Unit 5

CUSTOMER RELATIONSHIP MANAGEMENT

Concept of Customer relationship
management (CRM)
Customer relationship management (CRM) is an approach to manage
a company's interaction with current and potential customers. It uses
data analysis about customers' history with a company to improve
business relationships with customers, specifically focusing on
customer retention and ultimately driving sales growth.
Need and Importance for Customer
Relationship Management
Customer Relationship Management leads to satisfied customers and eventually higher
business every time.
Customer Relationship Management goes a long way in retaining existing customers.
Customer relationship management ensures customers return back home with a smile.
Customer relationship management improves the relationship between the organization and
customers.
 CRM strengthens the bond between the sales representatives and customers.
Importance of Customer Relationships
1. Great relationships are the key
2. Lasting customer relationships are not built instantly, but with time and effort, the quality of
service can be improved to foster positive relationships.
3. Retain clients in the long run
4. Timely response, undivided attention, and understanding are beneficial to develop and
nurture the bond with customers.
5. Positive word of mouth
6. Happy customers are the key to a thriving business. Their positive reviews enhance brand
loyalty. This further expands the customer base.
Customer relationship marketing
Customer relationship marketing (CRM) is a strategy that focuses on
building long-term relationships with customers.
CRM can help businesses:
•Create loyal customers
•Persuade others to buy from them
•Gain a competitive advantage
Here are some metrics that can be used to
evaluate the effectiveness of CRM:
•Length of each stage of the sales cycle
•Quality of leads
•Close rate
•Customer lifetime value
•Customer acquisition cost
•Churn rate and retention rate
•Net Promoter Score
Types of Customer Relationship
Programmes:
1. Win Back

This is the process of convincing a customer to stay with the organization while they are
discontinuing service or convincing them to rejoin once they have left. Of the four
categories of campaigns, win back campaigns is four times more likely to succeed, if contact
is made within the first week following a defection that if it is made in the fourth week.
Selectivity is another aspect of a successful win back campaign. Leading organizations often
filter prospects for contacting to exclude customers who have frequently switched , who
have bad credit ratings or whose usage is low.

To preserve the revenue stream and prevent the customer from becoming a “traditional”
win back candidate, a few organizations are now including partial disconnects and reduced
usage customers in their win-back campaign.
2. Prospecting:

Prospecting is the effort to win new, first time customers. Apart from the offer itself,
the three most critical elements of prospecting campaign are segmenting, selectivity
and sources. It is essential to develop an effective-need based segmentation model
that allows the organization to effectively target the offer. Without this focused
approach, the organization fails to achieve an adequate acceptance on the offer or
spends too much on promotions, advertising and concessionary pricing.
Selectivity is important to prospecting as it is to win back. Need-based segmentation
defines what the customer wants from the organization and profit-based segmentation
defines how valuable the customer is and helps the organization decide how much it is
willing to spend to get the customer. Pre-scoring a consumer credit rating is one of the
techniques that organization can use to determine the latter.
3. Loyalty:

Loyalty is the third category in which it is most difficult to gain accurate measures.
The organizations trying to prevent customers from leaving, uses three essential
elements: Value based and Need based segmentation and predictive churn
models. Value-based segmentation allows the organization to determine how much it
is willing to invest.
Once the customer is determined to belong to the value based segmentation
screening, the organization can use need-base segmentation to offer customized
loyalty program. Affinity programs such as airline miles and hotel points are some of
the most popular methods. However, the organization focus more on needs of
individual customers, they find that they are able to achieve the same loyalty with
less investment.
4. Cross Sell / Up-sell
The Cross –sell/ Up sell is also known as increasing the wallet share or the amount the
customer spends. The purpose is to identify complementary offerings that a customer
would like. For instance, a basic long-distance customer could be a candidate to buy
internet access. Up selling is similar but, instead of offering a complementary
product, the organization offers an enhanced one. For example, If the customer has
used his credit card a few times in apparel shop. CRM tool will enable the credit card
company to send his customized mailers on apparel offers including special incentive
schemes.
Cross- Sell and Up-sell campaigns are important because the customers targeted
already have relationship with the organization. In financial terms, when a customer
accepts a cross –sell or up-sell offer, that organization begins to reap more profits.
 Evaluation of customer relationship
marketing
Here are a few things that will help you in evaluating CRM systems.
1.User Experience:
An easy-to-use interface that can be accessed on mobile devices and desktops alike offers a wonderful user experience.
Therefore, ensure that the system has an attractive UI and cross-device capabilities.
2.Budget:
Examine the provider’s various pricing structures (hourly, monthly, annual). If you do not want to buy the extensive set of
capabilities, choose the pay-as-you-go option and purchase more features as your business demands.
3.Adoption:
A CRM with easy-to-learn functionalities leads to faster adoption by users. With simple solutions and easy navigation,
your workforce will immediately be able to use them.
4.Scalability:
An easily scalable CRM is very critical to supporting a growing business. Select a CRM that scales and supports your
expanding business needs.