CRM as an Integral Business

Strategy
 The Nature of CRM Strategy
In Value Disciplines Michael Treacy and Fred Wiersema make
the assumption that an organization will always excel in that
which it is good at. This value position is determined by the
opinion of external parties such as for example the
organization’s customers and suppliers.

The value position of an organization is not only determined by

price but also by other factors such as the effort someone has
to make to purchase the product/service
In studying successful companies Treacy and
Wiersema (1996) discerned three ‘Value
Disciplnes’ namely:-
1. Operational excellence
2. Product leadership
3. Customer intimacy
 1. Operational excellence

• Find combination of price, quality and ease of

purchase that none of the competitors are capable
of matching.
• Do not spend time on innovation and one-to-one
relationships with customer.
• Offer a guaranteed low price and problem free
service
• Focus on achieving cost leadership
Eg: McDonalds, Dell
• Products are purchased at low prices and in large volumes.

• The information systems follows the flows of goods closely

and remove inefficiencies .

• Activities are closely aligned with one another.

• Production is standardized & automated (if possible).

• Staff maintains a high level of productivity and management.

• Eg. IKEA, wal-mart
 2. Product Leadership
• Work hard to implement innovation and renewal.

• Product leaders surprise customers with the newest and best products.
• Creative, inspired and have many ideas.

• An inspirational vision of new products is indispensable in order to be able

to do this.

Eg :Apple(computers), Sony(walk man), Mercedes

• Success achieved by product leader dependent upon
the success they are able to realize in the market.
This can be risky since it involves new products and
services which have not been accepted by
customers.
• Quick decisions.
• Don’t allow any bureaucracy
• Don’t compromise with price
• Eg. Intel
 3. Customer Intimacy
• Relationship with customer
• A great deal of attention is focused on:-
Who do we want and who do we not want as
our customer?
• The company looks at the ‘lifetime value’ of a
customer, not only at the profit or loss of the
transactions.
• The organization feels that its customers are the most important aspect of
its organization.
• The organization is continuously working to meet the customer’s
requirements and delivers mainly tailor-made work and one-on-one
solutions in which the organization focuses on a long-term customer
relationship.
• Obtaining a once-only (large) transaction is subordinate to creating a long-
lasting intimacy bond. In order to excel in this strategy, organizations
often use an intensive Customer Relations Management (CRM).

• Examples of such organizations are: Home Depot, Staples in office-supply

retailing, Ciba-Geigy in pharmaceuticals, Kraft and Frito-Lay in consumer
packaged goods.
 Conclusion

• Which value discipline fits best with the CRM

strategy?
 Conclusion

• What is the distinctive feature of ‘Customer

intimacy’ discipline?
 Conclusion
• It is not recommended to combine the three value
disciplines.
• Even an organization that strives for operational
excellence will have to maintain the minimum level
of innovation and attention to and care for individual
customers.
 Offensive versus Defensive
Strategy
• When you are trying to improve satisfaction, there are multiple programs
you can try to employ.
• Some work on training employees better, others improve their
products, and so on. You have plenty of possibilities at your disposal, and
you do not necessarily have to limit which of these strategies you choose
to use.

• One of the things you are going to need to choose from is whether you
want to take an offensive customer satisfaction approach, or a defensive
customer satisfaction approach.
 Offensive Market Strategy
• Companies pursuing offensive strategies directly target
competitors from which they want to capture market share.

• Offensive strategies are when you try to improve satisfaction

of everyone, including new customers, actively looking at
ways to make customers happier.

• Offensive approaches are designed to make sure that your

overall customer satisfaction is as high as possible with all of
those that choose to keep coming back to your company.
• There are a number of ways in which a company can pursue an offensive
strategy:
1. Direct attack: It can slash prices, introduce new features, launch
comparison advertisements unfavourable to the competition, or go after
parts of the market that the competition has served poorly. For smaller
companies, such strategies can be accompanied by low-cost guerrilla
marketing campaigns designed to attract attention. 2
2.End-run: Companies can avoid direct competition but still pursue an
offensive attack by going into unoccupied markets or countries that have
been ignored completely by the rest of the industry.
3. Pre-emption: Sometimes the first company into a market
gains a position from which later entrants cannot dislodge it.

The first company into a market can secure relationships with

the best suppliers, it can acquire the best locations, and it can
target and build relationships with the best customers.
4. Acquisition: A truly aggressive company with deep pockets
can eliminate a rival simply by purchasing it.

Acquiring a company in a foreign market can also bring with it a

position in the marketplace, geographic coverage, and
established relationships.
Even so, such a strategy is complex and expensive, and it should
not be pursued unless it can be shown to be contributing to the
firm’s bottom line. It may also run afoul of local competitive or
anti-monopoly legislation.
 Defensive Marketing Strategy
• Defensive satisfaction strategies are focused on avoiding loss.
Defensive strategies target the customers that look like they
may be leaving your company, and look for ways to keep their
business before they defect to another company.

• Defensive strategies can target all customers, but they’re not

necessarily about raising the overall satisfaction scores so
much as they are trying to avoid the lowest ones deciding
that they need to go elsewhere.
• Focuses on customer retention
1. Exclusion: One way of defending a position is to set up exclusive arrangements
with key suppliers in the market. Such exclusive arrangements can block the access
of rivals to the best suppliers, sources or partners.

2. Pricing: A simple strategy is to match any price cuts by the competition with similar
discounts, as long as the price war does not get out of hand and ruin both sides.

3. Features: Adding new features or capabilities can be a positive and appealing way
of countering a competitive challenge.
4. Service: A company can respond to competitor price-cuts or new features by
emphasizing after-sales service or warranties, implicitly demonstrating that it
stands by the superiority of its products.

5. Advertising: A strong public campaign demonstrating commitment to the market,

confidence in the products, or a willingness to meet the competitor’s challenge.
 Offensive versus Defensive
Strategy
Enlarge Market
Offensive
(New Customers)
Increase Market
Share
Generic
Strategy

Build Switching
Barriers
Defensive
(Current Customers)
Increase
customer
Satisfaction
 The context of CRM strategy
• Internal- situation must be avoided in which a company
ultimately chooses to implement a CRM strategy based on
negative considerations. Eg. If problem with the quality of
products , their positioning or the logistics and feels the
competition breathing down its neck.
• - company not capable of translating its customers wishes
into products and services.
• - as a result- customer loyalty is decreasing and switching
behavior develops. (customer intimacy is the solution)
 External
• A CRM strategy must also be in tune with the
market and the broader external
environment. We can describe it in 3 sub-
headings-
• Customers
• Competition
• Distribution
Results of successful CRM strategy
 Discussion
• Think of one example of a company which
implement customer intimacy. Explain your
answer.