Customer Relationship

Management-Introduction

Marketing History
1940: effort towards marketing of
manufactured goods
70-90:shift towards service based
companies
2000:experience economy

Understanding the shift

Exchange Paradigm

Relational Paradigm

Time Perspective

Short

Prolonged

Mktg Function

Marketing mix

Interactive marketing

Quality Dimension

Product quality,
customer
satisfaction quality

Quality of experience

Metrics

Market share

Share of wallet focus

Interdepartmental
support

Low

High

Internal Marketing

Negligible

Very high

Is relation in business new phenomenon?

Relationship orientation of marketing in different era (Adopted from Sheth and

Parvatiyar, 1995)

Paradigm Shift
Pre-industrial era-Trust, trade within clans,
silk route, early branding
Industrial era -IR, mass production, shift in
jobs,mktg institutions, metrics like sales,
revenue, MS, profitability.

Post industrial era -complex products,

service economy, KAM

Shift continues..
The 4-P paradigm
involves marketing to
anonymous masses of
customers

The relationship
marketing paradigm in:

industrial marketing
services marketing
managing channel
strategic alliances
B2B marketing

Relationship Marketing
RM draws attention to the importance of retaining
as well as attracting customers, with emphasis
being placed on the development of long term
relationships with customers.
Primary goal of RM is to build and maintain a
base of committed customers who are profitable
for the organization.

Customer Life Cycle

Bonding for
Customer Relationship
Level 1: Financial bonds
Volume and frequency of rewards.
Level 2: Social Bonds
Personal relationships, continuous and social bonds.
Level 3:Customisation bonds
Customer intimacy mass customization
Level 4 Structural bonds
Joint investments shared processes and equipment
Berry & Parasuraman(1991)

Customer Loyalty Exercise

Think of a service provider to whom you
are loyal.
What do you do (your behaviors, actions,
feelings) that indicates you are loyal?
Why are you loyal to this provider?
What factors have influenced the
formation of your loyalty?

RM to CRM
CRM and Relationship Mktg. term used
interchangeably in academics.
(Parvatiyar & Seth 2001)
CRM is more about information
enabled relationship marketing.
(Ryals & Payne 2001)

Practitioners view
says that CRM isthe business processes
and supporting technologies that support the key
activities of: targeting, acquiring, retaining,
understanding, and collaborating with customers.
Forrester

Customer relationship management (CRM) is a

business strategy with outcomes that optimize
profitability, revenue and customer satisfaction
by organizing around customer segments,
fostering customer-satisfying behaviors and
implementing customer-centric processes. CRM
technologies should enable greater customer
insight, increased customer access, moreeffective
interactions,
and
integration
throughout all customer channels and back-

What researchers say

CRM is the core business strategy that integrates
internal processes and functions, and external
networks, to create and deliver value to targeted
customers at a profit. It is grounded on high
quality customer related data and enabled by IT
Francis Buttle 2007

Definition.
CRM is a comprehensive strategy and process of
acquiring, retaining and partnering with selective
customers to create superior value for the
company and the customer. It involves the
integration of marketing, sales, customer service,
and the supply chain functions of the organization
to achieve greater efficiencies and effectiveness
in delivering customer value. (Parvatiyar & Seth
CRM is the practice of analyzing and utilizing
2001)
marketing databases and leveraging
communication technologies to determine
corporate practices and methods that will
maximize the lifetime value of each individual
customer to the firm
(V. Kumar,Werner
J. Reinartz)

Link Between CRM and Customer Value

Customer Value: The economic

value of the customer relationship
to the firm expressed on the basis
of contribution margin or net profit

Profit Generated by a Customer Over

Time

Profit Impact of 5 Percent Increase in

Retention Rate

Source: F. F. Reichheld, Loyalty and the Renaissance of Marketing, Marketing Management, vol. 2, no. 4
(1994), p. 15.

The Customer Pyramid

Misunderstandings about
CRM

CRM
CRM
CRM
CRM

is
is
is
is

database marketing
marketing process
an IT issue
about loyalty schemes

ENABLERS FOR THE GROWTH OF CRM

Emergence of service economy

21

Market Maturity

22

Misalignment between Revenue

and Profit

23