The document discusses customer relationship management (CRM). It defines CRM as establishing, developing, and sustaining long-term, beneficial relationships between organizations and their customers. CRM aims to increase customer retention through loyalty programs and databases. It reduces costs associated with acquiring new customers. CRM software helps companies provide better service and increase customer satisfaction. Properly managing customer relationships is important for customer retention, reducing costs, and growing business.

1. Unit 14 Customer Relationship Management

2. Contents
• Introduction
• Relationship marketing vs. relationship management
• Definitions of customer relationship management
• Forms of relationship management
• Managing customer loyalty and development
• Reasons behind losing customers by organizations
• Significance of customer relationship management
• Social actions affecting buyer-seller relationships

3. Introduction
• In marketing, it is often said that ‘retaining customer is more important than
acquiring one’.
• Organizations use communication tools to make the consumer aware about their
products and brands.
• It uses supply chain and human resources to sell its products.
• All these have a cost to the company and in this competitive world organizations
want to reduce cost.
• For this organizations develop a database which helps in creating loyalty
programs.
• Many Indian companies like Infosys, Wipro and others started offering CRM
software to companies.
• The benefits of CRM software are quicker, better quality, and timely services to
the customers.
• This increases the word of mouth communications and reduces the cost of mass
media.

4. Learning Objectives
After studying this unit, you will be able to
• Explain the meaning, need and relevance of customer relationship
management.
• Mention the forms of relationship management.
• Cite the reasons for losing customers by organizations.
• Bring out the significance of customer relationship management.

5. Relationship Marketing Vs. Relationship Management
• The relationship marketing approach considers customers as part of the business
and aims at building a long term and never-ending relationship with them.
• The focus of relationship marketing approach is on developing ‘hard core loyal’
customers and retaining them forever.
• The relationship marketing approach has slowly taken the form of customer
relationship management.
• Relationship marketing focuses only on the marketing function of the organization.
• Customer relationship management focuses on customers and the entire
functions connected with value creation and delivery chain of the organization.

6. Definitions of Customer Relationship Management
• Berry defines CRM as “attracting, maintaining and in multi-service organizations
enhancing customer relationships.”
• Berry and Parasuraman define CRM as “attracting, developing and retaining
customer relationships.”
• In industrial marketing, Jackson defines CRM as “marketing oriented toward
strong, lasting relationships with individual accounts.”
• From the above definitions, it is concluded that Customer Relationship
Management refers to all marketing activities directed towards establishing,
developing, and sustaining long lasting, trusting, win-win, beneficial and
successful relational exchanges between the organization and its stakeholders .

7. • CRM is not a new concept but
a very old practice, which has
grown because of the benefits
it offers in the present
marketing scenario.
• CRM today is a discipline and
also a set of software and
technology which automates
and improves the business
process associated with
managing customer
relationships in the area of
sales, marketing, customer
service and support.
• CRM helps companies
understand, start and develop
long-term relationships with
clients as well as help in
retaining current customers.

8. Forms of Relationship Management
The 10 different forms of relationship marketing are:
1. The partnership involved in relational exchanges between manufacturers
and their external goods suppliers.
2. Relational exchanges between service providers, as between advertising
or marketing research agencies and their clients.
3. Strategic alliances between firms and their competitors, as in technology
alliances; co-marketing alliances and global strategic alliance.
4. Alliances between a firm and non-profit organizations, as in public-
purpose partnerships.
5. Partnerships for joint research and development, as between firms and
local, state, or national governments.

9. 6. Long-term exchanges between firms and customers, particularly in the services
marketing area.
7. Relational exchanges of working partnerships as in channels of distribution.
8. Exchanges involving functional departments within a firm.
9. Exchanges between a firm and its employees, as in internal marketing.
10. Within firm relational exchanges involving such business units as subsidiaries,
divisions or strategic business units.

10. Managing Customer Loyalty and Development
• Managing customer development is
one of the important aspects of
relationship marketing.
• The focus is on two things – customer
catching and customer keeping.
• ‘Customer catching’ is the process of
attracting new customers (inviting new
blood), while customer keeping is the
process of retaining the existing ones
(encouraging old blood).

11. • Customer Development Process

12. 1. Suspect: Suspect is everyone who might conceivably buy the product or service.
2. Prospects: Prospects are those people who have a strong potential interest in the
product and the ability to pay for it. The company rejects the disqualified
prospects because they have poor credit or would be unprofitable.
3. First time customers: The company wants to convert the qualified prospects into
first time customers.
4. Repeat customers: The company wants to convert satisfied first time customers
into repeat customers. First time and repeat customers may also buy from the
competitors.
5. Clients: The company then tries to convert repeat customers into clients. Clients
are those people who buy only from the company.

13. 6. Advocates: The next step is to convert the
clients into advocates. Advocates are those
people who speak good about the company
and encourage others to buy from it.
7. Partners: The ultimate goal of the company
is to convert advocates into partners. After
reaching this stage, the customer and the
company work actively together.
Some customers may become inactive or may
drop out due to many reasons leading to end
of the relationship. The challenge is to re-
activate dissatisfied customers through
customer win back strategies

14. Reasons Behind Losing Customers by Organizations
• The cost of attracting a new customer is five times the cost of keeping a current
customer happy.
• But most marketing theories and practices focus on attracting new customers
rather than retaining existing ones.
• Today, however, more companies are recognizing the importance of satisfying and
retaining the current customers.
• Today’s companies must focus on their defection rate and take steps to reduce it.
The possible reasons for customer defection include:

15. 1. Price related reasons: A customer tries to match the price of a brand
with the value of the brand. If there is a mismatch between the price and
the value, he would switch over to a competitor’s brand. Also, if the price
of brand goes beyond his affordability, he would switch over to a low
priced brand. Thus, the role of price in customer retention is very
significant.
2. Product related reasons: Due to technological advancement, the new
brand which enters the market would offer better performance as
compared to the already existing brand. This would encourage the
customers to switch over to the new brand.
3. Services related reasons: The customer’s focus is not only on the brand,
but also on the services offered at three different stages–pre-sales,
during sales and after sales. Any dissatisfaction with services would
cause the customer to switch over from the brand.

16. 4. Benefit related reasons: The customers may be attracted by greater
benefits offered by the competitors. Such benefits may be more
attracting and cause customers to change brand.
5. Competitor related reasons: Technological advancement, attractive
offers, value added services, etc., offered by competitors may also
encourage customers towards brand switching.
6. Personal reasons: The personal reasons for brand switch over may be
– The customer has moved away from the market area where the
brand is sold.
– Role changes in life cycle may lead to changes in brand preference.
– Anger, disgust, distress developed during the process of product
delivery.
– Sentimental reasons.
– Influence of other members of the family.

17. Significance of Customer Relationship Management
• Reduction in customer recruitment cost.
• Generation of more and more loyal customers.
• Expansion of customer base.
• Reduction in advertisement and other sales promotion expenses.
• Increase in the number of profitable customers.
• Easy introduction of new products.
• Easy business expansion possibilities.
• Increase in customer partnering.

18. Traditional Organizational Chart Vs Modern Customer –
Oriented Company Organization Chart
Traditional Chart Modern Chart

19. • Companies should understand that besides customers, their stakeholders
are equally important for organization’s success.
• The stakeholders of an organization would include: investors, the financial
community, vendors and suppliers, employees, competitors, the media,
neighbors and community leaders, special interest groups, and
government agencies. These stakeholders can affect and be affected by a
company’s marketing programme.
• Kotter and Heskett (1992) found that firms that emphasized the interests
of three communities – customers, employees and stakeholders –
performed better than those that emphasized only one or two.

20. Soft and Hard Versions of Relationship Marketing
• Soft version of relationship marketing suggests ‘humanistic
relationship development’, whereas the hard version reflects
a ‘utilitarian instrumentalism’.
• The soft version focuses on the term ‘relationship’, thus laying
importance on relationship management. It strongly
advocates that all management is basically relationship
management and all managers are relationship managers. It
focuses on ‘developmental humanism’ as a foundation to
build and develop long lasting relationships in marketing
exchanges.
• On the other hand, the hard version stresses on the idea of
‘marketing’, that is something to be used unemotionally and
in a formally sensible manner.

21. Social Actions Affecting Buyer-Seller Relationships
Good things Bad things
• Initiate positive phone calls • Make only callbacks
• Make recommendations • Make justifications
• Candor (frankness) in • Accommodative language
language • Use legal language
• Use “we” problem solving • Only respond to problems
language • Use long-winded
• Get to problems communications
• Use jargon or shorthand • Shift blame
• Accept responsibility • Rehash (repeat) the past
• Plan the future