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24.crm – customer relationship management


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24.crm – customer relationship management

  1. 1. CRM – Customer Relationship Management
  2. 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. 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. 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. 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. 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. 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. 8. Customer value, always dynamic
  9. 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
  11. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 22. Quiz • Segmentation of customers in CRM relates to what dimensions of customers.
  23. 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.