Product management and Customer

Relationship Management
Customer Relationship Management
 Introduction

• Transaction-based marketing - Buyer and seller exchanges characterized by

limited communications and little or no ongoing relationship between the parties

• Relationship Marketing - Development, growth, and maintenance of long-term,

cost-effective relationships with individual customers, suppliers, employees, and
other partners for mutual benefit
 The Shift from Transaction-Based
Marketing to Relationship Marketing

Shift away from production-oriented marketing

• Emphasis on individual sales and transactions
• Limited communication
• No ongoing relationship
• Limited in some markets, such as residential real estate
 The Shift from Transaction-Based
Marketing to Relationship Marketing

Shift toward relationship marketing

• Views customers as equal partners in transactions
• Encourages long-term relationships, repeat purchases, and multiple brand purchases
from the firm
• Leads to increased sales and low marketing costs
Forms of Buyer-Seller Interactions from
Conflict to Integration
 Relationship Marketing

• Focuses on long term rather than short term

• Emphasizes retaining customers over making a sale
• Ranks customer service as a high priority
• Encourages frequent customer contact
• Fosters customer commitment with the firm
• Bases customer interactions on cooperation and trust
 Elements of Relationship Marketing

Firms build long-term relationships in four ways

• Gather information about their customers
• Analyze the data and use it to modify the marketing mix
• Monitor interactions with customers
• Use customers’ preferences and knowledge
Internal Marketing

External customers - People or

organizations that buy or use a firm’s
goods or services

Internal customers - Employees or

departments within the organization
whose success depends on the work
of other employees or departments
Three Levels of Relationship Marketing
 First Level: Focus on Price

• Most superficial level, least likely to lead to long-term relationships

• Marketers rely on pricing to motivate customers
• Competitors can easily duplicate pricing benefits
 Second Level: Social Interactions

• Customer service and communication are key factors

• Example: A wine shop holding a wine-tasting reception
Third Level: Interdependent Partnership

• Relationship transformed into structural changes that ensure partnership

and interdependence between buyer and seller
• Example: Canadian software marketer Corel chose a cloud-based approach
• Its tech-help agents can now answer customer queries via chat, telephone, the Web, or
social media
Three Steps to Measure Consumer
Satisfaction
 Understanding Customer Needs

• To build long-term relationships firms must understand what customers

need, want, and expect
• Must measure customer satisfaction
• Marketers need to keep in touch with the needs of current and potential
customers
 Obtaining Customer Feedback
and Ensuring Satisfaction

• Sources of information include toll free numbers or online feedback

• Some firms hire mystery shoppers posing as customers to evaluate service
• Complaints help firms overcome problems and demonstrate commitment to
service
• Some firms conduct surveys to measure satisfaction
 Building Buyer-Seller Relationships

Consumers form relationships to:

• Reduce choices
• Simplify information gathering and the entire buying process
• Reduce the risk of dissatisfaction
 Building Buyer-Seller Relationships

• Perceived positive value received in a long-term buyer-seller relationships is a key benefit

for customers
• Customers may switch loyalties if they perceive better benefits from a competitor
 How Marketers Keep Customers

• Retaining customers is more profitable than losing them

• Customer churn - Customer turnover
• Is expensive for a company
• Firms generate more profits with each additional year of a relationship
 How Marketers Keep Customers

• Frequency marketing - Frequent-buyer or -user marketing programs that

reward customers
• Affinity marketing - Solicits responses from individuals who share common
interests and activities
 Database Marketing

Use of software to analyze data about customers

Helps firms to:
• Identify their most profitable customers
• Calculate the lifetime value of each customer’s business
• Build relationships and encourage genuine brand loyalty
• Improve customer retention and referral rates
 Database Marketing

• Reduce marketing and promotion costs

• Boost sales volume per customer or targeted customer group
• Expand loyalty programs
 Database Marketing

Possible sources of data

• Credit card applications
• Software registration
• Product warranties
• Point-of-sale register scanners
• Customer opinion surveys
• Websites
• Telecom companies database
 Database Marketing
Interactive television - Television service
package that includes a return path for
viewers to interact with programs or
commercials by clicking their remote controls

Application service providers (ASPs) - Outside

companies that specialize in providing both
the computers and the application support for
managing information systems of business
clients
 Customers as Advocates

• Grassroots marketing - Connecting directly with existing and potential customers

through non-mainstream channels
• Viral marketing - Satisfied customers spread the word about products to other
consumers
• Buzz marketing - Gathers volunteers to try products and then relies on them to
talk about their experiences
 Customer Relationship Management

• Combination of strategies and tools that drive customer relationship

programs
• Leverages technology to manage customer relationships
• Integrates all stakeholders into a company’s product design and development
 Definitions

“is a business strategy with outcomes

• that optimise profitability, revenue and customer satisfaction
• by organizing around customer segments,
• fostering customer-satisfying behaviors and
• implementing customer-centric processes.”
“is a strategy
• used to learn more about customers' needs and behaviors
• in order to develop stronger relationships with them.”
 Underpinning Theory

• Customers have many points of contact with an organization

• Retaining customers is far most cost effective than recruiting new ones
• Some customers are more profitable than others
• The “80/20” rule
• For most firms, 80 percent of profit comes from 20 percent of customers
• Use of Technology
 An example
The Elements of CRM
Sales force Customer service/call center Marketing
automation management automation

Call center telephone sales Call Centers Campaign

Managing aspects management
E-commerce Of customer contact

Field sales
Web-based Content
Retail self service management

Data analysis
Third-party brokers, Field services
And business
Distributors, agents and dispatch
Intelligence tools

Data warehouse and data cleaning tools

 Potential Costs Of CRM

• IT infrastructure
• Process change
 Benefits Of CRM For Customers

• Continuity
• A contact point
• Personalization
 Three phases of CRM

i. Acquiring New Relationships

• You acquire new customers by promoting your company’s product and
service leadership.
ii. Enhancing Existing Relationships
• You enhance the relationship by encouraging excellence in cross-selling and
up-selling, thereby deepening and broadening the relationship.
iii. Retaining Customer Relationships
• Retention focuses on service adaptability – delivering not what the market
wants but what customers want.
 Steps to improve CRM

1. Build a database
2. Analyze, define types, profitability
3. Customer selection
4. Activities to delight selected customers
- discourage others
5. Analyze again to see how we’re doing
 What should be in the database

• Demographics
• How do you get people to provide this?
• History of contacts
• Transaction history or summary
• Response to marketing communications
• How did you hear about us (this offer?)
CRM Applications
 Customer Relationship
Management CRM Model
 Customer Types

• Platinum --- Heavy, reliable users, not price-sensitive, try new products, loyal
• Gold --- Large users who push for price breaks, shop around and not so loyal
• Iron --- Low volume or intermittent users; cost to serve them is quite high
• Lead --- Demanding, want special attention but don’t buy much and show no
loyalty
 Advantages of CRM

• While company is quickly growing, customers are more satisfied as well

• Service provided in a better way, and a quicker way
• Sales force automated
• Integrated customer information
• Certain processes eliminated
• Operation cost cut, and time efficient
• Brand names more quickly established
• A central database so that everyone in your company can keep track of customer contacts
• Sales and marketing teams can benefit from having all this inside knowledge about customers
• Lets you set up rules for distributing work throughout your company
• Lets you pick and choose the functionality that you want
 Disadvantages of CRM

-Organizational wise change of priority to customers.

- Significant investment of time and money
- Threatens management’s control/power struggle
- Heightens people’s resistance to change
- Inappropriate integration leads to disaster
 Ways to build better Customer
Relationships
• Understand what your customers value
• Show you genuinely care
• Adapt to their pace
• Let your brand be your guide
• Model the behavior you want to see
• Remember that relationships are built over time
 Ways to build Customer Trust

• Reduce the perceived risk

Offer more information to consumers and better educate them.

• Offer Contractual Safeguards

Promise guarantees and offer warranties to skeptical patrons.

• Build Customer Confidence

Generate publicity through word of mouth advertising efforts
 Ways to build Customer Trust

• Emphasize Competence
Show consumers the expertise of the staff and ability to provide quality service

• Communication
Develop a shared understanding of the relationship by keeping open dialogue with consumers.

• Signal Commitment to the Consumer

Put consumers first. Adjust your services in order to fit consumer needs.

• Resolve Conflicts
Show responsibility and empower employees to take charge of situations.
 Product Concept and Product
Management

• A financial Product is essentially intangible and marketers make use of a

combination of price, promises and people to attract customers.

• The people (sales personnel) offer a financial product / service in the form of
promises in exchange for a price.
 Product Management

The financial industry is quite adept at creating new products and successfully
marketing them to the masses.

Many of these products have been successes that have made money for investors
and the financial institutions that offer them. Think mutual funds and exchange-
traded funds, for example.

However, other products have either been outright disasters or worse, have brought
the world to the brink of financial ruin.

The prime—or should we say subprime—example of such toxic products would

undoubtedly be U.S. mortgage-backed securities, whose implosion circa 2007 – 09
caused a global credit crisis and the Great Recession.
 Steps concerned in the creation of a new
financial product
• Creating Something New
• Concept of New Financial Products
• Product Development
• Regulatory, Legal Requirements
• Operations
• Registration of Products/Service with Regulators
• Marketing New Financial Products
• Distribution of the New Product
• Product Launch
• Compliance
• Product, Profitability Review
 Emerging considerations for Effective
Product Management in Financial Services
• Manage Financial Services and products complexity by means of a Unified Product
Catalogue

• “TrustedAdvisor” is becoming the overriding business model. Product

Management is consequently now a fundamental tool and not a luxury

• The past and future are similarly important as the present when selling financial
products

• Meticulousness is expected when unfolding products and their features

 Emerging considerations for Effective
Product Management in Financial Services
• Analytics makes a real distinction to Product Management

• Effective inspection of User behavior along the Product Management Lifecycle is

decisive

• A firm-wide product view provides many benefits [Regulatory compliances, Sales,

improved marketing and cross-selling opportunities]
 Levels of a product

• Actual product
• Expected product
• Augmented product
• Potential product.
 Factors influencing Product Strategies

• Customers
• Competitors
• Technology
• Government and legislations
 Product Mix Strategies

Product mix expansion --- Adding new product line or increasing depth of existing product line
• Trading up and Trading down strategies

Product mix contraction --- by eliminating entire product line or by removing certain products from
one of the product line

Product modification --- by redesigning, repackaging or delivering a product under a new name.
 Branding in Financial Products

• Corporate branding communicates the personality and values of the

company and helps the marketers position those values in the minds of the
consumers.

• Financial product marketers try to establish strong corporate brand images in

the minds of the consumers so that they recognise and associate the
marketers with the distinct brand image.
 Branding principles

• Branding starts with a clear strategy for targeting and positioning

• The brand image must be consistent with the marketing strategy
• Branding is not about spending lots of money on advertising
 Multi – tier branding

• For marketing financial products, branding can be a two or three tier strategy.
• First tier --- consists of the master brand or the corporate brand which conveys the
values of the organisation.
• Second tier --- consists of the banner or core brands
• Third tier --- consists of sub core brands
• The second and third tiers of brands should also convey the same values as the
master brand.
 Multi – tier branding

For Example
• Master Brand --- SBI which conveys the message – “safety for the customers’
money”.
• Core Brand --- SBI Mutual Fund
• Sub core brands --- Magnum series of products under SBI Mutual Fund
 Brand logos and taglines

Logo --- With its uniqueness distinguishes the brand from other brands and
communicates all the values of the brand to the customers.

Taglines --- Help highlight the brand values of the company / product in the market.

• ICICI Bank --- Hum Hain Na

• Bank of Baroda --- India’s international Bank
• HDFC Mutual Fund --- Continuing a Tradition of Trust
 Need for CRM in
Marketing Financial Products

• Due to competitive environment -- Change in approach from product centric

to customer centric
• Adopting CRM is not a USP but a necessity
 Benefits of CRM

• Long term profitability

• Cross selling of products – sale of other products
• Brand building – word of mouth publicity
 CRM and Relationship Marketing

• Two type of Relationship Marketing

1. Relationship building with external customers
2. Relationship building with internal customers
 Levels of Relationship Marketing

• Level one --- Basic

• Level two --- Reactive
• Level three --- Accountability
• Level four--- Proactive
• Level five --- Partnership
 CRM and One-to-One
Marketing

One-to-One Marketing --- Sequence of activities

1. Identify target customers (based on customer profiling)
2. Differentiate Customers -- segmentation
3. Interact with Customers
4. (Mass) Customize for Customers
 CRM Concepts

• Customer Knowledge
• Customer Loyalty
• Customer switching
 Customer Knowledge

Sr. No. Type of Customer Components of Customer Knowledge

Knowledge
1. Knowledge about the Processed demographic information
customer Knowledge of psychographic characteristics
Knowledge of behavioural traits
2. Knowledge to support the Knowledge of products / service purchased by the customer
customer Knowledge of interactions with customer
Product documentation
Troubleshooting guides and repair manuals
Knowledge of interaction between customers (user
communities)
3. Knowledge from the Feedback
customer Suggestions and ideas for innovation, especially from lead user /
high value users / high frequency users
Trends
 Customer Loyalty

• Affirmative Loyalty
• Reluctant Loyalty
 Factors influencing Affirmative Loyalty

• Focus on right customers

• Product service offerings to meet lifetime needs
• Loyalty of employees
• Effectiveness of measurement systems
• Electronic customer care
 Customer switching

The causes for switching

1. Core service failures
2. Service encounter failures
3. Price failures
4. Inconvenience
5. Employee response to service failures
 CRM implementation and evaluation

Customer Knowledge Management

• Main Objectives ---
1. To acquire more profitable customers and retain existing customers in the
long term
2. Maximise customer value by increasing customer spending on the
company’s products and
3. Ensure customer satisfaction
 Customer knowledge management Process

1. Develop a customer focused strategy

2. Develop the customer buying process
3. Implement actions, tactics and campaigns
4. Customer learning
 Role of Technology in CRM
implementation

• Technology infrastructure in the form of computer hardware, software,

networks and other facilities, have to be installed for the smooth functioning
of the CRM program.
• Data warehousing and Data mining
 Performance
Evaluation of a CRM Program
Basket of metrics
• Customer profitability
• Customer satisfaction
• Market Share
• Wallet Share
• Cross sell ratio
• Response rate
• Relationship duration
• System availability / Response time
 Future Outlook
for CRM Usage in India

• Choice of CRM application --- stand alone or with interfaces with ERP
solutions
• Functional Usage --- Which can handle the operational efficiency in terms of
customer handling and customer complaints.