customer relationship management concept, significance

CRM meaning, relationship marketing

1. 20BA1E04 CUSTOMER RELATIONSHIP MANAGEMENT Saravanan. R Assistant Professor Department of Management Studies Sri Ramakrishna Engineering College

2. Course Objectives To provide an overview on the process of acquiring, retaining and managing long-term relationships with customers and to understand the utilisation of technology in managing customer relationships. To understand the benefits of CRM and the competitive advantage it provides to organizations, appreciation for how technology can be leveraged to enhance CRM initiatives and exposure to best CRM practices in different sectors.

3. COURSE OUTCOMES CO1: Understand customers in terms of their expectations, lifetime value and loyalty status to select the profitable customer segments. CO2: Analyse the key issues and considerations of Customer Relationship Management. CO3: Understand the process and elements of Customer Relationship Management. CO4: Appreciate the role and changing face of Customer Relationship Management as an IT-enabled function, and manage customer relationships. CO5: Evaluate the Customer Relationship Management tools with an understanding of the implementation issues and the emerging trends.

4. MODULE 1 INTRODUCTION to CRM Introduction - Difference between Marketing and CRM - Types of CRM - Customer segmentation - Customer Value - Customer lifetime value - Customer satisfaction - Loyalty Programs - CRM Metrics - Success Factors in CRM - CRM Issues and Problems.

5. MODULE: II CRM PROCESS AND STRUCTURES Objectives of CRM process - CRM and e-CRTA/Online CRM - CRM Cycle - 4 C’s of CRM process - CRM process for marketing organisation - CRM value chain - Strategies for customer acquisition, retention and development - Models of CRM: KOELs Model, ONYX model.

6. MODULE: III CRM TOOLS AND IMPLEMENTATION CRM tools - Choosing the right CRM Solution; Framework for Implementing CRM: a Step-by-Step Process: Five Phases of CRM Projects: Development Customizations, Beta Test and Data Import, Train and Retain; Roll out and System Hand-off, Support - CRM practices in Retail - Hospitality and Banking industry.

7. Purpose of relationship marketing Drastic changes in marketing contexts such as physical distance, time, economy, deregulation, globalisation, customer expectations and new information technology. Research has shown that organisations are increasingly focusing on attracting, developing and retaining businesses. This is called relationship marketing. Relationship marketing attempts to involve and integrate customers, suppliers and other infrastructural partners into a firm’s developmental and marketing activities.

8. Examples

9. Transactional Vs Relationship Marketing

10. Distinction between transaction and relationship marketing Transaction Marketing Relationship Marketing One off exchange Focus Ongoing exchange Brand management Customer management Short term focus Time dimension Long term focus Mass communication Primary communication Personal communication Isolated market research Customer feedback mechanism Ongoing Mass markets or market segments Market size Markets of one Market share Criterion for success Mind share Profitability of transaction Critical Metrics Life time value of customer Brand equity Customer equity

11. CRM is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and for the customers. - Sheth and Parvatiyar CRM is an integrated approach to identify, acquire and retain customers. By enabling to manage and coordinate customer interactions across multiple channels, departments, lines of business and geographies, CRM helps organisations maximise the value of every customer interaction and drive superior corporate performance.

12. Customers Call centre field Partners Web and E-mail Analytics Marketing Back office Customer information Topic for discussion: “Customer involvement in the marketing of the company leads to a reduction in marketing transaction costs” CRM: A targeted, mutually beneficial profitable relationship with individuals and groups

13. Evolution of Relationship Marketing

14. Factors responsible for growth of CRM

15. CRM Cycle 01 Obtain information from customers Creating superior customer value 02 Building loyal customers 03 Acquisition of new customers 04 Working towards increased productivity 05

16. Illustration Hawkins Cooker Limited

17. Significance of CRM The American Society of Quality and Arthur Anderson Consulting Inc., in their report, brought out the following findings about customers: Customers tell 8 friends about a satisfying experience and 20 friends about a negative experience. It is easier to influence existing customers to buy 10% more than to increase the customer base by 10%. 80% of successful new product and service ideas come from existing customers Repeat customers cost one-fifth less than new customers and can substantially increase profit.

18. Channel cost rationalisation Enables business process re-engineering Helps understand customer behaviour Lowers cost of sale Helps customer retention Provides Premium Reduce Marketing time Provides opportunity to cross-sell and up-sell Significance of CRM Perpetual stream of revenue Positive referral creation

19. Types of CRM

20. Operational CRM Operational CRM are designed to help execute sales, marketing, and customer service functions. They help streamline and manage all the ways your company interacts with customers. The main goal of this type of operational CRM is improving customer acquisition and retention: they help generate new leads, nurture them, convert them into customers, and retain them through ongoing marketing communications and high-quality customer service. Businesses of all sizes use operational CRM systems and frequently enable time-saving CRM automations.

21. Analytical CRM An operational CRM system helps get leads into your sales funnel, an analytical CRM system enables you to understand how your prospects are moving through your sales funnel.  Analytical CRM systems capture, store, and analyse customer data to provide insights into how customers interact with your business, allowing you to assess the effectiveness of marketing, sales, and customer service efforts and adjust your strategy accordingly. Analytical CRM can also run performance reports, such as sales history and customer service satisfaction scores, allowing you to leverage the strengths of high-performing team members and identify areas for employee development.

22. Collaborative CRM In a large business, sales, marketing, and customer support teams frequently collaborate on client accounts. The main goal of a collaborative CRM is to improve customer experience and streamline business processes by facilitating communication between departments. Collaborative CRM are particularly popular with large businesses—companies with large customer bases in which multiple people service individual client accounts.

23. CUSTOMER SEGMENTATION Consumer segmentation is the strategic process of dividing a broad audience into smaller, distinct groups with shared characteristics, such as demographics, behaviors, needs, or psychographics, to enable businesses to deliver more personalized products, services, and marketing messages.  This tailored approach allows companies to better understand customer motivations, address specific pain points, foster loyalty, and ultimately drive increased sales and revenue. 

24. Benefits of Consumer Segmentation Improved Marketing Effectiveness Enhanced Customer Experience Increased Customer Loyalty and Retention Better Resource Allocation Competitive Advantage

25. Creating Customer Value, S a t is f acti on and Loyalty

26. Ritz Carlton - Famous for its Exceptional Service

27. Organizatio n Charts

28. Customer Perceived Value Consumers are better educated and informed than ever Customer perceived value is the difference between the prospective/future customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.

29. Customer Value Value creation is a strategic process to manage a product, service or a business unit’s growth and competitive share. It is built on a core foundation of market research applying advanced techniques, called Customer Value Analysis (CVA). Customer Value Management is a proven methodology for addressing critical business issues. Customer Value Management is a product of customer value-added techniques and economic value comparisons.

30. In the recent years, the notions of value creation and value delivery have become increasingly prominent. At the same time, there was a shift from the 4P’s of marketing to an emphasis on relationship, networks and interaction. The concept of customer value is becoming more and more prominent as a crucial strategic factor in gaining a competitive advantage. Perceived value represents an all-inclusive evaluation by the customer about the utility of a product based on “ what is got and what is given ”. Value resides in the balance between the functional solution acquired by the customer and the customer’s sacrifice in acquiring the solution.

31. Determinants of Customer Perceived Value Image benefit Psychological cost Personnel benefit Energy cost Services benefit Time cost Product benefit Monetary cost Total customer benefit Total customer cost TCB is the perceived value of economic, functional and psychological benefits customers expect from market offering. TCC is perceived bundle of costs customers expect to incur in evaluating , obtaining, using a given market offering , energy and psychological costs.

32. Customer Value from cost cost-benefit perspective Product Value Service Value Personnel Value Image Value Monetary Cost Time, energy & Psychic Cost Total Customer Value; Quality Dimension Total Customer Cost Customer Delivered Value

33. Steps in a Customer Value Analysis Identify major attributes and benefits that customers value Assess the qualitative importance of different attributes and benefits Assess the company’s and competitors’ performances on the different customer values against rated importance Examine ratings of specific segments Monitor customer values over time

34. Customer Lifetime Value CLV is the net present value of the total profits that a company could realise with the average new customer within a given customer segment during a given number of years. It is the true value of a customer that can be considered as the most appropriate measurement of how much an organization would or should be willing to invest in acquiring or retaining him. CLV can be used to decide how much the company can invest to build a relationship with a particular customer.

35. Customer Lifetime Value The company might decide to invest in the customer to retain him and thus reduce the rate of customer defection, or to turn low-profit customers into more profitable ones by increasing the longevity of the customer relationship and/or by enhancing the growth potential of each customer through cross-selling, up-selling and increased share of wallet. Ex: if an average customer of BSNL pays Rs.500 per month and stays with the company for 20 years, his average lifetime value will be Rs.500 * 12 * 20 =Rs. 1,20,000.

36. Issues in calculating CLV CLV has an intuitive appeal as a marketing concept because, in theory, it represents exactly how much each customer is worth in monetary terms and therefore exactly how much a marketing department should be willing to spend to acquire each customer. It is difficult to make accurate calculations of CLV due to the complexity and uncertainty surrounding customer relationships.

37. What is Loyalty? Loyalty is a deeply held commitment to re-buy a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.

38. The Value Proposition The whole cluster of benefits the company promises to deliver

39. Customer Satisfaction Customer satisfaction refers to the extent to which customers are happy with the products and services provided by a business. Customer satisfaction can be measured with respect to specific program services, activities or other aspects of the programme. Gaining a high level of customer satisfaction is very important to a business because satisfied customers are most likely to be loyal and to make repeat orders and to use a wide range of services offered by a business. Customers are likely to appreciate the goods and services they are provided if they are made to feel special.

40. Business Significance of Satisfied Customers Growth Strategies International (GSI) performed a statistical analysis of customer satisfaction data encompassing the findings of over 20000 customer surveys conducted in 40 countries by Infoquest . The study concluded that a customer who is totally A satisfied customer contributes 2.6 times as much revenue to a company as a somewhat satisfied customer Satisfied customers provide 17 times as much revenue to a company as somewhat dissatisfied customers Dissatisfaction decreases revenue at a rate equal to 1.8 times what a totally satisfied customer contributes to a business. Customer satisfaction can change over time. Changes in the level of customer satisfaction and the reason for such changes suggest that The timing of measurement is important Measuring and interpreting customer satisfaction can be challenging

41. There are many factors which lead to high levels of customer satisfaction, including; Products and services which are customer-focused and provide high levels of value for money Customer service gives personal attention to the needs of individual customers After-sales service, such as maintenance and updating

42. Process of evaluating customer satisfaction Determine how well the marketing Programme is meeting its goals
Identify Programme areas that need improvement
Find out if the Programme operates the way it was designed to operate
Discover the degree to which the customers are satisfied with important parts of the company’s Programme
Understand the customer opinion (Satisfaction/dissatisfaction)

43. There are two important factors in customer satisfaction Customer’s expectation Customer’s perception Customer satisfaction is a result of the comparison between the Customer’s perception and the Customer’s expectation. If customers’ expectation exceeds the perceived performance of the offers, it leads to customer dissatisfaction, and if the customer’s perception of the offer exceeds the customer’s expectation, it leads to customer satisfaction. Customer Expectation Customer Perception Customer Expectation Customer Perception Customer Dissatisfaction Customer Satisfaction

44. Measuring Satisfaction Periodic Surveys Customer Loss Rate Monitor Competitive Performance

45. Customer Satisfaction Customer Loyalty Company’s Profit

46. What is Quality? Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

47. Maximizing Customer Lifetime Value Customer P r o f i t a b i l i ty C u s t o m er Equity L i f e t i m e Value

48. Customer-Product Profitability Analysis What can company do for customer 2 & 3 ? It can raise the price of less profitable product or eliminate them It can try to sell customer 2 & 3 its profit making products .

49. Framework for CRM Identify prospects and customers (maintain your customer database) Differentiate customers by needs & value to company Interact to improve knowledge Customize for each customer

50. Harrah’s targets hundreds of segments

51. Reducing Defection • It is not enough to attract new customers ; the company must also keep them and increase business. • • • Too many companies suffer from high customer churn or defection. Ex. Telecom MNP introduce in India To Reduce defection rate companies must • • • Define and measure the defection rate Differentiate the causes of customer attrition and identify those that can be managed better Compare the lost customer’s lifetime value to the cost of reducing the defection rate

52. Managing the customer base Reduce the rate of defection Increase lo ngevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on high-profit customers

53. Building Loyalty Creating a strong , tight connection to customer is dream of any marketer and often the key to long term marketing success. There are three types of marketing activities companies are using to improve loyalty and retention. Interacting with customers Developing Loyalty Programs Creating institutional Ties

54. Customer Retention Acquisition of customers can cost five times more than retaining current customers. The average customer loses 10% of its customers each year. A 5% reduction in the customer defection rate can increase profits by 25% to 85%. The customer profit rate increases over the life of a retained customer.

55. Creating Customer Evangelists

56. Steps for Creating Customer Evangelists Customer plus-delta Napsterize your knowledge Build the buzz Create community Make bite-size chunks Create a cause

57. Database Key Concepts Customer database Database marketing Mailing list Business database Data warehouse Data mining

58. Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes

59. Don’t Build a Database When The product is a once-in-a-lifetime purchase Customers do not show loyalty The unit sales are very small The cost of gathering information is too high

60. Perils of CRM Implementing CRM before creating a customer strategy Rolling out CRM before changing the organization to match Assuming more CRM technology is better Stalking, not wooing, customers

61. Marketing Debate Online vs. Offline Privacy? Take a position: Privacy is a bigger issue in the online world than in the offline world. or Consumers receive more benefit than risk from marketers knowing their personal information.

62. Marketing Discussion Choose a business and show how you would go about developing a quantitative formulation that captures the concept of customer lifetime value.

63. CRM Process The CRM process is a strategy for keeping every customer interaction personalised and meaningful, which consists of five main steps. A customer relationship management system (CRM system) provides the data and functionalities a team needs to execute this strategy—and ultimately turn leads into customers.

64. CRM process To understand the steps in the CRM process, we need to understand the customer life cycle. It is one of the first concepts that we should learn as a sales representative to understand how a person becomes a loyal customer. The CRM cycle involves marketing, customer service and sales activities. It starts with outreach and customer acquisition and ideally leads to customer loyalty. There are five key stages in the CRM cycle: Reaching a potential customer Customer acquisition Conversion Customer retention Customer loyalty

65. CRM Process

66. 1. Generate brand awareness The first step in acquiring new customers is to introduce them to your business. The Marketing team generally takes on this task using several measures: 1.  Learning about your target audience:   Marketers will conduct research to identify their audience’s target demographics, interests, preferred channels of communication, what messaging they respond most to and what they care about. 2.  Segmenting your target audience:   Audience personas are created to segment a brand’s target audience into similar groups based on similar interests or demographics. This helps marketers identify which types of people are most likely to become customers and who their campaigns should target. 3.  Creating marketing campaigns that speak to the target demographics:   A/B tests and marketing automation can be used to identify what works and what does not, to create unique campaigns for unique customer segments such as on social media or email and to create strategies for lead acquisition.

67. 2. Acquire leads Introducing your brand to a potential customer is just the beginning of the CRM process. From there, we have to encourage them to learn more about our business and engage with it. Depending on how our company is structured, this lead acquisition step could be a marketing or sales team responsibility — or both. If your CRM technology comes equipped with a lead enrichment tool, like Reach, lead acquisition is unbelievably simple

68. 3. Convert leads into customers Once we have successfully engaged with our leads and they are interested. Now it is time to turn those leads into customers. To do so, sales representatives must be skilled at identifying how interested leads are and, specifically, whether they are interested enough to make a purchase. A CRM is very helpful here. The historical data from past successful sales can be used to identify lead-qualification criteria. These criteria can be added as “attributes” to your CRM’s lead-scoring tool to help representatives identify opportunities with the highest probability of a sale. If leads do seem likely to make a purchase, reps must then be able to nurture them further and build their trust enough to convert

69. 4. Provide superior customer service We have successfully converted our lead into a customer. But the CRM process does not end when a customer converts. In order to grow as a company, we need to retain customers. The only factor which the customer can retain with the company is the excellent service from Support. According to “ Zendesk’s 2020 Customer Experience Trends Report ” , customer service is the biggest factor that determines a consumer’s loyalty to a brand. Conversely, poor customer service can cost you customers and negatively impact our reputation. Support teams must be able to deliver superior support whenever, wherever, and however their customers expect it.

70. 5. Drive upsells When we think of a returning customer, we imagine a shopper continually coming back to the same business to buy the products they know and love. But there is another key way existing customers provide value — by upgrading to more expensive products.

71. Customer Relationship Management (CRM) CRM refers to Customer Relationship Management. It includes the processes and systems which enable a business to form, manage and track relationships and communications with its customers for the growth of the business, but CRM is based on traditional systems like web-based and retail store, telephone or fax customer contact. In Customer Relationship Management nature of the relationship is simple and static

72. Benefits of CRM Improved client data structure and access Better lead tracking and sales forecasting Improved client targeting and segmentation Simplified service and client assistance 

73. Electronic Customer Relationship Management (ECRM) eCRM refers to Electronic Customer Relationship Management. It is a step ahead of CRM, and it is the adaption of CRM in an E-Commerce environment and through the internet. In eCRM, every communication occurs through the internet like from obtaining customer support to online purchase, customer relationship management to customer feedback/suggestion collection. In Electronic Customer Relationship Management, the nature of the relationship is complex and dynamic.

74. Benefits of eCRM Getting to know customers in real time Digital marketing plans that don't cost a lot Better customisation with advanced data Global reach and customer access 24 hours a day, seven days a week 

75. Difference between CRM and eCRM S.No. CRM E-CRM 01. CRM stands for Customer Relationship Management. E-CRM stands for Electronic Customer Relationship Management. 02. CRM applies traditional tools and standards to perform its operation. E-CRM applies electronic/digital tools and standards to perform its operation. 03. In CRM customer contact is initiated through retail store, telephone or fax. Along with telephone, in E-CRM customer contact is initiated through the internet, email, wireless, mobile and PDA technologies. 04. In CRM Customer service is time and space-constrained. Customer service can be provided at any time from any location.

76. Difference between CRM and eCRM S.No. CRM E-CRM 05. In Customer Relationship Management wide area coverage is not possible. In Electronic Customer Relationship Management wide area coverage possible. 06. In CRM quick response is possible through telephonic call. In E-CRM quick response may or may not happen poor response 07. In CRM system is designed around products and job function. In E-CRM system is designed around customer needs. 08. Customer Relationship Management is more effective. In eCRM optional response limits its effectiveness.

77. Difference between CRM and eCRM S.No. CRM E-CRM 09. It may or may not provide so attractive options. It provides attractive options as it uses audio visual features, animations etc. 10. In CRM web-based applications needs PC clients and also which needs to be downloaded separately in various platforms. In Electronic Customer Relationship Management, no such requirement; the internet is the backbone, and the browser is the customer’s portal to e-CRM. 11. In CRM, the nature of the relationship is simple and static. In eCRM the nature of relationship is complex and dynamic. 12. CRM implementation is longer and management is costly as the system is situated at various locations and on several servers. In E-CRM reduced time and cost. System implementation and expansion can be managed on one location and on one server. 13. Customization of information is possible but requires little changes in system. Customization of information for each person is very easy. 14. Innovation is optional in CRM. Innovation is necessary in E-CRM. 15. In CRM the data is secured as there is no involvement of internet and no additional cost is incurred for data security. In eCRM the data is not so secured as there is involvement of internet but security can be provided with firewalls etc and additional cost is incurred for data security.

78. Advantages and Disadvantages: CRM vs eCRM Aspect CRM (Traditional) eCRM (Digital) Advantages - Improved data management - Enhanced sales tracking - Targeted marketing - Streamlined support - Real-time engagement - Cost-effective campaigns - Enhanced personalization - Global reach Disadvantages - Costly and time-consuming - Employee resistance - Data security concerns - Information overload - Tech dependency - Less personal touch

79. When to Choose CRM or eCRM? CRM is ideal for businesses with a strong offline presence or those that rely heavily on in-person interactions, such as retail stores or service providers with limited digital infrastructure. eCRM is best for organisations looking to scale rapidly, engage customers across multiple digital channels, and leverage data-driven personalisation, especially in e-commerce, SaaS, and global markets. Case Example Scenario 1: Traditional CRM A local insurance agency uses CRM software to track customer policies, schedule follow-up calls, and send renewal reminders by mail. The process is effective but limited to office hours and requires manual updates. Case Example Scenario 2: eCRM An online store uses eCRM to combine social media messaging, email marketing, and chatbots driven by AI. Customers get personalized product suggestions, updates on their orders in real time, and support 24 hours a day, seven days a week. This leads to higher conversion and retention rates.

80. 4C’s (Elements) of CRM Process The 4C’s ( Customer Experience, Conversation, Content, Collaboration ) play a crucial role in modern CRM strategies. By focusing on these elements, businesses can create more meaningful and profitable relationships with their customers, driving growth, loyalty, and sustainable success.

81. 4C’s (Elements) of CRM Process 1. Customer Experience Definition:   Customer experience (CX) refers to the overall perception and interactions a customer has with a company throughout their journey. It encompasses every touchpoint, from initial awareness and engagement to the post-purchase support and advocacy stages. Key Aspects: Interaction Quality:   Providing exceptional customer service and support is crucial. This involves promptly addressing customer queries, resolving issues efficiently, and offering personalized experiences. Product Quality:   Delivering high-quality products that meet or exceed customer expectations is foundational to a positive customer experience. Consistency:   Consistency across all touchpoints, whether digital or physical, helps in building trust and reliability with customers. Personalization:   Tailoring interactions and offerings based on customer preferences and behaviors enhances the overall experience. Impact:   A positive customer experience fosters customer loyalty, encourages repeat purchases, increases customer lifetime value, and generates positive word-of-mouth recommendations.

82. 4C’s (Elements) of CRM Process 2. Conversation Definition:   Conversation in the context of CRM refers to engaging in meaningful interactions with customers rather than one-way communication. It involves listening to customer feedback, responding in real-time, and actively participating in discussions. Key Aspects: Listening:   Monitoring and listening to customer conversations across various channels such as social media, customer support calls, and feedback forms. Engagement:   Actively responding to customer queries, comments, and concerns promptly and transparently. Facilitation:   Creating an environment where customers feel valued and encouraged to share their opinions and experiences. Integration:   Integrating offline and online conversations to amplify the impact of customer interactions. Impact:   Effective conversations build stronger relationships, improve brand perception, increase customer satisfaction, and drive engagement and loyalty.

83. 4C’s (Elements) of CRM Process 3. Content Definition:   Content refers to the information, messages, and materials that businesses create and share to engage with their audience. In CRM, content is used strategically to educate, inform, and engage customers. Key Aspects: Relevance:   Content should be relevant to the target audience’s interests, needs, and challenges. Authenticity:   Authentic content reflects the brand’s values and resonates with customers on a personal level. Engagement:   Engaging content encourages interaction, sharing, and participation from customers. Consistency:   Consistent content creation and distribution help maintain customer interest and build brand authority. Impact:   Good content enhances brand visibility, drives traffic to digital platforms, educates customers, nurtures leads, and supports customer retention efforts.

84. 4C’s (Elements) of CRM Process 4. Collaboration Definition:   Collaboration involves actively involving customers in business processes, decision-making, and co-creation activities. It aims to build stronger relationships and increase customer loyalty through participatory approaches. Key Aspects: Co-Creation:   Involving customers in product development, service enhancements, and innovation processes. Feedback Loop:   Soliciting and acting upon customer feedback to improve products, services, and customer experiences. Community Building:   Creating communities or platforms where customers can interact, share ideas, and provide mutual support. Transparency:   Being transparent about business practices and involving customers in decisions that affect them. Impact:   Collaborative approaches enhance customer satisfaction, foster brand advocacy, improve product-market fit, and strengthen customer loyalty and retention.