Professional Documents
Culture Documents
Management
CRM
Definition
CRM is “the automation of horizontally integrated business processes
involving front office customer contact points (marketing, sales, service )
via multiple, interconnected delivery channels
(Metagroep, 2000)
Identify Differentiate
Customize Interact
These steps are roughly in order of increasing difficulty and complexity,
even though there may be a good deal of overlap among them
Offensive(new)
Increase market
share
CRM strategy
Build switching
barrier
Defensive(current)
Increase customer
satisfaction
1 Knowledge 2 Customer
Discovery Interaction
Learning
Action
4 Analysis 3 Market
and
Planning
Refinement
Knowledge Discovery:
Analyzing customer specification and investment strategies. Analysis done
through process of Customer identification, customer segmentation and
customer prediction.
Functional data warehouse which is logical collection of information from all
over the organization , supports business analysis activities and decision making
tasks.
Used for campaign management to improve response rate.
Help company in customizing offers, reduce costly developing targeted
campaigns.
Customer Interaction:
Executing and managing customer communication with relevant information at
the right time with different communication channels as preferred by the
customer.
With this the company has the opportunity to deliver messages and sales
opportunities and to handle service issues.
Market Planning:
It defines specific customer offers and distribution channels.
Four different activities - market planning, offer planning, marketing planning
and communication planning.
Ambassador
Client
Prospect
CRM Strategies
• The aim of the CRM strategy is to be able to find ways to
deliver greater value to customers in more cost efficient
ways that employees find satisfying.
A CRM strategy has to be good for the customer, the
employee and the organization.
• Deals with establishing, developing and increasing
customer relations from a profitability perspective.
• Deals with segmenting customers based on the how
important they are to the business.
• Deals with handling large amount of data - data which is
complied from all communication channels like
company’s website, telephone, email, chats & social
media.
CRM Strategy
Product orientation to
Production orientation to
Selling orientation to
Customer orientation
Benefits for the firm
1.The firm experiences more financial stability – as it has a stable, loyal customer
base who regularly buys from them,
2.The firm can reduce its promotional budget – as less investment is needed to be
spent on generating new customers,
3.New products are typically more successful – as they can be more easily cross-
sold to a loyal customer base,
4.There is less need to compete on price – as the customer sees real value in the
relationship and its associated benefits,
5.Existing customers are easier to manage and require less information and
support,
Benefits for the firm
1. It creates a sustainable competitive advantage – competitors will find
it much harder to win your customers from you,
2. New customers are generated from positive word-of-mouth –
satisfied/loyal customers are more likely to recommend your firm,
and
3. A higher growth rate is likely – as long-term customers usually
increase their level of purchases over time.
Possible Benefits for the Customer
They are confident that the firm will deliver consistent quality,
They know that they can trust the firm,
They know that they will be able to fix any problems quickly,
They know they can get things done faster, if needed,
They feel comfortable in discussing/raising problems/issues,
They receive special deals/treatment from time to time, and
They may develop social relationships/friends.
Culture
People Mission
Relationship
Orientation
Structure System
Communication
CRM MISSION
The Ashridge Mission Model
FMCG : HUL
Consumer Durables : Maruti
Culture
The culture consists of the beliefs, norms and values which are adhered
to by the people within the organization and which have repercussions
on their behavior.
The culture of relationship oriented organization is characterised by the
fact that it understands customers: its employees can place themselves
with the world and empathise with them.
Creating a corporate culture
High cooperation
Low competition Pre- Development Maturity Decline
relationship stage stage stage
stage
Low cooperation
High competition
Time
(Wilkinson and Young, 1997)
Functions of Customer Relationship Management
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 role of salespeople as relationship builders and promoters
Salespeople by:
Independence
Relative influence
Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.
High
Use a non Build a strong
customized and lasting
approach relationship
Opportunities
for adding value
• CPA (Cost Per Action): It is a formula that measures the amount a business has
paid to attain a conversion. CPA campaigns are relatively low-risk, as costs are
only accumulated once the desired action has occurred.
For example, a company invests $1,000 in a campaign. They received 100 new
customers specifically from campaign. Their CPA is $10/customer. The formula
is CPA = (Cost/ Conversions). Divide the cost of the ad campaign by the
conversions.
• ROAS (Return On Advertising Spend): Its used to measure the profit made
from advertising. Evaluate the performance of marketing campaigns, how much
revenue you get back on each dollar spent on advertising.
For example, a company spends $20,000 on Google Ads and received $60,000 in
revenue. Their ROAS is $2 – ($60,000 - $20,000) / $20,000.
The formula: ROAS = (Ad revenue/ Cost of ad source). Divide revenue received
from advertisement by the cost of the advertisement.
• CLV (Customer Lifetime Value): This metric is used to determine the economic value a
customer brings to your business, not only for the time being, but for the entire time
they’re a customer.
The metric considers everything from their first interaction to their final purchase with your
company. This is essential to determine whether there is more value in long-term marketing
channels.
For example, if you fill 600 orders gaining revenue of $40,000, your average order value
would be $66.67. Then, you can determine the purchase frequency (PF) by dividing the
number of orders by the unique customers. In this case, if you had 400 unique customers,
the PF would be 1.5. To calculate your Customer Value (CV), you multiply these numbers.
In this case, it would be 66.67 (AOV) x 1.5 (PF) = $100 (CV).
Now, to determine the Customer Lifetime Value, you take the CV and multiply it by the
customer’s duration with your company. Generally, choosing a number between one and
five
provides accurate results, so let’s assume each order also comes with a contract. Let’s
assume
a 3-year contract is your minimum.
Your formula would look like this: 100 (CV) x 3 (Years) = $300. Your customer’s lifetime
value is $300 over a course of three years.
The Customer Lifetime Value (CLV) formula:
AOV = (Number of Orders X Revenue)
PF = (Average Order Value / Number of Unique Customers)
CV = (Average Order Value X PF)
CLV = Customer Value X Customer’s Duration with the Company
Metrics used in Customer
Analytics
Acquisition Rate
• The proportion of prospects converted to customers.
• It is calculated by dividing the fraction of prospects acquired by the total
number of prospects targeted.
• The acquisition rate denotes an average probability of acquiring a
customer from a population. Thus, the acquisition rate is always calculated
for a group of customers.
Acquisition Cost
• AC is defined as the acquisition campaign spending divided by the number
of acquired prospects.
• AC is measured in monetary terms.
Average Inter-Purchase Time
• Average Inter-Purchase Time (AIT) is the average time
elapsing between purchases.
• It is measured in terms of specific time periods (days, weeks,
months, etc.). It is computed by taking the inverse of the
number of purchase incidences per time period.
Size of wallet
Size of wallet is the amount of a buyer’s total spending in a
given category—or, stated differently, the category sales of all
firms to that customer. The size of wallet is measured in
monetary terms.
Share of Category Requirement
• Share of Category Requirement (SCR) is defined as the
proportion of category volume accounted for by a brand or
focal firm within its base of buyers. This metric is often
computed as an aggregate level metric, when individual
purchase data are unavailable.
Individual Share of Category Requirement
(iSCR)
• At the individual level, when such data are available, iSCR is computed by
dividing the volume of sales (V) of the focal firm to a particular customer
by the total category volume she buys.
• The metric thus indicates how much of the category requirements the
focal firm satisfies of an individual customer.
Share of Wallet
4. New sessions: Metric found in Google Analytics- tells how many are
New site visitors and how many are recurring visitors. It indicates if the
site is good enough to retain the interest of already exisiting customers
and how effective its outreach is. For example, if you change the
structure or content of your site significantly and your ratio of recurring
visitors to new visitors drops, it could be an indication that your website
is losing effectiveness in warranting multiple visits.
5. Bounce Rate : The bounce rate is the number of people who visit your
site and leave right away without performing any meaningful action. A
high bounce rate can point to several flaws in your digital marketing:
Poor campaign targeting, irrelevant traffic sources, weak landing pages,
etc.
6. Exit Rate: This is a helpful metric, especially for websites that have a
multi-page conversion process. The exit rate differs from the bounce
rate in that the exit rate measures the number of people who left the
site from a particular page as a percentage of all people who viewed
that particular page. This helps you identify drop-off points in your
conversion process so you can optimize accordingly.
Judging customer value on just one aspect will give an inaccurate report of
customer base and their lifetime value.
RFM model combines three different customer attributes to rank customers.
If they bought in recent past, they get higher points. If they bought many
times, they get higher score. And if they spent bigger, they get more points.
Combine these three scores to create the RFM score.
Assessing Customer Value : RFM
Customers can be classified into quintiles or deciles in terms of recency,
frequency and monetary value of the purchases they have made. This is
called RFM analysis. Expect to find that customers who have bought most
recently, frequently or spend most are the most responsive in general terms.
Here is an example