Chapter 1

Concept and Context of

CRM
Buyer and Seller Relationship over the
Ages

 Barter Age
 Customized Product Age
 Mass Production Age

- Customer
- Consumer
 Customization Age: 1:1 Relationship
What is CRM

Strategy, Process, Software, Philosophy, Project???

a) CRM is about Strategy

CRM is about creating a competitive advantage by

being the best at understanding, communicating,
delivering and developing existing customer
relationships, in addition to creating and keeping
new customers (Strategic CRM)
Ask questions for a good CRM Strategy
 What products and services are we offering now and in
the future?
 In what markets?
 What customer groups will these products and services
appeal to?
 Which of these are of greatest value to the organization?
In terms of expenditure, reliability, growth potential?
 What additional needs do the most valuable customer
groups have? Adiitional products? Additional services?
 In what different ways can we do business to deliver to
our customers better?
Designing a CRM Strategy

 Cog Wheel Process: CRM (UK) Ltd.

(Four Key Areas of the Business)
- Strategy
- People
- Technology
- Processes
D4 Company Analysis

 Step 1: Define the existing customer relationship

management processes within the company
 Step 2: Determine the perceptions of how the
company manages their customer relationships both
internally and externally
 Step 3: Design the ideal customer relationship
management solutions relative to the company or
industry
 Step 4: Deliver a strategy for the implementation of
the recommendations based on the findings
What motivates companies to adopt
CRM Strategies?

 Competition: Globalization

 Customer Expectation: e-Commerce

 Technology: Touchpoints

 Diminishing impact of advertising:

Information through e-mail and web sites
What is CRM?

b) CRM – the ‘customer’ thread

Whether the customers are current / potential /

selected CRM is about acquiring, retaining, partnering,
personalizing relationships with them

CRM helps businesses use technology and human

resources to gain insight into the behavior of
customers and the value of these customers.
Concept of Personalization and
Customization

 Customization: Customization assumes that

manufacturer will design / or enable
designing a product to suit customer needs.

 Personalization: Personalization is about

customer becoming a co-creator of the
content of their experience.
Relationship Hierarchy
Loyalty Pyramid
Nine Truths of Relationship Marketing

 TRUTH # 1: Customers are no longer loyal.

 TRUTH # 2: Customers do not really want a
relationship but companies do.
- Your Best Customers Can Leave
- Your Marginal Customers Can Move
- Consumers Can Become Customers
 TRUTH # 3: Customers want information.
 TRUTH # 4: Customers not only want to be
thanked for their patronage, they expect it.
Nine Truths of Relationship Marketing

 TRUTH # 5: Customers control the selling

process.
 TRUTH # 6: The Lifetime Value of a customer is
not relevant.
 TRUTH # 7: Do not overcomplicate the program.
 TRUTH # 8: Keep reporting simple and focused
on the customer.
 TRUTH # 9: WHAT IF? Ask it often. Experiment
every chance you get and don’t call it testing.
CRM, Marketing and Relationship
Marketing

Investment in ‘relationship’ with various stakeholders is very

important. CRM is the domain of relationship management with
customers.

 Industrial Revolution: “This is what I make, won’t you please buy

it?”
 Customer Revolution: “This is what I need, Can’t you please
make it.”

Companies have to turn from a ‘make and sell’ philosophy to

‘sense and respond’ philosophy.

[Please look at the Table at Page No. 21]

Holistic Marketing Framework

The THREE dimensions (CRM, Relationship Marketing and

Marketing) are extremely lucidly integrated in a concept called
‘Holistic Marketing’ framework.

The Holistic Management framework enables management to

answers following questions:

1. How can a company identify new value opportunities for

renewing its marketing – (Marketing Dimension)
2. How can a company create more promising new value offering?
– (Stakeholders Relationship Dimension)
3. How can a company use its capabilities and infrastructure to
deliver the new value offering efficiently? – (CRM Dimension)
Holistic Marketing Framework

The THREE dimensions (CRM, Relationship Marketing and

Marketing) are extremely lucidly integrated in a concept called
‘Holistic Marketing’ framework.
Management Decision depends on:
1. How can a company identify new value opportunities for
renewing its marketing – (Marketing Dimension)
2. How can a company create more promising new value offering?
– (Stakeholders Relationship Dimension)
3. How can a company use its capabilities and infrastructure to
deliver the new value offering efficiently? – (CRM Dimension)

Three organizational functions will play the major role in the

economy: the ‘demand management’ function, the ‘resource
management’ function and ‘network (Relationship)
management’ function.
Transaction VS Relationship Marketing

Transaction Marketing Relationship Marketing

 Functional Marketing  Cross-functional marketing

 Focus on a single sale  Focus on customer retention

 Orientation on product feature  Orientation to customer values

 Short time scale  Long time scale

 Little emphasis on customer service  High emphasis on customer service

 Moderate customer contact  High customer contact

 Quality is a concern of production  Quality is everyone’s concern

Tangible Relationship (30 R’s)

1. Classic Market Relationship: Consisting of the relationship

between the supplier and the customer, between the customer-
supplier-competitor and the classis network distribution channels.
2. Special Market Relationship: Relationship via full time and part
time marketers, interaction between customers and service
providers, relationship in industrial and business marketing, e-
relationship, green relationship (environment and health based,
law based)
3. Mega Relationships: Personal and social network, mass media
4. Nano Relationships: Relationship between internal customers
and internal suppliers, the relationship between operations
management and marketing, relationship with the employee
market.
First TWO considers as Direct market Relationship and Last TWO considers as Non-Market
Relationships
Types of CRM

1. Proactive versus Reactive

CRM

1. Operational, Collaborative
and Analytical CRM
Proactive versus Reactive CRM
Operational, Collaborative and
Analytical CRM

1. Operational CRM: Front office CRM. Interaction

between the customer and marketer directly through
customer touchpoint (POS, Call centers, web etc.).
 Face to face touchpoints:
Sales/Service/Channel/Events/Stores/Promotions
 Database driven touchpoints:
Telephones/Email/Mail/SMS/Fax/Loyalty
Cards/ATM’s
 Mass Media:
Advertising/PR/Websites
Any Transaction can take place through these touchpoints. Low level
managers interact in this stage and process the information to
the mid level managers
Operational, Collaborative and
Analytical CRM

2. Collaborative CRM: Two way dialog between a

company and its customers through a variety of
channels (business partners, agents, brokers,
intermediaries) to facilitate and improve the quality
of customer interactions and maintain a long term
profitable relationship.

Performed by Mid level managers and transform the information to

the top level managers and decision makers.
Operational, Collaborative and
Analytical CRM

3. Analytical CRM: Known as back-office or

strategic CRM. It involves understanding the
customer activities that occurred in the front office.
Using technology, mass data is going to
transformed into ‘business knowledge’ (behavior
patters, preferences, values of customers).

Top Level managers and decision makers establish the

process and convey the message to the mid level and low
level managers for implementation.