Main topics

4.1 Theory of Customer Relationship Management

(CRM) and Customer Retention Strategies

4.2. Theory of Customer Relationship Management

Value Chain (CRC) and Customer Lifetime Value
Chapter 6: (CLV)
Customer relationship management in the
digital marketing 4.3. Digital Marketing and its impact on CRM in the
Financial Institution

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4.1.2 Forms of CRM

4.1 Theory of Customer Relationship Management (CRM)
and Customer Retention Strategies

4.1.1 Definition CRM

CRM is an organizational capability that centers on the creation and

maintenance of profitable customer relationships through the design
and delivery of superior value propositions grounded in insights from
customer-related data.

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Strategic CRM: PayPal

a. Strategic CRM Case illustration 1.1
• PayPal's approach centers on understanding and meeting the evolving
needs and expectations of its customers.
• Strategic CRM aims to foster a customer-centric culture • By offering secure, convenient payment options like 'Pay in 4',
• by focusing on winning and retaining profitable customers expanding into cryptocurrency, and leveraging extensive data to
through superior value propositions, provide tailored services, PayPal enhances customer satisfaction and
• integrated company-wide customer experience loyalty.
management,
• This customer-centric strategy involves integrating customer
• and aligning resources and employee rewards with insights into business decisions, aligning resources and innovations
customer value maximization,
with customer value, and continuously adapting to market trends, all
• though many businesses struggle to achieve true customer- of which are key aspects of strategic CRM.
centricity due to the significant resources and tough
decisions required.

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 Operational CRM applications
b. Operational CRM

• Operational CRM aims to improve the efficiency and effectiveness of

customer-facing business processes and their integration between
different corporate divisions or teams, particularly through automation.
• Operational CRM includes:
• Marketing automation (MA) involves the software-based application of rules and algorithms that
execute marketing activities with little or no human intervention.
• Sales-force automation (SFA) is the application of computerized technologies to support and manage
the sales activities of the company whether these be through customer-facing staff or through self-
service channels.
• Service automation (SA) involves the application of technology to customer service operations. It
helps companies manage service operations, whether delivered through call center, contact center, field-
service, web or face-to-face with high levels of efficiency, reliability, and effectiveness.

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Example (MoMo)
CRM Element Example (MoMo) Benefit
c. Analytical CRM Identify
Uses analytics to build a 360° customer profile from More accurate segmentation, better
transaction history (P2P transfers, bill pay, top-ups), app understanding of needs, and improved next-
Customers
journeys, and device/behavioral signals. best-action recommendations.
• Analytical CRM Applies lookalike targeting and campaign analytics
Acquire Higher conversion rate, and more qualified
(channel attribution, cohort tracking) to run personalized
- utilizes diverse customer-related data Customers
acquisition campaigns and optimize onboarding funnels.
new users.

from internal and external sources Retain

Uses predictive churn models to identify at-risk users and
Reduced churn, improved retention and
stored in enterprise-wide relational Customers
trigger tailored retention offers (cashback, vouchers, fee
waivers) at the right time.
repeat usage.
databases, Recommends relevant services (bills, insurance, savings,
Enhance transaction frequency, and stronger
mini-apps, vouchers) based on usage patterns and
- allowing companies to leverage data Engagement
contextual signals (time, location, spend habits).
stickiness/loyalty.
mining tools to enhance customer Improve Mines customer feedback, support tickets, and journey
relationships and achieve customer Customer
Satisfaction
drop-offs to detect pain points and improve UX (faster
flows, fewer steps, clearer error handling).
Better user experience, fewer complaints.

relationship goals. Improve Uses LTV modeling + propensity scoring for cross-
Better margin via smarter incentives and
Overall sell/upsell (financial products, partner services), while
reduced fraud costs.
Profitability improving fraud/risk analytics to reduce losses.

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Customer Engagement, Customer Satisfaction, Loyalty and Profitability

4.1.3 Customer-
Supplier Relationship Customer engagement involves creating positive interactions between customers and a
brand's touchpoints to enhance experiences and drive meaningful interactions, ultimately
leading to customer satisfaction, loyalty, and positive company performance.
A relationship is a series of interactive episodes between
two parties over time.
• Episodes are time bound (they have a beginning and an Customer satisfaction measures the gap between customer expectations and their
end) and are identifiable; you can put names to the perceptions of their experience, aiming to balance offerings to enhance satisfaction and
episodes. foster customer loyalty.
• Each episode includes a series of interactions.
Interaction consists of action and a response to that Customer loyalty involves both repeat purchasing behavior and positive customer attitudes
action. towards a brand, blending these dimensions to measure and understand true loyalty (H
Parties may have very different ideas about whether they attitude/H purchase, versus latent(H attitude/L purchase), or spurious loyalty (L attitude/Hi
are in a relationship. purchase).
For example, in a professional procurement context for a
multinational organization, corporate buying staff may Business performance, influenced by customer engagement, satisfaction, and loyalty, is often
think they are transactional. Their suppliers, however, may measured through sales revenue, profitability, market share, share of customer spend (Share of
feel that they have built a relationship. Wallet – SOW), and Net Promoter Score (NPS: how likely a customer recommend the
company), with multiple metrics providing a comprehensive evaluation of a company's success.

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 Using social media to improve customer loyalty and advocacy Social media activities requiring management:

• Activity 1 Define listening and reputation strategy

• Activity 2 Transform the brand through social media
• Activity 3 Acquire new customers using social media
• Activity 4 Increase sales to existing customers
• Activity 5 Enhance customer service through social media

Source: Altimeter (2010)

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The challenge of customer engagement Benefits of using CRM to support customer engagement:

• Involvement • Targeting more cost-effectively

• Interaction • Permission marketing
• Mass customisation of the marketing messages
• Intimacy • Increased breadth and depth of information
• Influence • Deeper customer understanding
• Lower cost
• Delivering loyalty programmes
• Gamification

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Marketing applications of CRM: CRM technologies and data management

• Sales force automation • Three main types of customer data held in a CRM system:
• Customer service management
• Managing the sales process • Personal profile
• Customer communication management • Transaction data
• Analysis • Communication interaction data

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 Artificial intelligence for marketing Customer lifecycle management strategy

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Permission marketing Summary of elements of CRM strategy:

• Permission marketing
• Personalisation and mass customisation
• Using digital media to increase customer loyalty
• Determining what customers value
• The relationship between satisfaction and loyalty
• Measuring the voice of the digital customers
• Differentiating customers by value and engagement
• Lifetime value modelling
• Product recommendations and propensity modelling

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a. Improving Customer Retention

When Companies Want Relationships
Improving customer retention rates increases the customer base size, as demonstrated
with Customers by a comparison showing that a company with a 5% annual churn rate can have a
customer base 19% larger than one with a 10% churn rate after four years, highlighting
the importance of retaining profitable customers for sustainable growth.

• Improving customer
retention
• Reducing marketing and
customer service costs
• Improving customer
lifetime value (CLV)

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 b. Reducing Marketing and Customer Service Costs c. Improving Customer Lifetime Value (CLV)

Improving customer retention reduces marketing and onboarding costs, fosters trust and • Improving Customer Lifetime Value (CLV) involves focusing on the total income a
commitment, increases customer spending over time, and enables suppliers to better customer generates over their entire relationship with a company, emphasizing the
understand and meet customer needs, ultimately enhancing profitability and efficiency. strategic importance of retaining high-value customers for long-term profitability.
Advances in customer data analytics and sales automation allow companies to efficiently
and cost-effectively cater to diverse customer needs by simulating personalized
experiences and facilitating automated order navigation and fulfillment, as exemplified
by pioneers like Momo:
- Identify high-CLV segments using transaction history, spend level, frequency, and
usage timing to build profiles and predict cross-service potential.
- Increase “depth” (value per user) via contextual cross-sell: bill pay → recurring
payments; lifestyle spend → category vouchers; stable cashflow → suitable financial
CRM technology helps companies track customer progress along the journey and allocate services (where available).
resources efficiently to advance customers with timely offers, recognizing that initial - Increase “frequency” by recommending relevant Mini Apps (shopping, services,
investments in converting prospects can be significant and may not be immediately entertainment) to create daily use cases beyond transfers.
recoverable.

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4.2. Theory of Customer Relationship Management Value 4.2.1 Theory of The Value Chain model of CRM focuses on creating
Customer Relationship value at each stage of the customer relationship
Chain (CRC) and Customer Lifetime Value (CLV) process, from initial contact to post-purchase support,
Management Value to enhance customer satisfaction and loyalty while
Chain (CRC) driving business success.
• Customer • Customer
Relationship Lifetime Value
Management (CLV)
Value Chain
(CRC)

4.2.1 4.2.2

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4.2.2 Customer life-time value (CLV) Four causes of profit margin growth over
time
• CLV is the present day value of all net margins earned from a relationship
with a customer, customer segment or cohort. 1. Revenues grow over time, as customers buy more.
• To compute LTV, all historic net margins are compounded up to today’s 2. Cost-to-serve is lower for existing customers, because both supplier
value and all future net margins are discounted back to today’s value. and customer understand the other.
• Estimates of LTV potential look to the future only, and ignore the past. 3. Higher prices are paid by existing customers than new customers.
• A customer that appears to be valuable on the basis of the gross margins 4. Value-generating referrals are made by existing, satisfied
generated will most likely be less profitable once cost-to-serve the customers through their unpaid advocacy.
customer is taken into account.
Customers are potential income streams: A core CRM idea is that a
customer should not be viewed as a set of independent transactions but as a
life-time income stream.

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 Profit from customers over time Customer life-time value
Profit (loss) per customer over time ($)
• The total present day value of a customer is the sum of
Year • all past net margins compounded to today’s value, and
Service 0 1 2 3 4 5
• all future net margins discounted to today’s value

Credit card (51) 30 42 44 49 55

Industrial laundry 144 166 192 222 256
• The potential value of a customer is
Industrial distribution 45 99 121 144 168 • all future net margins discounted to today’s value
Auto servicing 25 35 70 88 88

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Cohort value: the impact of customer retention rate

What you need to compute LTV
$ $ $
Year Profit per net present Customer No. of Total annual
• insight into future buying behaviour customer value at 15% retention rate(%) customersprofit
• probabilities of buying products 1-n over the next x time periods discount
• margins earned from those products 0 -100 100,000 -10,000,000
• periodic costs of customer management 1 50 43.48 60 60,000 2,608,800
2 70 52.93 70 42,000 2,223,062
Plus, for new customers 3 100 65.75 75 31,500 2,071,125
4 140 80.00 80 25,200 2,016,000
• costs of customer acquisition 5 190 94.53 85 21,420 2,024,776
And finally 6 250 108.23 90 19,278 2,086,364
7 320 120.30 92 17,736 2,133,654
• Discount rate 8 400 130.72 94 16,672 2,179,346
9 450 127.84 95 15,838 2,024,744
10 500 123.15 96 15,204 1,872,372

Figure 2.5

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Core strategies to improve cohort profitability When do B2B companies not want relationships?
1. Improve customer retention rate in the early years of the relationship.
• When they fear loss of control. Relationships are bi-lateral arrangements,
2. Increase the profit earned per customer by which involve giving up unilateral control over resources.
• Reducing cost-to-serve
• Cross-selling or up-selling additional products and services • When exits costs are high. Not all relationships survive. It is not necessarily
easy or cost-effective to exit a relationship.
3. Become better at customer acquisition by
• Using more cost effective recruitment channels • Resource commitment. Relationships require the commitment of scarce
• Better qualification of prospects. resources such as people, time and money.
• Careful nurturing of prospects with high CLV potential. • When opportunity costs are high. If resources are committed to one customer
• Recruiting new customers matched to the profiles of current customers having a high realtionship, they cannot be used for another
CLV

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 4.3. Digital Marketing and its impact on
CRM in the Financial Institution
4.3.1 Context of digital transformation
4.3.2 Customer data management and analytics
4.3.3 Integrating on and offline for Effective CRM
4.3.4 Personalization
4.3.5 Social CRM
4.3.6 Digital tools – CRM systems
4.3.7 Data privacy and cookies

4.3.1 Context of digital transformation

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4.3.2 Customer data management and analytics

Analytics for CRM Strategy and Tactics

Customer analytics help companies predict future trends, uncover associations, and Analytics for CRM strategy and tactics involve using data to achieve long-term strategic
categorize customers for better strategic decision-making. goals and short-term tactical actions, focusing on revenue growth, cost reduction, and
customer loyalty enhancement.
Predicting Future Trends:
•Analyzing past customer behaviors to forecast future actions, improving operational
efficiency and effectiveness.
•Uncovering Associations:
Identifying surprising connections between variables that can lead to valuable insights
for achieving CRM goals.
•Customer Segmentation:
Grouping customers with similar characteristics to make targeted decisions on whom
to serve and how to approach them.

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Analytics Throughout the Customer Journey Analytics for Structured Data

Analytics throughout the customer journey involve using different types of analysis to Structured data is data that fits neatly into data tables and includes discrete data types such as numbers, short text, and
dates. Structured data are either discrete but qualitative/categorical (divided into groups), or discrete with whole
support strategies for customer acquisition, retention, and development, each tailored to number or continuous(has decimal) and quantitative data that can take any value over a particular time interval).
the specific phase of the journey.

Customer acquisition strategies involve identifying and qualifying potential customers, •Nominal Data (categorical data that are unordered):
Categorical data used for classification or identification without any order, such as customer IDs or gender.
typically using lead scoring based on various market, organizational, personal, •Ordinal Data (categorical data that are ordered:
relational, and behavioral attributes, with higher scores indicating better prospects. Ranked data that indicate order but not the magnitude of difference, like a list of customers ranked by sales, or degree of customer
satisfaction.
•Interval Data (continuous data):
Data that show both order and the exact distance between values but have no true zero point, such as customer perception of
product quality. Zero in temperature is just a particular point.
•Ratio Data (interval data with true zero):
Data with all properties of the other types, plus a true zero point, allowing for comparison of ratios, like customer income or
expenditure.

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 Analytics for Unstructured Data Big Data Analytics

Analytics for unstructured data involve advanced techniques to extract meaningful insights Big Data analytics involves analyzing large, fast, and diverse data sets to extract valuable insights that can improve
decision-making and customer experiences.
from non-structured sources like text, audio, and video, enabling businesses to better
understand customer behavior and trends. Volume:
Automatic Routing:
Refers to the vast amount of data generated, which
•Uses analytics to automatically route emails, detect spam, and exceeds the capabilities of traditional databases.
manage other communication flows efficiently. Variety:
Root Cause Analysis (RCA): Involves the diverse types of data, including structured
Analyzes customer service or complaint records to identify the and unstructured formats like social media posts, videos,
underlying causes of issues. and images.
Sentiment Analysis: Velocity:
Evaluates customer feelings and opinions about products, services, or Describes the high speed at which data is generated and
brands to gauge overall sentiment (positive, negative, or neutral). needs to be processed, often in real-time.
Text Analytics:
•Converts unstructured text into structured data to reveal hidden
Veracity:
themes and concepts, improving predictive models and decision- Concerns the quality and accuracy of the data, ensuring
making. that insights are reliable and actionable.
Trend Analysis:
Tracks changes in specific entities over time to understand patterns in
customer behavior or product performance.

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Tech Architecture & Ecosystem of a bank Three Ways to Generate Analytic Insights

CRM users can generate analytical insights through three main methods: standard reports,
OLAP (online analytical processing), and data mining.

•Standard Reports:
Predefined or customizable reports that provide users with essential customer-related
information, such as sales metrics or call center activity.
•OLAP (Online Analytical Processing):
Enables ad hoc data analysis through techniques like slice-and-dice, drill-down, and roll-
up, helping users explore data from different perspectives to uncover deeper insights.
•Data Mining:
Utilizes advanced statistical techniques to discover patterns, correlations, and trends in
large datasets, providing predictive insights and decision support.

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Standard Reports OLAP (Online Analytical Processing)

OLAP tools to examine sales performance by drilling down into sales data for a specific product category, such
as Food and Beverages, then by gender, revenue, quantity, etc.

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 Data Mining Data Mining I

Company uses big data analytics to enhance customer experience and optimize operations Data mining in CRM involves applying descriptive and predictive analytics to large data sets to support
through social media insights, personalized recommendations, inventory management, marketing, sales, and service functions, using techniques like classification, estimation, and clustering.
and improved checkout processes.
Classification:
•Categorizing data into predefined groups to predict outcomes, such as identifying likely customers to respond to a
Social Media Analytics: Analyzing social media data to understand customer preferences promotion.
and inform product decisions. Estimation:
Social Genome: Combining social and proprietary data to provide personalized product •Predicting numerical outcomes, like forecasting a customer’s lifetime value.
Prediction:
recommendations. •Anticipating future behaviors, such as predicting which customers are likely to churn.
Shopycat Gift Recommendation: Affinity Grouping:
•A Facebook app suggesting gifts based on users' social data. •Identifying relationships between items, such as products often purchased together.
Clustering:
Predictive Inventory Management: Forecasting demand to optimize inventory and •Grouping similar data points, such as segmenting customers based on buying patterns.
reduce overstock. Description and Visualization:
Improved Checkout Process: Using analytics to streamline checkout options and •Summarizing data to highlight key patterns and insights through visual tools.
staffing.

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Data Mining II Undirected Data Mining Techniques I

Hierarchical Clustering:
Directed (Supervised) Data Mining: Groups records into clusters by progressively merging them until one super-cluster remains.
•Using specific input data to predict a defined outcome, like forecasting customer responses to a marketing
campaign. Example: A dendrogram (tree diagram) is used to cluster markets based on sales data.
Discriminant Analysis (DA) to analyze data when the dependent variable is categorical and the
independent variable is interval in nature): Classifies data into groups based on distinguishing variables.
•Example: A retailer categorizes customers into value segments based on their spending and purchase
frequency.
Neural Networks: Machine learning models that predict outcomes by learning from data.
•Example: A telecom company predicts which customers might leave using patterns in their service usage
and complaints.
Undirected (Unsupervised) Data Mining:
•Exploring data without predefined outcomes to discover new patterns, such as uncovering unexpected
customer segments.

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Undirected Data Mining Techniques II Undirected Data Mining Techniques III

K-Means Clustering:
Two-Step Clustering:
Clusters records into a predetermined number of groups (k) by minimizing variance Combines hierarchical and k-means clustering, suitable for large datasets with mixed
within clusters and maximizing distance between them.
data types.
Example: Clustering customers into three distinct segments based on purchasing behavior.
Undirected Data Mining Techniques IV

Factor Analysis:
Reduces data complexity by identifying underlying variables that explain observed
patterns.

Artificial Intelligence (AI), Machine Learning (ML), & Deep Learning (DL)

AI, ML, and DL are advanced computing methods that evolved to make machines more
intelligent, with applications in CRM for predicting customer behavior using large
datasets and complex algorithms like Artificial Neural Networks (ANNs).

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 4.3.3 Integrating on and offline for Effective CRM 4.3.3 Integrating on and offline for Effective CRM

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4.3.3 Integrating on and offline for Effective CRM 4.3.4 Personalization

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4.3.5 Social CRM

4.3.6 Digital tools – CRM systems

Nguồn: Barton Goldenberg (2025)

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 4.3.7 Data privacy and cookies

Thank you
for listening!

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