Customer Relationship Management

CRM is a business philosophy based on upon individual customers and customised products and services supported by open lines of communication and feedback from the participating firms that mutually benefit both buying and selling organisations. The buying and selling firms enter into a learning relationship, with the customer willing to collaborate with the seller and grow as a loyal customer.

Customer Relationship Management

In return, the seller works to maximize the value of the relationship for the customers benefit. In short, CRM provides selling organisations with the platform to obtain a competitive advantage by embracing customer needs and building valuedriven long-term relationships.

CRM
CRM in general is operationally defineda management process of acquiring customers by understanding their requirements, retaining customers by fulfilling their requirements more than their expectations and attracting new customers through customer specific strategic marketing approaches. The process invites total commitment on the part of the entire organization in evolving and implementing relationship strategies that would be rewarding to all concerned.

What is CRM?
CRM is the development and maintenance of mutually beneficial long-term relationships with strategically significant customers (Buttle, 2000) CRM is an IT enhanced value process, which identifies, develops, integrates and focuses the various competencies of the firm to the voice of the customer in order to deliver long-term superior customer value, at a profit to well identified existing and potential customers. (Plakoyiannaki and Tzokas, 2001)

CRM
CRM is a comprehensive approach for creating, maintaining and expanding customer relationships.
Comprehensive: CRM does not belong just to sales and marketing. It must be a way of doing business that touches all areas. Approach: A way of treating or dealing with something. It is way of thinking about and dealing with customer relationships. Strategy: It involves a clear plan.

CRM
CRM is an approach to interacting with customers and prospects to provide a seamless (faultless) flow of information and service to the customer from marketing, through sales and customer service for the entire customer life cycle.

Goals of CRM
Most companies expect( waits for) CRM to add stability through increased customer retention and long-term profitability through increased efficiencies in sales (higher conversion rates of prospects to customers through prospect relationship management)

Different Terms Of CRM

eCRM (alternatively e-CRM): eCRM refers to electronic customer relationship management or, more simply, CRM that is Web-based. E.g. Golf retailer chipshot.com

cCRM: Collaborative CRM denotes situations in which customers can interact directly with the organization, usually through the Web. e.g. Dell allows customers to choose their own workstation components, essentially designing their own Pcs.

Continued
SRM: Supplier Relationship Management focus on actual suppliers. SRM helps companies evaluate and categorize suppliers for given projects to optimize supplier qualification and selection, thereby streamlining the supply chain. mCRM:Mobile CRM suggests the provision of data to customers, suppliers, and business partners via wireless technologies.

Continue
Type of CRM a company is looking into, the common denominator is Motivating the right customers to continue doing business with customers. Important distinction is Operational vs. Analytical CRM.

Operational CRM
Known as front-office CRM, involves the areas where direct customer contact occurs. Refer to these interactions as customer touch points, can be inbound contact e.g. a call to companys customer support hotline or outbound contact. e.g. an in- person sales call or an e-mail promotion.

Analytical CRM
Known as Back-office or Strategic CRM, involves understanding the customer activities that occurred in the front office. It requires technology (to compile and process the mountains of customer data to facilitate analysis) and new business processes (to refine customerfacing practices to increase loyalty and profitability).

 Campaign management: Analyzing data for purposes of launching a marketing campaign and then monitoring that campaign and tracking its results to determine the campaigns value. Can also refer to the technology that automates the campaign management A linear campaign: For launching a new marketing campaigns, rendered all the more difficult with the increasing frequency of smaller, more target promotions.

But only those with the necessary data can really monitor the results of threat campaign, and use these results to refine future campaigns, a process known as closed loop campaign management. This means not only to analyze and understand whether a campaign is a success and why. It means using that new knowledge as the basis for future campaigns, in effect closing the loop with evolving customer information.

 Cross- selling: selling a customer a product or service based on her past behaviors or purchase history. Best done when a company understand the relationship between two products and identifies which product might "pull another.

 Up-selling: Motivating a customer to trade up to a more expensive or profitable product. The logic is, now that I know what this customer wants to buy, perhaps we can motivate him to buy a more profitable version or model.

Transactional Marketing
This approach is focus on individual transaction and does not concern continuous relationship with customers. It does not contain a strategic long- term perspective. It centers around tentative adjustment process as regards performing marketing functions. Customers are viewed as outsiders to the business.

Transactional Marketing
In this approach, customers expectations, satisfaction, multiple influences on their decisions- making process etc. are not given due significance. Little attention is paid to customer services and customer commitments. The thrust is on gaining more and more new customers rather than retaining existing customers.

Relationship Marketing
It has a narrow focus on the customers and only on the marketing function of the organization concerned. CRM focuses more widely on customers and the entire function connected with value creation and delivery chain of the organization concerned. Organization uses the term CRM rather than relationship management.

Relationship Marketing
It is the philosophy of doing business, that focuses on keeping and improving current customers, rather then on acquiring new customers. It assumes that consumers prefer to have an ongoing relationship with one organization than to switch continually among providers on their search for value. It is usually much cheaper to keep a current customer than to attract a new one, successful marketers are working on effective strategies for retaining customers.

Comparisons of traditional & relationship marketing

Traditional transaction oriented Marketing Focus on single sale Relationship Marketing Focus on customer retention

Short term orientation

Sales to unidentified buyers Limited customer commitment

Long term orientation

Tracking of identifiable buyers High customer commitment

Quality is the responsibility of Quality is the responsibility of all. production department

Evolution of Relationship Marketing

They concentration at the beginning was only on Consumption. Human activities were confined (restricted) to consuming whatever was available within their reach. Then concentration moved to production. Production was performed initially for consumption only and then for exchange. In due course, production activities were extended to produce things both for consumption and for sales.

Evolution of Relationship Marketing

During the sales area, production was performed exclusively for sales and the attention was only on products. Whatever was produced became saleable because of limited supply. As the attention shifted to production, selling became a tough job because of increased supply. This made organization to move towards marketing and related activities. At this stage the focus was shifted from products to customers.

Benefits of Relationship Marketing

From the organizations point of view1. 2. 3. 4. 5. 6. 7. 8. Reduction in customer recruitment cost. Generation of more and more loyal customers Expansion of customer base Reduction in advertisement and other sales promotion expense Benefiting customer selectivity approach Increase in the number of profitable customers Easy introduction of new products. Easy business expansion possibilities.

Goals of Relationship Marketing

The primary goals is to build and maintain a base of committed customers who are profitable for the organization, to achieve this goals, the firm will focus on the Attraction, Retention and Enhancement of customer relationship The firm will seek to attract customers who are likely to become long term relationship customers.

Through market segmentation, the company can understand the best target markets for building lasting customer relationships.

As the no. of these relationships grows, the loyal customers will frequently help to attract new customers with similar relationship potential.

Leaky bucket model of customer retention and defectION

New customers

Current level Of customers

Lost customers

Bucket theory of marketing

By Andrew Ehrenberg

Leaky bucket model of customer retention and defection

Marketing can be thought of as big bucket: its what sales, advertising, and promotion programs do that pours business in to the top of the bucket. As long as these programs are effective, the bucket stays full. There is a hole is the bucket, when the business is running well and the service industry is delivering on its promises, the hole is small and few customers are leaving. When the operation is weak and customers are not satisfied with what they get, however, people start falling out of the bucket through the holes faster than they can be poured in through the top.

Why organization lose their customers?

Why organization lose their customers

Price related reason: Customer try to match the price they pay for acquiring a brand. If the customer perceives a mismatch between the price and the value, he would opt for a competitors brand.

 Product related reasons: Due to technological advancement, the new brand which makes entry would be capable of offering better performance as compared to the already existing brand. This would induce customers to make a brand switch over.

Why organization lose their customers

Service related reasons: The customers are concentrating services offered at presales, during sales and after sales. Any dissatisfaction as regards to services would cause the customer to move.

 Competitors related reasons: Technological advancement, attractive offers, value added services, etc. offered by competitors would also draw the attention and induce customers towards brand switching.

Why organization lose their customers

Benefits related reasons: The customers may be attracted by various augmented benefits offered by the competitors. Such benefits may be more appealing ad will induce customers towards brand changes. Personal reasons: customer would become a brand defector due to Moved away from the market area where the brand is sold. Influence of other members of the family or friends Role changes in life cycle, anger, disgust, distress developed with in the process of product delivery.

Benefits of customer Retention

Customers will receive greater value relative to what they expect from competing firms and remain loyal to a firm. Consumers gets quality, satisfaction, specific benefits exceed gives monetary and nonmonetary costs. Building a long term relationship with a service provider can reduce consumer stress as initial problem & solved special needs like legal, medical, education or weight-loss program.

Benefits of customer Retention

Most consumers have many competing demand for their time and money and are continually searching for ways to decision making to improve the quality of their lives. Firms may actually become part of the consumers social support system. E.g. Health club who known her customers personally, private school principal knows an entire family and its special needs.

Benefits for the organization

Increasing purchases: A consumers get know a firm and are satisfied with the quality of its services relative to that of its competitors, they will tend to give more of their business to the firm. Free advertising through word of mouth: when a product is complex and difficult to evaluate, consumers most often look to others for advice on which providers to consider. Satisfied, loyal customers are likely to provide a firm with strong work of mouth endorsements.

Benefits for the organization

Employee retention: It is easier for a firm to retain employees when they have stable base of satisfied customers. people like to work for companies whose customers are happy and loyal. Lifetime value of a customer: If companies knew how much it really costs to lose a customer, they would be able to make accurate evaluations of investments designed to retain customers.

Strategies for building relationship

An organization's strategies towards developing and maintaining sustainable relationship differ from one organization to another depending on certain factors such as:-

1.People: People have basic role in developing and maintain relationship with customers. Everyone from the lowest to the highest level irrespective of their functional specialization and responsibilities must integrate their activities towards- customer satisfaction.

Strategies for building relationship

2.Process: It involves a logical sequence of activities right from the need identification of potential customers to need fulfillment. It requires manufacture of products with desired attributes. The performance of each link must be objectively analysed and corrected in tune with the internal and external customers expectations.

Strategies for building relationship

3.Product:
The product offered must constantly provide value addition. A customer satisfied with a given product may soon become a dissatisfied customer In view of the changes that take place in his expectations.

4.Organization:
To build customer relationship, organization should be aware of the technology advancements and provide quality services in tune with the customer's expectations. should concentrate on total customer satisfaction and respond to the requirements of customers faster that its competitors.

Strategies for building relationship

5.Setting satisfactory service standard: A customer expects quality products and services. So Organizations is expected to render in 3 stages. Presales: During this customer develops expectations and organization must ensure quality and availability of the product in time. During sales: During sales process, organization must provide the customer an opportunity to inspect, and treat them with courteous attentiveness, prompt reply, etc. After sales: Organization must provide supporting services such as speedy replacements, simplify complaint procedure, efficient maintenance and repair services and so on.

Strategies for building relationship

6. Concentration on competitors: An organization must focus constant attention on the competitors performance, their strategy and style of operations and compare same with its own performance. The organizations performance must always be a step ahead of its competitors and it must know that the customer feels the difference.

Strategies for building relationship 7.Customer Analysis: It includes those who are presently consuming the products. And also prospective customers who are presently consuming the products of competitors. These customer must be analyzed which constitute customer inventory, level of customer retention, what makes them buy, level of satisfaction, place in loyalty ladder etc. this must be done by organization with help of experts i.e. external agencies. With existing customer and former customer.

Strategies for building relationship

8. Concentration on the paying ability of customers: Pricing decisions are to be governed not merely by cost related factors. Before fixing the price, the paying ability of the potential customers must be viewed. To some extend prices are to be adjusted with the fluctuations in the paying ability of potential customers.

 9.Cost Analysis: An organization must focus on cost of the product or services. They must perform value analysis. And try to reduce costs and retain the same good quality or improve quality of product or service.

Strategies for building relationship 10.Knowledge on purchase behaviors pattern:

Organization must have knowledge about factors of the purchaser decision process and ultimate outcome.

The outcome of purchase decision may be1.Purchase 2.Rejection 3.Postponement 4. Search for substitutes. They should have an idea about what % of customers arrive and what sort of a decision and appropriate steps are to be initiated towards making them buy the products on a continued basis.

Strategies for building relationship

11. Differentiation in prices and quality standards: Must offer services or brands of different varieties with price variations. So that depending upon the customers financial positions, may prefer a least one of the varieties available. This prevents switching over other brands.

 12.Focus on reducing dissatisfaction: The causes for dissatisfaction are to be identified and have to be attended well. If a complaint is well attended then customers becomes loyal and relationship would continue to exist.

Strategies for building relationship

13. Attention on Changing requirements of customers:The requirements of the customers are bound to change in tune with the changes in their lives, demographic and psychographic profiles and the related aspects. They would concentrate on lifemaintenance needs and then to life-changing needs, which will be followed by life- enhancing needs.

Strategies for building relationship

14.Concentration on performance: Performance of each one in the chain of product/ service offering is to be continuously monitored and corrective actions are to be initiated.

 15.Develop partnership with customers: Partnership builds long relationship with customers. This type of partnership may be form of buyback arrangements, training employees and extending managerial support to the customer organizations. This approach creates evidence for care and interest on the customers organisation

Strategies for building relationship

16.Training to supply chain employees: Organization must come forward to offer stateof the art training to all those who are connected in the supply chain. Training in the areas of customer care, customer approach, body language of service providers, customer communication, customer need assessment, customers complaint management ,etc. are to be provided.

Strategies for building relationship

17.Organizing customer clubs: should focus on sense of mutual belonging, understanding, and sharing of common problems, and emotions of the customers. Club serves as an effective platform for communicating organization's marketing activities, regular entertainment meets, pleasure trips awareness programmes, consumer education programmes, etc. can be organized involving the customers.

Strategies for building relationship

18.Effective customer communication system: communication must be simple, open, efficient customer friendly. They must feel free so that, special training may be given to personnel working in the communication channel in respect of receptive (friendly), encouraging, positive, optimistic and customer friendly to customers. The response from the organization to the complaints received also should be recorded.

Strategies for building relationship

19.Developing Customer satisfaction Index: Should build customer satisfaction index and measure the extent of satisfaction of the customers in terms if various attributes of brand and the related aspects. 20.Focus on preventive Actions: More attention should be devoted for order processing, delivery scheduling and the related aspects. Such actions would help damage control.

Strategies for building relationship

21.Concentration on customer satisfaction Research: Research on customer satisfaction in terms of customers level of satisfaction, factors contributing towards satisfaction, extent of customer retention, influence of competitors brand on customer satisfaction, customer attitude towards brand, perception of brand image so on. These strategies helps for improving customer satisfaction.

Strategies for building relationship

22.Unethical approach to build and maintain customer relationship: There are unethical way which are brought to your attention only for creating an awareness and not for application. Addiction: Creating a sense of addiction to the brand by adding ingredients that are harmful to body and mind such as soft drinks, food items etc. Fear: Developing a sense of fear in the mind of the customers, that once a brand is continuously used would cause problems in case of cosmetics, food, drinks medicines, etc.

Strategies for building relationship

Commitment: Developing misleading commitments and obligations. Imitating: Imitating the attributes of well-accepted brands in an unlawful way. Promises: Making promises to customers with no intentions to perform. Discrimination: Discrimination on the quality and services among buyers. Forcing: Making tie-up sales with other highly preferred items. Rewarding: Extending undue benefits in the forms of cash or equal means of benefits to the members of purchase team in case of industrial organizational purchase.

Developing total care programmes

Have to develop an excellent Total Customer Care Programme to suit to the specific requirements of its target customers.
Keep constant communication with customers. Respond as quickly as possible for all enquires received Concentration should be not only on the product satisfaction, but also on purchase consumption process. Make the products available within easy reach of the customers. Never hesitate to render advice to customers. Give product related educational programmes free of cost or with minimum fees. Encourage customer to participate in organizational customer related activities.