Customer Relationship Management (CRM)

CRM ? “Strategy”

“An approach to building and sustaining long-term business with customers.”

It is about creating a feel of high touch in high tech environment

CRM

Comprehensive approach for creating, maintaining and expanding customer relationships through the integration of people, process and technology

CRM is about managing relationships more effectively so as to drive down costs while at the same time increasing your sales & profits

CRM is not just a software

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People & Process

Information Technology

Business

Strategy

CRM strategy drives structure & technology

CRM applications & technologies are just a tool to support CRM strategy

Benefits of CRM

Competitive Advantage

Reduces costs, provides efficient operation

Increases customer satisfaction & Loyalty

Automate inefficient and expensive work processes

Increased marketing and selling opportunities

Benefits of CRM

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Identifying the most profitable customers

Making it easier for sales and channel partners to sell

Faster response to customer inquiries

Receiving customer feedback that leads to new and improved products or services

CRM Strategies Reduce the rate of defection

Reduce the rate of defection

Increase longevity

Enhance “share of wallet”

Terminate low-profit customers

Focus more effort on high-profit customers

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Business facts! It costs six times more to sell to a new

customer than to sell to an existing one. A typical dissatisfied customer will tell eight

to ten people about his or her experience. The odds of selling a product to a new

customer are 15 percent, whereas the odds of selling a product to an existing customer are 50 percent.

90% companies don’t have sales and service integration

70% of complaining customers will do business again if their complaint quickly addressed.

Framework for CRM

Identify prospects and customers

Differentiate customers by needs and value to company

Interact to improve knowledge

Customize for each customer

Three phases of Customer Relationship Management

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Customer AcquisitionTechniques used to gain new customers

Customer RetentionTechniques to maintain relationships with existing customers

Customer ExtensionTechniques to encourage customers to increase their involvement with an organization

Managing the Customer Life Cycle: The Three Phases of CRM

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Differentiation• Innovation• Convenience

Acquire

Extend Retain

Bundling• Reduce Cost• Customer Service

Adaptability• Listening• New Products

Newspaper Exercise Find ads with A, R & E

Personal Experience of a particular ad/brand association / dissatisfaction ?

Ads going for acquisition with Discounts

Is acquisition all about 2+ 5 Schemes/ Discounts ?

Ads going for retention with brand power

Any other issues with current ads..Do they affect retention ?

Customer PyramidsComponents of Customer Pyramid

Active Customers –that have purchased goods from company within a given period

Inactive Customers – that have purchased goods from company in the past but not within the given period.

Prospects – with whom there is some kind of relationship – but they have not yet purchased any goods. For example those who have responded to a mailing. The prospects, of course, are customers you expect to upgrade to active customer status in the near future.

Customer Pyramids Suspects –that company could be able to serve

with products and services in future. Normally, company seeks to begin a relationship with suspects and qualify them as prospects

The Rest of the World – that simply have no need or desire to purchase company’s products and services.

ActiveCustomers

InactiveCustomers

Prospects

Suspects

Rest of the World

Customer Pyramid

Segmenting Active Customers “Top: Customers – the top 1% of active

customers in terms of sales revenue.

“Big” Customers – the next 4% of active customers in terms of sales revenue

“Medium” Customers would be the next 15% customers the list.

“Small” Customers – the remaining are active customers in terms of sales revenue.

Customer Pyramid Segments

Top>Rs

75,000

Big Rs 25- 75,000

Medium>3-25,000

Small>Rs 1-3000

Rest of the World

Inactives

Prospects

Suspects

Classify your customers

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The Customer Pyramid

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The Platinum Tier

Most profitable customers, Heavy users of the product, not overly price sensitive,

willing to invest in and try new offerings, and are committed to the firm.

The Gold Tier

Profitability levels are not as high, perhaps because the customers want price discounts that limit margins.

They might not be as loyal to the firm even though they are heavy users in the product category – they might minimize risk by working with multiple vendors rather than just the focal company.

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The Iron Tier

Provide the volume needed to utilize the firm’s capacity

Spending levels, loyalty, and profitability are not substantial enough for special treatment.

The Lead Tier Costing the company money. They demand more attention than they are due

given their spending and profitability, and they are sometimes problem customers –

complaining about the firm to others and tying up the firm’s resources.

The Customer Pyramid (Cont’d)

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Differentiating Business Customers in the Retail Real Estate Industry

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• Pay full commission on a home costing Rs 50 Lakh or more;

• are motivated to purchase within the next six months;

• have purchased more than two homes in the past;

• and are members of social or professional networks that make them candidates to refer other high-end buyers.

Platinum customers:

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Purchase homes in the R25 L-50 L range but are more price sensitive than the top tier. E.G. some Gold customers want to negotiate on the commission or have the realtors pay points at closing.

Some of these customers buy homes that are in the same price range as Platinum customers but their price sensitivity reduces their profitability.

Likely to refer others, but the types of customers to be referred are not as valuable to the firm as those the Platinum customers refer.

Gold customers:

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• Buy homes in the Rs 10 L- Rs25 L range, and include retirees, young professionals, and families.

• Young professionals have higher lifetime value potential and therefore market to them differently than to market to others in this group.

• Young professionals who purchase homes at the upper end are tagged as potential Gold customers and moved to that category approximately five years after the purchase of a home.

• Relocations from other areas and are pressed to buy homes quickly, making them good prospects for the company despite home prices that are lower than the top two tiers.

Iron customers:

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Shoppers rather than buyers.

• Some Lead customers spend as long as two years looking at homes, calling upon realtors to show them homes when they have free time

• While they might be looking at homes in all price ranges, the homes they buy are likely to be under Rs 10 L.

• Often dissatisfied with what they see, making them less likely than other tiers to send qualified referrals to the company.

Lead customers:

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Differentiating Business Customers in the Marketing Research Industry

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• Large accounts that are willing to plan a certain amount of research during the year.

• The timing and nature of this research could be anticipated, making it easy for the research firm to smooth supply and demand.

• Tended to stay with the company and are willing to try new services and approaches developed by the research firm.

• Therefore, they bought across research service types and had minimal sales costs averaging only 2-5%.

• Willing to serve as references for the firm and are loyal to the firm.

Platinum customers

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• had similar profiles except that they were more price sensitive, inclined to spread their research budgets across several firms.

• While they were large accounts and had been customers for multiple years, they were not willing to plan for a year in advance even though the marketing research firm would give them better quality if they did.

• They provided referrals but on an ad hoc basis.

Gold customers:

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• Moderate spenders and conducted research on a project basis, sending out requests-for-proposals whenever they were conducting studies.

• Look for the lowest price and often do not allow sufficient time to perform the jobs.

• Because they have no overall plan, projects come in at any time

• Selling costs are high because the firm continually kept in personal and mail contact hoping to move these Iron customers up the Pyramid.

Iron customers

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• Spent little on research, conducted isolated projects that are usually of a “quick and dirty” nature.

• Selling costs are highest in this group since advertising and almost all speculative presentations are targeted to these accounts and salespeople have to spend multiple visits to get them.

• Once they became clients, the maintenance cost is high because they don’t understand the process of research.

• They often changed projects mid-stream and expected the firm to absorb the costs.

Lead customers

When Should a Firm Use the Customer Pyramid?

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When service resources, including employee time, are limited.

When customers want different services or service levels.

When customers are willing to pay for different levels of service.

When customers define value in different ways.

When customers can be separated from each other.

When service differentials can lead to upgrading customers to another level.

When they can be accessed either as a group or individually.

Customer-Product Profitability Analysis

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Customer alchemy is the art of turning less profitable customers into more profitable customers.

It can take place at any tier along the Customer Pyramid, but is more difficult at some levels than at others.

e.g: it is very difficult to move Lead customers up to Gold or Platinum tiers, and it is often necessary to “get the Lead out” rather than try to move those customers up.

Customer Alchemy

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If the decision is made to keep Lead customers, the strategies used are typically different than those used at other tiers.

Managing Expectations can help to move the customers up the ladder

Customer Alchemy

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Growing “share of customer”

Increasing the share of the customer’s purchasing in your product category.

Best way is through cross-selling

– Getting more business from current customers by selling them additional or complementary services

e.g : yatra.com, mytrip.com etc

Customer Alchemy