Concept and Context Of CRM

By Manoj Aiyer

Definition by Gartner 

has defined µCRM¶ as a business strategy designed to optimize profitability, revenue and customer satisfaction.

manage and personalize the needs of an organization¶s current and potential customers. .Definition by PwC Consulting  CRM is a business strategy that aims to understand / appreciate.

reacting and partnering with selective customers to create superior value for the company and the customer.Definition by Parvatiyar and Sheth  CRM is a competitive strategy and process of acquiring. .

It means working with customers such that they receive great service and are motivated to return again and again to do more business with the company.Definition by Bob Thompson ± CRM Guru. .com  CRM is a business strategy that applies to every organization.

aligning business processes. technology and the customer life cycle. CRM is a business strategy providing a systemic approach to customer life cycle management (CLCM). service and marketing process and the CRM technology environment with the customer. . CLCM is a three domain business system. This business system must integrate sales. It is about applying the right CRM treatment to the right customer segment at the right time to produce business results.Metagroup Definition   CRM is ultimately about driving bottom-line revenue through proactive management of the customer lifecycle.

maintenance and optimization of a long-term mutually valuable relationship between customer and organization.Defining CRM by CRM (UK) Ltd. development.. 2000  Customer Relationship Management is the establishment. .


CRM is about µstrategy¶ It is a strategy of not only delivering a singular customer experience and value but also creating of ongoing continuous improvements in customer experience and value enhancement in the relationship.  .

CRM from Strategy Perspective Kumar & Werner  CRM is a strategic process of selecting the customers a firm can most profitably serve & of shaping the interactions between a company & these customers . The goal is to optimize the current & future value of the customers for the company .

Three of the important trends:  Aging of the Population: The birth rate in most developed countries has been falling for more than two decades and this phenomenon is described as deyouthing . The market place changes the needs and wants when the demographic make-up of the market place changes.Why CRM is a big issue today? Customers: A key development in today¶s market is the diversity of the customers.

Increasing Individualisation : We will increasingly have to look at the individual behaviour as the family members spend more time apart. Another consequence is a higher degree of perceived loneliness in society . clothing and food. This will increase the need for the personalised attention to each household members. Marketing communications will have to reflect this diversity in the way companies serve their customers.CRM ²a big issue: customers Increasing diversity in ethnicity: Markets are becoming more segmented. Vendors will have to cater to ethnically diverse needs in housing.

Time is becoming one of the most precious commodities. . and services to time starved customers.CRM ²a big issue: customers  Time Scarcity:  Many households are technologically rich but relatively time poor. As activities compete for time. products. customers will redesign the tasks that consume much time and embrace time saving activities and time shifting technologies Eg: Internet and eating habits . value added messages. This has resulted in Multi tasking and customer time scarcity provides a window of opportunity for the savvy marketer who can effectively bring relevant.

The customers will raise their bar each time their expectations are met. they try new products n services & their expectation level is increased.CRM ²a big issue: Customer  Value consciousness & Intolerance for low Service Levels: Customers are becoming more demanding. . They are intolerant to failures and demand continuously more. customers compare their experience with best in class expectations. The expectations are extreme for reliable products . As the customers b¶come more educated.

makes it much harder for the providers to differentiate their products and services from those of their competitors. This has both positive and negative impacts. The negative side is that this . in turn. This makes it harder to grab customer attention & affect their product decision. . The positive side is that all the manufacturers and service are in almost equal position when making their information available to customers.CRM ²a big issue: Customer  Information Aptitude: Availability & Technological Customers are having access to tremendous amount of data.

The overarching result is that consumers are putting greater demands on firms in terms of high value products & services to be provided at right time at right place.  The changes in the markets are giving rise to newer trends in customer behavior.CRM ²a big issue: Customer  Decrease in Loyalty Customers are becoming increasingly selective and diversifying their business in unprecedented rates. . This happens as institutions implement more intensive cross selling campaigns.

location advantages have vanished. it was easier for people to switch to other brands as mass marketing was the strategy. services economy & technology market places started changing: Competition for customers becoming intense: With trade barriers being removed n geographies getting redefined. due to globalization. However. Hence.CRM-Big Issue: Market place  Business was essentially manufacturing based. Logistics and distribution partnerships have become more important .

Companies have moved away from transaction to relationships . Individual marketing is taking precedence with markets broken down into multiple segments Differentiation is becoming more difficult: the quality of objective product attributes are decreasing substantially and it is no longer a competitive advantage. Brand loyalty founded on product differentials is just relative & not absolute.CRM-Big Issue: Market place Markets have become fragmented: Customer have differentiated needs in developed markets where supplies exceed demand.  Good product is not sufficient.

there is a average drop of 40% every year . if they analyse correctly. Companies double storage space every 6 months  Firms are in better situation now. And the technology has also brought the size to much compact size. Earlier. the western economy was 1 petabyte. else it will be overwhelmed with data. On demand side the requirement of the economies have changed. it will have unprecedented data of consumer. .CRM-Big Issue: Data Storage  The demand and supply of the technology has changed dramatically. half of it is required for 1 oil field. storage On supply side cost per bit basis. Now.

. Mass communication is a model of past . the short term & deal focused consumer response is appropriate now for Consumers and manufactures. Television has taken precedence over dailies.  Decreasing Marketing efficiency & effectiveness Marketers have to demonstrate investments to return. acquisition & not retention. transaction & not relationship. prices & not value .CRM-Big Issue: Marketing function  Media Dilution & Multiplication of channels The nature of marketing communication is undergoing significant changes. The problem stems from the marketing practices which is more focused on.

In such a scenario. CRM shows a company the way to increase customer loyalty. corporate offerings are increasing and becoming commoditized. Differentiating products and services is becoming more and more difficult . .What motivates companies to adopt CRM strategies ?  Competition - With globalization and ecommerce continuing to spread. earn higher margins and stronger branding.

Companies that use CRM to truly understand their customers and respond to their needs. will come out on top. Amazon.What motivates companies to adopt CRM strategies ?  customer Expectation.E-commerce has competition just a mouse click away and customers have become more demanding when voting with their pocket books. .com is a text book example in this context.

The separate and isolated systems traditionally used by Customer Service. so it is easier to justify systems that consolidate your customers µtouch points¶. Sales and Marketing can now be phased out and the old communication gaps filled in.What motivates companies to adopt CRM strategies ?  Technology-The cost of CRM Technology has dropped. .

. hold people¶s attention better and retain customers longer and at a lesser cost. all forms of advertising are becoming ineffective. print journalism.What motivates companies to adopt CRM strategies ?  Diminishing impact of advertisingWhether it is primetime TV. With CRM you can target your message more precisely. direct mail or email marketing.

Marketing and Relationship Marketing  Under µselling concept¶ a company¶s task was to sell and promote products coming out of its factories in an effort to win as much volume as possible and thus maximize profits. distribution and marketing. Product standardization was the key-coupled with mass production. The job was to hunt down customer prospects wherever they could be found and use the persuasion power of personalized selling to make a sale.CRM. . Management gave little thought to segmenting the market and developing different product and service versions that met varying needs in the marketplace.

. Skills of market segmentation. Now a company¶s aim was to develop appropriate segment based offerings and marketing mixes. The aim was to find customers for company¶s products. Delivering higher customer satisfaction in each chosen segment to produce loyal customers ± whose repeat purchase would lead to increased profitability became the focus. With increased competition µMarketing¶ concept shifted attention from the factory to customers and to their varying needs. targeting and positioning became the key. The central purpose of traditional marketing was to sell products .

collaborators. . create and deliver individual customer value in a very dynamic and a competitive environment needs investment in µrelationship¶ with various stakeholders ± customers. The job of marketing was therefore to develop contextual offering of products. communities. services and experience to match individual customer requirements. employees. CRM is in the domain of relationship management with customers. To continuously explore.

customer has now become the hunter ± informing the company of his specific requirements proposing the price he will pay. From a company being the hunter. . establishing how he wants to receive the company information and advertising. ´This is what I need. won¶t you please buy it ?´ Which has now given way to that of the customer revolution which declares.CRM & Direct marketing   Lester Wunderman of direct marketing fame has put it well : The call of the industrial revolution was ³This is what I make. Companies therefore have to turn from a µmake and sell¶ philosophy to µsense and respond¶ philosophy. can¶t you please make it´.

  Products are developed to meet customer needs. Delivery is used to reinforce the value proposition. Marketing is managed by cross-functional teams. Brands are positioned to offer distinctive value. Everyone in the company is concerned with the customer. Communications were used to convey brand association. THE OLD   THE NEW       Products were developed to enter new markets.THEN Maximizing market share and revenue was the objective    NOW Maximizing customers value is the primary objective. Only marketing people were concerned with the customer. Delivery systems were used to make purchases easier. Product and service were separate entities. Relationships were less important than sales. Marketing management was an independent function. Communications are used to create expectations of value. . Brands were built to have differentiated associations. Relationships are built to offer lifetime customer value. Products are developed in service for customization.    Quality standards are determined by the customer.   Quality standards were determined internally.


Difference between Transaction Marketing and Relationship Marketing TRANSACTION V/S RELATIONSHIP MARKETING TRANSACTION MARKETING      RELATIONSHIP MARKETING        Functional marketing Focus on a single sale Orientation on product features Short time scale Little emphasis on customer service Moderate customer contact Quality is a concern of production   Cross-functional marketing Focus on customer retention Orientation to customer values Long time scale High emphasis on customer service High customer contact Quality is everyone¶s concern .

Customer receives value not only from purchase but from each exchange between the customer and the provider Thus managing relationship based processes is a core competence - .Difference between Marketing and CRM The differences are best explained by three cornerstones  Unlike marketing CRM views products as processes.

Third relates to provider¶s responsibilities.Difference between Mktg n CRM  Second concept in CRM is customer value creation or co creation. .  .A company can build stronger relationships with its customers only if it takes the responsibility for developing these relationships and offers its customers possibilities to create value for themselves. -According to this approach competitive advantage is not based exclusively on price but also on the ability of the provider to help customers create value for themselves.

µRelationship marketing is a marketing based on interactions within networks of relationships¶. the parties enter into active contact with each other. a two party relationship. A network is a set of relationships which can grow into enormously complex patterns. This is the party relationship of marketing. The relationship between the one who sells something and the one who buys something forms the classic dyad of marketing.Difference between CRM and Relationship Marketing    Relationship Marketing is a broader overriding concept. as the simple dyad grows into a complex networks. . According to Gummesson (2002). In the relationship. This is called interaction.

Levels of Relationship marketing High Margin Many customers/ distributors Accountable Medium Margin Reactive Low Margin Basic or reactive Reactive Medium number of customers/distributors Proactive Accountable Few customers/ distributors Partnership Proactive Accountable .

This has been done by defining 30 relationships. Gummesson(2002) has converted the philosophy of Relationship Marketing into tangible relationships that become part of the company¶s marketing and business planning. the 30 R¶s. . CRM does not deal with networks but focuses on the customersupplier interaction.CRM is the values and strategies of relationship marketing ± with particular emphasis on customer relationship turned into practical application.

green relationship (environment and health based.These 30 Rs are divided into four broad categories :  Classic market relationships (consisting of the relationship between the supplier and the customer. law based). relationship in industrial and business marketing.  . Special market relationships (Relationships via full time marketers and part time marketers. e-relationship. between the customer-suppliercompetitor and the classic network distribution channels). interaction between customers and service providers.

. relationship between internal customers and internal suppliers. etc. relationship with the employee market.  Nano relationships (Introduction of profit centres in an organizations.30Rs  Mega relationships (Personal and social network. the relationship between operations management and marketing. mass media).).

. The first two types are market relationships be it classic market relationships or special market relationships. The next two types are non-market relationships which directly influence efficiency of market relationship.

5. Piece of software solution Sales tactics Call Center services Relationship building by softer attributes of a contact person. 2.What is not CRM ? In summary CRM is not : 1. 3. 6. Another µbuzzword´/passing management fad like Enterprise Resource Planning (ERP) / Business Process Management (BPM). Empowerment to pass goodwill waivers. 4. .

. Proactive versus Reactive CRM or Operational. 2. Collaborative and Analytical CRM.Types of CRM 1.

Operational CRM The customer touch points are classified into :  Face to face touch points Sales/Service/Channel/Events/stores/Promotions  Database driven touch points Telephones / Email/Mail/SMS/Fax/Loyalty Cards/ATM¶S .


Mass Media Advertising / PR/Website At any of these touch points. Financial transaction Sale Payment Return of sale Information transaction Request for information Complaint Suggestion         . any number of the following transactions can take place.

By managing all these partners. .Collaborative CRM Jill Dyche defines collaborative CRM as a specific functionality that enables a two way dialog between a company and its customers through a variety of channels to facilitate and improve the quality of customer interactions. Sales. agents. OEM¶s. it tries to in turn facilitate the integration of various activities like Marketing. (Dyche 2002). service / support and quality. dealers. brokers. The mandate of Collaborative CRM is to manage various partners of the company be it business partners. resellers and retailers. intermediaries like distributors.

It also studies customer behavior patterns that helps to know what products to position for cross-selling / upselling and the level and kind of service to deliver to meet customer demand. . (Dyche 2002).Analytical CRM  Also known as back ±office or strategic CRM. It involves analyzing large amounts of crossfunctional data using date mining and other methods and feeding the result (knowledge gained) back to operational CRM. it involves understanding the customer activities that occurred in the front office.