[MBA-MKT-B] [ANANYA GHOSH] [RELATIONSHIP MARKETING]

RELATIONSHIP MARKETING
UNIT 1: FOUNDATION OF CRM
1.1.CUSTOMER RELATIONSHIP MANAGEMENT INTRODUCTION
CRM is a customer focused business strategy which includes people,
processes and technology apart from marketing, sales and service.
In this they use processes better and its methodologies are supported by
different software, and the internet to manage its customer relationships.
CRM helps companies to find new customers, achieve objectives, and
retain them. Companies use CRM as a tool for differentiating their
products and services. This led to the creation of brand loyal customers
in the long run and proved beneficial for company’s growth.
Relationships are important and customer value is built on customer
retention. Companies develop products with existing investment by
covering customer acquisition cost, involving less financial outlay and
risks and by giving utmost importance to customer service. Increases the
life time value of customers by creating collaboration and cohesiveness
in the organization where every person has a chance to contribute towards
its success.

THREE LEVELS OF CUSTOMER:

- Zone of defection
- Zone of indifference
- Zone of affection

1.2.DEFINITION OF CRM
“Process of creating and maintaining relationships with business customers
or consumers”
“A holistic process of identifying, attracting, differentiating, and retaining
customers”
“Integrating the firm’s value chain to create enhanced customer value at
every step”
“An integrated cross-functional focus on improving customer retention and
profitability for the company.”

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1.3.IMPORTANCE OF CRM
 Targeted customer relationship management
 Communication channel
 Improved experience
 Focusing your business
 New customer
 Cost effective
 Reputation management

1.4.CONCEPT AND GROWTH OF RELATIONSHIP MARKETING

EVOLUTION OF CRM:
 Pre-industrial age
 Industrial age
 Service-economy age
 Knowledge economy age

1.5.SCOPE OF RELATIONSHIP MARKETING:

 Attract/ Create/ Establish
 Enhance/ Develop
 Maintain
 Customers only
 Stakeholders
 “Attracting, maintaining, and enhancing customer relationships.”

1.6.CONCEPT OF LIFETIME CUSTOMER (same as CLV in unit 2)

1.7.CUSTOMER LOYALTY
very supplier wants to create and retain a loyal customer who engages in
continued profitable business with him. Customer Loyalty is the measure of
success of the supplier in retaining a long term relationship with the
customer. Thus customer loyalty is when a supplier receives the ultimate
reward of his efforts in interacting with its customer. Customer loyalty
tends the customer to voluntarily choose a particular product against another
for his need. The loyalty may be product specific or it may be company
specific. When a loyal customer has repetitive requirement of the same
product, such customers may be described as being ‘brand loyal’. On the
other hand he may also require different products of the same manufacturer.

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That is to say he makes significant purchases direct from the same supplier
and that counts as the company specific loyalty.
Loyalty also means that customer is sticking to the supplier on certain
grounds though he may be having other options also. It may be possible that
the supplier may not have the best product or the customer may be having
some problems with the supplier in respect of his supply of the product but
the customer likes to ignore other options and prefers to continue with the
same supplier as the customer thinks the supplier provides him more value
and benefit than others. Such loyal customers tend to spend more money
buy more, buy longer and tell more people about the product or supplier.
This type of long-term customer loyalty can only be created by making the
customers feel that they are number one priority with the supplier.
Some customers are inherently predictable and loyal, irrespective of the
supplier with which they are doing business. They simply prefer long-term
relationships with him. Loyal customers are predisposed to stay with one
product or supplier, resisting competitive offers and also recommend the
supplier to others.

1.8.BENEFITS OF CRM
Enhancing customer service – to achieve the most important objective of
customer loyalty to maintain its advantage
Enhancing efficiency – and productivity and success in competitive
markets by reducing its cost
Reducing its cost of operation – which is possible when all the employees
understand this objective and involve themselves in CRM implementation
Helping the marketing department – to achieve its goal by assisting them
in marketing campaigns, sales promotions etc. which is done both inside and
outside the organization
Improved customer relations
Increase customer revenues
Maximize upselling and cross-selling
Better internal communication
Optimize marketing

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Improved Informational Organization

CRM for Enhanced Communication
CRM Improves Your Customer Service
Automation of Everyday Tasks
Greater efficiency for multiple teams
Improved Analytical Data and Reporting
Reduces advertising costs
Increases awareness of customer needs
Tracks effectiveness of promotional campaigns
Competition for customers based on service, not prices
Prevents over-spending on low-value clients, under-spending on high-
value ones
Speeds time to develop and market a product
Improves use of customer channel
1.9.DIFFICULTIES OF CRM
Cost of CRM implementation – as most of the organizations lack
formalized procedures and they stick to their old procedures as it is their
comfort zone
Financial constraints – because the benefit, utility and need of CRM in the
organization has to be assessed before its implementation
Selection of CRM software – focus has to be more towards increasing its
return on investment
Failure because of Software companies – as they lack user friendly
features and the people using it find it non-productive as well as
complicating
Failure because of CRM packages – as they are inflexible and view
customer only as a transaction
Failure because of CRM implementation – as the employees are reluctant
to use it or visualize uncertainty associated with it
Failure because of supporting systems – as the organizations fail in
analyzing the options in the market before arriving at the final decision
because they are convinced that it is a fad and it can take care of itself
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1.10 TRANSITION VS RELATIONSHIP MARKETING

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UNIT 2: CRM PROCESS AND IMPLEMENTATION

2.1.Introduction, Customer Development Process:

Customer development is a four-step framework, originally identified by Steve

Blank, to discover and validate that you have identified a need(s) that
customers have, built the right product to satisfy that customer’s need(s), tested
the correct methods for acquiring and converting customers, and deployed the
right resources in the organization to meet the demand for the product. The
framework provides a way to use a scientific approach to validate assumptions
about your product and business.

The four steps of the framework are:

1. Customer discovery - Understand customers and their needs that you

may be able to satisfy.
2. Customer validation - You have a product that will satisfy your
customer’s needs.
3. Company creation - You determine whether your product will satisfy all
the customers’ needs
4. Company building - You can grow your organization in order to support
the demand for your product.

2.2.Customer Retention: The key to customer retention is customer satisfaction

Satisfied Customers
 Stay loyal longer  Are less price sensitive
 Talk favorably about the  Offer service ideas to the
organization organization
 Pay less attention to the  Cost less to serve than new
competition customers
THE CUSTOMER VALUE RETENTION MODEL:

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2.3.Customer satisfaction
It is a measure of how products and services supplied by a company meet or
surpass customer expectation. Customer satisfaction is defined as "the
number of customers, or percentage of total customers, whose reported
experience with a firm, its products, or its services (ratings) exceeds
specified satisfaction goals."
2.4.Importance of customer retention
1. It increases revenue
2. Identify and explore referral sales opportunities
3. Build and foster constructive relationship with customers
4. Identify and rectify flaws within company policies and processes
5. Enhance brand reputation
6. Understand future needs of the customers
2.5.Customer Retention Strategies
2.6.Customer Life Time Value: Calculating the LTV of individual customers
THE BENEFITS OF LTV ANALYSIS
• Assigning acquisition allowances
• Choosing media for initial customer acquisition
• Setting selection criteria for retention marketing
• Investing in the reactivation of lapsed customers
• Assigning an asset value to the marketing database
CLV IS INCREASINGLY USED AS A MEASUREMENT
CATEGORY OF CUSTOMER RELATIONSHIP MANAGEMENT
(CRM):
• Identification of profitable customer segments
• Impact of new channels of distribution (multi channeling) on
customer value (“Value driver”)
• Aggregated CLV as “Customer Equity”
• Drawing on customer equity as indicator for the enterprise value
• Carrying out marketing campaign management (CRM) according
to customer values
• Aligning pricing and product design with CLV Basis

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FINANCIAL MOTIVATIONS FOR THE CLV

• In many businesses, the profits yielded by the customers are the
only earnings of the company
• Researchers have shown that the CLV of the customer base
(Customer Equity) was a key driver of the stock value.
• As a financial analyst, knowing the CLV of the customer base
increase the knowledge on the focal company.
MARKETING MOTIVATION OF THE CLV: By knowing the CLV
of the customers, one can
• Focus on groups of customers of equal wealth
• Evaluate the budget of a marketing campaign
• Measure the efficiency of a past marketing campaign by
evaluating the CLV change it incurred
COMMERCIAL MOTIVATION FOR THE CLV: By knowing the
CLV, someone in a branch office can
o Focus on the most valuable customers, which deserve to be closely
followed
o Neglect the less valuable ones, to which the company should pay
less attention
o At each decision level, to know the CLV allows to make efficient
actions.

2.7.types of Relationship Management

1) OPERATIONAL CRM : Sales, Marketing and Service automation
2) ANALYTICAL CRM
3) COLLABORATIVE CRM

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[MBA-MKT-B] [ANANYA GHOSH] [RELATIONSHIP MARKETING]