CRM

1. SERVICES MARKETING Text and Cases CRM CHAPTER 12 by RAJENDRA NARGUNDKAR

2. CRM There are many definitions, but there are two or three key aspects to understanding the concept. These are • Relationships rather than transactions • Assessment of a Customer’s value and Value to a customer • Technology enablers

3. CRM Issues • For a new service company, customer acquisition is more important • For established companies, the issues may include the following - • Retention Strategies for Potential Defectors • Retention Strategies for Loyal Customers • Measurement Systems for Customer Value • Implementing Retention Plans • Attracting Customers-Acquisition Plans and their Implementation

4. Defector Types There are different types of defecting customers. • Price Defectors- These are customers attracted to competitors due to lower prices of competitors. Cell phones, airlines etc. see this form of competition • Product Defector- to superior products. A surfer may change from a regular cybercafe to Satyam I-way because of a superior experience-faster browsing speeds.

5. Defector Types…contd. • Service Defectors- due to bad service of the original provider. This can happen when a hotel or a restaurant serves a customer half-heartedly. He may shift to another one. • Market Defectors- Relocators, businesses that fail etc. Customers may move from one city to another, or one locality to another, and change their bank to the nearest available branch. • Technology Defectors- switch to substitute products with alternative technology. For example, CDMA handset holders may switch to GSM cell phones, or vice-versa.

6. Defector Types..contd Social Defectors-for social reasons, networks etc. For example, IIT or IIM alumni may persuade their friends or alumni to switch to the services they are marketing, and other things being equal, the customer may switch.

7. Stopping Defections • Analyse customer processes, internal processes with emphasis on employee motivation. • Address as many of the reasons for defection as can be addressed, within the goals and capabilities of the organisation. If it is a question of survival, then even consider building new capabilities to retain customers. • Actions that need to be taken may revolve around processes, people or some aspects of the design or delivery. You may sometimes need to do a lot to modify ways of working or attitudes in your organisation- popularly called change management.

8. Customer Value • Compute it over a period of time (at least 3-5 years, possibly upto 30 years) • A customer’s value is not one-time. Nor is it linear, and may increase or decrease with time. A student bank account today could turn into a salary or business account a few years later and yield much more profit to the service provider.

9. Customer Value…contd. • Deduct marketing cost for loyal/retained customers, and give them credit for referrals • For future years, a discounting rate can be used, to compute a net present value like in capital budgeting or project finance. • For instance, a 100 rupee purchase over every week for 30 years (say, of vegetables or fruits) can give a revenue of 100x30x52 which is 1,56,000 rupees (undiscounted)

10. The Ladder of Loyalty A popular version of the representation of increasing commitment levels of a customer to a brand is illustrated in the figure called the Ladder of Loyalty, shown in the next slide. This takes the view that a customer goes through stages in his relationship with a brand, and may finally reach the advocate’s stage, where he actively canvasses for a brand. The service firm should try its good customers into advocates who in turn become ambassadors of the brand.

11. Advocate Supporter Client Customer Prospect Ladder of Customer Loyalty Emphasis on developing and enhancing relationships Customer Retention Customer Acquisition Emphasis on new customers

12. CRM Objectives • Turn Prospects Into Advocates • Minimise Defections • Have a large proportion of loyal advocates • Have profitable relationships of the type customers desire, with those who desire them • Use cross-selling opportunities without annoying customers-don’t overdo it

13. Implementing CRM Employees Must Feel a Part of the Plans • Clear objectives must be set • Empowerment of staff • Regular Product Innovation • Conversation with consumers - and action to back it up • Think of Tangible Benefits to Reward customer loyalty

14. Some General caveats for Service Marketers • Set Tough Standards for Customer Services • Continuously Train Employees • Create a culture of Customer comes first • Serve to the best of your ability within the constraints • Explain why you cannot if you can’t • Treat every encounter as if your business depends on it

15. Is there a limit to CRM? • CRM may have to have some limits, considering the customer’s need for privacy. It is now possible for technology to snoop into our lives, and therefore, lay bare our private lives and lifestyle to anyone who we deal with in a commercial transaction. • Caution is needed in handling customer info

16. END OF THE CHAPTER