RFM, Lapsation, Stickiness, ABV, ABS and Basket Migration are some of the tools to be used in CRM.

1. Strategic Concepts (India) Pvt. Ltd.

2. Strategic Concepts (India) Pvt. Ltd.
“All customers
are not equally
important .”

3. Customer Differentiation
vs. Product Differentiation
• Research by Professors Cooper and Kaplan at the
Harvard Business School has shown that in a large
number of companies 20 percent of customers
account for 225 percent of profits and the 80 percent
`lose’ 125 percent of profits.
• But the trouble is that most companies do not know
which customers make up the 20 percent and which
make up the 80 percent.

4. Strategic Concepts (India) Pvt. Ltd.
Traditional Marketing CRM
Goal: Expand customer base,
increase market share by mass
marketing
Goal: Establish a profitable, long-term,
one-to-one relationship with
customers; understanding their
needs, preferences, expectations
Product oriented view Customer oriented view
Mass marketing / mass production Mass customization, one-to-one
marketing
Standardization of customer needs Customer-supplier relationship
Transactional relationship Relational approach
The Changing Paradigms

5. Customer Satisfaction  Customer Loyalty
The Death of Customer Satisfaction: CRM in the
Internet Age by Tony Zingale
• Fulfillment – The company
has what I want.
• Value – The price meets my
expectations.
• Convenience – The product
is easy to get.
• Trust – I’m reasonably
confident the product is
reliable.

6. Conceptual Overview
A shift in thinking …
• Transaction  Learning relationship
• Mass Marketing  Individual marketing
• Transaction Value  Life time value
• Conquest Marketing  Retention marketing
• Product Life Cycle  Customer Life Cycle
• Customer Satisfaction  Customer Loyalty
• Share of the market  Share of the customer
• Product differentiation  Customer differentiation

7. Strategic Concepts (India) Pvt. Ltd.
Changing Landscape in Customer Mgt.
General Focussed

8. Strategic Concepts (India) Pvt. Ltd.
“CRM is concerned with the creation,
development and enhancement of
individualised customer relationships
with carefully targeted customers and
customer groups resulting in
maximizing their total customer life-
time value”

9. What it does...
 Builds a database that describes the customers and the
relationship they hold with the company. whatis.com
 Database: a collection of information that is organized in a way that allows
it to be easily accessed, managed and updated. whatis.com
 Provides enough detail so that the company can offer the
client the product/service that matches their need the best.
whatis.com
 May contain information about their past purchases, who is
involved with the account and a summary of all
conversations.

10. 10

11. 11

12. 12

13. Strategic Concepts (India) Pvt. Ltd.
The Integrated Approach to CRM

14. 14
The Trust Cycle

15. RFM Methodology
Recency, Frequency, Monetary
15
• Recency
– When was the last customer interaction?
• Frequency
– How frequent was the customer in its
interactions with the business?
• Monetary value of the interactions

16. 16
RFM Method:
Putting the Codes Together
• At the end of the monetary coding firm obtain R F
M metrics for customers. Each customer belongs to
one of 125 possible combinations of the RFM
values:
R
F
M
1 2 3 4 5
21 22 23 24 25
231 232 233 234 235
Database

17. 17
• Create 3 digits RFM codes cells
• All cells having the same number of customers in them
• RFM values are used to define group of customers that
marketing campaign should target or should avoid
• Used for identifying customers having high probability to
respond to campaigns:
555’s response rate > 552’s > 543’s >541....
• Increase the response rate
• Increase profitability
RFM Method:
STEPS

18. 18
Customer Value Metrics
• Critical measures used to define customer worth in
knowledge-driven and customer-focused marketing

19. 19
Customer Value Metrics:
Size of Wallet
• Size of wallet =
• Assumption: Firms prefer customers with large size
of wallet in order to retain large revenues and profits

J
j
jS
1
jS Sales to focal customer by firm j

20. 20
Customer Value Metrics:
Individual Share of Wallet (SW)
• A proportion expressed in terms of percentage,
calculated among buyers
• Measured at individual level
• A measure of loyalty
• Can be used in future predictions
• Different from the “market share”, which also considers
customers with no purchase
• Individual share of wallet % =

J
j
j
j
S
S
1
jS Sales to focal customer by firm j

21. 21
Customer Value Metrics
• Share of wallet and size of wallet should be analyzed
together because...
Size of
Wallet
Share of
Wallet
Purchases
Customer 1 $500 50% $250
Customer 2 $100 50% $50

22. 22
Customer Value Metrics:
Transition Matrix
• Shows expected share of wallet from multiple brands
• Depicts consumer’s willingness to buy over time
• Transition probability from B to A, than from A to C:
10%*20% = 2%
Brand A Brand B Brand C
Brand A 60% 30% 20%
Brand B 10% 80% 15%
Brand C 20% 15% 70%

23. Benefits of CRM
 Research has shown that companies that create satisfied, loyal
customers have more repeat business, lower customer-
acquisition costs and stronger brand value. Siebel.com
 Which equals better financial performance. Siebel.com
 Check this out... → → →

24. Satisfied customers pay off…
siebel.com

25. CRM may...
 Help marketing departments identify and target their best
customers, manage campaigns as well as discover qualified
leads. whatis.com
 Qualified Leads: prospects who seem most likely to buy because of some
information known about them. Duncan, Tom
 Improve sales and streamline existing processes. whatis.com
 Form individualized relationships with customers. whatis.com
 Give employees information needed to improve customer
service and also to better understand customer needs. whatis.com

26. It also...
 Is a fast way to identify and handle potential problems.
Wikipedia.org
 Tracks all points of contact between a customer and the
company. Wikipedia.org
 Provides all employees with product specs, product use
information and technical assistance. Wikipedia.org
 CRM quickly manages the scheduling of follow-up sales calls to
assess the satisfaction of customers and their repurchase
probabilities (when and how much). Wikipedia.org

27. CRM leads to...
 Identifying prospects and helps them become customers.
Brillianceweb.com
 Closing sales more effectively and efficiently. Brillianceweb.com
 Allowing customers to perform business transactions quickly
and easily. Brillianceweb.com
 Providing better service and support following a sale.
Brillianceweb.com
 Which = Customer Service!!

28. Customer Service
 Helps make call centers more efficient. Darwinmag.com
 Aids in cross and up selling products. Darwinmag.com
 Cross Selling: Provide additional products/services. Chonko...
 Up Selling: Upgrade existing products/services. Chonko...
 Helps sales staff close deals faster. Darwinmag.com
 Simplifies marketing and sales processes. Darwinmag.com
 Allows companies to discover new customers. Darwinmag.com

29. It even ties into BI…
(Business Intelligence)
CRM is closely related to business intelligence
because both methods involve using
technology to gather, analyze and organize
data in order to develop relevant information.
CRM is just a more specific form of BI that
concentrates strictly on customer’s behaviors
and actions, for both past and future
information.

30. Strategic Concepts (India) Pvt. Ltd.