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Customer RelationshipManagement

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CHAPTER 1

Customer Relationship Management

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Definition of CRM

Customer Relationship Management (CRM) is a

comprehensive strategy and process of acquiring, retaining &partnering with selective customers to create superior value

for the company & the customer

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Understanding CRM

It is a process or methodology used to learn more aboutcustomers' needs and behaviors in order to develop

stronger relationships with them

It brings together information from all data sources within

an organization to give one holistic view of each customer in

real time

This allows customer facing employees in such areas as sales,

customer support, and marketing to make quick yet

informed decisions on everything from cross-selling and

upselling opportunities to target marketing strategies tocompetitive positioning tactics

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Understanding CRM

CRM can be viewed in 4 principal ways It is a contemporary response to the emerging climate of unprecedented

customer churn, waning brand loyalty & lower profitability

It is central to the task of making an organisation customer centric

It is the surest symbol of embracing IT in business

It is the most certain way to increase value to the customers &profitability to the practicing organisations

CRM is all about capturing pertinent data about prospective

& current customers in respect of their buying pattern,

shopping behaviour & usage habits of the products & services

& to use the information to commence a 2-way dialogue with

them

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Understanding CRM

There are three key elements to a successful CRM initiative People: The people throughout a company-from the CEO to each and

every customer service rep-need to buy in to and support CRM

Process: A company's business processes must be reengineered to bolster

its CRM initiative, often from the view of, How can this process better

serve the customer? Technology: Firms must select the right technology to drive these

improved processes, provide the best data to the employees, and be easy

enough to operate

If one of these three foundations is not sound, the entire CRM

structure will crumble

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Thus,CRM

Cost to acquire customersCost to sell

Cost to serve

Time to serve

Reduces:

Customer satisfaction

Return on relationships

Competitive advantage

Number of consumers

Retention rate

Revenue per customer

Enhances:

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Is CRM a new concept???

Pre-Industrial Era Practised since centuries by merchants & traders

Markets traditional & small & businesses built on trust

Customisation of product and all aspects of delivery & payment

possible

Personal rapport shared with customers in the form of social

interactions

Industrial Era

Mass production, mass communication & mass distribution to

achieve economies of scale

More focus on lowering costs & increasing operational

efficiency

Emergence of intermediaries resulting in many layers between

manufacturer & customer

NO!!!

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Post- Industrial Era (Information Era) Rapid advances in technology

Helped firms know their customers, learn more about them &

build stronger bonds through frequent interactions

The above information helped them respond to their needs

through manufacturing, delivery & customer service

Intensive competition

In competitive markets, specially ones that were maturing and

witnessing slow/no growth), firms found it more profitable to

focus on existing customer

Shift from just selling products to understanding customer

needs/wants and then satisfying them

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Post- Industrial Era (Information Era) Growing importance of service sector

In services, provider usually involved in production as well as

delivery directly. Eg: doctor, consultants

Customers directly involved in purchase & consumption of these

services

These direct contacts create opportunities for better

understanding of needs & constraints & emotional bonding

Adoption of TQM programmes

This required firms to work closely with their customers,

intermediaries & suppliers

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Benefits of CRM Lower cost of marketing

Occurs as the company specifies its target segment customers &

knows their needs better, thus spending less money on advertising

& promotions

Decreased cost for customers

As marketing expenses of a firm decreases, firms can offer thesame product at a bit low cost, thus benefiting customers

Increased sales revenue

Results from spending more time with customers which results

from spending less time chasing needed information Improved customer satisfaction

Results from customers finding the company more responsive &

better in touch with their specific needs

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Benefits of CRM Improved customer retention

As old customers will be fully satisfied, they will buy the same

companies products as they know their problems would be taken

care of ,well

Creates intelligent opportunities for cross-selling & up-selling

Opens up possibility of rapid introduction of new brands &products

Strong customer loyalty

CRM helps to build good relationship with customers, thereby

ensuring that they remain loyal with the company

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Why CRM???

The top four reasons for implementing CRM are: gaining customer confidence and loyalty

providing personalized service to customers

acquiring better knowledge of customers and their buying

habits

differentiating themselves from the competition

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CRM architecture

A holistic approach to CRM inevitably makes it essential to integrate the back office & the front office activities &

Provde information seamlessly across all tiers of the organisation

Hence, CRM architecture has 3 primary components

Operational

CRM

Customers

Collaborative

CRM

Analytical

CRM

Firm

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CRM architecture Operational CRM

Automation of horizontally integrated business processes involving front

end customer touch points ie: places where a customer makes direct

contact with the employees of the organisation

At the root of any CRM success or failure ,is a well-designed operational

CRM infrastructure.If an organisations front-line customer service, sales

and marketing employees are not efficient, its CRM initiative is bound tofail

Operational CRM is the source for customer-related information, which is

invaluable for an organisation as it can be processed by analytical CRM

tools to extract business value

A badly co-ordinated operational CRM initiative will capture incorrectdata, paint an untrue picture of the buyers needs, and provide insufficient

service and response levels. Operational CRM needs to be in sync with

business units to receive complete and updated information on which it can

act. It must also integrate the systems at various customer touch points

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CRM architecture

Analytical CRM Analysis of data created on the operational side of CRM for the

purpose of business performance management & improvement

Prediction of customer behaviour, identifying relevant customer

segments, identifying potential customers are some of the activities

that could be performed from knowledge arising from this CRM

Collaborative CRM

Consists of technologies to ensure enterprise/customer interaction

across all contact channels such as in-person, phone, electronic andwireless

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CRM process framework

Purpose

Programs

Partners

Formation

Management

&

GovernancePerformance

Evolution

There are 3 main components

Formation

Management & governance

Performance

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CRM process framework: Formation

Purpose What is the need /specific requirement from the CRM process?

Partners

Selection of partners is based on intuitive judgement of seniors in the

company or extensive research

Criteria varies according to company goals & policies

Programs

Three generic types of CRM programs applied on three different set

of customers

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Programtype

Mass markets Distributors Business toBusiness markets

Continuity

marketing

1. After marketing

2. Loyalty

programs

3. Cross selling4. Up selling

1. Continuous

replenishment

1. Special

sourcing

arrangement

One to one

marketing

1. Permission

market

2. Personalisation

1. Customer

business

development

1. Key account

program

Partnering /Co-

marketing

1. Affinitypartnering

2. Co-branding

1. Logisticpartnering

2. Joint marketing

1. Strategicpartnering

2. Co-design3. Co-development

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Continuity marketing - To retain customers & increase loyaltythrough long term special services

Continuity marketing aimed at Mass markets

After marketing : Reaching to customers, post sales, to know theirfeedback

Loyalty programs : Designed and implemented to refraincustomers from switching to competitors. Eg: Shoppers Stop

Cross selling : Getting back to customers to buy relatedproduct/services

Up selling : Selling an upgraded version of the basic product to thesame customer over a period of time

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Continuity marketing aimed at Distributors Continuous replenishment:Delivering information of goods

sold , to the manufacturer through integrated computer networks &

communication protocols

Continuity marketing aimed at Business markets

Special sourcing arrangement: It can be single sourcing,multiple sourcing or just in time

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One to one marketing - To satisfy each customers needuniquely

One to one marketing aimed at Mass markets

Permission marketing : Requesting permission from customersto talk about products/services

Personalistion: Addressing customer by his name or personalisinghis home page like rediff does

One to one marketing aimed at Distributors

Customer business development: Providing knowledge aboutcustomer type, buying behaviour, habits etc

One to one marketing aimed at Business markets

Global account managers: One to one marketing practised in abusiness to business environment

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Partnering / Co-marketing Focuses on the capability of thebusiness to partner with the relevant customer

Partnering aimed at Mass markets

Affinity partnering: Two different businesses coming together toincrease their profit

Co-branding: Advertising not only own brand but also the brand ofthe component that goes inside the product

Partnering aimed at Distributors

Logistic partnering: Sharing the process of transportation

Joint marketing: Dividing the marketing expenses between themanufacturer & the retail outlet owner

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Partnering aimed at Business units Strategic partnering/ Co-design/ Co-development : During

the development stage, sharing of strategic plans by the manufacturer

with his vendors or raw materials provider. Also includes people from

the vendors team at the design stage

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Management & Governance Team structure

Role specification

Planning process

Process alignment

Monitoring process

Communication

Employee motivation

Employee training

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Performance : Measured under three heads Strategic: How has the program helped in increasing the strategic

asset of the company is measured

Financial : How has the program helped in improving the financial

status of the company is measured

Marketing: Customer retention, satisfaction & loyalty is measured

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Measuring CRM

A good CRM strategy should be followed by measurablecriteria defined before the implementation

For eg: the success of CRM at a banks retail business unit depends

on the rate of revenue growth, yield per customer, rate of decrease in

customer complaints and rate of customer acquisitions etc..

Every business unit, from operational to the back office, mustcreate well-defined metrics for measuring performance a day

before CRM

Any improvement in performance over time (week, month or

quarter) can be quantified and considered the measurement ofsuccess of a CRM initiative

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CRM used by Indian firms

B

elow mentioned companies have all adopted technology smartly tocreate better customer care solution & systems

1. Customer care begins before the sale:

Lakme Lever

Unveiled a radically new customer service: interactive kiosks that allow

women to choose products that suit them

Branded as Lakme Beauty Zones, these kiosks first take a picture of the

customer's face. Then, as the customer chooses different shades of

eyeshades & lipsticks, these are superimposed on the image on the screen.

That way, she is able to decide whether the colour suits her before she

buys the product Lakme had found that for many products, particularly foundation creams,

the number of lapsed users who bought it once & then stopped buying,

were high

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CRM used by Indian firms For long time, Lakme organized Beauty Clubs, where experts

offered beauty tips. But over time, organising these gatherings

proved to be a logistic nightmare

Now, with these kiosks, Lakme hopes to reach out to more women

right at the point of sale

Godrej - GE Has set up a Customer Care Call Centers manned by executives who have

a complete description of all appliances sold by the company

The call centres across Mumbai, Chennai & Delhi receive close to 3000

pre-sale calls. Sometimes, customers ask for information to help them

decide which product model will suit them better

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2.U

nderstanding buying patterns: Food World

Undertake bar coding of products to keep a track of stock keeping

Planning to implement a system to understand purchase patterns better

Apart from regular customer meets & formal research, it has invested in

data mining software in Chennai that would help understand productadjacencies ie: figuring out which products are typically bought together

This will, in turn, help formulate product placements, undertake cross

promotions or develop new pack sizes

3. Understanding the customer:

ICICI

All customer information will be centralized in ICICIs server farm at

Mahalaxmi in Mumbai & gather information real time

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4. Rewarding customer loyalty: BPCL

Initiated a smart card programme, enlisting select petrol pumps, where

customer is assured of a minimum level of quality service

Pumps had to have the ability to upgrade their facilities, practice ood

house keeping & customer care & of course, provide the right quality &quantity of product

Customers were given points for transactions made on the card, which

later, could be redeemed through gifts

5. Making after sales service easier: Samsung Electronics

If a cusomer finds a defect in their product, they can simply log on to the

company website & key in their address & product serial no.

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CRM used by Indian firms Immediately, the name & contact no. of the nearest Samsung dealeras well

as the complaint no.

If the dealer does not have the part, then the software directs the customer

to the nearest dealer who has the part

There is a common thread running through all theseorganisations,Talking, listening & understanding

what the customer is all about!!

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Impact of globalisation on CRM

Market segmentation Advancement in communication technology & growth of internet

Product Life Cycle

Product availability in different country markets, creates difficulty to

manage product life cycle

Competitive environment

Different competitive environment in different countries lead o

inconsistent CRM

Cultural difference

Leads to differences in products and services sold across differentcountry markets leading to inconsistent CRM programs.

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Winning markets through effective CRM

There are 2 approaches to CRMTraditional approach Web enabled & Integration

approach

Customer contact:

a) Telephone b) mails

Customer database

Personal selling EPOS (Electronic Point Of Sale)

After sales service Automation of customer

service(SFA)

Complaint handling Call centre

Account management System integration

Customer care Customer lifetime value

Customer satisfaction

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Traditional approach to CRM

Customer contact

Established through different methods

Telephonic method : Cheap, but less effective

Mails: Low conversion rate in India because of poor computer literacy

Personal selling

Costly & time consuming

Each of the contact should reflect good things about the company to the

customer

After sales service

Customers can become advocates for the product/service only when theyare happy using it. This is possible if the after sales service provided is a

good functional one

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Traditional approach to CRM

Complaint handling Procedure for filing complaint & receiving attention should be easy,

simple & fast

Account management

Each interaction of a high potential customer is recorded so that the

company can manipulate his future interactions

Customer care & customer satisfaction

Are ongoing processes through which company creates chances to

interact with the customer & make each of these interactions, a happy one

for the customer

Eg: AMC is a method of customer contact

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Web enabled approach to CRM Customer database

A hardware which gets regular flow of information

Helps understand customers & accurately anticipates their behavioural

patterns

Also helps to plan, implement & monitor customer contact

All this is possible if the database is a robust one & good data miningtools are applied on customer data

EPOS

The electronic gadget at the check out counter of a retail outlet where the

billing happens is an example of EPOS

Helps calculate sales rate, stock levels, price & margin Since sale of products depend on demographic & socio economic lifestyle

of the customers, useful information about the products that the customer

wants, can be given by an EPOS

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Web enabled approach to CRM Sales force automation

One of the powerful software modules of a CRM package, usually used

by sales people

Helps in automating & optimising sales processes

Shortens sales cycle & increases sales productivity

Gives information on

Customer, company & hierarchy of people to be contacted over there

Characteristics of the important person in the customer company

Information about competitors & their product profile

After sales information

Call centres Systems used by companies to interact with customers to sell their

products & solve customer problems

Can be inbound or outbound

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Web enabled approach to CRMUse the following technology

Automatic call distribution: A programmable telephone systemused in incoming call centres which automatically answers, queues &

distributes calls to agents.Also plays delay announcements to callers,

provide real-time & historical reports on these activities

Predictive dialing: A feature of a phone system where outboundcalls from a user elected list are automatically initiated & answeredcalls are passed to available service agents. Is designed to minimise

the time between answered calls, thus enhancing agent productivity

Interactive Voice Response: A system with menu drivenchoices that specify which choices you can make by hitting numbers

on your telephone pad. Helps handle routine transactions without

involvement of live agents

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Web enabled approach to CRMUse the following technology

Computer Telephony Integration: A software that helpsapplication programs control the phone system. Helps increase employee

productivity, enhance customer service & reduce costs with the custom

functionality ofWindows, Unix orWeb applications.Data collected by ACD

or IVR systems can be passed to existing PC, Unix orWeb applications

through the phone software System integration

There should be seamless integration between the front office & back-

office applications

Customer lifetime value

Amount of money that a customer spends while doing business with a

company in his entire lifetime. This will also include the money spent by

his referrals in doing business with the company

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Problems with CRM Exorbitant Costs

Huge investment needed to maintain a customer database. Money

required for computer hardware, software, personnel etc

Inadequate Focus on Objectives

When starting off on a CRM strategy the objectives are clearly

established and followed Midway during the CRM implementation, when hard times hit, the

organization loses sight of its goals and ultimately steers away from it

Insufficient Resources

Sometimes in phased implementation of CRM, if conditions worsen

within the company or without, organizations start lessening their budgetsfor the current phase

When funds are less, budgets get strained & the necessary costs required

for CRM success are not employed. As a result CRM starts failing

midway

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Problems with CRM Inappropriate Metrics

The old adage You cant manage what you cant measure is true for CRM also

Failure to choose the right method of measurement and implementation is one of

the chief reasons why CRM fails

Business Needs Most Important

One of the chief mistakes companies make is letting the technology drive

their CRM functionality

Instead they need to analyze their business problems first and then find the

appropriate CRM solution for it

Slow Returns

Another failure of CRM is its inability to provide quick returns oninvestment

Waiting for years to see their investments show results, tests patience and

leads to both employees and management slackening their efforts in the

implementation

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Problems with CRM

No Customer Focus

Employees need to be motivated to be absolutely customer centric. This

involves tremendous effort on the part of the company

CRM problems arise because of employee reluctance to be more customer

focused

The result is a highly expensive customer strategy being adopted by thecompany in an effort to retain customers, with reluctant, unfocussed

employees implementing it

Most CRM problems can be mitigated, resolved and ultimately

obliterated. What is highly required is the ability to focus on the business

needs, choose a CRM package that works towards it, employ the right

resources and assume the right metrics. Adopting these measures would

go a long way in alleviating CRM problems.

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CHAPTER 2

Technological tools for CRM

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Data Mining Is the discovery and presentation of non trivial, novel, interesting

and ultimately potential useful information from a very large

customer database or data ware house

Information received above helps solve critical business

problems. For eg: to increase market share, to improve internal

productivity or to gain competitive advantage An inter-disciplinary field that takes its inputs from diverse but

related disciplines

Is usually done on data collected while undertaking day-to-day

transactions of a company. Such data usually has less bias than

data that has been specifically collected for the purpose of analysis Aims to facilitate the involvement of the end user in the

discovery process without the need for trained experts either for

running the various techniques or for interpreting the results

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Applications ofData Mining

Covers a wide range of applications in commercial as

well as non-commercial fields

Commercial applications

Customer profitability

Customer retention

Customer segmentation

Channel optimisation

Targeted marketing

Fraud prevention

Market basket analysis

Demand forecasting

Price optimisation

Non - commercial

applications

Oil exploration & research Medical research

Crime investigations

Astronomy & cosmology

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Applications ofData Mining

Non - commercial

applications

Oil exploration & research

Medical research

Crime investigations

Astronomy & cosmology

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Tools/Techniques ofData Mining

Cluster detection Decision trees

Memory based reasoning

Link analysis

Rule induction

Neutral networks

Genetic algorithms

Sequential pattern discovery

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How to perform data mining

Step 1: Define business objectives Step 2: Prepare data

Data selection

Preprocessing of data

Data transformation Step 3: Perform data mining

Step 4: Evaluate results

Step 5: Present discoveries

Step 6: Ensure usage for discoveries

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Data Mining in banks & insurance cos A large customer base coupled with detailed demographic

information

Cross-selling & Up-selling of products can be taken up due to

cost advantage in selling to an existing customer

However, for this, a lot of investment needs to be done in

communicating about the offers to customer A better idea would be identify those customers who would respond

favourably to those offers

The favourable prospects are identified by segmenting the

database (using classification algorithms)

Data mining provides the intelligence & knowledge needed to

understand customers & their behaviour from past interactions

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E-CRM

E-CRM can be defined as activities to manage customerrelationships by using the Internet, web browsers or other

electronic touch points

E-CRM provides companies with a means to conduct interactive,

personalized & relevant communications with customers across

both electronic & traditional channels

It utilizes a complete view of the customer to make decisions

about messaging, offers & channel delivery

It synchronises communications across disjointed customer-

facing systems Thus, E-CRM is the management of customer interactions at all

levels, channels, and media

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Basic Requirements of E-CRM

Electronic channels Web & personalised e-messaging

Enterprise

Construction & maintenance of a data warehouse that

provides a consolidated, detailed view of individual customer

behaviour & communication history

Empowerment

Deliver timely, pertinent & valuable information to the

customer

Economics

Asset allocation to be directed at individuals likely to provide

the greatest return on customer communication initiatives

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Basic Requirements of E-CRM

Evaluation Customer interactions across various customer touch points need

to be evaluated & anticipated ROI should be compared against

actual returns through customer analytic reporting

External information

Gathered from sources like web page profile applications & third

party information networks

An E-CRM solution must have applications that synchronise

customer communications across channels & do so in

real-time

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Need of E-CRM

CRM offerings remain channel centric rather than customercentric

Customer facing systems create new islands of non-integrated

information

One of the reasons eCRM is so popular nowadays is that digital

channels can create unique and positive experiences - not just

transactions - for customers

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E-CRM architecture

Following is a set of technical E-CRM capabilities &applications that collectively comprise a full E-CRM solution

Customer Analytic Software:

Integrates with customer communications software to help

companies transform customer findings into ROI producing

initiatives

Data Mining Software:

Integrates with campaign management software to keep pace with

multiple campaigns running daily or weekly

Campaign Management Software

Tests various offers against control groups, captures promotion

history for each customer & prospect & produces output for any

online/offline customer touch point

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E-CRM architecture

B

usiness Simulation: Used in conjunction with Campaign Management software,

optimizes offer, messaging & channel delivery prior to campaign

execution & compares planned costs & ROI projections with

actual results

Real Time Decision Engine: Contains business intelligence to determine & communicate the

most appropriate message offer & channel delivery in real time &

support 2-way dialogue with the customer

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E-CRM framework

Identify

opportunity

Optimize

strategy

Present

communication

Evaluate

result

START

Customer

warehouse Deliverrecommendation in

batch

2-way dialogue &

channel

synchronisation

Plan

communication

strategy

Points of sale

SFA

Call center

Direct mail

Web

E-mail

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E-CRM framework

: set of e-marketing & offline marketingfunctions that utilise a single view of the customer contained

in the single data warehouse

a sample of customer channels, containing

both electronic applications as well as traditional direct mail

one-way batch outputs to the channels

bi-directional customer communications in

real time & synchronization of communications across

channels

Left hand cycle

Right hand cycle:

One-way arrow:

Two-way arrow:

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Benefits of E-CRM Service level improvements - Using an integrated database to deliver

consistent and improved customer responses

Revenue growth - Decreasing costs by focusing on retaining

customers and using interactive service tools to sell additional

products

Productivity - Consistent sales and service procedures to createefficient work processes

Customer satisfaction - Automatic customer tracking and detection

will ensure enquiries are met and issues are managed. This will

improve the customer's overall experience in dealing with the

organisation Automation - eCRM software helps automate campaigns including:

Telemarketing

Telesales

Direct mail

Lead tracking and response

Opportunity management

Quotes and order configuration

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Benefits of E-CRM Captures and Reuses past experiences

Ensures Knowledge Management- A strategy to organize and use

available information, experience and expertise

Focus on customers across organization

Lower cost of service as servicing a customer online costs less

Help to capitalize on most profitable customers Helps increase marketing capabilities through gathering enhanced

demographic data

Many forms of advertising are not as effective as they need to be.

CRM enables a company to target their audience more precisely and

gain customer retention, all at a lesser cost

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How does E-CRM work? In today's world, customers interact with an organisation via multiple

communication channels-theWorldWideWeb, call centres, fieldsalespeople, dealers and partner networks. Many organisations also have

multiple lines of business that interact with the same customers

eCRM systems enable customers to do business with the organisation the

way the customer wants - any time, via any channel, in any language or

currency-and to make customers feel that they are dealing with a single,unified organisation that recognises them every step of the way

The eCRM system does this by creating a central repository for customer

records and providing a portal on each employee's computer system allowing

access to customer information by any member of the organisation at any

time

Through this system, eCRM gives you the ability to know more about

customers, products and performance results using real time information

across your business

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CHAPTER 3

Implementing CRM

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Steps to implement CRM

Need analysis Project planning

Implementation

Testing & quality assurance

Deployment & training To implement CRM successfully, you'll have to

reorganize your customer and change yourorganizational mindset. There are three importantcriteria

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Steps to implement CRM

To implement CRM successfully, an organisation needs toreorganize customers and also change their mindset

There are three important criteria

Good design interface: It has to be easier for a customer to give a

company its information and for the company to capture that

information Good memory: The company has to remember what the customer told

them so that they dont need to ask the customer same question again

Ability to integrate the information

These three criteria apply both on and off the Web

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Measuring the effectiveness ofRelship Marketing

Research findings by Mr. A Lindgreen to measureeffectiveness of relationship marketing are as

follows:

The loyalty accounting matrix

The relationship quality customer retention theory ofcreating shareholder value

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Measuring the effectiveness ofRelship Marketing


Yellow

customer

Yellow

customer

Green

customer

Red

customer

Relative attraction

Satisfa

ctionwiththe

company

L H

H

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Green customers More attracted to the company thancompeting business.. These customers need to be always kept

satisfied & given special attention

Yellow customers Score high on one parameter..hence

greater scope to convert them into green customers by

adopting an appropriate strategy

Red customers More price sensitive; will move their

business to suppliers of lower priced products..hence not very

profitable to be concentrated on, by the company

Thus, if the customers are properly chosen & administered with

relationship marketing, good results can be achieved

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The Relationship Quality model

Trust in credibility

Trust in benevolence

Affective commitment

Affective conflict

Satisfaction

Social bonding

Relshipquality

Customerretention

Customer revenue

Customer`s cost

Share of customer

Employee satisfaction

Share of future

Shareholder value

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The Relationship Quality model

Relationship quality is made of 6 key constructs

Credibility

Benevolence

Commitment

Healthy conflict

Satisfaction

Social bonding

Relationship quality can be increased by bringing about an increase

in the above mentioned factors. To achieve this, the businesses

must meet its business customers more often, both formally &informally

An increase/improvement in relationship quality will lead to

increase in customer retention, thereby generating revenue for the

business

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The Past, Present & Future of CRM

The Past:

1960: Era of massmarketing, standardised

products were produced in

large quantities in huge

manufacturing set ups

Products sold to allcustomers who wanted it &

were willing to pay for it

There was no segmentation

or customisation

1970: Introduction ofsegmentation, direct mail

campaigns & early

telemarketing

1980: Era of nichemarketing

Small group of customers

were offered customised

service & products & they

were ready to pay apremium for it

1990: Emergence ofrelationship marketing

Explosion of telemarketing& call centres , all set up to

develop relationships with

customers

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The Present: Now, organisations are moving through several stages of CRM as shown

in the table below:

Stage State Culture

Satisfaction

based

Re-active 1. Meet customer needs

2. Respond to complaints3. Minimal evaluation of customer

service levels

Performance

based

Pro-active 1. Evaluate customer perception

2. Identify customer retention factors

Commitment

based

Very pro-active 1. Evaluate multiple customer needs

2. Continuous inbound/outbound

flow & feedback

3. Continuous improvement

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The Present:

As seen from the table, a company can be just into CRM

(satisfaction based), deep into CRM (performance based) or

very much deep into CRM( commitment based)

Depending on the companys commitment to keep itscustomers happy, it could be in reactive mode, proactive mode

or very proactive mode

In reactive mode, the company reacts to customer needs as it

arises. In the other 2 states, the business tries to provide the

services to the customers before they ask for it

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The Future:

Customers will play a significant role in managing

relationships

Service models will continue to change

The web will create globalisation Loyalty programs will be the necessity in order to retain

customers

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Customer loyalty models

Relationship Continuous model

Rational & emotional 2 major connects to make consumers accept a

product/service

Rational connect executed through communication of potential value

of products/services like functional value, quantitative benefits etc

Emotional connect made through perceived value of products/servicewhich would help marketers enjoy brand equity

This model primarily focuses on enhancing customer relationships

through continuous value offering

Customer Need model

Helps marketers identify the level of consumer needs & design &deploy appropriate strategies to capture their mind & money share

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Customer loyalty models

Customer Involvement model

Degree of customer involvement would enable marketers to decide on

the products/services & the appropriate communication to reach them

Higher the customer involvement - higher the degree of brand loyalty

& affinity towards the product & services

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Campaign Management

To inform customers about various products & ultimately sell

them, marketing managers routinely conduct various

marketing campaigns. They may be for:

Launch of a new product

Increase visibility of an existing product

Re-launch of an old product with more features Campaigns for specific occasions & others

Many of these campaigns may be conducted in multi

locations across various communication channels

Campaign management solutions are software products thathelp plan, design, execute & measure the effectiveness of

marketing campaigns

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Campaign Management

Campaign management software works as follows:

Segment: Defining the campaign population & using different

models to filter them

Plan: Creating the campaign

Execute: Scheduling the campaign across various channels like direct

mail, email, telephone, SMS etc.. Track: Monitoring direct & inferred responses & tracking return on

investment

Campaign management usually depends on Interruption

marketing

Interruption marketing happens when a customer receives anunannounced phone call or unsolicited e-mail. Eg: pop-up windows in

Internet

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Campaign Management

Another type of campaign management E-campaign

management based on Permission marketing

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Response Management

Depending on which type of campaign management is used,

the response also varies

2 types of response management

Traditional response management

E-marketing response management

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Traditional Response Management

Marketing campaign

Email Telephone

response

Others

Campaign refinement

Registration

information

New Marketing campaign

ETR

ORI

Time

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E-marketing Response Management

Email Telephone

response

OthersRegistration

information

Time

E-marketing campaign

Feedback

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Response Management

E-marketing response management is the process by which

huge amount of customer feedback is consolidated for a

campaign & the result studied as the campaign progresses

Hence mistakes made are rectified as the campaign progresses

In the traditional method, marketing people had to wait till a

campaign was over to learn about the mistakes made & hencelaunch another campaign.

Time involved was enormous , almost double the time involved in e-

marketing response

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CHAPTER 4

Relationship Management in

Business To Business

Commerce

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Building customer loyalty in business-to business

market

Need As end customers demand better value proposition from the

manufacturer in terms of quality, product variety & convenience;

manufacturers expect the following from their vendors

Greater responsiveness

Reliability Quality consciousness

Higher service level

Integration with their system

Bundled products & services

Fierce competition & maturing markets have forced vendors to focus

on building loyalty with their customers

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market

Market Intelligent Enterprise model of PriceWaterHouseCooper

Market Intelligent enterprise is an enterprise that instutionalises the capacity

to acquire & apply market information quickly across & effectively manage

customer relationships with the best customers & the best prospects

Aligns strategy & process

with customer expectation

Identify customer expectation

Collect customer information as

strategic asset

Managing customer expectation

Managing customer

relationship based on

ongoing customer value

Embrace market intelligent

technology

Developing a MIE

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market

Collecting customer information as strategic asset Collects information not only on its current customers but also its

prospective & target customers

Salesmen an important source for critical customer information. Hence

important to educate them on the value & methodology of collecting this

information Identifying customer expectation

Customer expectation would generally be a combination of the following

Supply reliability & flexibility

Supply lead time (time between production & delivery)

Quality

Price

Technological support

Integration with customers process & systems

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market Most industrial customers have a well defined vendor evaluation

methodology..hence necessary for the market intelligence enterprise to

identify the key drivers of customers expectations

It can either be changing end market conditions or the specific

competitive advantage of the manufacturer

Aligning strategies & processes with customer expectations Processes like manufacturing cycle, procurement time & delivery time tobe redesigned according to customers expectation

The processes to be aligned after identifying the key process matrix of

the customer

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market Managing customer expectation

Post alignment of processes, it is necessary to communicate the same to

the customer

This can be done by managing customer interactions across various

touch points like marketing, customer support, billing & payment,

product development

If practised properly, a market intelligent enterprise can change a

customer who is a terrorist into an advocate

Terrorist

Rejecters

Defectors

Vulnerable Advocate

Supporter

B ildi l l i b i b i

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market One of the objectives of managing customer expectation for an enterprise

is to convert key customers to advocates & address the grievances ofterrorists

In between the Rejectors, Defectors, Vulnerable & Supporters are the

different stages through which a customer passes if handled properly by

the business

Managing customer relationship based on ongoing customervalue

Key customers can be identified on two basis

Customer Lifetime Value: Total amount of value the customer brings tothe business directly or indirectly during his/her lifetime

Generally measured as the monetary benefits the customer brings to the

business

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market

Strategic importance of customer : Strategic importancecan be realised by considering the following points

How important is the customer to the achievement of the mission of

the enterprise?

What will be the overall impact of losing a particular customer?

Does the enterprise gain any technical know how/skill set from thecustomer?

Based on the above values, the customers can be scaled on an increasing

basis as shown below

1. Do nothing/sell current value

2. Limited enhancement, cross sell with bundled benefits

3. Respond with enhanced feature & discount with certain parameters

4. Respond & match with competitors offer

5. pre-emptive refinement of offerCustomerValue

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market Embracing market intelligent technology

Technology plays an important role by facilitating information flow

across the value chain

But, the technology used like business application (ERP, CRM

packages) & database used should be integrated properly to help

relationship building with customers

Mail,face to face, self-service,

telephone

Front office Back office

Data warehouse & operational

data stores

Customer/Prospect/

Employee touch points

Business applications

Data stores

M/ETechnolo

gytemplate

K A t M t R l ti hi Ch i

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Key Account Management or Relationship Chain

Weaving the web:

Planning the

relationship

Mapping the

customer

organisation

Understand value

drivers

Formalising the web:

Forming the

contact matrix

Owning the

relationship

Monitor tangible

delivery

Managing the web:

Positive impact

analysis

Managing total

Business

experienceEnhancing the web

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A dedicated account team forms a contact matrix wherein

different members from the vendor team develop & maintain

contacts at various levels in the manufacturing organisations

The relationship is built through the following steps

Weaving the web: The first stage involves laying thefoundation for the relationship. It involves the following:

Planning the relationship

During this stage, vendor consistently delivers in terms of

specifications, performance, quality, reliability etc.

Long term & short term plans are formulated based on customersgrowth potential

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Mapping the customer organisation

Vendor identifies key people in the customers organisation

responsible for the business of the customer with the vendor

Key people can be decision makers like purchase manager,

production manager etc. or influencers like finance manager etc.

Understanding value drivers

Each of the key players identified above will have different value

drivers ie: they consider certain things to be more important than

others.

For eg: for the purchase manager, cost might be the value driver, for

production manager, timely delivery might be the value driver

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Formalising the web:

Forming the contact matrix

Key account management is decided at this stage

Members of the team are matched with the key people in the

customers organisation.

For eg; R&D expert in the vendors team will be mapped with theend users in the manufacturers company because the end users can

give critical inputs which R&D expert can implement during product

development

Owning the relationship

At any point of time, the vendor is responsible for the relationship Road map & timetable for the visits are created at this stage

Two things are very important for the sustainability of the

relationship

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Hierarchy: There must be equal participation from all levels of the

organisation on both the sides Personal chemistry: People having one o one relationship must be

comfortable in the interactions

Monitoring tangible delivery

A serious failure in delivery of promises, either tangible or

intangible at this stage can be perceived as a breach of trust

Managing the web: Relationship has to be managed to givehigher value ie: profitability for the vendor & enhanced

solutions for the customers. This can be done by 2 steps:

Positive impact analysis: Using increased exposure that thevendor gets with the customer, the interfaces can be classified into

3 kinds

K A M R l i hi Ch i

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Positive impact analysis: Using increased exposure that the

vendor gets with the customer, the interfaces can be classified into

3 kinds

Necessary impact interfaces: These things must be done like

quotation, on time delivery etc.

High impact interfaces: These activities by the vendor are highly

appreciated by the manufacturer eg: giving a toll-free number for

service queries

Low impact interfaces: These things that the vendor does goes

unnoticed by the manufacturer eg: changing the colour of the

package

Managing total business experience

Vendors organisation is aligned to the customers processes

All interaction points are monitored & quality of interaction specified

internally. Thus the total experience of the business customer is managed

crm 120610

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