Strategic Customer Relationship

Management

Ardhendu Shekhar Singh

 CRM at different level
• CRM at the Functional level
• Set of processes to execute marketing functions like sales force automation or mktg. campaign
management

• CRM at the Customer-facing level

• Set of activities that provide a single-view of the customer across all contact channels
• Customer intelligence obtained is available across all customer-facing functions

• CRM at the Organizational level - Strategic CRM

• Knowledge about customers and their preferences have implications for the entire organization

12/24/2022 CRM, SSBF (2022-24) 2

Strategic CRM
• Successful strategic CRM is a complex set of activities that together form
the basis for a sustainable and hard-to-imitate competitive advantage

• Shapes interactions between company and customers to allow

maximization of lifetime value of customers

• Recognizes differences between customers with respect to their

• economic value to the firm as well as
• expectations from the firm

12/24/2022 CRM, SSBF (2022-24) 3

Components of CRM Strategy
1) Customer-Management
Orientation

4) CRM
Strategy
Implementation

2) Integration and 3) Information capture

alignment of and alignment of
organizational processes technology

12/24/2022 CRM, SSBF (2022-24) 4

 Customer Management Orientation

• Defined as the set of organizational values, beliefs, and strategic actions that enable the implementation of
customer management principles

• Characterized by a top management belief and commitment that the customer is at the center of activity

• Recognizes that customers are heterogeneous in needs and value to the firm and reflects a readiness to treat
different customers differently

• Considers the fact that a longer-term view of revenues from customers needs to be taken into account

12/24/2022 CRM, SSBF (2022-24) 5

Integration and Alignment of Organizational
Processes
• Comprises organization wide creation and synchronization of processes, systems, and reward systems
enabling implementation of customer management principles
• Strategic CRM works best for organizations that are organized around cross-functional processes rather than
functional silos
• Firmly incorporates needs of the customer and goals of the firm into product and service delivery
• Characterized by an understanding that value provided to target customers should be what drives all
processes
• Individual processes work in sync with common goal of attracting and retaining target customers
• Customer management compatible incentives drive employee and organizational goals simultaneously

12/24/2022 CRM, SSBF (2022-24) 6

 Information Capture and Alignment of Technology
• Comprises all the necessary technology and processes to collect, store, and process
relevant and timely customer information

• Characterized by the capability of leveraging data to actionable information

• Makes customer management processes not only more efficient but also more effective

• Helps to create entirely new processes and channels based on online and mobile
applications

• Firms that are able to generate intelligence and act on it will derive competitive advantage

12/24/2022 CRM, SSBF (2022-24) 7

Customer centricity

12/24/2022 CRM, SSBF (2022-24) 8

Star model of customer centricity (Galbraith,
2005)

12/24/2022 CRM, SSBF (2022-24) 9

Strategy
Product centric Customer centric
Goal Best product for customer Best solution for customer
Main offering New products Personalized packages of products,
service, support, education,
consulting

Value creation route Cutting-edge products, useful Customizing for best total solution
features, new applications

Most important customer Most advanced customer Most profitable, loyal customer
Priority-setting basis Portfolio of products Portfolio of customers—customer
profitability

Pricing Price to market Price for value, risk

12/24/2022 CRM, SSBF (2022-24) 10

Structure, processes and rewards
Product centric Customer centric
Structure Organizational concept Product profit centers, Customer segments,
product reviews, product customer P&Ls
teams
Process Most important process New product Customer relationship
development management and
solutions development
Rewards Measures Number of new products, Customer share of most
Percentage of revenue valuable customer,
from products, Market Customer satisfaction,
share Lifetime value of a
customer, Customer
retention

12/24/2022 CRM, SSBF (2022-24) 11

People
Product centric Customer centric
People Approach to personnel Power to people who Power to people with in-
develop products depth knowledge of
customer’s business
Mental process Divergent thinking: How Convergent thinking:
many possible uses of this What combination of
product? products is best for this
customer?
Sales bias On the side of the seller in On the side of the buyer
a transaction in a transaction
Culture New product culture: Relationship management
open to new ideas, culture: searching for
experimentation more customer needs to
satisfy

12/24/2022 CRM, SSBF (2022-24) 12

  Product centric Customer centric

Strategy Goal Best product for customer Best solution for customer
  Main offering New products Personalized packages of products, service,
support, education, consulting

  Value creation route Cutting-edge products, useful features, new applications Customizing for best total solution

  Most important customer Most advanced customer Most profitable, loyal customer

  Priority-setting basis Portfolio of products Portfolio of customers—customer profitability

  Pricing Price to market Price for value, risk

Structure Organizational concept Product profit centers, product reviews, product teams Customer segments, customer teams, customer P&Ls

Process Most important process New product development Customer relationship management and
solutions development

Rewards Measures Number of new products, Percentage of revenue from products, Market share Customer share of most valuable customer, Customer satisfaction, Lifetime value of a
customer, Customer retention

People Approach to personnel Power to people who develop products Power to people with in-depth knowledge of customer’s business

Mental process Divergent thinking: How many possible uses of this product? Convergent thinking: What combination of products is best for this customer?

Sales bias On the side of the seller in a transaction On the side of the buyer in a transaction

12/24/2022Culture New product culture: open to new CRM,

ideas, experimentation
SSBF (2022-24) Relationship management culture: searching for more customer needs
13 to satisfy
Exercise
• Choose 2-3 organizations and rank them on a scale of 1-5 (worst (1)
and best (5) on each parameters discussed i.e. Strategy, Structure,
Process, Rewards and People (with justification).
• Look at the mission/vision, organization structure etc. of these
organizations and analyze it from customer centricity point of view

12/24/2022 CRM, SSBF (2022-24) 14

Developing a CRM Strategy

12/24/2022 CRM, SSBF (2022-24) 15

Steps in Developing a CRM Strategy

Gain enterprise-wide commitment

Build a CRM project team

Analysis of business requirements

Define the CRM strategy

12/24/2022 CRM, SSBF (2022-24) 16

 Step One: Gain Enterprise-wide
Commitment
• Top-down management commitment

• Bottom-up buy-in from system users

• Dedicated full-time project team

• Budget allocation for the total solution

12/24/2022 CRM, SSBF (2022-24) 17

 Step Two: Build A CRM Project Team
• Management - Provide leadership, motivation and supervision
• Information services/ technical personnel - Ensure CRM system compatible with existing
software applications
• Sales, marketing and services groups - Evaluate usability of CRM system based on
effectiveness, efficiency and satisfaction
• Financial staff - Provide critical analysis for assessment of increased sales productivity,
evaluation of operating costs, estimated cost of system expansion and ROI projections
• External CRM expert - Provide a valuable source of objective information and feedback

12/24/2022 CRM, SSBF (2022-24) 18

 Step Three-Analysis of Business Requirements

• Identify the services and products that are being supported

• Map current workflows, interfaces, and inter-dependencies

• Review existing technologies, features and capabilities

• Discuss the vision for the business and the operational plan

• Define business requirements

12/24/2022 CRM, SSBF (2022-24) 19

 Step Three (contd.)

• Develop enhanced business workflows and processes

• Identify gaps in technology functionality

• Develop a new technology and functionality framework

• Develop a conceptual design and prototype plan

12/24/2022 CRM, SSBF (2022-24) 20

 Step Four: Define the CRM Strategy

a. Value Proposition
b. Business case
A Defined CRM Strategy ---------------> c. Customer strategy
d. Enterprise transformation plan
e. Other stakeholders

12/24/2022 CRM, SSBF (2022-24) 21

 The Value Proposition
• Multi-faceted package of product, service, process, price, communication, and interaction
that customers experience in their relationships with a company

• What the customers value – what the company should focus on

• What the company says it offers the customers

• What the company actually offers the customers

12/24/2022 CRM, SSBF (2022-24) 22

Laddering
Laddering
• Laddering is an interview technique used in semi-structured
interviews.
• Laddering is a method that helps you elicit the higher or lower level
abstractions of the concepts that people use to organize their world.
• The method is performed by using probes.
• Laddering and probing is used to: “understand the way in which the
informant sees the world” (Reynolds & Gutman, 1988).

12/24/2022 CRM, SSBF (2022-24) 24

Contd..

• The laddering method is derived from means-end theory, which is

premised on the belief that individual behavior is driven by personal
values (Gutman,1982).

• to link sequentially in a value hierarchy, product attributes (A) to

consequences of product use (C) and to individuals’ values (V)
• Attributes (A) derive their relative importance from satisfying
(functional and psychosocial) Consequences (C), which in turn, derive
their importance from satisfying higher-order personal Values (V).
12/24/2022 CRM, SSBF (2022-24) 25
Laddering
• Attributes Only Scratch the Surface
• Consequences
• Value
• Values are the real reasons why people buy what they buy
• Goal of laddering: extract the abstract reasons for purchase behavior

• In laddering, the line of questioning proceeds from product

characteristics to user characteristics.

12/24/2022 CRM, SSBF (2022-24) 26

How?
• It is performed on the basis of a one-to-one interviewing technique.
• start by focusing on a certain product or service and its attributes.
• Probes are oriented towards ‘why’-questions, i.e.: “Why is that
(attribute) important to you?”

12/24/2022 CRM, SSBF (2022-24) 27

 Example
• “What do you like best about your phone?”
• “Getting real-time sports scores” [feature]

• “What is important about that?”

• “I know what’s happening right away.” [functional benefit]

• “What does that do for you?”

• “I can tell my friends, as soon as I know.” [higher benefit]

• “What does telling your friends right away do for you?”

• “I am the go-to guy for sports. My friends expect me to know. It is what we talk about.” [emotional
benefit]

12/24/2022 CRM, SSBF (2022-24) 28

Example
• On the basis of the attributes, you start probing: “Why is that
(attribute) important to you?”

Self-esteem (V)
Better figure (C)
Don’t get fat (C)
Eat less (C)
Strong taste (A)
Flavored chip (A)

12/24/2022 CRM, SSBF (2022-24) 29

Hierarchical Value Map of an ice-cream

12/24/2022 CRM, SSBF (2022-24) 30

 Business Case
• Directly link delivery of customer value with creation of shareholder value

• Ensure acceptable ROI

• Planned increase in economic value of customers over the duration of their relationship
with the company

• Customer satisfaction resulting in increased Revenue

• Impact of learning and innovation- reduce cost incurred through higher marketing
effectiveness and improved products and services

12/24/2022 CRM, SSBF (2022-24) 31

 Customer Strategy

• Defines how the company will build and manage a portfolio of customers

• Customer understanding - Customers benchmark expectations against past experience and best-in-
class standards

• Customer competitive context - awareness of competitor’s services and how to increase customer
share

• Customer affiliation - primary factor affecting ability to both retain and extract greater value from
customer through cross-sell and up-sell efforts

• Customer management competencies - providing customized offers including customized products,

services, communication, prices, etc

12/24/2022 CRM, SSBF (2022-24) 32

 Enterprise Transformation Plan
• Business process

• Organization

• Location and facilities

• Data flows

• Application architecture

• Technology infrastructure

12/24/2022 CRM, SSBF (2022-24) 33

 Key Stakeholders of Strategic CRM

Customers

Preferred Value
Propositions
Owners Partners
Practice of
Strategic
CRM

Employees Suppliers

Management

12/24/2022 CRM, SSBF (2022-24) 34

Implementing the CRM Strategy

12/24/2022 CRM, SSBF (2022-24) 35

Elements of a CRM System

• Customer Interface/Touch points

• Salesperson
• Mobile
• Web-based
• Kiosks
• CRM Applications
• Sales Management Functions
• Marketing Functions
• Campaign Management
• Segmentation
• Personalization and
• Customization
• Customer Service Functions
• Helpdesk
• Customer Care

12/24/2022 CRM, SSBF (2022-24) 36

 ROI (Return on Investment) of CRM
• Formula: Profits/Investment X 100% = ROI (%)

• Questions on what can be counted as investment in CRM?

• How much will consulting for the project cost ?
• To what degree is business process re-design necessary?
• What new software and hardware must be purchased to accommodate
the new system?
• How much customization is required and at what cost?
• Can the system be easily configured and maintained by internal IT staff or is continuous external assistance
required?
• What is the cost of training the company’s staff to use the CRM system?
• What is the timeframe for implementation and what will happen to the current system processes during that time?
• What are recurrent costs?

12/24/2022 CRM, SSBF (2022-24) 37

CRM Costs
• IT Costs
• Sales force automation
• Marketing automation
• Customer-service automation
• People costs
• Recruitment, redeployment and training costs
• Process costs
• Market segmentation process, selling process and campaign management
process

12/24/2022 CRM, SSBF (2022-24) 38

Stages of ROI Estimation
Setting the target

Reaching the target

Building consensus and commitment

12/24/2022 CRM, SSBF (2022-24) 39

CRM Implementation

Implementation Projects

Operational Projects Analytical Projects

12/24/2022 CRM, SSBF (2022-24) 40

Operational Projects

Objectives:

• Construct infrastructure meeting technical and functional requirements of CRM

• Maximize profitability

• Reduce support costs

• Increase sales and customer loyalty

12/24/2022 CRM, SSBF (2022-24) 41

 Components of CRM Infrastructure

Component Description

1. Information Delivery/Online Catalogs Capability to display and list company's products and
services online

2. Customer Database Capture, organize, present, and analyze customer-

specific data

3. Personalization and Content Management Utilizing results of data analysis to create an

individualized experience for customers

Enhance/modify service delivery vehicles to match

specific needs of customers

12/24/2022 CRM, SSBF (2022-24) 42

 Components of CRM Infrastructure (contd.)

4. Sales force Automation Deployment and use of tools and services designed to automate
sales

5. Partner Channel Automation For integration of a company's service vehicles with those of its
provider and third-party partners

6. Customer Services Use of technology and business processes to successfully

support a company's products and services

12/24/2022 CRM, SSBF (2022-24) 43

Analytical Projects
Also Called Data Analytics
• Leverages resources created by operational projects

• Adds value by enabling firms to understand their customers

• Helps determine customer strategy and development of on-going CRM strategy

• Major activities:
• Customer data transformation- data warehousing, data integration
• Customer knowledge discovery-data analysis, prediction based on results

12/24/2022 CRM, SSBF (2022-24) 44

 Analytical CRM
• Capturing all relevant customer information
• Data integration and standardization
• Real-time updating of customer information
• Incorporation of external sources of information
• Customer demographic analysis and customer behavior modeling
• Define customer segments to form basis for differential marketing decisions
• Analysis of customer transaction history
• Prediction of future purchase behavior
• Customer value assessment
• Focus resources on most valuable customer relationships

12/24/2022 CRM, SSBF (2022-24) 45

 CRM Implementation Matrix

Customer dimension

Acquisition Growth and Decline and

stage retention stage exit stage

Analytical
CRM
Management
Dimension Operational
CRM

12/24/2022 CRM, SSBF (2022-24) 46

Characteristics of Marketing-Driven CRM Implementation

• Activities and processes that constitute analytical CRM (customer data collection, satisfaction
and loyalty metrics, customer needs analyses, segmentation)
• Activities and processes that constitute operational CRM (value proposition management,
campaign management, channel management, referral management, and loyalty
management.)
• A firm’s ability to understand the value of the customer to the firm and the variety of needs
different customers have
• An acquisition and retention process that continuously aligns the offering with customer
needs and values
• An ability to continuously improve what the company offers by learning about its customers

12/24/2022 CRM, SSBF (2022-24) 47

Deploying Operational and Analytical Outputs

• Issues

• Resistance from employees

• Motivation and Training

• Availability of information

12/24/2022 CRM, SSBF (2022-24) 48