This document provides an overview of customer relationship management (CRM) concepts and practices. It defines CRM, discusses the emergence of CRM with new technologies, and provides examples of successful CRM programs. It also outlines key aspects of developing a CRM strategy, including constructing a customer database, analyzing customer data, selecting target customers, developing relationship programs, and measuring CRM program impact. The document emphasizes the importance of customer retention over acquisition and discusses how CRM can be used to improve the customer experience.

1. EMERGING CONCEPTS IN
CRM
CONCEPTUAL FRAMEWORK &
WINNING MARKETS

2. What is CRM ?
• Narrow viewpoint is that CRM is database
marketing and or customer retention using
aftermarket tactics to achieve customer bonding
• Berry in 1995 proposed that relationship
marketing “attracting, maintaining and – in multi-
service organizations – enhancing customer
relationships”
• Focus on cooperative and collaborative relations
between customers and firms, and/or other
marketing actors

3. Emergence of CRM practice
• Developing customer relationships was there
even in the pre-industrial era but in recent times
de-intermediation process in many industries
has accelerated the evolution of CRM
• Airlines, banks, insurance, computer program
software, and household appliances are using
computer and telecommunication technology to
directly interact end-customers
• Databases and direct marketing tools give
industries the means to individualize their
marketing efforts

4. RECENT SUCCESSSES
• On-line Banking
• Charles Schwab and Merrill Lynch’s on-line
investment programs
• Direct selling of books, automobiles and
insurance
• Growth of service economy and total quality
management have driven adoption of CRM
• Partner relationship with suppliers and
customers for TQM, JIT and MRP seen at
Toyota, GM , IBM, Ford and Motorola

5. ERA OF HYPER
COMPETITION
• Marketers are forced to be more concerned with
customer retention and loyalty
• Retaining customers is less costly and a more
sustainable competitive advantage as against acquiring
new ones
• On supply side also it pays to develop closer relations
with few suppliers than developing more vendors
• With new technology and advanced product features and
services customer expectations are rising every day !
And to keep track of this relationship building with
customers is the only way forward

6. CRM FORMATION PROCESS
• Identify and differentiate individual customers
• Define the objectives of CRM, selecting
customer partners for appropriate programs, and
developing relational activity schemes
• Overall purpose of CRM is to improve marketing
productivity and enhance mutual value for
relationship partners
• Objectives can be financial, marketing, strategic
and operational goals

7. CRM FORMATION
• Purpose would be increased effectiveness and efficiency
• Programs could include Account Management, Retention
marketing, Coop Agreements, and Strategic partnerships
• Partners based on criteria and process
• Management by team structure, role. Planning, process,
monitoring, communication and employee motivation and
training
• Relationship performance to be gauged
• Evolution of this effort could lead to enhancement and
improvement

8. CRM PROGRAMS
• Continuity Marketing for mass markets with After-marketing, Loyalty
and Cross-selling programs
• For distributors continuous replenishment, efficient consumer
response programs
• For B-2-B markets it would need special sourcing arrangements
• One-to-one marketing is based on account-based marketing and
involves permission marketing, personalization, Key Account and
Global account programs
• Partnership/ Co-Marketing involves co-branding and affinity
partnering e.g. Delta Airlines and American Express have co-
branded Sky Miles Credit Card

9. CRM Governance Process
• Programs for distributors and business
customers need to involve both parties
• Degree of governance in responsibilities will
depend on the perception of norms among the
relational partners
• Issues to be addressed are Role specification,
communication, common bonds, planning
process, process alignment, employee
motivation, and monitoring procedures
• Proper monitoring helps to safeguard against
failure and manage conflicts in relationships

10. CRM PERFORMANCE
EVALUATION
• Periodic assessment of results in CRM is
needed to make corrective actions and to
evaluate the programs
• Balanced Scorecard which combines a variety of
measures based on the defined purpose of each
program
• Another global measure used is the
measurement of relationship satisfaction and
customer loyalty

11. CRM EVOLUTION
• With time CRM programs can change as
also with maturity
• Extraneous factors like acquisition,
mergers, or divestment can cause
changes in relationship marketing
programs
• Also when senior corporate executives
and senior leaders move the CRM
programs can undergo changes

12. IMPLEMENTATION ISSUES
• Today companies interface with
customers through a variety of channels
like sales people, service personnel, call
centers, Internet websites, marketing
department , and business development
agents etc.
• All these agencies work separately but
need to share information on a real-time
basis to avoid gaps in communication

13. IMPLEMENTATION ISSUES
• Challenge is to develop an integrated CRM platform which collects
relevant data input at each customer interface and simultaneously
provides knowledge output on strategy and tactics to win business
and loyalty
• If call center personnel cannot differentiate a high value customer
and fail to up-sell or cross-sell it would be a tremendous opportunity
loss
• CRM solutions need to be based on interactive technology and
processes
• Since CRM implementation has significant IT component many
companies hand over the responsibility of CRM implementation to
IT Department which installation becoming the focus rather than
strategy or programs in place

14. CRM RESEARCH
DIRECTIONS
• Relationship marketing research as per Wilson can be
classified into 3 levels – concept level, model level and
process research
• Concept level identifies, defines and measures
successful predictors measuring constructs like trust,
commitment, shared values, interactions, adaptation,
power imbalance, interdependence and mutual
satisfaction, etc.
• Model level presents integrative ideas to explain how
relationships are developed e.g. Hakansson has studied
300 industrial marketing relationships to build the IMP
Interaction model, Network model uses the social
network for strengthening relationships

15. PROCESS LEVEL RESEARCH
• Partner selection
• Key account management programs and
strategic partnerships
• Performance of hospitals
• Convergence of CRM and other paradigms in
marketing are happening now
• Many tools like TQM, Process reengineering,
mass customization, EDI, value enhancement
and activity-based costing are being used for
CRM

16. ANDERSON CONSULTING
STUDY
• The number of firms citing customer retention as
a critically important measure in the next 5 years
has jumped to 60%, as they shift focus from
attracting new customers to retaining their more
profitable ones
• By 2002 , 83% of companies expect to have
customer data warehouse from a level of 40% in
2001
• Companies predict their use of the Internet to
collect customer data will surge 430% in next
two years

17. TRY TO BE NEXT
• Rather than trying to be better, companies need
to try to be next
• Offer more customized solutions and tailored
customer experiences from traditional and new
channels
• For wealth creation you would need in today’s
world imagination, experimentation, and agility
• Driven by short cycle times, increased pressure
to cut costs, and increased customer orientation
business processes need to be upgraded all the
time

18. TRADITIONAL CRM
APPROACH
• Customer contact by phone, mail, in
person
• Personal Selling
• After Sales Service
• Complaint Handling
• Account Management
• Customer Care and Satisfaction

19. WEB-ENABLED INTEGRATED
CRM
• Customer information system
• Customer Database
• Electronic point of sale Sales Force
• Automation of Customer Support Processes
• Call Centers
• Systems Integration
• Lifetime Value of Customer

20. USE OF TECHNOLOGY IN
CRM
• EPOS (Electronic Point of sale) – Retail
scanners are accurate and timely and can
provide sales rate, stock levels, stock turn, price
and margin, demographics, socio-economic and
lifestyle characteristics
• This drives choice of products, allocation of shelf
space, and number of facings, etc.
• Sales Force Automation has improved sales to
shorten the sales cycle and increase productivity
by efficient tracking of leads, contacts and sales
forecasting

21. TECHNOLOGY IN CRM
• Customer Service Helpdesk can provide more
information on product and improve skills to use them,
also deal with customer problems, enquiries,
suggestions and software can raise the quality of
response
• Call Centers can be integrated to automatic phone
systems like EPABX to allow automatic routing to
agents, self-service Interactive Voice Response systems
– specially used by banking, telecom and hospitality
• Systems Integration of CRM solutions at the front office
and ERP at back office for automating the key functions
• Every business can now electronically link with end
customers

22. CUSTOMER CONTACT
• Internet is helping improved communications
with consumers
• Collaborative design with suppliers allows much
faster turnaround of new designs
• This causes earlier introduction of products and
generates higher satisfaction of getting state-of-
the-art products
• Connecting Supplier-Manufacturer Intranets into
functioning Extranets has been notably a
success

23. PERSONALIZING
INTERACTION
• Help customers make informed
purchasing decisions
• Customer communities can be targeted on
line in chat rooms and the word of mouth
is very rapid way of marketing
• It is a special form of differentiation
• It helps customers to become co-creators
of the content of their experiences

24. ACHIEVING SUPERIOR
CUSTOMER EXPERIENCE
• CRM is about managing customer life cycle
through all points of customer contacts ensuring
every interaction leads to value addition in
relationship
• All points should thus be empowered to be
responsive and offer superior experience
• Experiences connect the company and the
brand to customer’s lifestyle
• Good one will deliver service product and peace
of mind

25. ACQUISITION VS RETENTION
• Bristol-Myers Squibb, a pharma company
spends 85% of marketing dollars on acquisition
• BCG study in 1999 showed Internet companies
spend 33% on building awareness, 55% on
acquisition and only 12% on retention
• Annual churn rate of cellular subscribers in USA
is 25% as in 2003
• High switching costs can hugely impact industry
fortunes, and each percentage point increase in
churn costs enough to reduce the total market
value of cellular companies by $ 150 million

26. ECONOMICS OF LOYALTY
• British Airways missed the point on London-San
Francisco flight by not giving the passenger a seat in the
business class for avoiding the smoking rows
• Lifetime customer value was lost as passenger said he
would never fly with BA again
• 100% retention is impossible but advertising agency
industry finds increase from 80 to 85% results in
increase of 95% in the net present value of average
customer’s billings
• Loyal customers stimulate growth, are less expensive to
serve, refer new customers to company and are often
willing to pay price premiums

27. ACQUISITION COST
• American Express must send number of direct mail pieces to make
telemarketing pitches to obtain new customers
• Longer a customer is retained, longer is the base profit earned
• Customers increase purchase quantities over time e.g. you might
prefer to buy life or home insurance from your auto insurance
company
• Existing customers have better knowledge of company’s systems
and procedures and so cost less
• Referrals are made to friends and neighbors
• Price premium comes from loyal customers who become price
insensitive
• Framework for CRM model needs to be structured carefully

28. CRM MODEL
• Constructing a customer database
• Analyzing the database
• Based on analysis, selecting customers to target
• Target the selected customers
• Develop relationship programs with customer
target groups
• Consider privacy issues
• Measure the impact of the CRM program

29. CREATING DATABASE
• Customer Information File or CIF is made up of 5 major
areas
• Firm demographics and contact names and addresses
• Purchase history – products bought, channels utilized,
prices paid and margins
• Contact history- Any recordable contact with customer
service ?
• Response information – prior response to direct
marketing and promotional offers, or other traceable
marketing activity
• Value of customer – estimate of monetary value of the
customer to the firm

30. FREQUENCY OF
INTERACTION
• Direct and high for Banks, Telecom, and
Retail
• Direct and low for PCs, Internet
infrastructure, etc.
• Indirect and high for Airlines, Packaged
Goods, Drugs, etc.
• Indirect and low for Furniture, Autos, etc.