CHAPTER TWENTY-ONE

Customer Relationship Management

 Topics Covered

Delivering value and capturing value: The essence in CRM

CRM performs several tasks and brings several benefits
Customer lifetime value (CLV)
Designing and operating a CRM programme
Components of a CRM programme
CRM helps market selection, customer selection and order selection
Avoiding common pitfalls
 Delivering Value and Capturing Value:
The Essence in CRM
‘Customer Relationship has more to do with Value than with Relationship’
—Martin Christopher, Adrian Payne and David Ballantyne

What is CRM at the operational level?

CRM is a protocol or tool offering a systematic approach to managing the
interaction with the customers.

• Customer retention, especially of the profitable ones, is the prime task

• Managing customer information through all customer touch points

As an idea, CRM is not new; as a technology-based tool, it is a new development

• Technology makes CRM the new, all-rounder tool of marketing

CRM Performs Several Tasks and Brings
Several Benefits
Chart 21.1 ‘CRM Performs Several Tasks and Brings Several Benefits’ explains in a nutshell
tasks performed by CRM.
Customer lifetime value (CLV)
• It is an important concept in customer management.
• It is the net present value of the likely future income/profits that can be expected/
generated from a given customer.
• The emphasis is on the future stream of revenue and profits.
• This knowledge helps to enhance marketing efficiency.
Designing and operating a CRM programme
Customer database
Customer database is the foundation of any CRM programme.
Requisites of a good customer database
 Comprehensiveness
 Up-to-date
 Functionality
 Privacy compatibility
 Designing and Operating a CRM
Programme
The information gathered needs to be integrated
• Integrating data scattered over multiple departments
• Providing a single, cohesive view of the customer
• Data gathering becomes increasingly sophisticated and hi-tech

The four components of a CRM programme

• Conceptual component

• Operational component

• Analytical component

• Collaborative component
Continued…
…Continued
Designing and Operating a CRM
Programme
• Conceptual component
 Setting out the objectives and choosing the technology (Exhibit 21.1)
 Automation of business processes
• Operational component
 Processing all customer requests coming in through multiple channels
• Analytical component
 Analytics becomes the dominant part of CRM
 McKinsey’s survey on customer analytics
• Collaborative component
 Collaboration with customers across the value chain, adjusting company’s
business processes for customer participation, is the essence here
 From relationship marketing to collaborative marketing and to co-creation
of value
CRM Helps Market Selection, Customer
Selection and Order Selection
Market selection
CRM enables the search to go deeper into market segments to choose and access specific
customers within the segment and serve them.

Customer selection
The firm has to consider two vital aspects in customer selection:
1. Are they the ones it should prefer to have? Are they the profitable ones?
2. Does the company have the resources to serve those customers?
Customer profitability analysis
Identifying Customers who will staunchly support the product
The net promoter score (Exhibit 21.2)
Order selection
With a given customer, the firm may be greatly interested in servicing certain orders and
may not be enthusiastic at all about servicing certain other orders. Profitability and
ease in servicing are important criteria.
 Avoiding Common Pitfalls

• Failure to appreciate the dynamic nature of marketing

• Preoccupation with gathering the data and neglecting its application
• Failure to follow up the feedback from customers
• Reluctance to share the data on customers with all staff
• Ignoring the need for efficient, trained, well-motivated employees

Building Customer Trust: The Heart of CRM

Exhibit 21.3 ‘Customer Trust: How to Build It, Sustain It and Regain It, if
Lost’ provides the details on customer trust-building, showing specific ways to build,
sustain and regain customer trust.