Syed Ferhat Anwar

Professor, IBA
University of Dhaka
“The purpose of a business is to create a customer and grow that
customer.”
“Because the purpose of business is to create a customer, the
business enterprise has two--and only two--basic functions:
marketing and innovation. Marketing and innovation produce
results; all the rest are costs. Marketing is the distinguishing, unique
function of the business.”

– Peter Ferdinand Drucker

 Content Marketing By Michael Brenner
 CRM at the Speed of Light By Paul Greenberg
 On Customer Lifetime Value By Martin J Crowder, David J Hand and
Wojtek J Krzanowski
 Organizational Data Mining: Leveraging Enterprise Data Resources
for Optimal Performance By Watson, H.J., D.L. Goodhue, and B.H
Wixom
 The Definitive Guide to Customer Relationship Management By V.
Kumar, Richard Hammond, Herb Sorensen & Michael R. Solomon
 The CRM Handbook: A Business Guide to Customer Relationship
Management By Jill Dyche
Reduce the rate of defection

Increase longevity

Enhance “share of wallet”

Terminate low-profit
customers

Focus more effort on high-

profit customers
Suspects

Prospects Disqualified

First-time Repeat
customers customers Clients Members

Partners
Ex-customers
 Customer  Business
database database
 Database  Data warehouse
marketing  Data mining
 Mailing list
To identify prospects

To target offers

To deepen loyalty

To reactivate customers

To avoid mistakes
CRM is “the development and maintenance of mutually beneficial
long-term relationships with strategically significant customers”
(Buttle, 2000)

CRM is “an IT enhanced value process, which identifies, develops,

integrates and focuses the various competencies of the firm to the
‘voice’ of the customer in order to deliver long-term superior
customer value, at a profit to well identified existing and potential
customers”.
(Plakoyiannaki and Tzokas, 2001)
CRM is a business philosophy based on upon individual customers
and customised products and services supported by open lines
of communication and feedback from the participating firms that
mutually benefit both buying and selling organisations.

The buying and selling firms enter into a “learning relationship”,

with the customer being willing to collaborate with the seller and
grow as a loyal customer. In return,, the seller works to maximize
the value of the relationship for the customer’s benefit.

In short, CRM provides selling organisations with the platform

to obtain a competitive advantage by embracing customer needs
and building value-driven long-term relationships.
 Trust

The willingness to rely on the ability, integrity, and motivation of

one company to serve the needs of the other company as agreed
upon implicitly and explicitly.

Value

The ability of a selling organisation to satisfy the needs of the

customer at a comparatively lower cost or higher benefit than
that offered by competitors and measured in monetary,
temporal, functional and psychological terms.
In addition to trust and value, salespeople must:

Understand customer needs and problems;

Meet their commitments;

Provide superior after sales support;

Make sure that the customer is always told the truth

(must be honest); and

Have a passionate interest in establishing and retaining a long-term

relationship (e.g., have long-term perspective).
 Identify customer relationships

Leverage customer Understand interactions

information with current customer base

Capture customer data

Identify best customers
based on interactions

Store and integrate

customer data using IT
 High
Synergistic KAM

Partnership
Degree of
involvement Mid-KAM

Early-KAM

Low Pre-KAM

Transactional Collaborative
Nature of customer relationship
(Millman and Wilson, 1995)
High cooperation
Low competition Pre- Development Maturity Decline
relationship stage stage stage
stage

Low cooperation
High competition

Time
(Wilkinson and Young, 1997)
Direct functions (are the basic requirements of a company that are
necessary to survive in the competitive marketplace)
Profit;
Volume; and
Safeguard

Indirect functions (are the actions necessary to convince the

customer to participate in various marketing activities).
Innovation:
Market;
Scout: and
Access.
 Value Creation Process
Technology delivery process
•R&D
•Technology integration
Management •Efficiency, effectiveness
Decision learning
Process
Value-based
Customer sensitivity Product delivery process Strategies
•Concept to launch •Pricing
•Diversity •Manufacturing process •Communication
•Information
•Differentiated
offering Customer delivery process
•Supply chain
•Distribution
•Infomediation (distribution
of information)
(Sharma et. al., 2001)
 The Brock and Barcklay (1999) model of selling
partner relationship effectiveness

Independence

Mutual trust Selling partner

relationship
Cooperation
effectiveness

Relative influence
The ultimate outcome of a successful CRM strategy is the creation
of a unique company asset known as a relationship network.

A relationship network consists of the company and its major

customers with whom the company has established long and
enduring business relationships.

The additional aspects of a global salesperson’s job are to:

Manage customer value;

Act as customer advocate; and
Enhance customer loyalty and build a “health” and
profitable network of relationships.
 Customer
Profitability

Marketing
Metrics
Customer Lifetime
Equity Value
 Marketing metrics are the set of measures that helps
marketers quantify, compare, and interpret marketing
performance.
External
 Awareness
 Market share
 Relative price
 Number of complaints
 Customer satisfaction
 Distribution
 Total number of customers
 Loyalty
Internal
 Awareness of goals
 Commitment to goals
 Active support
 Resource adequacy
 Staffing levels
 Desire to learn
 Willingness to change
 Freedom to fail
 Autonomy
 Retaining existing customers
Acquiring new customers and increasing CLV

More customers = More Sales = More

Revenue = More Profits = Good times Old wisdom that it’s cheaper to keep a
ahead customer than to find a new one
Just 16% of
companies focused more on
retention than acquisition.

82% companies surveyed

agreed that retention was
cheaper than acquisition.
Customer Lifetime Value (CLV),
sometime called life-time value, is a
prediction of the total net profit a
company can expect to make from a
customer over the course of their
relationship.
The Unified / Single Customer View
• Single customer view is an aggregated,
consistent and holistic representation of the
data
• A single customer view gives you the ability
to track customers and their communications
across every channel
Strong Interactions Between
Online & Offline Channels
• Marriage of offline and online
channels help brands to take into
account all consumer touch points
Analyzing the data to get customer level
insights
Helps in understanding
• Buying behavior
• Buying preferences and
• Purchasing power
Create right segments
Segmentation is the process of
segregating your users
(customers) into groups based
on behavior, characteristics and/
or needs.
Create right content for the right
segments
• Segments should drive your content
marketing strategy
• Personalized marketing and contextual
remarketing prove to be the two most
effective techniques of retaining your
customers
Executing the campaigns
across channels
Deliver Personalised Experience
• Right message
• Right person
• Right channel
• Right time
Right Person Right Content Right Time Right Channel

Customer Experience
Modern Marketers’ Path To Future
Prospects Customers Retained Retained Retained
Customers Customers Customers

$ $ $ $
Discount Factor
Divide by Number of Initial Customers
= Customer Lifetime Value
 CLV-projection of future cash flows for a customer across all
product holdings and discounting these to get an
"embedded value" of the customer.
 
 n
r i 
   n
r i 1 

CLV  GC   i 
 M   i 0.5 

 i o (1  d ) 
   i 1 (1  d ) 

 GC - Yearly gross contribution margin per customer

 M- Promotion costs per customer (can refer to other costs

as well)
 n - Length, in years, of the period over which cash flow
are projected.
 r - Early retention rate

 d - Early discount rate

 Recency – the most recent date that the customer has
requested for a change in his service (usually a purchase,
but not always)
 Frequency – the number of time the customer has made a
purchase.
 Monetary – the monetary amount is the total dollar amount
that a customer has spent.
 3.0

2.5

2.0
Number of
purchases 1.5
per year
1.0

0.5

0.0 1 2 3 4 5

Years as a customer
 $70

$60

$50
Average $40
Purchase
Price $30

$20

$10

$0 1 2 3 4 5

Years as a customer
 90%
80%
70%
Percentage 60%
Retained 50%
from
Previous 40%
Year 30%
20%
10%
0% 1 2 3 4 5

Years as a customer
 First year costs are

70%
often high

60%

50%
Costs as 40%
a % of
revenue 30%
20%

10%

0%
1 2 3 4 5

Years as a customer
 1 2 3 4 5
“The people most likely to respond to a new offer are those people who have
made a purchase from you most recently”, Arthur Middleton Hughes
 Buy
Buy/ No Buy
/ No Buy

RFM
RFMvariables
variables