1. Customer relationship management (CRM) involves using technology to organize sales, marketing, customer service and technical support to manage interactions with current and future customers. 2. Companies analyze customer purchase histories and characteristics stored in a customer information file to calculate customer lifetime value and identify the most profitable customers to target. 3. Relationship marketing programs like loyalty programs, customer satisfaction initiatives, and mass customization are used to increase customer retention, loyalty, and long-term profitability.

1. CUSTOMER RELATIONSHIP
MANAGEMENT
PRESENTED BY
VISHAKH.S
VIVEK GOPAN
NITIN NAIR
ZAKARIYA. K

2. • Customer relationship management (CRM) is
a system for managing a company's
interactions with current and future
customers. It often involves using technology
to organize, automate and synchronize, sales,
marketing, customer service and technical
support.

3. Different Perspectives On Buyer-Seller
Relationship

4. The Economics Of Loyalty
Why loyal customers are more profitable ?
• Acquisition Cost
• Base Profit
• Revenue Growth
• Operating Costs
• Referrals
• Price premium.

5. A FRAMEWORK FOR CUSTOMER
RELATIONSHIP MANAGEMENT

6. • Means different things to different people
 May be salesforce contact software like the ones sold
by salesforce.com
 May be telephone call centers for contact
management
 May be loyalty programs

7. CUSTOMER RELATIONSHIP
MANAGEMENT MODEL
1.
2.
3.
4.
5.
6.
7.
Many companies use
CRM as a key source of
competitive advantage
E.g.: UPS

8. CREATING THE DATABASE
CUSTOMER CHARACTER
-ISTICS
PURCHASE
HISTORY
CONTACTS RESPONSE VALUE
1.
2.
.
.
.
n
Customer Information File (CIF)
• Repository of information about customers
• Basis for identifying and targeting current and potential customers
• Asses value to the firm of each customer & develop relationship programs –
customized in content and intensity
CUSTOMER INFORMATION FILE

9. 5 AREAS OF CONTENT IN CIF
• Important 3rd
dimension – Time
• CIF has to contain
information on
these dimensions
over time
• Identify customers
becoming better
and worse

10. GETTING MORE CUSTOMER
INTERACTION
HIGH
LOW
DIRECT INDIRECT
InteractionFrequency
Customer Interaction
 Upper left
quadrant:
relatively easy to
develop CIF
 2 quadrants on
the right have to
work harder to
collect
information
CIF – key source of competitive advantage e.g.: UPS

11. • Companies create special programs and
events
e.g.: Kellogg's “EET & ERN”
• Management consultant firms host free
seminars in specialized topic areas –
information about prospective clients
• Another challenge – Multiple touch points
Acxiom – centralized database

12. ANALYZING THE DATABASE
• Data mining – segments, purchasing patterns, trends etc.
LIFETIME CUSTOMER VALUE (LCV)
 Purchase information + information about profit margin on each product
purchase projected profit implication of each customer or row
in CIF.
 Ultimate goal is to place a monetary value on each customer and make
resource allocation decisions

13. BERGER & NASR, 1998
• Uses available purchase information in the CIF to calculate
each customers cumulative profitability in the past.
Customer Profitability = ∑[∑(P – C) - ∑ MC]
Where
t = the number of past and current rime periods measured
j = the number of products purchased in a time period
k = the number of marketing tools used in a time period
P = Price
C = Cost
MC = cost of marketing tool
t j k
i j k

14. The formula can be used for purposes other than
computing profitability:
 Increasing P & j by cross selling or upselling
 Reducing market cost over time as customer loyalty will
increase
 Increasing the number of time periods t that the customer is
purchasing.

15. Gupta & Lehmann, 2003
Margin “multiple”
= r/(1+i-r)
In this formula ‘r’ is the retention rate
‘i’ is the discount rate
Discount rate
Retention
Rate
10% 12% 14% 16%
60% 1.20 1.15 1.11 1.07
70% 1.75 1.67 1.59 1.52
80% 2.67 2.50 2.35 2.22
90% 4.50 4.09 3.75 3.46

16. LCV- CUSTOMER ACQUISITION COST
PERSPECTIVE
-100
-50
0
50
100
150
1 2 3 4 5 6 7 8 9 10
Customer Life Cycle Profit Pattern in the Credit Card
Industry
Annual profit
AGE OF ACCOUNT
( IN YEARS)

17. Profit – acquisition cost = customer value.
Take into account time value of money
Gives an idea of how much we would spend to
retain a customer

18. Customer Selection
• Customer Profitability Analysis can be used to
separate the customer who provide long term
value to the firm.
• 80-20 rule
• Helps in decision making:
– Which customer to keep
– How much money to spend on them

19. Customer Targeting
• After selecting targeted customer
• Direct Marketing approach often referred to
as 1 to 1 marketing.
• Special promotion, prices, perks, products and
other offers are made through telemarketing,
direct mail and personal sales calls

20. Relationship Marketing Programs
Customer Satisfaction
• Requirements of customer loyalty is
satisfaction.
• Customer Satisfaction Model
• Customer Satisfaction Scale
• Customersat.com & Zoomerang.com are
customer satisfaction software sold via web.

21. Customer Satisfaction Model

22. Customer Satisfaction Scales

23. Customer Service
• Customer Satisfaction  Customer Service
• Level of Customer Service delivered is
equivalent to product quality.
• Have to go beyond expectation by offering
levels of customer services that competitors
cannot match.
• Service Guarantees
• Service Recovery

24. CUSTOMER LOYALTY

25. LOYALTY PROGRAMS
• One of the Major trends in marketing is the
ubiquity of loyalty programs.
Ex: Frequent-flier programs.
• Technology is changing the way.
• Smart cards- Microprocessor built in to them.

26. Several issues of Loyalty Programs.
• Making the reward too high.
• Ubiquity.
• What kind of loyal customers are you actually
getting?
• Lack of inspiration.
• Lack of communication with customers.
• Insufficient analysis of data.

27. When Loyalty programs seem to work
best
• The programs support and is consistent with
the brand value proposition.
• The programs add value to the product or
service.
• Lifetime customer value is high.

28. MASS CUSTOMIZATION
• Customer retention and loyalty are also being
affected by a marketing process called mass
customization.
• It imparts a feeling that the products was
made especially for the customer.
• Most of the attention on mass customization
has been in the Manufacturing sector.
Ex: Dell online ordering system.

29. Four Different Approaches to Mass
Customization
• Collaborative Customizers
• Adaptive Customizers
• Cosmetic Customizers
• Transparent Customizers
Commonality: All realize that customers are
heterogeneous and want different
combination of product features and benefits.

30. COMMUNITY BUILDING
• The main challenge for marketing managers is
to create a sense of affinity to their companies
and brands in their customers.
• Share information between the customers and
the company.
• Online communities offer real opportunities.