CUSTOMER RELATIONSHIP MANAGEMENT • THE CONCEPT OF RELATIONSHIP MANAGEMENT A business enterprise, organization, or firm must focus on both getting and keeping customers. It is the marketer’s job to use the resources of the entire organization to create, interpret, and maintain the relationship with the customer.
CUSTOMER RELATIONSHIP MANAGEMENT • Every time a customer approaches your business they arrive with an expectation, • It may be a service need or a new product interest but in every case they have an expectation that accompanies their interest in your business, • What happens next will from an experience that shapes their behavior a good experience may increase their loyalty and tendency to purchase again a poor experience may transfer their business to your competitor • The availability to recognize this process and to actively manage it forms the basis for customer relationship management.
CUSTOMER RELATIONSHIP MANAGEMENT • Customer Relationship Management is a process of acquiring, retaining, and growing profitable customers
The role of Customer Relationship Management • The role of Customer Relationship Management is to identify, establish, maintain and enhance relationships with customers and other stakeholders, at a profit, so that the objectives of all other parties involved are met, and that this is done by a mutual exchange and fulfillment of promises.
CUSTOMER RELATIONSHIP MANAGEMENT • DEFINITION • CMR system is a process to compile information that increases understanding of how to manage an organization’s relationships with its customers.
CRM system consists of two dimensions, analysis and action. • CRM is a business strategy that uses information technology to provide an enterprise with a comprehensive, reliable, and integrated view of its customer base so that all processes and customer interactions help maintain and expand mutually beneficial relationships.
CRM is a technique or a set of processes designed to collect data and provide information that helps the organization evaluate strategic options. • A CRM strategy should help organizations improve the profitability of their interactions with current and potential customers while at the same time making those interactions appear friendlier through individualization and personalization.
A CRM system brings together lots of pieces of information about customers, customer characteristics, sales transactions, marketing effectiveness, responsiveness, and market trends. • An effective CRM system describes customer relationships in sufficient detail so that all aspects of the organization can access information, match customer needs with satisfying product offerings, remind customers of service requirements, know what other products a customer has purchased, and so forth.
Customer relationship management (CRM) is a widely implemented model for managing a company’s interactions with customers, clients, and sales prospects.
It involves using technology to organize, automate, and synchronize, coordinate business processes—principally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture, encourage and retain those the company already has, entice, invite former clients to return, and reduce the costs of marketing and client service. Customer relationship management describes a company-wide business strategy including customer-interface departments as well as other departments.
THE CRM SYSTEM OF APPLIED LEARNING • Information technology within a CRM system is a continuous process. The firm recognizes its lack of knowledge and begins to learn about customer segments and their distinct needs before the first sale is made. • The organization learns a bit about the customer’s needs, and a circular process begins as the firm collects and analyzes data about customer transactions and preferences that is converted into information for different functional areas.
POTENTIAL RETURNS OF CRM SYSTEMS • A fundamental principle of marketing is that customers are different. Some customers cost a great deal to attract and require a great deal of service while the others require very little service and seem anxious to learn about your organization.
Successful organizations attempt to define characteristics of the best customers, to then estimate the lifetime value of such customers, and to adjust marketing strategy accordingly.
POTENTIAL BENEFITS OF CRM SYSTEMS TO THE ORGANIZATION • A Customer Relationship Management system advantages • Quality and efficiency • Decrease in overall costs • Increase Profitability
Potential costs and benefits of CRM systems Life time value of the relationship Benefits Customer focus Customer retention Share of customer Long-term profitability Organization Costs Privacy Opportunity Benefits Continuity Contact touch points Personalized service Enhanced satisfaction, safety Costs Infrastructure investment Reactions to process Customer
The satisfaction of consumers’ needs and wants is the justification for an organization’s existence. • An effective CRM system is a way for the organization to develop a customer focus that has impact, that allows the organization to hear the customer’s voice. • If organizations can learn enough about individual customers, then the customer should be more satisfied, trusting, and willing to talk positively to others about the organization’s wonderful approach.
The development of CRM systems leads to a different kind of thinking about the nature of a business.
POTENTIAL COSTS OF CRM SYSTEMS TO THE ORGANIZATION • A major benefit of an effective CRM approach is that it allows marketers to send the right messages about the right offers to its best customers at the right time. • Another significant cost in developing an effective CRM system is the price of process change. Process change implies an alteration in the habitual pattern for accomplishing a task.
POTENTIAL BENEFITS OF CRM SYSTEMS FOR CUSTOMERS • Customers may also benefit from CRM approaches and relationship marketing efforts. • First, the continuity derived from a relationship with the same seller simplifies the buying process. Continuity implies a stable connection or linkage.
POTENTIAL BENEFITS OF CRM SYSTEMS FOR CUSTOMERS • Buyers become regular customers because they want to do business with organizations that will provide a consistent level of product or service quality (Hairdressers or barbers examples). • In an age when personalization is rare, CRM information technology is bringing it back. Personalization implies that the organization knows the customer by name, knows the customer’s normal purchasing routine, and can forecast the customer’s need for variety as well.
POTENTIAL BENEFITS OF CRM SYSTEMS FOR CUSTOMERS • For the customer, over the time, the CRM system should increase the value of the relationship, increase satisfaction, reduce the risk associated with interactions, and thereby increase the safety and comfort of having needs met. Customers may benefit from feeling special and enjoy being recognized as an important entity to the organization.
POTENTIAL COSTS OF CRM SYSTEMS FOR CUSTOMERS • Perhaps the most obvious cost of the widespread adoption of CRM systems by organizations is the inevitable loss of privacy for customers. • Organizations want to know which people purchase which products in which colors on which days of the week with which credit card.
POTENTIAL COSTS OF CRM SYSTEMS FOR CUSTOMERS • Another intangible cost to the customer of developing a sole-source relationship with an organization is the opportunity cost associated with ignoring other offers from competitive sources. If customers take the time to search, they may find a better price for the same features or find options that better beet the original need.
LIFETIME VALUE OF THE RELATIONSHIP Whether the final customer is a business or a household, CRM systems are formed to facilitate exchanges and interactions over time. It may be helpful to recall at this early stage of the text that a customer can be an organization, another supplier, or a household. CRM systems represent the logical next step in improving lifetime value for organizations and customers within the system.
LIFETIME VALUE OF THE RELATIONSHIP • The lifetime value of the relationship can be simply defined as the net benefit to each party in an exchange over the length of time that interactions occur. • A focus on lifetime value does not ignore the fact that costs accrue, grow, but rather it emphasizes the need to view the long-term potential in the exchange.
LIFETIME VALUE OF THE RELATIONSHIP • CRM systems may offer customers better service at more reasonable prices as well. The basic idea is to have disparate organizations and people function with the same ultimate goal-to satisfy each other as they maximize the value of exchanges over a lifetime.
SUMMARY • Customer relationship management (CRM) is a business strategy that uses information technology to provide the enterprise with a comprehensive, reliable, and integrated view of its customer base so that all business processes and customer interactions help maintain and expand mutually beneficial relationships.
SUMMARY • CRM systems help organizations improve the profitability of their interactions with current and potential customers while at the same time making those interactions safer and friendlier through individualization and personalization. • The system’s goals are to enhance customer service, improve customer satisfaction, and ensure customer retention.
SUMMARY • Customer retention and customer loyalty are major benefits of CRM systems to the organization. Working to retain existing customers by managing relationships with them will generally increase revenues, and, in most cases, reduce costs. • Positive outcomes can include a larger share of a customer’s business as a result of activities such as cross-selling and up-selling.
SUMMARY • Customers benefit from CRM systems and relationship marketing in a number of ways, including simpler buying processes, ongoing dialogs with the firm, and personalized attention. • Costs to customers of CRM systems include a loss of privacy and, perhaps, missed opportunities to learn about or to purchase offerings from other organizations.
SUMMARY • The lifetime value of a relationship focuses on the net gain to each party in an exchange over the period of time when interactions occur. • A quick view of the supply chain serves as a reminder that customers can be members of a household or other organization (i.e., suppliers , retail stores, wholesalers). • While CRM systems can be expensive to implement, the long-term benefits should become apparent as time progresses, repeat purchases occur, and customer loyalty deepens.
UNDERSTANDING CUSTOMER DIFFERENCES • A fundamental principle CRM is that all customers are not the same. Marketing strategy becomes effective and efficient when managers realize that CRM is based on the idea of treating different customers differently.
Views of customers • A potential payoff to the organization for investing in an effective CRM system is in differentiating segments from others so that strategic initiatives can be implemented with precision. Organizations with sophisticated CRM systems often have databases that record a customer’s RFM (recency, frequency, and monetary) scores.
Views of customers • Buyers of many products and services vary in their consumption patterns. Some customers have had only a single experience with the organization, others are repeat customers, while still others are so firmly loyal they will accept no substitutes.
Views of customers • Concentrating on the heavy user market segment is an attractive strategy because a small percentage of all users of a product-the best customers- account for a large portion of an organization’s sales. • Organizations must be focused on the biggest spenders for many reasons. Since it’s very difficult to gain new business right now, losing the biggest clients is simply not an option.
Views of customers • But concentrating on the largest or heaviest user segment may not always be the best course of action. Some organizations mistakenly aim at such a segment just because it is so obviously attractive. • Clearly, the organization’s strategic view of customers is a critical component of selecting appropriate segments to target with market offers.
Views of customers • When segmentation is applied with skill, the organization has a picture of the customer to use in developing products, communicating messages, selecting distribution options, and deciding on an appropriate price. CRM systems can aid the organization in obtaining the “pictures” of various segment options. • The most effective CRM systems may well be those that can blend traditional approaches in marketing with the capabilities provided through information technology.
Strategic options for approaching customer • Economists draw few distinctions among different types of buyers as long as they have the financial ability to buy. Men and women, young and old, people who drink a bottle of coca a day, those who don’t drink at all are lumped together from that perspective.
Views of customers • Traditionally, most services, such as those provided by architects, tailors, doctors, or lawyers, require that each customer be treated in a unique way. With custom or one-to-one marketing, each individual customer receives personalized treatment, thus, each customer gets exactly what he or she wants. While the effectiveness of reaching the hearts of customers with this strategy is assumed to be high, marketing costs must be considered as well.
Views of customers • Managers of CRM systems typically collect data about items purchased, size of orders, payment method, purchase frequency, service requirements, and any of a number of other customer attributes. Information about how, when, where, and why customers contact the organization, make purchases, or complain fosters an understanding of each customer’s interaction history.
Views of customers • It has been observed that for many organizations, focusing too closely at the individual level can be mistake. The crucial process, which not many enterprises have yet mastered, is to find the right level of aggregation-to categorize customers in groups that are neither too big nor too small. The promise of CRM technology is to define segments that are large enough to approach with a unique marketing mix.
Market segmentation • Dividing a heterogeneous market into a number of smaller, more , more homogenous subgroups is called market segmentation (or customer segmentation).while there is a great diversity in the number of ways a market can be divided, the basic logic behind a segmentation strategy is the same.
Market segmentation • Not all buyers are alike • Subgroups of people with similar behaviors or values may be identified. • Subgroups will be smaller and more homogeneous than the market as a whole. • A marketing effort targeted at the unique needs of smaller groups of similar customers should be more effective than a marketing effort to satisfy the diverse needs of a large group of heterogeneous customers.
Market segmentation • The most fundamental way of distinguishing markets is on the basis of the buyer’s use of the good or service being purchased. When the buyer is an individual costumer who will use the product to satisfy personal or household needs, the good or service is a consumer product sold in the business-to-consumer market (B2C).
Market segmentation • When the buyer is a firm or organization that will use a product to help operate its business, or when the product is a component part for the product the firm produces, or when a firm will buy and resell a product to another customer, the good or service is within the business-to-business market (B2B). Defining and choosing a target market-that is, the specific group toward which the firm aims its marketing plan-allows the organization to tailor a marketing mix to the specific needs or characteristics of that group.
Identifying customer differences • The essence of a market segmentation strategy is to look at total markets and find meaningful differences across defined groups that affect the success of long-term relationships. The traditional bases for differentiating market segments are virtually unlimited.
Geographic variables • Geographic market segmentation often begins with the broad distinction between domestic and foreign markets. International marketers recognize that people in different nations may have different tastes, needs, and behaviors. • Another basis for segmentation is political boundaries, such as state and city lines and the like.
Geographic variables • Geographic information systems use software to tie demographic information to specific locations, such as street addresses, codes, and census tracts.
Demographic segmentation variables • Demographic segmentation variables are those characteristics, such as gender, income, age, marital status, family life cycle, race, and ethnicity, that are easily understood, easily found, and often related to customer purchasing behavior. For these reasons, demographic characteristics are among the most commonly used segmentation variables.