COMMERCIAL RELATIONSHIP

MANAGEMENT (CRM)
OKEMWA OGWOKA
0701668721
0722575388
 COURSE OUTLINE
• UNIT NAME: COMMERCIAL
RELATIONSHIP
• UNIT CODE: DPL 201
 Course description:
• Commercial Relationship Management (CRM)
is a comprehensive set of processes and
technologies for managing the relationships
with potential and current customers and
business partners across marketing, sales, and
service areas regardless of the channel of
distribution.
• This course focuses on the development and
implementation of relationship marketing and
strategies via the use of CRM initiatives.
 Expected Learning Outcomes
• 1. To show an understanding and insight
into new learning in the area of customer
relationship management.
• 2. To have a conceptual understanding and
the knowledge pertaining to practical
application of critical skills necessary for
building and managing partnering
relationships with customers and suppliers.
• 3. To be able to discuss the conceptual
foundations of relationship marketing and its
implications for further knowledge
development in the field of business
• The purpose of this course is to prepare
students to be able to deal with these changes
in the corporation and the global market place
- by exploring issues related to challenges of
developing and managing relationship
marketing strategies and programs.
•
• It explores a variety of factors and actions that
drive successful partnering relationships and
in turn lead to higher customer satisfaction,
market share and net cash flow. Strategic,
organizational, informational, operational and
financial perspectives are brought to bear on
the issue of building successful business
relationships
 Course Content

• Introduction-Defining CRM, CRM

Constituencies, Strategic CRM, Collaborative
CRM, Commercial contexts of CRM, Models of
CRM, Misunderstandings about CRM.
•
• Understanding relationships- What is a
relationship? Relationship quality, Need for
relationships with customers, Why customers
need relationships with suppliers, Why customers
do NOT want relationships with suppliers,
Customer satisfaction, loyalty and business
performance, Researching the satisfaction–profit
chain, Relationship management theories.
•
• Planning and Implementing Commercial
Relationship Management Projects-
Introduction, CRM implementation
• Phase 1: Develop the CRM strategy
• Phase 2: Build CRM project foundations
• Phase 3: Needs specification and partner
selection
• Phase 4: Project implementation
• Phase 5: Evaluate performance
• Managing Supplier and Partner
Relationships- Introduction, Supplier
relationships, Product development, Supplier
accreditation programs, Partners in value
creation, Alliances between non-competing
firms, Alliances between competing firms,
Category teams, Benchmarking partners,
Partners in value delivery.
•
• Managing Networks for Customer Relationship
Management Performance- Introduction to CRM
networks, Business networks, Network position,
What is meant by ‘focal firm? ’Business networks
and CRM, Supplier networks, Distribution
networks, Principles of network management,
Management of networks, Management in
networks, Research into network competence
•
 INTRODUCTION
• WHAT IS CRM
• GOALS OR OBJECTIVES OF CRM
• TYPES OF CRM
• MODELS OF CRM
• CRM CONSTITUENCIES
• MISUNDERSTANDING ABOUT CRM
 WHAT IS CRM
• CRM is an acronym of Commercial Relationship
Management.
• Commercial means relating to, engaging in or
used in commerce.
• It also means profitable, having profit as the main
goal.
• Relationship means the state of being related, the
friendship, contact or communication which exist
between people. ( by Collins Concise Dictionary)
• Customer relationship management (CRM) is a
combination of people, processes and
technology that seeks to understand a
company's customers. It is an integrated
approach to managing relationships by
focusing on customer retention and
relationship development.
• Companies that successfully implement CRM will reap
the rewards in customer loyalty and long run
profitability. However, successful implementation is
elusive to many companies, mostly because they do
not understand that CRM requires company‐wide,
cross‐functional, customer‐focused business process
re‐engineering. Although a large portion of CRM is
technology, viewing CRM as a technology‐only solution
is likely to fail. Managing a successful CRM
implementation requires an integrated and balanced
approach to technology, process, and people.
• Therefore CRM can be defined as a
comprehensive set of processes and
technologies for managing the relationship
with potential and current customers and
business partners across marketing, sales,
service areas regardless of the channels of
distribution.
 CRM Definition cont…
• CRM is an overall strategy that allows
organization to more effectively manage and
tract customers contacts.
• Customers have always been valuable for
businesses, but today their importance is very
much appreciated for the profitability of the
enterprise. This is largely because of rapid
globalization and growing competition.
Customers now have a variety of options
available with them for purchasing a particular
product. They can easily make comparisons,
shop or even switch companies in case they
are not satisfied with the service.
• As a result, today, the topmost strategy of a
business is to become a customer-focused
business in order to provide maximum
satisfaction to the customers thereby
establishing a long-term relationship with
them. That is why many companies are
turning to customer relationship
management (CRM) that focuses on the ways
of identifying and retaining the profitable
customers.
• Customer relationship management (CRM) is
defined as a business and technology
discipline that manages the ways an
organization deals with its customers in order
to enhance the revenue, profitability,
customer satisfaction and retention. It
analyzes the different aspects of customer
relationships, including customer services,
sales, and marketing, to improve their
customer focus.
• Customer satisfaction and customer loyalty
Customer satisfaction means that customer
needs, wishes and expectations are met or
overcome during the product/service period,
giving way to re-purchasing and customer
loyalty.
• A highly satisfied customer (Kotler, 2000: 48)  continues
his shopping for a long time,  buys more as long as the
firm produces new products and the existing products are
improved,  speaks of the firm and its products with praise,
 keeps indifferent to the trademarks that are in
competition with the products of the firm and does not
place the emphasis on the price,  and offers the firm
suggestions and ideas about products and services. It is
possible to secure the customer loyalty through customer
satisfaction. However, the fact that there are many
enterprises that offer products and services of the same
quality and at the same price interval makes it difficult for
the enterprises to secure customer satisfaction.
• Today the most important thing to do about
the reduced customer satisfaction is the
customer-centred practices adapted to each
customer’s needs and values. By treating
different customers in different manners,
firms can achieve customer loyalty (Tarhan,
2004: 77). Customer loyalty is the long and
uninterrupted retention of the relationship by
offering service that meets and even goes
beyond the customer needs.
• Customer loyalty is defined with consideration
paid to the amount of buying for a given
trademark. The level of loyalty is measured by the
watching of the frequency of buying (Javalgi and
Moberg, 1997: 165). With the increase in the
amount of accessible information in recent years,
the conscious level of customers has improved
continually. Today’s customers are aware of the
power they have on the market and that every
activity is realized for them. It is now easier to
reach the products and services.
• Before choosing a given trademark, consumers
look at the price, newness, accessibility of the
product and the additional services offered. As
the alternatives increased, consumers’ loyalty to
the products and services decreased (Tekinay,
2002: 129). Today firms have entered into an
effort to present at a lower cost than their rivals
the products and services that can meet the
customer wishes and expectations fully, so that
they can render customers more loyal (Çoban,
2002: 117)
• The tactics that can be employed by the firms
to create customer loyalty can be listed as
follows (Karan, 2002: 63- 64):  rewarding
those who send new customers,  sending
thank-cards,  sending personal letters, 
reminding by phone,  choosing the field in
which they are the best,  preparing events
and occasions peculiar to customer,  and
above all, evaluating the customer complaints
in detail and giving quick replies.
• Whether enterprises can make their current customers
loyal depends on whether they can manage the
customer relationships well. As customers have grown
to be more conscious consumers, enterprises have had
to pay the prices of the errors and faults they do in
customer relationships. The most important quality of
the 1990s is that customers revealed their power then.
They realized that they themselves had something to
say and have themselves listened to. The firms, then,
understood that they had to listen to their customers
so as to be able to sustain their presence in the market
• (CRM) is an information system that integrates and
automates in a business processes eg in sales,
marketing, and customer services to provide quick,
convenient, and consistent service to its customers.
• The customer relationship management systems
comprise a set of tools that capture customer
information from all customer touch points (methods
of interacting with customers) like e-mail, telephone,
fax, retail stores, company’s website, etc. This
consolidated info is stored in a common customer
database and made available across the organization
via the Internet, intranet, or other network links.
 NOTE
• An effective CRM is the one that examines
how a business works with its customers,
solves their problems and encourages them to
buy products and services.
 OBJECTIVES/GOALS OF CRM
• CRM, the technology, along with human
resources of the company, enables the
company to analyze the behavior of customers
and their value. The main areas of focus are as
the name suggests: customer ,relationship ,
and the management of relationship and the
main objectives to implement CRM in the
business strategy are:
• To provide better customer service
• To discover new customers and increase
customer revenue
• To increase customer retention
• To sell more
• To understand customers needs better
• To expand customer base
• To maintain long term customer relationship
• The CRM processes should fully support the
basic steps of customer life cycle . The basic
steps are:
• Attracting present and new customers
• Acquiring new customers
• Serving the customers
• Finally, retaining the customers
 STEPS OF THE CRM PROCESS
• Understand your business need
• Understand users need
• Understand your future customer needs
• Define your vision and pick the right system
• Make a plan and share it
 BEEFITS OF CRM
• CRM is a system that aims to improve the
relationship with existing customer, find new
prospective customers, and win back former
customers. This system ca be brought into
effective with software that facilitates
collecting, organizing and managing customer
information
 cont
• The benefits of CRM includes
• Improved information regarding the
customers
• There is enhanced communication
• Improved customer service
• Automation of everyday tasks
• Improved analytical data and reporting
 HOW TO MAKE CRM SUCCESSFUL
• Ensure top management buy in the idea
• Appoint a dedicated super user
• Find an awesome project manager
• Launch with a bang
• Set up internal usage guidelines
• Offer sufficient training
 DRAW BACK OF CRM SYSTEM
• CRM is costly
• Lack of leadership or management support
• Business culture
 TYPES OF CRM

• Nowadays, three major types of customer

relationship management systems,
namely strategic CRM, operational CRM,
analytical CRM and collaborative CRM are being
used in many organizations.
• Strategic CRM. Strategic CRM is a type of CRM in
which the business puts the customers first. It
collects, segregates, and applies information
about customers and market trends to come
• up with better value proposition for the customer. The
business considers the customers' voice important for
its survival.
• Operational CRM
• It provides support to front-office business processes
that involve direct interaction with customers through
any communication channel, such as phone, fax, e-
mail, etc. The details of every interaction with
customers, including their requirements, preferences,
topics of discussion etc., are stored in the customers’
contact history and can be retrieved by the
organization’s staff whenever required.
• Analytical CRM
• It enables to analyze customer data generated by
operational CRM applications, understand the
customers’ behavior, and derive their true value to the
organization. This helps to approach the customers
with pertinent information and proposals that satisfy
their needs. The analytical customer relationship
management applications use analytical marketing
tools like data mining to extract meaningful
information like the buying patterns of the customers,
target market, profitable and unprofitable customers,
etc., that help to improve performance of the business.
• Collaborative CRM
• It allows easier collaboration with customers, suppliers,
and business partners and, thus, enhances sales and
customer services across all the marketing channels.
The major goal of collaborative customer relationship
management applications is to improve the quality of
services provided to the customers, thereby increasing
the customers loyalty. Examples of collaborative CRM
applications are partner relationship management
(PRM), customer self-service and feedback, etc.
 Summary of types of CRM
• STRATEGIC CRM
• The data in strategic CRM are used to identify
the target customer and know what to offer
them.
• OPERATIONAL CRM
• The data here is used to run everyday business
such as transactions.
• COLLABORATIVE CRM
• Data here are useful to be shared by multiple
department.
• ANALYTICAL CRM
• Data here are used to analyze customers and
sales that helps to design future strategies.
 MODELS OF CRM
3 common CRM models
• Many CRM models have been created over the
years, but they all pretty much have the same
message: Learn everything you can about
individual customers in the prospecting stage of
the sales funnel and use this information to
provide an amazing experience throughout the
life of the customer.
• Let’s now break down three common customer
relationship management (CRM) models and
discuss how their capabilities can help you
strengthen relationships with customers.
• Even though these CRM models are similar,
that doesn’t mean they’re not valuable in
their own way. Some you might find more
pertinent to your business:
• IDIC CRM model
• Buttle’s CRM Value Chain model
• Payne & Frow’s Five-Step Process model
• Below we provide a quick summary about
how each model works.
 1. IDIC CRM model
• The IDIC CRM model is an excellent framework
for discovering and using your customers’ needs
and values as the foundation for how you interact
with every customer.
• How it works:
• Developed by Peppers and Rogers in 2004, the
IDIC model is made up of four actions to
strengthen personal relationships, from prospects
to customers.
• Identify individual customers. Develop an
understanding of what their business
struggles with and what they value. Divide
into segments.
• Differentiate customers. Use the information
about your customer segments to sort
customers by their value to your business
(now and in the future) and by their specific
needs.
• Interact with customers. Armed with in-depth
knowledge about your customer, demonstrate
that you understand their needs on an individual
level.
• Customize for customers. Take what you know
about your customers and customize your
offerings to meet their needs and values.
• With the IDIC model, you gain important insights
on what’s essential to your customer’s happiness
and what personalizations you can offer to help
achieve that.
 2. Buttle’s CRM Value Chain Model

• While every customer is important, not every

customer is created equal. According to the
80/20 rule in sales, 20% of your customers
provide 80% of your profits.
• With Buttle’s CRM value chain model, offer
extra attention and service to your most
valuable customers.
• How it works:
• Designed to be used as a platform when
developing CRM strategies, the CRM Value Chain
is a five-step process focused on “strategically
significant customers.”
• These types of customers are treated differently
from other customers as they generate more
revenue and make for better referrals. With this
model, you can develop quality, long-term
relationships with your most valuable customers.
• Customer portfolio analysis. Also known as CPA,
this step helps you identify your most valuable
customers.
• Customer intimacy. Now that you have a list of
“strategically significant customers,” find out
what they need to determine how you can best
serve them. Customer data can give these
insights.
• Network development. Satisfying top customers
is a team effort. Work closely with marketing,
support, and vendors outside of your company.
• Value proposition development. Combine
your network with your product/service and
offer significant value for your top customers.
Plan to provide things like product add-on
discounts, exclusive resources via email, and
one-on-one consulting sessions.
• Managing the relationship. With these foundations in
place, nurture customer relationships over the long
term.
• The CRM Value Chain doesn’t mean you should ignore
your other customers. However, it does mean that you
should make extra efforts to serve truly invested
customers. Consider these customers to be the bread
and butter of your business. These efforts ensure that
your most valuable customers stick with your company,
which ultimately impacts your company’s bottom line.
 3. Payne & Frow’s Five-step Process
Model
• Eighty-seven percent of customers think
brands need to put more effort into providing
a consistent experience. Payne & Frow’s Five-
Step Process Model ensures that the customer
experience is consistent across all
departments (not just sales) thanks to the
third process (multi-channel integration
process).
• How it works:
• The five processes of the model are categorized
as follows:
• Strategy development. Divided into two
strategies, this process first looks at business
strategy, determining the vision of your
product/service and how it competes in the
industry. Customer strategy means that you
outline the characteristics of your current and
potential customers.
• Value creation. This process looks at the value customers
bring to your business, as well as the value you bring to
your customers. Create a value proposition based on this
information.
• Multichannel integration. In this process, every
department works together. When every department (such
as marketing, sales, and support) are all on the same page
and understand the value that your company is bringing to
the table, your customers receive a cohesive experience.
• Performance assessment. Analyze how well your value
proposition is performing. Is revenue up? Are your
customers happy? Are your reps engaged with customers?
With different departments?
• Or, if your product/service solves a complex
need in your industry, use the IDIC model. No
matter what model you choose (do your
research), you’ll need a tool to ensure that
relationship management is successful. This is
where CRM software comes in.
MISUNDERSTANDING ABOUT CRM
• Many companies have misconceptions about
CRM in regard to assessing customer
satisfaction in order to enhance business.
There are several misunderstandings in
Customer Relationship Management to be
checked otherwise these may cost the
organization revenue and profits.
• Identifying CRM with a software system-
CRM is a business strategy which consists of
people and business processes in addition to
technological implementations. A successful
implementation of CRM is not possible
without each one of them. So CRM is not an IT
issue only to be simply equated to software. It
would be improper to have a successful
business purely ‘technology-centric’ ignoring
the importance of people and processes.
• Software is only an enabling or a facilitating
device. The process is implemented and enabled
by the software only when it is properly designed
and developed by people. Then only it can deliver
customer and company value. Therefore the right
implementation sequence has to be followed and
it must include proper competencies and people’s
attitudes, the right business strategies and then
the right IT implementation.
• CRM is a complicated system, difficult to understand-
The meaning of CRM is simple - to fetch customers,
retain them and maximize profitability. Because of the
fast developing technology there is pressure on IT
professionals to cope up with the recent
developments. So the ‘how’ part of implementing CRM
may be felt difficult. But the ‘why’ part of the CRM
concept is also not difficult to understand. If we go
back to the times when there was no IT
implementation, still customer relationships were
being managed then by keeping in mind a customer
database.
• Now, in the present times technology is more
advanced and the quality of customer
management have been entirely changed. But
the core of CRM and the target remain the
same - to maximize business profits. Keeping
this perspective in mind proper techniques
must be employed to access its utility.
• CRM is expensive and unaffordable by small
enterprises- It is a myth that IT maintenance cost
is unaffordable by small and medium class
entrepreneurs. Nowadays Application Service
Providers with simple and limited functions have
been introduced to provide CRM at affordable
prices. Its operation is easy without involving
expensive IT professionals. Therefore to target
good results emphasis should be on people and
procedure strategies and utilize software at the
end part only.
• Wrong assessment for the Return On Investment in
CRM- In CRM implementation, Return on Investment
means the evaluation of returns with the costs
incurred. CRM is sometimes regarded as giving a poor
ROI? It is the wrong way to think so. In fact the
probability of poor ROI is more if CRM is not deployed
and the opportunity costs are more. The main causes
of poor ROI are ignoring people and procedure
strategies, absence of quantified benchmarking to
measure the results, lack of vision in strategic
acquirement of opportunities etc. These are the points
to ponder before implementing a CRM.
• Who is responsible for CRM implementation - The
Marketing, Sales, Customer Service, or IT officials?- It is
not at all advisable to lay the responsibility on all of them
individually. The result will be that none of them will feel
his responsibility. The responsible person should be the
CEO who is the leader of the enterprise and it is he who
formulates and manages the business strategies. Why the
other person should be pressurized? In order to have a
better success index, the CEO and his immediate deputy
should be well educated and trained for a better
implementation of CRM.
• A better understanding of different dimensions of CRM
therefore is a must to potentially enhance the benefits of
CRM implementation.
 UNDERSTANDING RELATIONSHIPS
• WHAT IS RELATIONSHIP?
• RELATIONSHIP QUALITY
• NEED FOR RELATIONSHIPS WITH CUSTOMER
• WHY CUSTOMERS NEED RELATIONSHIPS WITH
SUPPLIERS
• WHY CUSTOMERS DO NOT WANT
RELATIONSHIP WITH SUPPLIERS
• CUSTOMER SATISFACTION, LOYALITY AND
BUSINESS PERFORMANCE
• RESEARCHING THE SATISFACTION – PROFIT
CHAIN
• RELATIONSHIP MANAGEMENT THEORY
 WHAT IS RELATIONSHIP
• Relationship means the state of being related, the
friendship, contact or communication which exist
between people. ( by Collins Concise Dictionary)
• In CRM the alphabet ‘R’ means relationship. But
there is always an ambiguity to understand the
actual meaning of this relationship. This
relationship between supplier and customer is
not a personal relationship or a one-time
transaction relationship; for example buying a
refrigerator from a consumer’s outlet would not
be called as a relationship.
• Relationship with customers can change from
time to time because it is evolved under
distinguished situations. Following are the stages
from where the relationship with customers can
evolve-
• Exploration- Exploration is the process when
customer investigates or tests the supplier’s
capabilities and performance or cross verifies the
product’s or brand’s usefulness. If the test results
fail to satisfy customer’s demands, the
relationship can drastically come to an end.
• Awareness- Awareness is the process when the
customer understands the motivational values of
supplier or the products he sells.
• Expansion- Expansion is the process when the
supplier wins customer’s faith and customer falls
under huge interdependence of the supplier. This
is time when there are more chances of business
with that particular customer and expand
business.
• .
• Commitment- Commitment is a powerful
stage when suppliers learn to adapting
business rules and goal to excel.
• Dissolution- Dissolution is a stage when
customer requirement suddenly changes and
he looks for better perspectives. This sudden
change is the end of relationship
• Relationship can come to an end due to many
reasons like - customer is not satisfied with the
services of supplier or customer diverges to other
better brands and products. Suppliers can also
prefer to break relationships due to customer
failing to be a part to increase sales volume or
when the suppliers are entangled with fraud
cases.
• Broadly there can be two distinguished
attributes of a developed relationship between
supplier and customer:
• Trust: Trust means confidence and security in any
relationship and can be treated as the biggest
investment in building long term relationships.
Trust is developed between the two parties when
they experience flawless and satisfied motives
between each other. As a result of knowing more
about each other, all the doubts and risks are
minimized and leads to inevitably smooth
business. Lack of trust on the other hand
weakens the relationship foundation and chances
of uncertainty and conflicts increases.
• Commitment: Commitment is yet another milestone
that should be achieved to set a long term mutual
relationship. Commitment can only be attained when
there is mutual trust and the two parties share each
other’s values. In a committed relationship both
suppliers and customers strive to uphold the
relationship and never want to exit which in turn
results in building the relationship stronger and
sharper. There is, in fact, huge cost which is incurred in
switching from committed relationships of one supplier
and build new relationships with other suppliers from
scratch.
• Relationship is always mutual or reciprocal so
it is important for both supplier and
customers to stick to common guideline to
attain better relationship among each other.
There is lot of involvement of cost, efforts and
time in striving developed relationships
between the two parties but the outcome is
always inevitable.
•
 NEED OF RELATIONSHIPS WITH
CUSTOMERS
• Building relationship with customers in
current market trends is the most important
aspect that an organization should focus on.
Distinction and eminence are now most
sustainable and affirm for which developing
good relationship with customers is
must. Some of the substantial outcomes of
building a quality relationship is explained
below by which need of relationship with
customer are insight:
• Better Customer perceptiveness- As the
customer lengthens to deal with a supplier,
the supplier tends to explicate a better insight
of customer’s needs and expectations. By this
a high level of relationship can be developed
between them. This will result in selling more
products and retain the business with the
customers which finally will lead to profitable
business.
• Lead to Customer Satisfaction- Customer
satisfaction is the measure of how the needs and
responses are collaborated and delivered to excel
customer expectation. It can only be attained if
the customer has an overall good relationship
with the supplier. In today’s competitive business
marketplace, customer satisfaction is an
important performance exponent and basic
differentiator of business strategies. Hence, the
more is customer satisfaction; more is the
business and the bonding with customer.
• Lead to Customer Loyalty- Customer loyalty is the
tendency of the customer to remain in business with a
particular supplier and buy the products regularly. This
is usually seen when a customer is very much satisfied
by the supplier and re-visits the organization for
business deals, or when he is tended towards re-buying
a particular product or brand over times by that
supplier. To continue the customer loyalty the most
important aspect an organization should focus on is
customer satisfaction, hence it can be said that
customer loyalty is also an outcome of good
relationship.
• Lead to Customer Retention- Customer retention is a
strategic process to keep or retain the existing
customers and not letting them to diverge or defect to
other suppliers or organization for business and this
only possible when there is a quality relationship
between customer and supplier. Usually a loyal
customer is tended towards sticking to a particular
brand or product as far as his basic needs continue to
be properly fulfilled. He does not opt for taking a risk in
going for a new product. More is the possibility to
retain customers the more is the probability of net
growth of business.
• Chances of getting referrals- It is always a cost-
free advocacy by customers to provide referrals
to supplier when they feel satisfied and
encouraged and when they have a healthy
relationship with customers. These referrals or
customer’s reference of other customers acts like
a piece of cake for suppliers as there is no cost
and struggle involved in this. This could be
treated as the best outcome of quality
relationship what a supplier can think of.
• Growth in revenue- When suppliers have
healthy relationship with customers the
revenue of the organization always increases
as customers tend to buy more and more.
There is possibility that a satisfied customer
seek to buy special category of related
products apart from the regular ones from
that particular supplier.
• For instance if a satisfied and loyal customer
has a home insurance from an insurance
company then there are positive chances that
he could also insure his property and car also
if he is fully satisfied with the services of that
insurance company. This will definitely result
in growth of business.
• Cost to serve is low- Cost to serve existing
satisfied customers is always very less for the
supplier as they know and understand
customers. Customers never come back with
complaints and queries because they know
the actual business flow and completely rely
on the relationship with supplier.
Quality of Relationship with Customers

• Satisfying customer needs ensures the

business survival for an organization. A
periodical check is required to enhance the
quality of services and product to build a
quality relationship with customers. For
fulfilling this goal organizations must have a
set of rules to measure and improve this
quality.
• Delivering best quality services to customers is
considered the most efficacious way to ensure
that an organization stands out from a group
of competitors and avail the privilege to be
known as best among all. The main
ingredients that are involved in a high quality
relationship between customer and supplier
are trust and commitment
• . Trust means confidence and security in any
relationship and can be treated as the biggest
investment in building long term relationships.
Trust is developed between the two parties
when they experience flawless and satisfied
motives between each other.
• As a result of knowing more about each other,
all the doubts and risks are minimized and
leads to inevitably smooth business. Lack of
trust, on the other hand, weakens the
relationship foundation; as a result chances of
uncertainty and conflicts increases.
• Commitment is yet another milestone that
should be achieved to set a long term mutual
relationship. Commitment can only be attained
when there is mutual trust and the two parties
share each other’s values. In a committed
relationship both suppliers and customers strive
to uphold the relationship and never want to exit
which in turn results in building the relationship
stronger and sharper. There is, in fact, huge cost
which is incurred in switching from committed
relationships of one supplier and build new
relationships with other suppliers from scratch.
• There are other attributes as well which
promote a high quality relationship, these
include the following:
• Courtesy- Many times customers become
irritated and uncivil due to some unpredictable
reasons. But it is substantially important for
supplier to keep his calm and deal accordingly.
Delivering the responses in calm voice with
courtesy and sympathetic sense could
dramatically act as a catalyst in driving customer’s
satisfaction.
• Availability- Manic customers always prefer
human responses instead of electronic emails
or messages. Hence, it is important for an
organization to make its executives always
available for customers for responding and
dealing with customer queries and needs.
Provision of these services always promotes
emotional bonding between customers and
suppliers which in the end is always fruitful
and drives to profitable business.
• Responsive- The suppliers should always have
prompt, responsive and experienced executives
to serve customers. For example, if a customer
calls and asks about some critical features of any
product and the executive fails to explain it or
being non-responsive to most of his questions
then the customer could probably divert his way
to some other organization for better response
which could definitely result in end of the deal
and relationship with that customer.
• Intelligent- Many customers are attracted
towards good deals which consist of discounts
and feasible prices. A supplier should be
intelligent enough to deal with these
situations and offer the best price and deal so
that the customer is not lost to the supplier
who is able to make some substantial profit if
not more. This requires predefined strategies
to be created and to respond intelligently
towards fulfilling these strategies.
• Futuristic- Always be futuristic to technological
changes. The strategies, types of services and products
could gradually deteriorate with time due to huge
competition and higher rate of technological changes.
Keeping this in mind an organization should always
focus on renovating business strategies periodically
and convince the customers accordingly.
• Inheriting the above quality attributes into business
will always improve quality relationship between
customers and suppliers and is always fruitful for both.
 Customer Relationship with Supplier
• For a positive growth of business all customers
have to depend, directly or indirectly, on good
and reliable suppliers. Apart from their
expectations from the supplier the customers
also need to be loyal to them so as to
strengthen their relationship. Therefore
customers should work on building a strong
and long-lasting supplier relationship as they
do with their own customers. And it is not a
complicated process.
• The positive customer-supplier relationship
begins with the initiative of the supplier to
demonstrate his sensitivity to the customer’s
needs. A customer always vouches for the
conditions of his business deal with the
supplier and likes to be honest with them to
have a smooth flow of business. But many
non-serious suppliers sabotage the deal in the
beginning only by making the customer
struggle to even getting a relationship started.
• The lapses and diversions on the part of the
suppliers can affect their relationship in many
ways as given below:
• Satisfaction: The customer expects overall
attention and convenience in all departments
to ensure smooth fulfillment of his needs. This
includes quality, timeliness, ease of access and
commitment of conditions. He wants to
believe that the supplier cares for him.
• Competitiveness: Customers assess the
supplier through competition based on the
pricing and quality of their products, its
reliability, its technological background and
industry trends. These factors affect the deal.
• Innovation: It is difficult for the supplier to
divert the customer from their quality
assessment. Customer knows and lives the
products more than the supplier does, as he is
working on them and is in a position to
suggest innovation and development for the
products.
• Finance: Suppliers have to be ready for
providing financial advantages as loan,
extended terms on purchases and
postponement of debt when demanded by
their loyal customers particularly at their
growth stage or when they are into a financial
crisis.
• On the other hand suppliers also have a right
to get their needs met as they are ultimately
motivated by profit. They want to be known as
the best in their deals so they count on
customer loyalty and satisfaction at all levels
which translate into direct benefit of both of
them.
• Therefore it is only win-win relationships
between them in all stages of the customer-
supplier chain to produce total satisfaction. It
should be remembered that a customer
assumes his name only in relation to his
supplier. As such in order to be a valued
customer to suppliers, here are a few things
he should do:
• Payments always on time. The customer
should always negotiate for favorable
payment terms before the deal is initiated. But
once the order is placed, the commitment
should be honored. Any problems arising in
this regard should be properly dealt with to
maintain the goodwill and benefits to earn.
• Provide adequate flexibility. The customer
should try to give suppliers as much flexibility
as possible for them unless there is a
compelling, competitive reason not to do it.
Unreasonable demands should be avoided.
This tendency also connects to quality
production.
• Personalize the relationship. The customer
should always be in contact with the supplier
and visit him frequently, not necessarily only
when it is needed. He may also be invited to
attend and give suggestions in some of their
strategy meetings. Methods of improving
business may also be discussed. Sharing of
knowledge, opportunities, service benefits,
software compatibility etc. would be
beneficial for both.
• Share information. The customer should be
communicative by keeping the suppliers
aware of what is going on in their
organization. He may share some of the key
strategic information with them. Frequent and
open communications are important in
understanding each other’s expectations. All
relationships begin with self.
• Be a demanding but a valued customer. Being a
demanding customer can just be fair. The
customer should state his demands clearly and
tell his supplier to hold his agreements. At the
same time as a valued customer he must always
cooperate with him to keep up his commitments
without embarrassment. Sharing knowledge,
service benefits, media exposure opportunities,
software compatibility, efficiencies etc. would
add to enhance relationship.
COMMERCIAL RELATIONSHIP
PART 2 NOTES
NOTES
• The marketing concept
• This concept began in the 1950s and defined marketing
as the whole business seen from the point of view of
its final result….from a customer point of view. The
essence of the marketing concept is to understand
customer needs and wants, thus the main focus is on
the customer. For a company to maximize profitability
they have to offer goods and services that satisfy needs
of and creating value for the customer (provide
customer satisfaction and the right customer-perceived
quality).
• Traditional marketing approach
• This marketing approach was not entirely
focused on customer supremacy. The needs
and wants of consumers were not perceived in
reality as being paramount important. Let us
discuss the traditional marketing mix,
transactional marketing and market
segmentation.
• Marketing mix: the traditional marketing mix comprises of
product, price, place and promotion. Therefore, the
combination of these Ps of marketing was fully dependent
on the management speculation. Therefore, there was a
need to address the 4 Ps to accommodate customers more.
• Transactional marketing: states that just because a
customer has purchased a certain product from your
company, does not mean that they will make a repeat
purchase. The marketing process ends once the customer
has made a purchase. The major focus here is to make
customers buy regardless of whether they exist or new
customers. In most cases the customer does not want to
buy, they are persuaded to make the purchase.
• Marketing segmentation: the traditional
approach to segmentation focuses on dividing
the market into sub set of customers. Each
segment has similar needs and the organization
has to decide which of the market segments it
can best satisfy, and then they develop a product
to that specific segment. Basis of segmentation
are geographic, demographic, psychological,
behavioral (buyer behavior) and benefits sought.
• CRM is defined as the overall process of
building and maintaining profitable ties
between organizations and customers by
delivering superior customer values and
satisfaction.
• Overtime, relationship marketing has grown
and replaced transactional marketing as
summarized in the table below.
Transactional marketing Relationship marketing

(One way communication) (Two way communication)

Focus on a single sale Focus on customer retention

Product features oriented Orientation on product benefits

Short time scale Long timescale

Little customer service High customer service

Limited customer commitment High customer commitment

Moderate customer contact High customer contact

Quality is the concern of production Quality is the concern of all

• CRM therefore involves attracting, retaining
and growing customers.
•
• To effectively manage customer relationship, marketers
normally employ the following approaches:
• Customer Value and Satisfaction
• Customer Value is the perception of what a product or
service is worth to a Customer versus the possible
alternatives. Worth means whether the Customer feels
s/he or he got benefits and services over what s/he
paid. In a simplistic equation form, Customer Value
is Benefits-Cost (CV=B-C).
• Customer satisfaction refers to a products
perceived performance as compared to the
buyers’ expectation. If the products performance
falls short of expectation the customer is
dissatisfied and vice versa. Smart companies aim
at delighting customers by exceeding their
expectation. At its most basic, customer
satisfaction measures how your product, service,
and overall experience either falls short, meets,
or exceeds customer expectations.
• Satisfied customers produce several benefits to
the company including
• They are less price sensitive.
• They spread a favorably word of mouth to others
about the company
• They remain loyal for a longer time.
• They buy a wider range of products
• They cost less to service as they are familiar with
the product and business design
• They exhibit strong Lifetime Customer Value (LCV)
• Customer loyalty and retention
• For successful CRM marketers must work to create
customer loyalty. A loyal customer is one who buys the
company’s brand and no other. E.g. a customer goes to
the store to buy Kimbo {not cooking fat} if Kimbo is not
in the store he tries the next store rather than settling
for another brand. Marketers must strive to grow the
customer through the loyalty ladder from prospect, to
customer, to client to a supporter, and finally to an
advocate as shown below
•
• Customer retention is the collection of
activities a business uses to increase the
number of repeat customers and to increase
the profitability of each
existing customer. Customer
retention strategies enable you to both
provide and extract more value from your
existing customer base.
Customer loyalty ladder

Advocate
clients
Customers
prospects

suspects
• The loyalty ladder is a relationship marketing
concept that sees customers gradually moving
up through relationship levels, starting at the
bottom as prospects (those who have the
intent to purchase but have not yet done so)
and ending up at the top as advocates
(intensely loyal brand champions).
• 1. Suspects:
• They are the potential customers for an organization. They
may be aware of the promotional campaigns of the
organization but are currently doing no business with that
organization.
• 2. Prospects
• They are the ones who have been impressed with the
organization’s promotions and are in serious consideration
of buying products of the organization. The organization
must treat them cordially and solve all of their doubts.
•
• 3. Customers:
• They have bought products of the
organization for the first time and are
currently using them. The organization must
extend them all possible after-sales assistance
in order to pacify their concerns. These
customers can be engaged with a loyalty
program or a loyalty discount.
• 4. Clients:
• They are doing business repetitively with the
organization and are willing to foster the engagement
in future. Clients if well engaged can help boost
business with their brand loyalty.
• 5. Advocates:
• They are not only doing repetitive business with an
organization but are also recommending the
organization to their own acquaintances. They are the
most valuable players and the organization must treat
them royally with the highest priority.
• The concept of Customer Loyalty Ladder comes under
relationship marketing and brand management which
deals with establishing long term relations with
customers. It is said that the cost of attracting new
customers is 4-6 times more than that of doing
business with existing customers. Hence it is worth for
any organization to keep its existing customers happy
and satisfied in order to do a more profitable business.
Customer Loyalty Ladder thus helps an organization
plan engagement strategy wisely so that the customers
would be tempted to move up the ladder.
• Hence for companies to retain their customers
for a longer period, they must aim high in
satisfying their needs and wants.
• Relationship marketing
• As the years progressed, a new marketing paradigm (a
shift in business thinking) developed drawing from the
traditional marketing principles. The definition of
relationship marketing changed to attracting,
maintaining and enhancing customer relationships. The
objectives of relationship marketing are to identify and
establish, maintain and enhance and where necessary
terminate relationships with customers and other
stakeholders at a profit to satisfy all parties.
• Dimensions of relationship marketing
• RM seeks to create new value for customers
• RM recognizes the key role of individual
customers and what they wish to achieve.
• RM businesses are seen to design and align
processes communication, technology and
people to support customer value.
• It represents continuous cooperative effort
between buyers and sellers
• It recognizes the value of customer’s lifetime
value (the present value of the future profits
expected over the customer’s lifetime purchases).
• Seeks to build a chain of relationships within the
organization, between the organization and its
stakeholders including suppliers, distribution
channels, intermediaries and shareholders.
• Identify the most profitable customers so that the
business can focus on customers appropriate to
its strategy.
• Focus areas of relationship marketing
• Individual customer approach
• Since not all customers are the same, different
customers need to be treated differently. Instead
of focusing on a single customer (which can be
very expensive) segment the customers based on
their individual needs. Companies should focus
on the profitable customers. Implementing one
to one marketing is not simple because engaging
customer’s changes repeatedly and the company
has to form interactions early.
• Improving the traditional marketing mix
• The biggest asset to improving the marketing mix is
adopting technology to help in combining the 4 Ps
thereby offering the customers many choices so that
they can obtain precisely what they want (product),
when and how they want it (distribution or place), at a
price which represents the value they wish to receive
(price) and engage and communicate effectively
(promotion). Therefore, technology digitalizes
traditional marketing offering customers many choices.
Therefore, it is for the customer to choose, not for the
marketer to provide what he thinks the customer
wants.
• Reconsidering traditional market segmentation
• Segmentation involves profiling prospective customers
for product development, identifying appropriate
prospects for marketing campaigns and classifying
groups according to response to pricing strategies.
Therefore, companies should not only focus on
customer profitability in terms of level of sales,
increase in order volume and size of transaction and
shift focus on technology, customer satisfaction and
retaining. In addition, customer loyalties, high
customer lifetime value which later translate to repeat
business, referral and positive word of mouth are other
advantages of revising the market segmentation.
• Need for new capabilities by companies
• Before embarking on a CRM strategy, a
company must know who its customers are,
their value, what they buy, location and what
channels they needs their products through.
Therefore to implement the CRM strategy, the
company should focus on the following:
• Support of top management
• Top management should take the lead and ensure the
message is broadcast throughout the organization and
understand the importance of creating relationships. A
CRM manager should convince senior management of
the need to become customer focused, seek help from
external firms for guidance, develop strong in house
marketing training programs and establish annual
marketing recognition to reward teams. In addition,
employees should be empowered to handle customer
complaints well to ensure a successful CRM strategy
• Processes
• This involves the procedures, tasks, schedules,
mechanisms, activities and routines by which a
product or service is delivered to customers.
Therefore for a successful CRM strategy, a
company needs to manage and link all processes
and manage core business processes like new
product development, customer attraction and
retention, and order fulfillment.
• Excellent customer service
• A successful CRM strategy cannot be a reality without
training all employees who are in direct/indirect
contact with customers. Employees must also
understand that their own job satisfaction entirely
depends on the success of the organization. The
interaction between employees and customers is called
service encounter (the actual service the customer
receives either face to face, telephone or by email.
Therefore the customer care should be flawless and
well understood by all members of staff.
• Technology
• Once we have established that the customer is
central in all our operations, technology
enables us to acquire knowledge about
customers, establish a database and gain
insight into this knowledge through data
mining.
•
• Customer relationship management is a
customer-based relationship management
philosophy that enables the coordination and
cooperation between all the departments,
customers and business associates as a front
office practice (marketing, selling and customer
service) and back office practice (accounting,
production and logistics).”The basic objective of
the customer relationship management is to
create customer loyalty.
• Besides, the objectives of customer
relationship management can be listed as
follows: to make the customer relationships
profitable; to form and preserve long-term
and profitable relationships with customers;
to increase the productivity of the firm; to
create differentiation; to meet the customer
demands; to enable cost minimization and
harmonious activities. (Ergunda, 2003: 2)
• customer relationship management is an
approach that makes it necessary to form
long-term relationships with customers for the
purpose of increasing the profitability and
productivity of the enterprise and to make use
of technology for this purpose. The
enterprises should pay attention to the
following issues so as to improve their
relationships with customers: (Holloway, 2002:
80) 
• Recognizing the customers,  Distinguishing the
customers,  Listening to the customers,  Making
all sorts of contacts with the customers, 
Enterprise identifying itself with the customer, 
Adapting to the customers. Creating maximum
benefit from customer relationship management
depends on its right management. A consistent
customer relationship management may also
bring about the following benefits: (Odabaşı,
2000: 22).
•  Reduction in customer disagreements,  High
level of customer satisfaction and loyalty, 
Reduction in procedure costs,  Ability to form
close contacts and relationships with the
customers in terms of technologic, informatics
and social terms.  Offering a big advantage of
competition to the enterprises,  Forming a
learning relationship with each customer
provides the enterprises the opportunity to find
new products/service for their customers.
• Thus, the enterprise may have the ability to
perceive and meet the needs of its customers
before its rivals.  Loyal customers may be a
reference for the potential customers.  The
cost of gaining a new customer is higher than
that of retaining the existing customer.
 CRM NOTES
BUILDING CUSTOMER
RELATIONSHIPS
• Specific Objectives
• At the end of the lecture, you should be able to:
• Define and explain how to building customer
relationships
• Define what learning relationships are
• Analyzeunrealistic relationships
• Understand what ingredients are required to
build relationships
• Introduction
• Forward thinking organizations realize the
importance of knowing customers and
understanding their lifetime value. Goods and
services are no longer sufficient to
differentiate organizations. Rather, customers
are increasingly making purchase decisions
based on a perception of their relationship
with a particular organization.
Building customer satisfaction through
quality service and value
• Customers are value maximizers yet they have
limited knowledge, ability and income.
Products are bought for the benefit they offer.
This is the actual function of the product e.g. a
pen is used to write notes useful for study.
• Benefits include: the actual good function, the
services it comes with, the personnel used to
deliver it and the image it portrays.
• The product comes at a cost to the customers
and this includes the price, time spent to get it
and the psychology involved. The difference
between the benefits and cost results in value.
The marketer makes it his business to increase
the benefit, reduce costs so as to maximize
value.
• The company with the highest value for
customers is always the market leader.
Customer delivered value is the difference
between the total benefits – total cost.
Satisfaction is a person’s feelings of pleasure
or disappointment resulting from comparing a
products perceived performance in relation to
the customer expectation.
• When a product performs exactly as the
customer expected the customer is satisfied
however, they are easy prey to competitor
when they come with a better offer. When a
product performs lower than the customer
expectation the customer experience is
disappointment or dissatisfaction. It requires
customer to rethink his product so that he can
at least satisfy the customer.
• When a product performs higher than the
customer expectation the customer experiences
delight and this makes them loyal to the company
and its products and it becomes easier to sell
them more products and hence promise the
company a stream of income.
• How expectations are formed
• Past buying experiences
• Friends and associate advisors
• Marketers and competitor info.
 Learning relationships
• To improve a customer relationship, the marketer
needs to acquire knowledge about the customer
and be able to develop insight into this
knowledge and also interact regularly with the
customer to acquire new information.
• Learning relationships are based on knowledge:
every individual interaction with customers keeps
updating on individual detailed needs and wants.
Gaining customer knowledge and developing
insight into this knowledge can deepen and
extend customer relationships.
 Customer interaction enhances
relationships:
• interacting with a customer to learn how
satisfied the customer is, or whether the
customer has an unspoken complaint is
another way of obtaining information about
that customer needs. Every time you deal with
a customer better than the last time you
create a learning relationship with that
customer and after a few more interactions
that customer will be loyal.
 There are rules of engagement in
dealing with customers:
• Do not initiate an interaction with a customer
without a clear objective
• Do not ask a customer the same thing more
than once
• Interact in the medium of the customer choice
• When interacting, start with the customer, not
the product
• Make the interaction personal and
personalized
• Ensure your interactions with customers are
welcome
• Protect customer privacy
• Invite dialogue by giving contacts
• Ensure customers can see value in the
interaction
• Be sensitive to customer time, don’t try learn
everything all at once
 Unrealistic Relationships
• It is not possible for all businesses to apply
learning relationships because there are
sometimes when developing that relationship
is unrealistic. These may include:
• When there is no likelihood the customer will
buy from you again
• When the buyer wants to avoid the
relationship as it may lead to dependency on a
seller
• When there is a formalized process to prevent
either party in developing relationships e.g.
those that involve government institutions
• When the cost associated with the
relationship puts the buyer at a cost
disadvantage in a price sensitive market.
 Relationship loyalty
• Customer loyalty means that customers are
committed to purchasing products and services
from a specific organization, and will resist the
activities of competitors attempting to attract
their patronage. The objective of relationship
marketing is to turn new customers into regularly
purchasing customers, then move them to strong
supporters, then advocates and finally act as
referral source. This ultimately leads to customer
loyalty.
 HOW TO BUILD BRAND LOYALTY
• Deliver on quality and value do more than
what is expected
• Talk to your customer or clients regularly
• Be consistent with everything
• Focus on customer experience and service not
sales
• Provide unexpected incentives
•
• Customer retention: many companies spent a lot of
effort, time and money wooing new customers yet very
few take time to actually retain those they have. the
effect of customer retention can affect company profits
because acquiring new customers costs more than
retaining one, regular customers make more orders,
retained and loyal customers are harder to be swayed
by competition, long term customers are less price
sensitive, provide more positive word of mouth and
increase employee satisfaction and retention too.
Customer migration can be improved if the
organization focuses on customer retention.
• Customer lifetime value: this is the present
value of the stream of future profits expected
over the customer’s lifetime purchases. This is
calculated by using the past behaviors to
forecast the future purchases, gross margin
from these purchases and costs associated
with servicing the customer. The costs here
include advertising, promotions and cost of
goods returned.
Stages in developing relationships
• This depicts the ladder of loyalty of customers
in relationship development. They include:
• Partner: a person who has a relationship of a
partner with you and your organization
• Advocate: a person who actively recommends
you to others i.e. does marketing for you
• Supporter: a person who likes your
organization but only supports you passively
• Client: a person who has done business with
you on a repeat basis but may be neutral or
negative towards your organization
• Purchaser: a person who has done business
with you only once
• Prospect: a person whom you believe may be
persuaded to do business with you
•
• Summary
• Define and explain how to building customer
relationships
• Define what learning relationships are
• Analyze unrealistic relationships
• Understand what ingredients are required to
build relationships
 CRM NOTES

SERVICE ISSUES IN RELATIONSHIP

MARKETING AND CRM
• Specific Objectives
• At the end of the lecture, you should be able
to:
• Explain the concept of customer service
• Analyze why customer service fails
• Understand the importance having good
customer service in an organization.
 Introduction
• Customer relationship management systems
track and measure marketing campaigns over
multiple networks. These systems can track
customer analysis by customer clicks and
sales. Places where CRM is used include call
centers, social media, direct mail, data storage
files, banks, and customer data queries.
 Customer Service
• This is the provision of service to customers
before, during and after a purchase. It is any back
up service that a company provides to customers
to maintain their loyalty and secure a sale. It is
important to note that it is not the actual service
provision that is of importance, but the
perception that the customer has of the service.
The perception is based on the experience the
customer is faced with in the past, what they
have heard from their reference groups, seen in
the media adverts or news reports.
 Customer service in building
relationships
• All companies that embrace the marketing
concept seek ways to build a profitable long term
relationship with each customer. Due to
competition, companies strive to maintain those
customers they have retain and satisfy them so
they can purchase from them repeatedly.
Therefore, most successful marketers understand
that key issues in developing competitive
advantage include building long term
relationships are customer satisfaction and
creating customer value.
• Customer satisfaction: this is the customers
feeling that a product has met or exceeded
his/her expectations. Organizations that have
done this successfully deliver high level of
customer satisfaction differently from their
competition. They focus on satisfying
customers rather that selling products. For
this to also work, employee attitude and
actions must be customer oriented.
• Customer value: this indicates the ratio of benefits to
the sacrifice (by the customer) necessary to obtain
those benefits. Everyone in the company needs to
work together to ensure the customer has minimal
complaint of service provision. Not every time a high
priced product will be perceived as good value and vice
versa. Instead, customers value goods and services of
the quality they expect that are sold at prices they are
willing to pay. The higher the perceived benefit of a
product or service, the higher the customer value and
the greater the chance that the customer will choose
and keep choosing the product in the future.
 HOW TO PROVIDE EXCELLENT
CUSTOMER SERVICE
• Be friendly
• Respond in a timely manner
• Know your product or service
• Listen to your customers
• Say thank you
• Ask for feedback
• Use the feedback you receive
• Focus on relationship
 Tools for tracking and measuring
customer satisfaction
• Complaints and suggestion system: it should
be easy for customers to deliver suggestion &
complains. Businesses provide questionnaires
placed in prominent places inviting customers
to fill them. Others have customer hot lines
where customers pass their complaints or
suggestions. Any good ideas should be rapidly
resolved.
• Customer satisfaction survey: less than 5% of
dissatisfied customer complains. Therefore the
above method may not be relied upon. They
design a periodic survey using questionnaires or
telephone interviews. They may use the use the
opportunity to identify their competitors
performance, the customer repurchase decision
and willingness to recommend the product to
other people. Customers interviewed can be past,
present/potential customers.
• Ghost shopping: the company hires people to
pose as potential buyers then report their
findings on the strong and weak points they
experienced while buying. This can be used on
the companies on their competitor products.
• Lost customer analysis: the company should
contact those customers who stopped
purchasing or have switched to another brand
product. This will give their reason for failing
enabling them to improve in future. It also
indicates their rates of losing customers.
 Customer expectations
• Service quality is the ability of the
organization to meet or exceed customer
expectations. Customer expectations may be
defined as the desires or wants of consumers.
Service quality is measured in terms of the
extent to which an organization’s performance
is perceived as meeting or exceeding
expectation. Therefore, the customer
perception of performance is what counts
rather than the reality of performance.
• Service quality
• This is the ability of an organization to determine
customer expectations correctly and to deliver
the service at a quality level that will ease
customer expectations. Delivering on promises is
the essence of mutually satisfying relationships.
Service quality refers to the consistency with
which customers’ expectations are met and the
general superiority of the service relative to that
of competition. This may include:
• Raise standards and improve service
performance
• Listen to customer preference and ensure
that customer requirements are met
• Provide friendly professional, courteous
service that is consistent, fair and reliable
• On time deliveries
• Supply a wide range of goods and services
• Knowledgeable staff
• Provide technical competence
• Listen to customers
• Knowing the market
• Understand customer needs
•
• Reasons why customer service fails
• The market may not be properly segmented
• The database of customers maybe incomplete or
non existent
• The organization is managed from inside out
(more focus on product not customer)
• All blame is shifted downward to fore line
employees
• Misunderstanding of employees who are never in
contact with customers
• The focus is on attaining new customers not
retaining the existing ones
• Dehumanizing customers and focus just on
monetary value
• Poor services (sins of service)
• Apathy: where employees have lost interest in
serving customers
• Brushing customers off: e.g. lunch or break time
• Coolness towards customers: too formal,
unsmiling and officious
• Treating customers with condescension:
talking down to customers
• Robot like behavior of employees: because
they are used to doing routine jobs
• Following rules: too much to favor the
company not customers
• The customer turn around: dispose customers
to another department instead of assisting
• Steps to Remarkable Customer Service
• Fix everything in two ways: identify a problem and fix it
to ensure its not repeated
• Think laterally to avoid customer complaint and
offending the customer
• Make your customers into fans
• Service employees must be eager to solve problems
• Take the blame
• Memorize useful phrases
• Go the extra mile and give exceptional services
• Honor ceremonial expectations
• Avoid greed
• Provide a performance guarantee
• Give customer service a career path
• Make sure there is something in it for
employees
 TOP CUSTOMER SERVICE SKILLS
• The following are some of the skills that your
sales people should possess
• Persuasive speaking skills
• Empathy
• Clear communication skills
• Self control
• Taking responsibility
• patience
 HOW TO BUILD RELATIONSHIP WITH
CUSTOMERS
• Communicate communicate communicate
• Exceed expectations
• Ask for feedback
• Connect
• Show appreciation
 Strategies of dealing with difficult
customers
• Listen
• Build rapport through empathy
• Lower your voice
• Respond as if all your customers are watching
• Know when to give in
• Stay calm
• Don’t take it personally
• Remember you are interacting with a human
being
 WHAT TO SAY TO AN ANGRY
CUSTOMER
• I hear
• Thank you for being straight with me
• Sometimes we fail
• You have the right to be angry
• Your are right
• That must have been frustrating
• If I were in your shoes, I would feel the same way
• I am going to do my best to help you
 BENEFITS OF A GOOD CUSTOMER
SERVICE
• Customers will stick around
• Upsell and cross sell opportunities
• There will be a good business growth
• Enhanced brand reputation
• Attract the best talent
• Prompt word of mouth recommendation
PLANNING AND IMPLEMENTING
COMMERCIAL RELATIONSHIP
MANAGEMENT PROJECTS
PART 4
 NOTES
• “Ideas are easy. Implementation is hard.”Guy Kawasaki
• Implementing a CRM project in an organization takes
more than purchasing and installing the CRM form a
vendor. It needs setting up the features of CRM system
according to the business requirement, training the
staff, and overall shifting from conventional work
culture to a new method of handling work and
customer relationships.
• There are various phases a business needs to go
through while implementing CRM projects. Here in this
chapter, we will discuss in brief how to implement a
CRM project.
 PHASE 1 -Developing CRM Strategy
• This is the first stage. CRM strategy is a top
management level plan of aligning employees,
CRM process, and technology to achieve business
goals.
• Situation Analysis
• The business conducts situation analysis by
considering internal and external factors. This is
nothing but SWOT (Strength, Weakness,
Opportunities, and Threats) analysis to find out
how the business is doing with the objective of
examining readiness for CRM implementation.
• The managers analyze and appraise existing customer
strategy, served market segments, market position of
business, marketing channels, etc. They try to find out the
answers for the questions such as −
• Which customer segments does the business serve?
• What are the marketing and customer related objectives of
the business?
• What is the business position and market share?
• What is the cost to customer management?
• How effective the present strategies of customer
acquisition and retention?
• Which products/services under what category does the
business offer?
• To what extent the customers are aware of the
products/services?
• Who are business competitors, and what are profit
margins?
• Which channels we use for product distribution? What is
the depth of channel penetration?
• Which channels are effective? Which are becoming
obsolete?
• How do channel partners find dealing with our business?
• Will the business buy, rent, or create its own CRM? What is
each option’s feasibility?
• Thus, situation analysis serves as a foundation to know
what the managers want to achieve by implementing CRM
 PHASE 2- Building CRM Project
Foundation
• Before implementing CRM projects, there are various
changes required to bring in the business environment such
as −
• As the CRM can mean different to the people from different
domains, it is necessary for the business to start educating
the staff on CRM systems.
• The top management of business also sets up the vision on
how CRM will change the business to benefits regarding
serving the customer better and earning high revenue.
• Clear priorities are set for objectives and activities such as
enhancement of customers’ experience, cost reduction,
increasing revenue, etc.
• Goals (qualitative results) and objectives (quantitative
results) are set.
• Governance structure of experts is formed which is
essential to identify and allocate resources and
responsibilities appropriately.
• The internal IT staff of the organization is put to
perform several CRM related roles such as networking,
database management, front-end development,
system integration, etc.
• The management identifies change and project
management needs in the organization, and risk
factors.
• Identifying Business Processes
• The processes are the ways by which the business gets
the things done. The processes can be of the following
types −
• Vertical − Located completely within a department. For
example, customer acquisition is only marketing
related process, whereas annual revenue and tax
calculation are accounts processes.
• Horizontal − They span across various departments in
the business. For example, product manufacturing is
cross functional across R&D, finance, material
management, sales, etc.
• Primary − They have major impact on the business
costs or revenue. For example, picking and delivering
packages is primary process for a courier company.
• Secondary − They have minor impact on the cost or
revenue of the business.
• Front-Office − They encounter the customers. For
example, complaint handling.
• Back-office − They are where customers are directly
involved. They are not known to the customers. For
example, database management, procurement, etc.
• The business needs to anticipate which
existing processes may get affected and to
what extent.
• PHASE 3- Specifying Requirements
• During this step, the business identifies the
stakeholders (staff, sales team, marketing
team, channel partners, IT specialists, etc.),
processes, data requirements, and technology.
• Data Requirements
• The business needs to create the inventory for
the available data for the CRM purposes. There
are different data requirements for different CRM
types as shown −
• Which database system the business will require
for CRM?
• What is the number of customers the business
have?
• How much the number of customers can increase
in future?
• Which fields of data are mandatory and which
are additional for the business?
• The business develops a customer related
database to store the customer information, such
as contact data, contact history, transaction
history, communication preferences,
opportunities with customer, and so on.
• Technology Requirements
• It includes selection the required CRM technology from a
wide choice.
• How to access the CRM software: from business server (On-
Premise) or from vendor’s server (Hosted or Online) via
internet?
• Which CRM applications can fulfill the business vision and
objectives among a myriad number of applications under
CRM.
• What hardware is required for sales, services, and
marketing staff?
• What is the required hardware platform on which the
database will reside and function?
• Creating Proposals
• The business forms a well-structured Request for
Proposal (RFP) in which it lists down the idea and
vision of CRM, the type of CRM required, process,
technology, costs, time frames, contracts, and
staff issues.
• The proposal is descriptive enough to give idea to
the vendor about the business structure and
requirements. The business then invites at least
three and at the most six technology vendors by
sending the proposal.
 PHASE 3-Selecting Partner
• When a business receives response from various
vendors, it need to select a right vendor. The business
management assesses the proposal responses on the
scale of importance of issues included in the RFP
Request for proposal. It the shortlists the technology
vendors and invites them for demonstrating their CRM
products.
• PHASE 4- Implementing the CRM Project
• The business takes the following steps to −
• Chalk out the internal project plan.
• Refine the project plan with incorporating the
technology vendor.
• Identify customization needs as no off-the-shelf CRM
software can completely satisfy the CRM needs of a
business. It is done with lead developer, database
developer, front-end developer, and vendor.
• Create a prototype of the customized software.
• Test the prototype on dummy database and users. Test
it first on the newly acquired customers rather than
directly on the customer database.
• Identify further customization and training
requirements.
• Create in-house awareness on the final system
installation.
 PHASE 5-
• Performance Evaluation
• As a final and continual stage for large span of time,
the business evaluates how well does the CRM
perform. When a business implements new
technology, the users take a large span of time to get
acquainted and comfortable with the technology.
• There are two variables the business considers −
• Project outcomes − Whether or not the project went
on as per the plan without overrunning budgets, costs,
and time. Is it working smoothly and successfully?
• Business outcomes − Has the business
objectives set initially have achieved?
• If the business objective was to improve the
rate of customer retention, the rate was 70%
before CRM coming to aid, and it went up to
78% after CRM implementation then the
business has achieved its objective.
•
•
Relationship Management
Theories
• There are various schools of thoughts with
different theories of relationship management.
Let us discuss some of them briefly −
• Theory by Industrial Marketing and Purchasing
Group (IMP Group)
• This Europe-based research initiative in Industrial
Marketing focuses on B2B relationships and
states the following characteristics −
• Buyers and sellers both actively participate in the
transaction to find solutions to their respective
challenges.
• Buyer-seller relationships are normally long-term
and close.
• Relationships are composed of interpersonal
bond, connections among businesses, and
strengths or weaknesses of the business.
• The transactions often occur with respect to
relationship’s history.
• The businesses chose the mode and the manner
of interaction with the entities at various levels of
importance
• Theory by Nordic School
• A Scandinavian services marketing group, named The
Nordic School, emphasizes on supplier-customer
relationship. It identifies the triplet of relationship
marketing as −
• Interaction − As customers and suppliers interact, each
one provides a service to another. Customer provides
information and supplier provides solution.
• Dialogue − Communication is bilateral and is essential
for the survival of the relationship.
• Value − The business needs to generate something that
is perceived as value to the customer.
• Theory by Anglo-Australian School
• It states that relationships are important not
only from the viewpoint of customers but also
from the angle of stakeholders of the business
such as employees, suppliers, and
government. It also found out that customer’s
satisfaction and customer retention are value
drivers of any business.
Theory by North American School
• According to this theory, good relationships
reduce costs significantly. Trust and
commitment are vital attributes of a
successful relationships. By connecting the
trust to the commitment, this theory states
that trust created on the basis of minimal
functional conflicts, communication, non-
opportunistic behavior, and cooperation.
Commitment is linked to high relationship
termination cost and relationship benefits.
• Theory by (Guanxi) Asian School
• This theory is based upon the teachings of Lord
Buddha regarding social conducts and acts of
reciprocation. This theory states that people from
a family, friendship, same-clan fellowship are
connected to each other due to informal social
relationships which impose them to follow
reciprocal obligations to acquire the resources by
exchanging favors and cooperation.
 THE BENEFITS THE ORGANIZATION
ENJOY FROM OFFERING CUSTOMER
VALUE AND SATISFACTION
• Quality customer service is the vital factor required for
a successful business. In this customer driven market,
where competition is becoming stiffer and critical
deadlines are rife, No one can think of business growth
without exceptional customer service. A number of
organizations underestimate the vital of customer
satisfaction, while laying the foundation of their
business. So they focus on the quality of services,
organizational infrastructure but often overlook the
fact that it is consumers who can make/ break a
business.
• .
• Good customer service can benefit your business
in many ways and by observing the importance of
customer service you can take measures to
provide your consumers with a good experience.
• By understanding how important these benefits
impact your online business, you will be able to
make changes that allow you to grab these best
11 benefits very quickly upon their
accomplishment
• 1.Successful Business Strategies
• To encourage consumers for feedback and comments is
a basic part of good customer service. You might
follow consumers’ feedback for analyzing
the weaknesses and strengths is probably the effective
way to understand the insight of consumers and make
successful business strategies.
• Quality service can boost your business growth.
Moreover, Quality services can help you enlarge your
customer base but awesome customer service is the
key to retain your customers and stand out of the
crowd
• 2.Good Public Publicity
• Yeah, Good publicity from customers come from
quality customer services. When a customer
receives awesome customer services, they will
tell their families and friends which leads to good
public publicity and word of mouth. This are both
create more exposure for your business and
increases your popularity around products,
visibility, your services.
• 3.Better Morale
• To Create a work environment where
customer service is vital might lead to
improved employee morale. Employees who
are eager to help can put irate improve their
shopping experience and customers ease. This
might lead to a more pleasurable
environment, then make staff feel nice about
what they do.
• 4.Higher Profits
• Happy customers always lead to higher
profits. But there are many business owners
that aren’t aware that this is one of the best
benefits they can receive when providing
excellent customer services. Higher profits
mean more money to re-invest on your
business.
• 5.Consumer Satisfaction
• If your customers are happy, your business
partners and investors will be happy as well,
and this finally leads to higher profits. In
addition, You can win the trust of investors
and make the most of every viable business
opportunity with a strong customer base.
• 6.Increased Responsibility
• You will discover that over time, your staff will
begin to take on additional responsibilities in
order to make this process work effectively.
Moreover, You will find that many of your staff
will try to meet/exceed expectations of the
company as a result of the popularity your
company will experience by setting the bar
high .
• 7.Employee Motivation
•
• Customer satisfaction directly influences the
working environment of business
organizations. Staff can work in a nice
corporate atmosphere with decreased
pressure of meeting financial stability and
aim, so you might encourage them to work to
their maximum capacity
• At first, Although it might seem hard for
employees to grasp how the process works, but
after providing good customer service regardless
of the industry you are in, this will eventually
build staff motivation and pride. Moreover, the
staff will begin to discover, through others, how
well people like the customer service which is
being provided by their company. Yeah, This will
instil a sense of extreme motivation and pride to
continue in this process.
• 8.Satisfied Shareholders
• When customers are happy, your shareholders will be
happy as well. When customers are happy, this
typically leads to more business.
• Satisfactory response from consumers means increased
sales, which ultimately leads to increased satisfaction
of shareholders. And more business means more
profits, and more profits which translate happy
shareholders and higher returns on investments for
your business. They tend to invest more in your
organization, which can dramatically improve the
profits of your business.
• 9.Saving Money
• An efficient workplace has always allowed the
business owner to save money. When
providing good customer services over time,
you will discover ways to streamline this
process which will allow you to save on
training new staff, developing different
systems, taking care of problems that are a
direct result of bad customer service.
• 10.Reduced Risk of Business Failures
• Understating the expectations and mindset of consumers
can considerably reduce the risk of business failures and
losses.
• 11.Increased Efficiency
• The above mentioned benefits lead to overall increased
productivity of the organization.
• Now that you are familiar with all the ways through which
good customer service can benefit your
business, innovative strategies, implement creative to
value your customers.
•
•
 CRM CONSTITUENCIES
• There are several important constituencies
having and interest in CRM:
• Companies implementing CRM, many
company have implemented CRM.
• Customer and partners of these companies
• CRM application service provider (ASP)
• Vendors of CRM hardware and infrastructures
• Management consultants.
8 building blocks of CRM
• Gartner defines customer relationship
management (CRM) as a business strategy
that maximizes profitability, revenue and
customer satisfaction by:
• Organizing around customer segments
• Fostering behavior that satisfies customers
• Implementing customer-centric processes
• To achieve the long-term value of CRM,
enterprises must understand that it is a strategy
involving the whole business, and thus should be
approached at an enterprise level.
• CRM initiatives need a framework to ensure that
programs are approached on a strategic,
balanced and integrated basis. Gartner has
developed such a framework, called the Eight
Building Blocks of CRM:
• Vision- creating a picture of what the customer-
centric enterprise will look like, in order to build a
competitive market position based on value
propositions that are defined, communicated and
personified by the enterprise brand.

• Strategy- developing a strategy to turn the

customer base into an asset by delivering
customer value propositions. This includes setting
objectives and determining how resources will be
used to interact with customers.
• Valued customer experience - ensuring that the
enterprise's offerings and interactions deliver ongoing value
to customers, are delivered consistently and achieve the
desired market position.

• Organizational collaboration- changing cultures,

organizational structures and behaviors to ensure that
employees, partners and suppliers work together to deliver
customer value.
• Process – effective managing not only customer life cyle.
• Information – collecting the right data and routing it to the
right place
 What is Customer Lifetime Value
(CLV)?
• The lifetime value of a customer, or customer
lifetime value (CLV), represents the total
amount of money a customer is expected to
spend in your business, or on your products,
during their lifetime. This is an important
figure to know because it helps you make
decisions about how much money to invest in
acquiring new customers and retaining
existing ones.
• Calculating CLV
• The simplest way to calculate CLV is:
• CLV = average value of a purchase X number of
times the customer will buy each year X average
length of the customer relationship (in years)
• So a marathon runner who regularly buys shoes
from your shoe store might be worth:
• $100 per pair of shoes X 4 pairs per year X 8 years
= $100x4x8=$3,200
• And the mom of a toddler might be worth:
• $20 per pair X 5 pairs per year X 3 years =
$20x5x3 = $300
• So who should you be paying more attention
to? Clearly, the adult runners in your
database.
• The Value of Knowing Your CLV
• Calculating the CLV for different customers helps in a
number of ways, mainly regarding business decision-
making. Knowing your CLV you can determine, among other
things:
• How much you can spend to acquire a similar customer and
still have a profitable relationship
• What kinds of products customers with the highest CLV
want
• Which products have the highest profitability
• Who your most profitable types of clients are
• Together, these types of decisions can significantly boost
your business’ profitability.
 REASONS FOR TERMINATING
RELATIONSHIP BTW CUSTOMER AND
SUPPLIER
• Failure to meet terms of contract
• Provision of substandard or defect products or
services
• Consistent late delivery issues
• Supplier is bankrupt
• Cost issues – when you find that you can
purchase the same product cheaper elsewhere
• Poor service delivery
 Different types of CRM
• Strategic CRM – data to identify target
customer, what to offer them.
• Operational CRM – data to run everyday
business such as transactions
• Collaborative CRM – Data useful to be shared
by multiple department
• Analytical CRM - data to analyze customers
and sales that helps to design future
strategies.
• Technology – managing data and information
– IT Infrastucture
• Metrics – measuring internal and external
indicators of CRM success and failure.
 MANAGING NETWORKS FOR
CUSTOMER RELATIONSHIP
MANAGEMENT PERFORMANCE
Companies do not exist in splendid isolation. They
are positioned within a network,and it is the
performance of that network which determines
whether companies achieve their goals.
CRM performance is more assured when the
resources of the network are aligned and
coordinated to contribute to the creation and
delivery of value to the focal company’s customers.
• Our defi nition of CRM, repeated below,
recognizes the role of thebusiness network in the
achievement of CRM outcomes.
• CRM is the core business strategy that integrates
internal processes and functions and external
networks to create and deliver value to targeted
customers at a profi t.
• It is grounded on high-quality customer-related
data and enabled by information technology.
• Competition for the customer’s spend is
changing. In the past, competition has been head
to head between independent companies.
• Today, competition is increasingly between
networks. A good illustration of this is the motor
industry. In the 1920s Ford not only assembled
cars, they also owned steel mills, coal mines, iron
ore mines, steam ships, rubber plantations, sheep
farms and railroads.
• It was standard practice for companies to own
and manage as many factors of production
that they could.
• Today it is different. In the year 2000, Ford
only produced about 50 per cent of the value
of their cars. The rest was outsourced to
members of their supplier network.
• Companies like IBM, GE (General Electric), UPS
(United Parcel Service) and AMP (Australian
Mutual Provident) are examples. Intel and
Microsoft carry so much weight that computer
manufacturers such as Dell, Toshiba and
Compaq take great risks if these components
are not part of the fi nished product.
 WHAT IS NETWORK
• The term ‘ network ’ can, in general terms, be
thought of as a structure made up of nodes that
are related to each other by threads. Business
networks exist. They are unavoidable. They are a
fact of business life whether they are actively
coordinated or not. A business network can be
defined as follows:
• A business network is made up of nodal
companies, organizations and individuals, and the
relationships between them.
 BUSINESS NETWORKS
• In the context of business markets, these nodes
are business units such as suppliers, producers,
distributors, partners, regulators, contractors,
customers and other companies, organizations
and individuals.
• The relationships between these business units
are expressed in actor bonds, activity links and
resource ties. To recap material that was
introduced, actor bonds are interpersonal
contacts between people in network-related fi
rms; activity links are the commercial, legal,
• administrative and other connections that
form between companies as they interact;
resources are the human, fi nancial, legal,
physical, managerial, intellectual and other
strengths or weaknesses of fi rms in the
network.
 NETWORK POSITION
• Every company occupies a network position. Network
positions are products the of an organization’s past and
present operations. They result from relationships and
interactions that were, or are, needed for the fi rm to
do what it was set up to do. Every company in every
network occupies a particular position in relationship
to other network members.
• Network position can be defi ned as follows:
• A company’s network position is the sum total of a
company’s network relationships and all the activity
links, resource ties and actor bonds that these
relationships contain.
• These relationships both constrain and enable
what that fi rm can do in the future. A
company that has all the relationships in place
to be a successful shipbuilder cannot become
a fi nancial institution without creating new
relationships that provide the necessary skills
and resources. Relationships can have more
advantageous consequences. Asupplier might
introduce a fi rm to one of its customers
enabling them
• to work on a project of shared interest.
Alternatively, a supplier might choose to
withdraw from a relationship with a customer
in order not to endanger a relationship with a
bigger, more profi table customer.
• A company’s network position is a resource that
can create competitive advantage. Networks
supply the resources and perform the activities
that enable companies to create and deliver
value to their customers.
• Network positions are dynamic. Members adapt
their network positions to ensure their survival
and prosperity. They look for opportunities to
exploit. For example, they seek out relationships
that can be used to lift sales or reduce costs.
• Avon Rubber, for example, manufactures
engine mounts for the car industry and counts
Ford as one of its strategically signifi cant
customers. It leveraged its relationship with
this reference customer to win business from
Saab, and to enable it to present its
credentials to other car manufacturers.
• Clearly, some network positions are more infl
uential than others.
• For example, a network member might be
positioned as a gatekeeper to opportunities that
are highly sought after by other network
members. The supplier of a subassembly, such as
a braking system fora car, has considerable
network power in enabling or disabling access of
component suppliers to the car manufacturer.
• Whether a desired network position is achieved is
determined at least in part by the fi rm’s network
competence. This is the fi rm’s ability to accrue
and/or utilize the necessary knowledge, skills,
qualifi cations and experience to successfully
manage network interactions. 2 Skilful
management of the company’s network position
can realize several benefi ts. Toyota uses its
network position to enhance their cars ’
reliability, economy and design.
• Toyota works with and through its network
members to keep costs low, while ensuring
product quality is high. Every company’s
network position is subject to a set of
relational obligations and restraints among
network members. For example, in the Toyota
scenario company expects tier one suppliers
to develop and strengthen their relationships
with tier two suppliers to ensure that Toyota
gets the quality they require.
• Tier two suppliers expect tier one suppliers to
maintain a good relationship with Toyota to
ensure that they have ongoing access to a
strategically signifi cant customer
 What is meant by
‘ focal fi rm? ’
• The focal fi rm is the fi rm whose network is
being considered. If you are examining Delta
Plastics ’ network, Delta Plastics is the focal fi
rm. Sometimes the threads linking a focal fi
rm to its network are loosely connected; at
other times they are contractually defi ned
and tightly controlled, as in the relationship
between Dell Computers and its component
suppliers.
• There is growing recognition that the
resources within networks need to be actively
coordinated and managed. A focal
organization must take responsibility for
managing its network so that it creates and
delivers sustainable value to customers.
Failure by a network member to provide the
necessary resources or perform the required
activities could threaten the performance of
the focal organization.
• Although fi rms do try to exert infl uence within
their immediate network neighbours, actions
elsewhere in the network – though several steps
removed from the focal fi rm – might make a
considerable difference to that fi rm’s
performance. For example, the collapse of an
agricultural chemical fi rm in Brazil might Lead to
a dramatic rise in the cost of coffee beans, which
in turn drives up the retail price of coffee in
overseas markets, in turn fuelling consumer
demand for an alternative hot beverage, tea.
 Business networks
and CRM
• Networks are important from a strategic CRM
perspective, because network members
supply the material inputs, services, funding,
people, technology and knowledge that are
used to create value propositions for the focal
fi rm’s customers. They also provide services
such as advertising, logistics and distribution
that help raise and satisfy customer demand.
• Consider, for example, that some retailers have
developed relationships with banks to offer fi
nancial services products to the retailer’s
customers.
• You can fi nd this arrangement in the UK, where
Tesco and Royal Bank of Scotland are partners,
and in Australia where Woolworths and
Commonwealth Bank partner. This is an
arrangement that blurs the conventional
customer-perceived distinctions between retailer
and bank.
• For partnerships like these to succeed, each
partner needs to understand the other party’s
competences, to share customer-related
information, to align their technologies and to be
clear about the goals of the partnership. If the
relationship between the retailer and the bank is
poorly managed, value will not be delivered to
customers or created for the partners. Liberating
the potential value in customer relationships also
hinges on companies effectively managing their
non-customer network relationships
• that is, relationships with alliance partners, suppliers,
distributors, fi nanciers and so on.
• The need to manage business networks is recognized in
modern CRM systems, with the move towards extra-
enterprise, or collaborative, CRM.
• CRM systems now include applications for managing
relationships
• with partners (PRM), the integration of websites for
investor relations, the management of relationships
with employees (ERM) and, through integration with
enterprise resource planning (ERP), the management
of suppliers.
 The SCOPE of CRM
• There are four main constituencies of a focal
organization’s network. As they are suppliers,
owners/investors, partners and employees.
• You can use the mnemonic SCOPE to
remember the constituencies in the network:
S suppliers, C the focal fi rm’s customers who
are at the hub of the network, O
owners/investors, P partners and E
employees.
 Supplier networks
• As you read earlier, Toyota only manufactures about 20
per cent of the value of its cars. It relies on a network
of approximately 50 000 supplier relationships to
create and supply the inputs required for car
manufacture.
• This is not to say that Toyota tries to manage 50 000
relationships. The company has a number of critical
relationships with tier one supplier these in turn have a
number of important relationships that enable them to
create and deliver what Toyota wants. They have
relationships with third tier companies that enable
them to meet their customer requirements, and on.
• Toyota regards these tier one suppliers as ‘ systems
suppliers ’ . This means that they not only supply the parts
that they manufacture, but they are also responsible for
managing the contributions of a network of lower tier
suppliers. This is much the same idea as the ‘ category
captain ’ . Some large supermarket operators have
appointed category captains to work cooperatively with
them to create profi table product categories. A category is
a class of product, such as men’s shaving supplies, hosiery
or ice-cream. The category captain is responsible to the
retailer for assembling a network of complementary lower
tier suppliers that contribute to the category performance.
• Networks are an inescapable feature of the
business landscape. They are complex, interactive
systems that are always undergoing change.
Every company occupies a network position
which is really no more than the sum total of its
network relationships and all the activity links,
resource ties and actor bonds that these
relationships contain. Network constituents can
be remembered through the mnemonic SCOPE:
suppliers, customers, owners, partners and
employees. Two of these are particularly
important to CRM.
• Network members supply the material inputs,
services, funding, people technology and
knowledge that are used to create value
propositions for the focal fi rm’s customers, and
network members play demand chain roles in
communicating and distributing products and
services to customers. No networks are subject to
the absolute control of any single company,
though all organizations strive to enhance their
network position by exerting infl uence over
other network members.
• Senior managers need to master two network management
competences: managing of networks, and managing in
networks. Management of networks involves identifying
the activities that need to be performed in order for
companies to create and deliver value for and from
customers, and to recognize, then coordinate and manage,
the actors and resources that are best suited to perform
those activities. Sometimes these will be internal to an
organization; often they will be external.
• Management in networks involves managing both clusters
of network members, such as segments of customers, and
managing individual network members, such as advertising
agencies or logistics partners.
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