Customer Relationship Management (CRM)

Importance of CRM
Determinants of CRM and the
key stages in its development
Functions and various models of
CRM
Explain the role of Sales People
as Relationship Developers
Management of customer
Relationships.
It typically Costs 5-10 times as much to acquire a new customer as
it does to retain an existing one.

“Some companies can Boost Profits by almost 100% by retaining

just 5% more of their customers.” Harvard Business Review
(Reicheld & Sasser)

A recent McKinsey study showed that the average new customer

spends $24.50 at a given web site in the first 3 months as a
shopper. The average Repeat Customer Spends $52.50 every 3
months.

Most companies Lose 50% of their customers in

5 years (Harvard University)
On average only 15% of a customers consider themselves
Loyal. The loyalty rating among people who had
experienced a problem was only 6%, Customers who had
not experienced problems indicated a customer loyalty
rating of 19%.

The loyalty rating among customers who had experienced

problems but were satisfied with the way they were
handled: 21%.

70% of repeat purchases are made out of indifference to

the seller, NOT loyalty.

The web customer is ‘Only 1 click away from

the competition’.
 Customer
Relationship
Management

CRM is “The development and maintenance of Mutually Beneficial

Long-Term relationships with Strategically Significant Customers”.

CRM is “An IT enhanced value process, which identifies, develops,

integrates and focuses the various competencies of the firm to the
‘Voice’ of the Customer in order to deliver Long-Term Superior
Customer Value, at a profit to Well Identified Existing and Potential
Customers”.
Understanding Customer Relationship Management

CRM is a Business Philosophy based on upon individual customers

and customised products and services supported by Open Lines
of Communication and Feedback from the participating firms that
Mutually Benefit both Buying and Selling Organisations.

The buying and selling firms enter into a “Learning Relationship”,

with the customer being willing to collaborate with the seller and
grow as a Loyal Customer. In return, the seller works to Maximize
the Value of the Relationship for the Customer’s Benefit.

In short, CRM provides selling organisations with the platform

to obtain a Competitive Advantage by embracing customer needs
and building Value-Driven Long-Term Relationships.
Determinants of CRM

Trust

The willingness to rely on the ability,

integrity, and motivation of one company
to serve the needs of the other company as
agreed upon implicitly and explicitly.

Value

The ability of a selling organisation to satisfy the needs of the

customer at a comparatively lower cost or higher benefit than
that offered by competitors and measured in monetary, temporal,
functional and psychological terms.
Determinants of CRM

In addition to trust and value

Salespeople must:
Understand customer needs
and problems

Meet their commitments

Provide superior after sales support;

Make sure that the customer is

always told the truth
Have a passionate interest in establishing and retaining a long-
term relationship
 Stages in the Development of a Key-Account Relationship

High
Synergistic KAM

Partnership
Degree of
involvement Mid-KAM

Early-KAM

Low Pre-KAM

Transactional Collaborative
Nature of customer relationship
(Millman and Wilson, 1995)
 A Relationship Life Cycle Model

High cooperation
Low competition Pre- Development Maturity Decline
relationship stage stage stage
stage

Low cooperation
High competition

Time
(Wilkinson and Young, 1997)
Functions of Customer
Relationship
Management

Direct functions (Are the basic requirements of a company that are

necessary to survive in the competitive marketplace)
Profit;
Volume;
Safeguard

Indirect functions (Are the actions necessary to convince the

customer to participate in various marketing activities).
Innovation:
Market;
Access.
Functions of Customer Relationship Management
Value Creation Process
Technology delivery process
•R&D
•Technology integration
Management •Efficiency, effectiveness
Decision learning
Process
Value-based
Customer sensitivity Product delivery process Strategies
•Concept to launch •Pricing
•Diversity •Manufacturing process •Communication
•Information
•Differentiated
offering Customer delivery process
•Supply chain
•Distribution
•Infomediation (distribution
of information)
(Sharma et. al., 2001)
The role of salespeople as relationship builders and promoters

Salespeople by:

Identifying potential customers and their needs

Approaching key decision makers in the buying firm

Negotiating and advancing dialogue and mutual trust

Coordinating the cooperation between the customers and company

Encouraging the inter-organisational learning process

Contributing to constructive resolution of existing conflicts;

are the individuals in any organisation who act both as relationship

builders and as relationship promoters.
 Models of Customer Relationship Management
The Evans and Luskin (1994) model for effective
Relationship Marketing

Relationship marketing inputs

•Understanding customer expectations
•Building service partnerships
•Empowering employees
•Total quality management
Relationship marketing outcomes
•Customer Satisfaction
•Customer loyalty
•Quality products
•Increased profitability

Assessment state
•Customer feedback
•Integration
(Evans and Luskin, 1994)
Models of Customer Relationship Management
The Brock and Barcklay (1999) model of selling
partner relationship effectiveness

Independence

Mutual trust Selling partner

relationship
Cooperation
effectiveness

Relative influence
 Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.

Initiating the relationship

Engage in strategic prospecting and
qualifying
Gather and study pre-call information
Identify buying influences
Plan the initial sales call
Demonstrate an understanding of the customer’s needs
Identify opportunities to build a relationship
Illustrate the value of a relationship with the customer
 Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.

Developing the relationship

Select an appropriate offering;
Customise the relationship;
Link the solutions with the customer’s needs;
Discuss customer concerns;
Summarize the solution to confirm benefits; and
Secure commitment.
 Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and Enhance the process that is aimed at building trust and commitment with the
customer.

Enhancing the relationship

Assess customer satisfaction;

Take action to ensure satisfaction;
Maintain open, two-way communication; and
Work to add value and enhance mutual opportunities.
 Managing Customer Relationships
Qualifying prospects for relationship building

High
Use a non Build a strong
customized and lasting
approach relationship
Opportunities
for adding value

Seek better Focus on

opportunities loyalty-building
elsewhere program
Low
Low Potential profitability of customer High
Relationship networks
The ultimate outcome of a successful CRM strategy is the creation
of a unique company asset known as a relationship network.

A relationship network consists of the company and its major

customers with whom the company has established long and
enduring business relationships.

The additional aspects of a global salesperson’s job are to:

Manage customer value

Act as customer advocate and
Enhance customer loyalty and build a “healthy” and
profitable network of relationships.
Summary

CRM is a new business philosophy based on trust and value;

The core function of CRM is the value creation process;

Customer relationships develop over time;

The role of global salespeople in the process is that of both

relationship builders and relationship promoters; and

The basic premise of CRM is to offer superior value to

customers in an effort to turn prospects into customers,
customers into loyal customers, and loyal customers into
partners.
CRM is not the destination , it is the passage