand, and
there is no substitute for that brand they are happy to
continue in their relationship with the company.
Behavioural loyalty refers to customers who are loyal out of
habit. Sometimes switching from one brand to another
causes more of a problem for the customer so they struggle
with leaving a brand for another and/or are too lazy to
transfer so they stay with a brand despite how unsatisfied
they are with the customer experience.
Attitudinal loyalty is loyalty due to the customer’s attitude
towards the brand. When customers trust and depend on
the brand, and there is no substitute for that brand they are
happy to continue in their relationship with the company.
How to use customer loyalty to grow your brand
Customer loyalty is tricky because customers are not
bound by anything to stick with you. A loyal customer
can jump to another brand for a ton of different
reasons. Another brand may be more accessible, or they
may just want to change and try out a new brand. Or
perhaps there is a better promotion around the corner.
But there are customer loyalty marketing strategies you
can use to make sure your customers are sticking
around for as long as possible. There are five Loyalty
strategies generally used by companies.
Five Loyalty strategies generally used by companies
1. Solicit customer feedback
2.Target customers with special offers
3. Reward your most profitable (VIP) customers
your most profitable customers, which, if you consider the
80/20 rule, this investment is bound to pay off.
4. Personalize your follow-ups
5. Keep your follow-up promises
TYPES OF LOYALTY
Transactional Loyalty vs Emotional Loyalty
Emotional loyalty is the ultimate, where consumers
will look to one particular brand regardless of price,
convenience or other outside factors because they have
a personal connection to the brand.
Transactional loyalty is slightly different. That's the
retailer closest to home, or the one that consistently
has the lowest prices. When certain conditions change
- say a retailer opens even closer to home, or they have
to raise prices - then the customer's dollars are at risk
of being spent elsewhere.
Customer Loyalty Ladder
Customer Loyalty Ladder is a systematic way of
classifying customers of an organization into five
different categories depending upon the business level
engagement of customers with the organization.
Customer loyalty ladder helps businessmen to identify
potential customers who can remain engaged with
their business for a long time and also become loyal to
Customer Loyalty Ladder Categories- Customer
Loyalty Ladder classifies the people related to the
product based on their engagement. People are
classified as suspects, prospects, customers, clients and
advocates. The below mentioned diagram shows
1. Suspects: They are the potential(low)customers for an
organization. They may be aware of the promotional
campaigns of the organization but are currently doing no
business with that organization later.
2. Prospects: They are the ones who have been impressed
with the organization’s promotions and are in serious
consideration of buying products of the organization. The
organization must treat them cordially and solve all of their
3.Customer: They have bought products of the
organization for the first time and are currently using
them. The organization must extend them all possible
after-sales assistance in order to pacify their concerns.
These customers can be engaged with a loyalty
program or a loyalty discount.
4. Clients: They are doing business repetitively with
the organization and are willing to foster the
engagement in future. Clients if well engaged can help
boost business with their brand loyalty.
5. Advocates: They are not only doing repetitive
business with an organization but are also
recommending the organization to their own
acquaintances. They are the most valuable players and
the organization must treat them royally with the
Customer Loyalty Ladder
The concept of Customer Loyalty Ladder comes under
relationship marketing and brand management which
deals with establishing long term relations with customers.
It is said that the cost of attracting new customers is 4-6
times more than that of doing business with existing
Hence it is worth for any organization to keep its existing
customers happy and satisfied in order to do a more
profitable business. Customer Loyalty Ladder thus helps an
organization plan engagement strategy wisely so that the
customers would be tempted to move up the ladder
A customer loyalty program is a rewards
program offered by a company to customers who
frequently make purchases. A loyalty program may
give a customer free merchandise, rewards, coupons,
or even advance released products.
Loyalty programs are structured marketing
strategies designed by merchants to encourage
customers to continue to shop at or use the services of
businesses associated with each program. These
programs exist covering most types of commerce, each
one having varying features and rewards-schemes.
Importance of Customer Loyalty Programs
Companies face intense competition in the sector in which
they operate and there is a limited scope of differentiation
in terms of products or services. Customers have several
options to choose form when it comes to buying products
or using services. In order to stop customers from
switching to a competition brand, companies adopt
various methods to retain customers.
One such strategy of customer retention is through a
customer loyalty program. A brand loyalty program
empowers the customer with more benefits & incentives
which he or she gets along with the products or services
that they use. With such a loyalty discount & rewards, a
customer becomes happy and satisfied and it adds to
the customer loyalty.
Different types of loyalty programs for customer retention
and increasing business are as mentioned below:
1.Discount-This type of a loyalty program gives
discounts to regular customers on the price which is
being offered. This works well for retail companies and
2.Points System- This loyalty program encourages
more shopping. The more a customer shops or buys,
the more points he or she will get, and which can be
redeemed in the next purchases.
3.Cashback- Cashback loyalty program is mostly for
credit card or online shopping customers, who are
given cashback based on their purchases. This is
popular in ecommerce companies.
Different Loyalty Programs…
4.Club Cards or Programs- Based on frequency of usage,
companies allot cards to customers. Club card loyalty program
gives free services or goodies or better incentives to customers.
This works well with service-based companies like airlines who
offer frequent flyer cards.
5.Partnerships- Companies partner with other brands and offer
loyalty program which benefits both partners. Like a food app
can partner with restaurants to give discounts or benefits to
6.Coalition- Multiple-brands and companies combine to offer
incentives and benefits to customers based on such a loyalty
program. This empowers the customers to choose from a variety
Benefits of a Loyalty Program
Companies use loyalty programs to ensure that their
customers are happy and satisfied. Some of the key
advantages & benefits of loyalty programs are:
1. A loyalty program helps in retaining good customers.
2. It helps to reduce unwanted customers.
3. A good brand loyalty program helps in creating more
4. A good customer database is collected over a period of
time based on customer loyalties & needs.
5. Repeat customers help in driving the repeat business.
6. Loyal & satisfied customers help in bringing new
customers based on their good experience.
7. Loyalty programs helps in better brand communication
and keeps consumers engaged & connected.
How to Design a Successful Loyalty Program
Whether your loyalty program is “official” or informal,
complex or super user-friendly, it is critical that it through
thoroughly at inception, and pay close attention to its
ongoing execution and profitability. Whatever your plan,
six factors loom critical in any loyalty effort.
1. Successful loyalty plans are strategic
2. Trade-offs are required to attain financial goals
3. Objectives must drive program strategy
4. Identify how program design delivers value to the
5. Leverage best practices of industry leaders
6. Best loyalty programs align with customer relationship
Designing Successful Loyalty Program
1. Plan and Ideate Strategically : First, set goals around a
primary business objective that will drive customer impact –
things like increasing the frequency and size of purchases over a
defined period. Then evaluate whether potential benefits are
sufficiently compelling to drive such behavior and, pivotally,
whether your employee training and customer communications
yield awareness, curiosity, and action.
2. Trade-offs required: The trade-offs come when you decide
which customers are targeted and, by the process of elimination,
which you deem less valuable. No business can be all things to all
audiences; your loyalty program doesn’t have to excite or engage
less-profitable customers, it should be focused on encouraging
profitable customers to buy more and more frequently, and
recommend your brand to colleagues and friends.
3. Derive Objectives Intelligent ly: Once defined clearly,
your objectives must be distilled into a strategic message
that is simple and sustainable over time. Now that you’ve
defined your most-coveted market segment, decide how
specific message elements can be tweaked to broaden or
narrow the appeal of your loyalty strategy.
4. Deliver Value to the Business : Collection and
evaluation of anecdotal and statistical information will tell
you how best to leverage your loyalty program at the point of
sale, in PR, advertising, mobile, online marketing, and social
media. And, whether your POS is face-to-face or geekishly
technological, training, implementation, and evaluation are
central to the plan. Loyalty is secured (or not) and
augmented (or not) at that critical moment of truth when
your customer turns her money over to you.
5. Leverage Loyalty Program Best Practices: Identify the
leaders in your industry not only have already defined their
loyalty strategies, but the very success of those strategies
define what you must do. Yes, it helps if you’re creative, but
you needn’t entirely re-invent the wheel. Look at your
companies unique value proposition to create a differentiated
value proposition that will matter to your customers.
6. Best Loyalty Programs: The sales data collect and the
stories shoppers relate – directly to your employees, in focus
groups and on social media outlets, for example – constitute
the testimony of customers on the efficacy of your efforts.
A loyalty program fails – like any element of your marketing and
growth strategy – if it does not deliver positive ROI.
A new loyalty effort may launch with optimism and enthusiasm
but often fails to deliver for any of several reasons. For example:
Your target audience and supporting data may not be clearly
defined and organized.
Employees who don’t receive adequate training may lose their
Miscommunication of procedures and rewards may
inadvertently sabotage success with key objectives.
You had a plan to launch the program, but not a plan to manage
the customer life-cycle from a new member to an active member,
to highly engaged to loyal brand advocate. In the end, the loyalty
program lapses into auto-drive and, instead of changing
customer behaviour, you reinforce the various negative
conceptions you were trying to overcome.
Factors EFFECTING CRM:
1. Changes W.R.T Marketplace
Competition for customers is becoming
Markets are becoming more fragmented
Differentiation is becoming more difficult
2.Changes WRT Data storage technology
Growth in data warehousing applications
Storage service providers
Strong intensive consumer applications
3. Changes WRT marketing function
Media dilution and multiplication of channels
Decreasing marketing efficiency and effectiveness
Benefits of data-based customer
Integrate and consolidate customer information
Provide consolidation information across all channels
Manage customer cases
Personalization of product/service
Automatically & manually generate new sales
Generate and manage campaigns
Yield faster and more accurate sales leads, referrals
Manage all business process
Give top managers detailed and accurate picture
Instantly react to changing market environment
9 truths of Relationship marketing
Truth 1 Customers are no longer loyal
Truth 2 Customers do not really want a relationship but
Truth 3 customers want information
Truth 4 Customers not only want to be thanked for their
patronage, they expect it
Truth 5 Customer control the selling process
Truth 6 the lifetime value of a customer is not relevant
Truth 7 Do not overcomplicate the program
Truth 8 Keep reporting simple and focused on customer
Truth 9 What if? Ask it often and experiment every
chance you get
Difference between marketing and
Unlike marketing CRM views products as processes
Customers receives value from each exchange between
provider & customer
Managing relationship based processes
Second concept in CRM is value creation or co-creation
Competitive advantage is based ability of the provider to help
customers create value for themselves
Third relates to providers responsibilities
A company can build stronger relationship with its customers
only it takes the responsibility for developing relationships
What is not CRM?
Piece of software solution
Call center services
Relationship building by softer attributes of a contact
Empowerment to pass goodwill waivers
Another buzzword like ERP/BPM
Types of CRM
1. Proactive Versus Reactive CRM
2. Operational, collaborative and analytical
The practice of the company to anticipate and respond
to the customer needs suitable offerings is contrasted
with the practice of simply responding to the customer
stimulus that comes through suggestions or
The customer touchpoints are classified into:
Face to face touchpoints – Events/stores/service
Database driven touchpoints – telephone/email/SMS
Mass media – advertising/PR/website/facebook
The mandate of collaborative CRM is to manage
various partners of the company be it business
partners, agents, brokers, OEMs, intermediaries like
distributors, dealers, resellers and retailers
It involves analyzing large amounts of cross-functional
data using data mining and other methods and
feeding the result back to operational CRM
It also studies Consumer behavior pattern that helps to
know what products position for cross
Customer segmentation based on loyalty attributes
Another basis of geographic, demographic or
Behavioral segmentation could be looked in terms of
loyalty or frequency
Segmentation based on choice of communication
Types of customers and their
Types of relationships
Price centered relationships – Best deal
Need centered relationships – offer personalization of
channels, interfaces and services
Value Centered relationships – depend on intensive
and extensive collaboration
Product centered relationships – focus on deliver of
customized products, services, and solutions
Linking profitability to loyalty
High profitability and short term customers
Low profitability and short term customer (Strangers)
Low profitability but long term customers (Barnacles)
High profitability and long term customers (True
Customer value: Concept
Customer value is the customers perception of what
outcome he expects in a specific use situation with
the help of a product/service offering in order to
accomplish a desired purpose/goal.
Few fundamental lessons on
1. Value is customer defined
2. Customers differ in what they seek
3. Value is opaque
4. Value is contextual
5. Value is multidimensional
6. Value is trade-off
7. Value is relative
8. Value is a mindset
Types of value based on Barnes
1. Choice based value
2. Employee based value
3. Information value
4. Association value
5. Relationship value
6. Customer unique value
7. Experience value
8. Product for price value
9. Access or convenience value
Customer Lifetime Value (CLTV)
Dimensions of CLTV:
The duration of customer lifetime
The firms share of wallet among its customers
The firms success in terms of frequency of up & cross
The firms cots of acquiring, serving & retaining its
CLTV = D( (R-C) + Rf(Ac-Acr))/ 1+r-Ac
Rf = No of referrals generated by customer
n = Length of customer relationship
Ac = Full acquisition cost
D = Customer Retention rate
Acr = Reduced acquisition cost
R = Revenues earned from customer
C = Cost of servicing customer in year t
r = Discount rate
1. Sales Force Automation: Sales Force Automation (SFA) is a
software tool that automates each and every task in the function of
Sales. Right from order processing to order tracking, managing
information, contact management, inventory management
(monitoring and control), customer management, sales forecast
analysis and employee performance evaluation.
2. Lead Management: Lead management is the first step of acquiring
the customer. Once this step is completed, leads(a list of strong
potential buyers with some of their details) is passed on to the Sales
department. In this way, lead management process acts as the bridge
between two important departments, namely marketing and sales.
3. Opportunity Management: The tool of Opportunity Management
gives you the pearls of opportunities in sales. Pure leads are just
basic information and that's meaningless unless it is filtered as per
your company requirement. This analyzing and filtering job is done
by this tool. It judges the leads and puts the qualified ones as an
opportunity in the sales pipeline.
4. Contact Management: Over the years, sales
management and contact management software have
evolved as close-knit tools. It is vital in this age to have
your contact information fully synchronized with your
5. Task Management: How do you ensure your sales rep is
following the right path "step by step" in his sales
process? You can simply spell the steps out, beforehand.
Yes, absolutely. And here in this aspect of CRM, Task
Management takes care of exactly this
6. Sales Forecasting In your highly comprehensive and
integrated CRM software, you can easily predict (to a high
degree of accuracy) the future sales of your product.
7. Campaign Management: Campaign Management is now
available as part of the CRM solutions and you can launch and
track the success of the campaign right from your CRM
8. Invoice Management: This tool is going to save you from a
future headache. Managing invoices is the most boring and
monotonous part of being in business. With your CRM
software, you can now raise bills and invoices automatically.
9. Social CRM : With the advent of social media, this is a new
feature added to the CRM tool. This tool enables you to
manage your social media interaction with your customers.
10. CRM & Sales Reports: You can build numerous reports with
CRM and have the perfect overview of your company's
11. Mobile Edition: Here the power of CRM gets manifested
with the sheer brilliance of mobility. You can access your CRM
on your mobile, with or without connectivity, wherever you go
and whenever you want. You can configure your mobility
device (Smartphone or tablet) to be able to view the most
important information at all times on your customized
12. Cloud / On-Demand (SaaS): CRM now uses the cloud-
hosted delivery method vis-à-vis the traditional "on-premise
installation". SaaS technology allows hosted delivery or cloud
computing and lets businesses gain a rented "anytime
anywhere" access to their CRM systems.
Advent of Social CRM - Human-beings are social
animals, and since consumers are also human-beings,
they love interacting with each other. With the
popularity and spread of social media, there is perhaps
not a single day when people haven’t interacted with
someone. According to a recent survey, around 50%
consumers use social media for making purchase
Rapid growth of Cloud CRM - It shouldn't be
surprising to know that nowadays more businesses are
opting for Cloud CRM solutions. Apart from affordable
pricing, these solutions are flexible, updated regularly
and easily maintained.
Integration at its peak - A single software package
for all departments makes business tasks smoother
and seamless. Integrating CRM software with all
departments is much time saving and cost efficient.
CRM Predictions using Analytical Statistics - CRM
software are being coupled with real-time analytical
statistics data for predicting consumer trends and
Better Customer Experience - Every customer looks
for a human touch, and they find it missing in online
business. This is exactly where brick and mortar
business scores over online business.
Inclusion of Content Marketing Software into
CRM - Content marketing is no new word in online
business. Building consumer trust and generating
online sales is synonymous with content marketing.
Personalizing dynamic emails and landing pages
through CRM systems is crucial for nurturing leads
and landing more sales.