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Chapter 15 
Customer Relationship Management (CRM) 
Learning Objectives 
Define CRM; 
Understand the importance of CRM; 
Explain the determinants of CRM and the key stages in its development; 
Discuss the main functions and various models of CRM; 
Explain the role of salespeople as relationship developers 
Discuss the management of customer relationships.
Chapter 15: Customer Relationship Management (CRM) 
What is Customer Relationship Management (CRM)? 
CRM is “the development and maintenance of mutually beneficial 
long-term relationships with strategically significant customers” 
(Buttle, 2000) 
CRM is “an IT enhanced value process, which identifies, develops, 
integrates and focuses the various competencies of the firm to the 
‘voice’ of the customer in order to deliver long-term superior 
customer value, at a profit to well identified existing and potential 
customers”. 
(Plakoyiannaki and Tzokas, 2001)
Chapter 15: Customer Relationship Management (CRM) 
Understanding Customer Relationship Management (CRM)? 
CRM is a business philosophy based on upon individual customers 
and customised products and services supported by open lines 
of communication and feedback from the participating firms that 
mutually benefit both buying and selling organisations. 
The buying and selling firms enter into a “learning relationship”, 
with the customer being willing to collaborate with the seller and 
grow as a loyal customer. In return,, the seller works to maximize 
the value of the relationship for the customer’s benefit. 
In short, CRM provides selling organisations with the platform 
to obtain a competitive advantage by embracing customer needs 
and building value-driven long-term relationships.
Chapter 15: Customer Relationship Management (CRM) 
Determinants of CRM 
Trust 
The willingness to rely on the ability, integrity, and motivation of 
one company to serve the needs of the other company as agreed 
upon implicitly and explicitly. 
Value 
The ability of a selling organisation to satisfy the needs of the 
customer at a comparatively lower cost or higher benefit than 
that offered by competitors and measured in monetary, 
temporal, functional and psychological terms.
Chapter 15: Customer Relationship Management (CRM) 
Determinants of CRM 
In addition to trust and value, salespeople must: 
Understand customer needs and problems; 
Meet their commitments; 
Provide superior after sales support; 
Make sure that the customer is always told the truth 
(must be honest); and 
Have a passionate interest in establishing and retaining a long-term 
relationship (e.g., have long-term perspective).
Chapter 15: Customer Relationship Management (CRM) 
Stages in the development of a Customer Relationship 
The Pre-relationship Stage 
The event that triggers a buyer to seek a new business partner. 
The Early Stage 
Experience is accumulated between the buyer and seller although a great 
degree of uncertainty and distance exists. 
The Development Stage 
Increased levels of transactions lead to a higher degree of commitment and 
the distance is reduced to a social exchange. 
The Long-term Stage 
Characterised by the companies’ mutual importance to each other. 
The Final Stage 
The interaction between the companies becomes institutionalized.
Chapter 15: Customer Relationship Management (CRM) 
Stages in the Development of a Key-Account Relationship 
High 
Degree of 
involvement 
Low 
Mid-KAM 
Synergistic KAM 
Transactional Collaborative 
Nature of customer relationship 
Pre-KAM 
Early-KAM 
Partnership 
(Millman and Wilson, 1995)
Chapter 15: Customer Relationship Management (CRM) 
A Relationship Life Cycle Model 
High cooperation 
Low competition 
Low cooperation 
High competition 
Time 
Pre-relationship 
stage 
Development 
stage 
Maturity 
stage 
Decline 
stage 
(Wilkinson and Young, 1997)
Chapter 15: Customer Relationship Management (CRM) 
Class Exercise 
What should the focus and main activities of a global 
salesperson be in each stage of the relationship 
development process? 
Why? (Please justify your answer)
Chapter 15: Customer Relationship Management (CRM) 
Functions of Customer Relationship Management 
Direct functions (are the basic requirements of a company that are 
necessary to survive in the competitive marketplace) 
Profit; 
Volume; and 
Safeguard 
Indirect functions (are the actions necessary to convince the 
customer to participate in various marketing activities). 
Innovation: 
Market; 
Scout: and 
Access.
Chapter 15: Customer Relationship Management (CRM) 
Functions of Customer Relationship Management 
Management 
Decision 
Process 
Customer sensitivity 
•Diversity 
•Information 
•Differentiated 
offering 
Value Creation Process 
Technology delivery process 
•R&D 
•Technology integration 
•Efficiency, effectiveness 
learning 
Product delivery process 
•Concept to launch 
•Manufacturing process 
Customer delivery process 
•Supply chain 
•Distribution 
•Infomediation (distribution 
of information) 
Value-based 
Strategies 
•Pricing 
•Communication 
(Sharma et. al., 2001)
Chapter 15: Customer Relationship Management (CRM) 
The role of salespeople as relationship builders and promoters 
Salespeople by: 
identifying potential customers and their needs; 
approaching key decision makers in the buying firm; 
negotiating and advancing dialogue and mutual trust; 
coordinating the cooperation between the customers and 
their company; 
encouraging the inter-organisational learning process; 
contributing to constructive resolution of existing conflicts; and 
leading the customer relationship development team 
are the individuals in any organisation who act both as relationship 
builders and as relationship promoters.
Chapter 15: Customer Relationship Management (CRM) 
Models of Customer Relationship Management 
The Evans and Luskin (1994) model for effective 
Relationship Marketing 
Relationship marketing inputs 
•Understanding customer expectations 
•Building service partnerships 
•Empowering employees 
•Total quality management 
Relationship marketing outcomes 
•Customer Satisfaction 
•Customer loyalty 
•Quality products 
•Increased profitability 
Assessment state 
•Customer feedback 
•Integration 
(Evans and Luskin, 1994)
Chapter 15: Customer Relationship Management (CRM) 
Models of Customer Relationship Management 
The Brock and Barcklay (1999) model of selling 
partner relationship effectiveness 
Independence 
Relative influence 
Mutual trust 
Cooperation 
Selling partner 
relationship 
effectiveness
Chapter 15: Customer Relationship Management (CRM) 
Managing Customer Relationships 
The global salesperson must be involved in the following activities in order to initiate, 
develop and enhance the process that is aimed at building trust and commitment with the 
customer. 
Initiating the relationship 
Engage in strategic prospecting and qualifying; 
Gather and study pre-call information; 
Identify buying influences; 
Plan the initial sales call; 
Demonstrate an understanding of the customer’s needs; 
Identify opportunities to build a relationship; and 
Illustrate the value of a relationship with the customer
Chapter 15: Customer Relationship Management (CRM) 
Managing Customer Relationships 
The global salesperson must be involved in the following activities in order to initiate, 
develop and enhance the process that is aimed at building trust and commitment with the 
customer. 
Developing the relationship 
Select an appropriate offering; 
Customise the relationship; 
Link the solutions with the customer’s needs; 
Discuss customer concerns; 
Summarize the solution to confirm benefits; and 
Secure commitment.
Chapter 15: Customer Relationship Management (CRM) 
Managing Customer Relationships 
The global salesperson must be involved in the following activities in order to initiate, 
develop and enhance the process that is aimed at building trust and commitment with the 
customer. 
Enhancing the relationship 
Assess customer satisfaction; 
Take action to ensure satisfaction; 
Maintain open, two-way communication; and 
Work to add value and enhance mutual opportunities.
Chapter 15: Customer Relationship Management (CRM) 
Managing Customer Relationships 
Qualifying prospects for relationship building 
Opportunities 
for adding value 
Use a non 
customized 
approach 
Seek better 
opportunities 
elsewhere 
Build a strong 
and lasting 
relationship 
Focus on 
loyalty-building 
program 
Potential profitability of customer 
High 
Low 
Low High
Chapter 15: Customer Relationship Management (CRM) 
Relationship networks 
The ultimate outcome of a successful CRM strategy is the creation 
of a unique company asset known as a relationship network. 
A relationship network consists of the company and its major 
customers with whom the company has established long and 
enduring business relationships. 
The additional aspects of a global salesperson’s job are to: 
Manage customer value; 
Act as customer advocate; and 
Enhance customer loyalty and build a “health” and 
profitable network of relationships.
Chapter 15: Customer Relationship Management (CRM) 
Summary 
CRM is a new business philosophy based on trust and value; 
The core function of CRM is the value creation process; 
Customer relationships develop over time; 
The role of global salespeople in the process is that of both 
relationship builders and relationship promoters; and 
The basic premise of CRM is to offer superior value to 
customers in an effort to turn prospects into 
customers, customers into loyal customers, and 
loyal customers into partners.

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Customer relationship-management1

  • 1. Chapter 15 Customer Relationship Management (CRM) Learning Objectives Define CRM; Understand the importance of CRM; Explain the determinants of CRM and the key stages in its development; Discuss the main functions and various models of CRM; Explain the role of salespeople as relationship developers Discuss the management of customer relationships.
  • 2. Chapter 15: Customer Relationship Management (CRM) What is Customer Relationship Management (CRM)? CRM is “the development and maintenance of mutually beneficial long-term relationships with strategically significant customers” (Buttle, 2000) CRM is “an IT enhanced value process, which identifies, develops, integrates and focuses the various competencies of the firm to the ‘voice’ of the customer in order to deliver long-term superior customer value, at a profit to well identified existing and potential customers”. (Plakoyiannaki and Tzokas, 2001)
  • 3. Chapter 15: Customer Relationship Management (CRM) Understanding Customer Relationship Management (CRM)? CRM is a business philosophy based on upon individual customers and customised products and services supported by open lines of communication and feedback from the participating firms that mutually benefit both buying and selling organisations. The buying and selling firms enter into a “learning relationship”, with the customer being willing to collaborate with the seller and grow as a loyal customer. In return,, the seller works to maximize the value of the relationship for the customer’s benefit. In short, CRM provides selling organisations with the platform to obtain a competitive advantage by embracing customer needs and building value-driven long-term relationships.
  • 4. Chapter 15: Customer Relationship Management (CRM) Determinants of CRM Trust The willingness to rely on the ability, integrity, and motivation of one company to serve the needs of the other company as agreed upon implicitly and explicitly. Value The ability of a selling organisation to satisfy the needs of the customer at a comparatively lower cost or higher benefit than that offered by competitors and measured in monetary, temporal, functional and psychological terms.
  • 5. Chapter 15: Customer Relationship Management (CRM) Determinants of CRM In addition to trust and value, salespeople must: Understand customer needs and problems; Meet their commitments; Provide superior after sales support; Make sure that the customer is always told the truth (must be honest); and Have a passionate interest in establishing and retaining a long-term relationship (e.g., have long-term perspective).
  • 6. Chapter 15: Customer Relationship Management (CRM) Stages in the development of a Customer Relationship The Pre-relationship Stage The event that triggers a buyer to seek a new business partner. The Early Stage Experience is accumulated between the buyer and seller although a great degree of uncertainty and distance exists. The Development Stage Increased levels of transactions lead to a higher degree of commitment and the distance is reduced to a social exchange. The Long-term Stage Characterised by the companies’ mutual importance to each other. The Final Stage The interaction between the companies becomes institutionalized.
  • 7. Chapter 15: Customer Relationship Management (CRM) Stages in the Development of a Key-Account Relationship High Degree of involvement Low Mid-KAM Synergistic KAM Transactional Collaborative Nature of customer relationship Pre-KAM Early-KAM Partnership (Millman and Wilson, 1995)
  • 8. Chapter 15: Customer Relationship Management (CRM) A Relationship Life Cycle Model High cooperation Low competition Low cooperation High competition Time Pre-relationship stage Development stage Maturity stage Decline stage (Wilkinson and Young, 1997)
  • 9. Chapter 15: Customer Relationship Management (CRM) Class Exercise What should the focus and main activities of a global salesperson be in each stage of the relationship development process? Why? (Please justify your answer)
  • 10. Chapter 15: Customer Relationship Management (CRM) Functions of Customer Relationship Management Direct functions (are the basic requirements of a company that are necessary to survive in the competitive marketplace) Profit; Volume; and Safeguard Indirect functions (are the actions necessary to convince the customer to participate in various marketing activities). Innovation: Market; Scout: and Access.
  • 11. Chapter 15: Customer Relationship Management (CRM) Functions of Customer Relationship Management Management Decision Process Customer sensitivity •Diversity •Information •Differentiated offering Value Creation Process Technology delivery process •R&D •Technology integration •Efficiency, effectiveness learning Product delivery process •Concept to launch •Manufacturing process Customer delivery process •Supply chain •Distribution •Infomediation (distribution of information) Value-based Strategies •Pricing •Communication (Sharma et. al., 2001)
  • 12. Chapter 15: Customer Relationship Management (CRM) The role of salespeople as relationship builders and promoters Salespeople by: identifying potential customers and their needs; approaching key decision makers in the buying firm; negotiating and advancing dialogue and mutual trust; coordinating the cooperation between the customers and their company; encouraging the inter-organisational learning process; contributing to constructive resolution of existing conflicts; and leading the customer relationship development team are the individuals in any organisation who act both as relationship builders and as relationship promoters.
  • 13. Chapter 15: Customer Relationship Management (CRM) Models of Customer Relationship Management The Evans and Luskin (1994) model for effective Relationship Marketing Relationship marketing inputs •Understanding customer expectations •Building service partnerships •Empowering employees •Total quality management Relationship marketing outcomes •Customer Satisfaction •Customer loyalty •Quality products •Increased profitability Assessment state •Customer feedback •Integration (Evans and Luskin, 1994)
  • 14. Chapter 15: Customer Relationship Management (CRM) Models of Customer Relationship Management The Brock and Barcklay (1999) model of selling partner relationship effectiveness Independence Relative influence Mutual trust Cooperation Selling partner relationship effectiveness
  • 15. Chapter 15: Customer Relationship Management (CRM) Managing Customer Relationships The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Initiating the relationship Engage in strategic prospecting and qualifying; Gather and study pre-call information; Identify buying influences; Plan the initial sales call; Demonstrate an understanding of the customer’s needs; Identify opportunities to build a relationship; and Illustrate the value of a relationship with the customer
  • 16. Chapter 15: Customer Relationship Management (CRM) Managing Customer Relationships The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Developing the relationship Select an appropriate offering; Customise the relationship; Link the solutions with the customer’s needs; Discuss customer concerns; Summarize the solution to confirm benefits; and Secure commitment.
  • 17. Chapter 15: Customer Relationship Management (CRM) Managing Customer Relationships The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Enhancing the relationship Assess customer satisfaction; Take action to ensure satisfaction; Maintain open, two-way communication; and Work to add value and enhance mutual opportunities.
  • 18. Chapter 15: Customer Relationship Management (CRM) Managing Customer Relationships Qualifying prospects for relationship building Opportunities for adding value Use a non customized approach Seek better opportunities elsewhere Build a strong and lasting relationship Focus on loyalty-building program Potential profitability of customer High Low Low High
  • 19. Chapter 15: Customer Relationship Management (CRM) Relationship networks The ultimate outcome of a successful CRM strategy is the creation of a unique company asset known as a relationship network. A relationship network consists of the company and its major customers with whom the company has established long and enduring business relationships. The additional aspects of a global salesperson’s job are to: Manage customer value; Act as customer advocate; and Enhance customer loyalty and build a “health” and profitable network of relationships.
  • 20. Chapter 15: Customer Relationship Management (CRM) Summary CRM is a new business philosophy based on trust and value; The core function of CRM is the value creation process; Customer relationships develop over time; The role of global salespeople in the process is that of both relationship builders and relationship promoters; and The basic premise of CRM is to offer superior value to customers in an effort to turn prospects into customers, customers into loyal customers, and loyal customers into partners.