crm- 250711
TRANSCRIPT
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Customer RelationshipManagement (CRM)
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10-1
The Shift from Transaction-Based Marketing
to Relationship Marketing
Transaction-based marketing Buyer and Seller exchanges characterized by limited communications and
little or no ongoing relationship between the parties
Relationship marketing Development and maintenance of long-term, cost-effective relationships
with individual customers, suppliers, employees, and other partners formutual benefit.
Customer relationship management The combination of strategies and tools that drive relationship
programs, re-orientating the entire organization to a concentratedfocus on satisfying customers
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10-2
Comparing Transaction-Based Marketing andRelationship Marketing Strategies
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What is CRM?
CRM is a business strategy that aims to understand,anticipate and manage the needs of an organisationscurrent and potential customers (1).
It is a comprehensive approach which providesseamless integration of every area of business thattouches the customer- namely marketing, sales,customer services and field support through theintegration ofpeople, process and technology (1)
CRM is a shift from traditional marketing as it focuseson the retention of customers in addition to theacquisition of new customers (2)
The expression Customer Relationship Management(CRM) is becoming standard terminology, replacingwhat is widely perceived to be a misleadingly narrowterm, relationship marketing (RM) (3).
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Definition of CRM
CRM is concerned with the creation,development and enhancementof individualisedcustomer relationships with carefullytargetedcustomers and customer groups resulting in
maximizing their total customer life-time value(2).
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What is CRM?
CRM is a long term, customer-centric businessstrategy whose goal is to maximize profitability
through customer loyalty
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Strategically significant customers
Customer relationship management focuseson strategically significantmarkets. Not allcustomers are equally important (3).
Therefore, relationships should be built withcustomers that are likely to provide value forservices
Building relationships with customers that will
provide little value could result in a loss oftime, staff and financial resources
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10-7
Figure 10.1 Forms of Buyer-
Seller
Interactions on aContinuum fromConflict toCooperation
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Three Levels of Relationship Marketing
Transaction selling: customers are sold to and notcontacted again
Relationship selling: the seller contacts customersafter the purchase to determine if they are satisfiedand have future needs
Partnering: the seller works continually to improveits customers operations, sales, and profits
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Underlying principles of CRM:CRM may be understood by looking at the ideas of product andcustomer-centricity
these refer to an organizations tendency to concentrate its activitieson product or customer
The characteristics of product and customer-centricity include:the two are mutually exclusive
an organization may be somewhere between the two
discrete activities between the two may be defined
there is a natural evolution from product to customer- centricity hence the idea of "maturity"
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Mission
Competition
Environment
OrganizationIncrease
customer
profitability
Reduce
cost,
cycle time
Product-centric
strategies
Customer-centric
strategies
Product and customer strategies
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Increase customer profitabilitye.g.,
bundling
cross-selling, up-selling
maximizing high-value /low-cost customers
Retain customerse.g.,
listening
adaptability
new products
customer service
loyalty program
The strategies of CRM
Acquire new customerse.g.,
differentiation
innovation
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Attracting and
Retaining Customers Attracting
Customers Computing the Cost
of Lost Customers
Customer churn
Lifetime value
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Attracting and Retaining Customers
The Need for Customer Retention
Measuring CustomerLifetime Value (CLV)
Customer Relationship Management(CRM): The Key Customer equity
Three drivers of customer equity Value equity
Brand equity
Relationship equity
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3-14
Figure 3-5:The
Customer-
Developme
nt Process
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Attracting and Retaining Customers
Forming Strong Customer Bonds: The
Basics Cross-departmental participation
Integrate the Voice of the Customer intoall business decisions
Create superior offering for the targetmarket
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Organize and make accessible a database ofcustomer information
Make it easy for customers to reach theappropriate personnel
Reward outstanding employees
Adding Financial Benefits Frequency programs (FPs)
Attracting and Retaining Customers
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3-17
Attracting and Retaining Customers
Adding Structural Ties
Create long-term contracts
Charge lower price to highvolume customers
Turn product into
long-term service
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3-18
Figure 3-7: Customer-Product Profitability Analysis
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Classification of
Customer Loyal Segments
Strangers short-term-low profit customers
Butterflies high-profit potential but tend to be
short-term and disloyal Barnaclesstay around for the long-term but
generate relatively low profits
True Friendsare both highly profitable and arelong-term customers
(Reinartz, W. and Kumar, V., 2002)
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Exhibit 2-9: Dependence Increases
as Relationships become More
ImportantHigh
Low
Re
lationships
HighLow Dependence
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Partnering, cont
Components of partnering include:
Individual excellence
Importance
Interdependence
Investment
Information
Integration
Institutionalization
Integrity
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Exhibit Partnering contd..
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Evolving business processes to customer centricityCUSTOMER-CENTRIC
PRODU
CT-CENTRIC
Customer-centric
business
functions
Customer
value
creation
Customer
knowledge
management
Performproduct-centric
business
functions
Deliverproduct or
service
Select
markets
VARIATIONS
BY
FEATURE
VARIATIONS
BY
CUSTOMER
SEGMENT
STANDARD
FULLY
PRODUCT
FOCUSED
FULLY
CUSTOMER
FOCUSED
LARGELY
PRODUCT
FOCUSED
LARGELY
CUSTOMER
FOCUSED
ESTABLISH
HIGH VALUE
CUSTOMERS
MASS
MARKET
MARKET
OF
ONECUSTOMER
NICHEPRODUCT
VERSIONS
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Evaluating Customer Relationship Programs
Lifetime value ofcustomer: the revenuesand intangible benefits
that a customer brings tothe seller over anaverage lifetime, less theamount of money which
must be spent toacquire, market to, andservice the customer
Structuring
Relationships
Measure-
ment &
Evaluation
Assessing
Costs &
Benefits
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Additional techniques used to evaluaterelationship programs include:
Tracking rebate requests, couponredemptions, credit-card purchases, andproduct registrations
Monitoring complaints and returnedproducts and analyzing why customers leave
Reviewingreply cards, common forms, andsurveys
Monitoring "click-through" behavior onWebsites to identify why they stay or leave