Customer Relationship

Management
Dr. Ruchi Jain
 Module I : Introduction to CRM
• Pre Industrial age, Industrial age, Service
Economy age, Knowledge Economy Age.
• Relationship Marketing Theory
• Introduction to CRM, Transition from Product
focus to Customer focus.
• Relationship marketing and Value exploration
and creation of value chain
 Why CRM developed
• 1980’s onwards saw rapid shifts in business that
changed customer power
• Supply exceeds demand for most products
• Sellers have little pricing power
• Only protection available to suppliers of goods and
services is in their relationships with customers
Gartner estimated that a 5 percent increase
in customer retention rates can increase
profits by 25 percent to 125 percent.

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 Few facts about customers
• Pareto’s principle: 80/20 rule
 80 percent of your profits are from 20 percent
of your customers.
 20 percent of your profits are from 80 percent
of your customers.
• It takes 8 to 10 calls to make a sale to new
customers, 2 to 3 to existing customers.
• It is 5-10 times more expensive to sell to new
rather than repeat customers.

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 Why CRM (rationale)?
• It costs up to 10 times more to lure
and win over a new customer than it
does to retain one.
• Customer relationship management
can help businesses increase
customer loyalty and retention.
• The concept of CRM is simple: a well-
treated customer will happily buy
more and spend more

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Forms of Buyer-Seller Interactions:
Conflict to Cooperation

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Transactional Marketing Relationship Marketing

• Focus on Single Sale recruitment • Focus on retention of the customer

• Emphasis on product features • Emphasis on product benefits and
• Little or no importance given to • systematic solutions
customer services • Customer service is taken as most
• Limited commitment towards the • important element
• customers • Higher commitment towards the
• Communicate to persuade customers
• Functional, mechanistic and production • Focus on quality at all levels
oriented business model • Communication to make sense and
• Goal is customer satisfaction • meaning
• It Serves 4Ps of Transactional • More humanistic and relationship
Marketing based business model
1. Product • Goal is customer delight
2. Price • It Serves 8C’s of Relationship
3. Place Marketing
4. Promotion
 8 Cs of relationship Marketing
• 1. Customer Expectation
• 2. Customer Satisfaction
• 3. Customer Delight
• 4. Customer Cooperation
• 5. Customer Retention
• 6. Customer Touchpoints
• 7. Customer Behaviour
• 8. Customer Collaboration
Evolution of CRM from relationship
marketing
• Roots of CRM are seeded in the evolution of
ERP, which forced all the resources of
organization to work with a single platform.
• Centralized records of customers made data
mining, profiling and STP research very
precise, leading to better understanding of
customers.
• Development of electronic marketing also
became a rich source of customer data
accessible to many organizations at one
 Class Activity 1
• Develop a list of at least 10 shops/brands you
frequently use or visit..
• Analyze whether your approach to them is
purely transactional or repeat buying or actual
relationship oriented. Categorize each one of
them.
• Brainstorm the difference in marketing
approaches of these marketers to you.
• Present your conclusions to the class.
 A Strategic Framework for Customer
Relationship Management
Adrian Payne & Pennie Frow (Journal of marketing)

In the academic community, the terms “relationship marketing” and CRM are
often used interchangeably (Parvatiyar and Sheth 2001).

However,CRM is more commonly used in the context of technology solutions and has
been described as “information-enabled relationship marketing” (Ryals and Payne
2001, p. 3). Zablah, Beuenger, and Johnston (2003, p. 116) suggest that CRM is “a
philosophically-related offspring to relationship marketing which is for the most
part neglected in the literature,”

To some, it meant direct mail, a loyalty card scheme, or a database, whereas others
envisioned it as a help desk or a call center. Some said that it was about populating
a data warehouse or undertaking data mining; others considered CRM an e-
commerce solution.

This review suggests that CRM can be defined from at least three perspectives: narrowly and
tactically as a particular technology solution, wide-ranging technology, and customer centric.

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 CRM defined
CRM is a strategic approach that is concerned with creating improved
shareholder value through the development of appropriate
relationships with key customers and customer segments.
CRM unites the potential of relationship marketing strategies and IT to
create profitable, long-term relationships with customers and other
key stakeholders.
CRM provides enhanced opportunities to use data and information to
both understand customers and co-create value with them.
This requires a cross-functional integration of processes, people,
operations, and marketing capabilities that is enabled through
information, technology, and applications.

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 CRM-definitions
• Customer Relationship Management is a
comprehensive strategy and process of acquiring,
retaining, and partnering with selective customers to
create superior value for the company and the
customer.
• It involves the integration of marketing, sales,
customer service, and the supply-chain functions of
the organization to achieve greater efficiencies and
effectiveness in delivering customer value.

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 Strategy Development Process
This process requires a dual focus on
• the organization’s business strategy and
• its customer strategy.
The business strategy process can commence with a review or articulation of
a company’s vision, especially as it relates to CRM (e.g., Davidson 2002).

Customer strategy involves examining the existing and potential customer

base and identifying which forms of segmentation are most appropriate
segment granularity involves decisions about whether a macro, micro, or
one-to-one segmentation approach is appropriate (Rubin 1997).

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 Value Creation Process
The value creation process transforms the outputs of the
strategy development process into programs that both
extract and deliver value.
The Value the Customer Receives are benefits integrated in the form of a
value proposition that explains the relationship among the performance
of the product, the fulfillment of the customer’s needs, and the total cost
to the customer over the customer relationship life cycle (Lanning and
Michaels 1988).
The Value the Organization Receives is to determine how existing and potential
customer profitability varies across different customers and customer segments.
Also, the economics of customer acquisition and customer retention and
opportunities for cross-selling, up-selling, and building customer advocacy must be
understood.

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 Explosion of CRM in Marketing and IT

• In the 1990s, CRM started attracting attention of academicians

as well as practitioners from marketing and IT.

• The early adopters of CRM in the business to consumer markets

were financial services, retailing, telecommunication, travel and
hospitality, utilities and automotive.

• The last decade witnessed an explosion of CRM in marketing

and IT.

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ENABLERS FOR THE GROWTH OF CRM

Emergence of service economy

Emergence of market economy

Global orientation of businesses

Aging population of the economically advanced economies

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 Emergence of Service Economy

• The emergence of service economy is a global phenomenon.

• The growing importance of services resulted in greater customer
orientation as services are characterised by simultaneity/inseparability.
• It implies that the production and consumption of services are
inseparable.
• In services, one needs to be close to customers to deliver the service
offering.
• Service businesses like hotels, airlines, banking, financial services, telecom
and retailing were the early adopters of CRM.

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 Emergence of Market Economy

• The 1990s witnessed acceleration in the deregulation of many

large industries including banking, telecommunications,
broadcasting and airlines across the world.
• Market-oriented firms operating in intensely competitive
markets now take decisions that was once controlled by the
government.
• Market-oriented economy necessitated a customer focus and
boosted the importance of CRM.

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 Global Orientation of Businesses

• Increasing international trade became the growth

engine for the global economy.

• Liberalisation of markets and trade proved to be a

far stronger growth engine.

• Firms need stronger customer-orientation to be able

to tap opportunities in new markets while defending
themselves in their home markets.

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 Aging Population in Economically
Developed Countries

• The economically advanced nations are

witnessing an aging of their population.

• Aging of population has been attributed to

the combined effects of a slowdown in
birthrate and an increase in life expectancy.

• Therefore, in these markets, growth is being

achieved by increasing the ‘share of wallet’
and not through ‘growth of markets’.
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THE CRITICALITY OF CUSTOMER
RELATIONSHIPS

Non-traditional
competition

Market maturity

Misalignment
between revenue
and profits

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 Non-traditional Competition

• Non-traditional competitors include:

• New entrants from outside the industry

• Substitute technology
• Supplier as a competitor
• Customer becomes a competitor

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Market Maturity

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Rising Customer Expectations

Increasing affluence
in the emerging
economies

Greater awareness
due to explosive
media growth

Customer diversity

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Affordable Technological
Advances

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