CRM Strategy – B2B Mktg

Learning Objectives

1. Recognize the strategic importance of relationship marketing

2. Contrast transactional exchange and collaborative exchanges when managing
buyer–seller relationships
3. Describe the factors that influence the profitability of individual customers
4. Explain a procedure for designing effective customer relationship
management programs
5. Recognize the critical drivers of relationship marketing success
Collaborative Advantage

 Customer Profitability is a major consideration in B2B marketing while

compared to B2C where it is Company’s profitability only

 Ability of organizations to create & maintain profitable relationship on a

sustained basis provides Competitive Advantage.

 A collaborative advantage is the ability to form effective and rewarding

partnerships with other firms, for mutual benefit.

 Many business marketing firms (b2b Companies) create a collaborative

advantage by demonstrating special skills in managing relationships with key
customers or by jointly developing innovative strategies with alliance partners

 Superior Relationship Skills = Competitive Advantage

The Strategic Importance of Relationship
Marketing
The Strategic Importance of Relationship
Marketing
6) Loyal customers are less likely to be lost to competitors

7) Satisfied customers are more insulated from price competition

8) Loyal customers are more likely to provide an opportunity for recovery efforts
when things go awry

9) Positive work environments for employees often go hand-in-hand with satisfied

and loyal customers
“Relationship Marketing focuses on all activities directed towards establishing
. Developing, maintaining successful exchange with Customers & its
Constituents”
Customer Relationship Management – A
Perspective
Why CRM ?
 CRM is a strategy to manage your organization's relationships with customers
and prospects. CRM enables you to stay connected with them, streamline
sales and after-sales processes, and improve profitability.
 The goal of CRM is simple – improve business.
 Three aspects crucial to a B2B organization's success are:
✓ Customer details
✓ Sales management
✓ After sales support
 If the organization is missing a usable customer database, it's a sign that it
needs a CRM system. This might appear like a small issue right now but will
have far-reaching repercussions in the long run.
 Organization could be bleeding money on resources that interact poorly with
customers and prospects. Or worse, on resources that don't interact with
them at [Link] Sales Management requiring strong CRM Systems
 CRM System enables the Orgn. To go beyond the sales transaction & tracks
after sales service and establish CSI as per company objective
Types of Relationships
Relationship Spectrum

Transactional Exchanges( Automated/Anonymous

purchases)

Value Added Exchanges( Beyond Attracting

Customer to Customer Retention)

Collaborative Exchanges( Complete collaboration

and integration between Supplier & Customer
Nature of Relationships
 Relationship commitment involves a partner’s belief that an ongoing
relationship is so important that it deserves maximum effort to maintain
it.

 Trust exists when one party has confidence in a partner’s reliability

and integrity.

 Trust & Commitment is the foundation to Collaborative Exchange

 Trust & Commitment between the individuals at Buyer’s & Seller’s

end often transfers the same between the organizations

 Strategic Choices : Engaging between Transactional Exchange Thr’

Value Added Exchanges to Collaborative Exchanges
Collaborative and Transactional Buyer–Seller
Relationships
 Customers are more likely to prefer a transactional relationship when a
competitive supply market features many alternatives, the purchase decision
is not complex, and the supply market is stable. ( e.g Transportation
Contracts through Daily Bidding)

 Buying firms prefer a more collaborative relationship when alternatives are

few, the market is dynamic (for example, rapidly changing technology), and
the complexity of the purchase is high.( Quantity Allocations are frozen for
Commodities while Prices Negotiable)

 In considering possible changes from one selling firm to another,

organizational buyers consider two switching costs: investments and risk of
exposure.( Lead Time & investment in dedicated storage tanks by
Suppliers)
Spectrum of Buyer- Seller Relationship
Strategy Guidelines

 Collaborative Customers: Relationship-building strategies, targeted on strong

and lasting commitments, are especially appropriate for these customers.

 Value Drivers in Collaborative Relationships : Personal equity & relationship,

Service Support, Product Quality & Delivery commitments hold the key

 Transaction Customers: These customers display less loyalty or commitment

to a particular supplier and can easily switch part or all of the purchases from
one vendor to another.
Value Drivers – Collaborative
Relationships
Measuring Customer Profitability
 Activity-based Costing (ABC) illuminates exactly what activities are
associated with serving a particular customer and how these activities are
linked to revenues and the consumption of resources.( e.g Sourcing of DFA ,
Slag and its moisture content & Blain consistency)

 Unlocking Customer Profitability: By accurately tracing costs to individual

customers, managers are better equipped to diagnose problems and take
appropriate action.

✓ Tracking Customer’s Direct Costs which are influenced by the Seller’s

Products ( Product Costs & Labour Cost)
✓ Tracking Customers Variable Cost ( Transportation, Power consumption )

 Once a firm implements an ABC approach and plots cumulative profitability

against customers, a striking portrait emerges that is often referred to as the
whale curve.
The Whale Curve….
Characteristics of High vs Low
(Cost 2 Serve)
Identify Profitable Customer &
Organisational Synergy
 Managing High- and Low-Cost-to-Serve Customers

• Look Inside First : Organization’s appetite for serving a high cost

customer or possibility of converting to a Low Cost Serving Option

• A Sharper Profit Lens

• The net margin approach i.e the net price, after all
discounts, minus manufacturing costs and also subject it to the
costs of Customer acquisition , serving the customer,
including order-related costs plus the customer-specific
marketing, technical, and administrative expenses.
• Identify Profitable Customers
Customer Profitability
Measuring Customer Profitability

 Managing Unprofitable Customers

• The most challenging set of customers for marketing managers is found in

the lower right-hand corner : low margins and high cost-to-serve.
➢ Action Plan : A) Reduce Cost of Activities associated with serving the
customer
B) Develop Customer understanding to reduce avoidable
costs i.e
small order qty vs Bulk Orders ( size of orders)
C) Improving TAT for transport vehicles

 Firing Customers
• What should we do with those unprofitable customers that remain in the
high-cost-to-serve quadrant in spite of efforts > Shift to High Volume &
High Cost or Low Volume with lowering cost
When is it time to fire the Customer ?
❑ Customer is physically & mentally abusive which brings down sales
person’s moral
❑ Dishonest Customer
❑ Unreasonable Demands
❑ Lacks commitments to pay
❑ Create repetitive Disputes on Invoices & other small issues
❑ Constantly changes the Purchase Agreements
❑ Does not follow seller’s advice & blames seller for anything going
wrong
❑ Constantly playing you off Competition
❑ Poor reputation of customer to be associated with
Loyalty & Customer Profitability
 Four Distinct Type of Customers exists while we examine Loyalty & Customer Profitability

 True friends (high loyalty and high profitability) are the firm’s most valuable customer assets.
They are extremely satisfied with the firm’s offerings, buy consistently over time, and offer the
highest profit potential. They should be managed with special care.

 Butterflies (low loyalty and high profitability) are profitable but they enjoy flitting around to find
the best prices and avoid building a stable relationship with any seller. To manage this type of
customer, the firm should seek ways to lower the cost-to-serve and be willing to abandon the
relationships.

 Barnacles (high loyalty and low profitability) are long-term customers but do not purchase enough
to generate a satisfactory return on investment. However, these customers can become profitable if
properly managed. For example, if the customer is also buying the same or similar items from a
competitor, specific up-selling and cross-selling can be done to boost profits. However, if cash flow
is their problem, marketing resources should be diverted to Butterflies.

 Strangers (low loyalty and low profitability) represent a poor fit with the company’s products and
services. The key strategy is to identify these customers early and refrain from making marketing
investments.
Loyalty & Customer Profitability Matrix

Hi- Loyalty/Low High Loyalty/High

Profitability(BARNACLES) Profitability(TRUE FRIENDS)

Loyalty- Profitabilty
Matrix

Low Loyalty/Low Low Loyalty/High

Profitability( STRANGERS) Profitabilty(BUTTERFLIES)
Customer Relationship Management
 Customer relationship management (CRM) is a cross-functional process for
achieving
• a continuing dialogue with customers
• across all their contact and access points with
• personalized treatment of the most valuable customers
• to ensure customer retention and the effectiveness of marketing initiatives.

 To meet this challenging requirements, Organizations are investing in CRM

systems – Enterprise Software applications in SAP/ERP to integrate Sales,
Marketing , Customer Service Information , Logistics & Supply Chain etc.

 CRM systems synthesizes informations from all “touch points”of company

 CRM software can help only after a customer strategy has been designed &
executed
Development of Customer Strategy

 The key to a successful CRM implementation is the robust Customer strategy

which can be broadly categorized under following 5 areas :

❑ AQUIRING RIGHT CUSTOMERS

❑ RIGHT VALUE PROPOSITION
❑ DESIGNING THE SOPS & PROCESSES
❑ EMPLOYEE MOTIVATION
❑ CUSTOMER RETENTION
Cloud Based CRM - Salesforce
CRM- Sales Force

 Popularly known as the world’s number one customer relationship

management (CRM) platform – Salesforce
 Entirely cloud-based, with standalone applications for sales, customer service
and marketing
 Salesforce is widely used by modern enterprises to simplify business
processes, secure customer data, generate sales opportunities, oversee
marketing campaigns and interact with customers through every stage of
their journey.
 Salesforce Offerings
 Sales Cloud : A sales team can perform as strong as the database that
supports it. Sales Cloud helps to monitor all facets of the sales process, from
lead generation to the use of the data for potential action. Users can benefit
from a full 360-degree view of their customers as well as make informed sales
decisions based on the activity, transaction history, notes shared by other
team members and insights obtained from social media.
 Salesforce CPQ : Salesforce CPQ is a dedicated sales tool for businesses to
provide specific pricing for any product configuration scenario. It assists sales
representatives to quickly and reliably quote product pricing. Besides, it also
enables customizations, discounts, quantities and several optional features
related to the product.
 Service Cloud: Modern enterprises desire instant solutions to their issues, the
reason why Service Cloud allows customers to create self-service customer
service portals. This further facilitates quick and productive customer
interactions to manage credibility through online brand presence. Besides, it
encourages direct communication with customers, be it requests or
complaints, both get registered and responded immediately. Service Cloud
also helps to minimize the handling time of every event and proposes
automated response workflows.
Salesforce Offerings ….

 Marketing Cloud : Salesforce’s Marketing Cloud creates and tracks consumer

journeys. It analyzes individual consumer profiles and suggests how to turn
the customer interaction into a purchase through social message, mail, or
interactive piece of content.
 Field Service Lightning : It is a Service Cloud extension that gives a holistic
view of workforce management. For instance, it assists a field service
technician with where he is now, where to show up, what resources are
available, and more. Aims to improve the efficiency of field service
operations using a versatile field service approach, both on and offline. From
generating work orders for field service operations, refining schedules and
intelligently assigning tasks, it provides everything a field service technician
may need.
 Analytics Cloud : The Analytics Cloud provides an enterprise with a business
intelligence platform to work with massive data sets, create graphs, charts
and other data pictorial representations. It can be optimized and integrated
with other Salesforce clouds to leverage mobile access and data visualization.
CRM Construct
 Maintain detailed customer profiles so that brands can identify their loyal
customers and market more effectively.
 Connect thousands of employees across the organizations, locations and time
zones for a complete customer success journey.
 Personalize emails to users, use dashboards to get real-time status on their
opinions across different regions.
 View and update data, co-ordinate with clients easily and find effective
community resources.
 Deliver unified experiences to your customers and make them happy.
 Manage multiple geographies and several business functions to connect
people and information.
 Run a single layer of data management throughout the organization for fast
and efficient business operations.
 Deliver, design and deploy critical cloud applications for better stability and
cost-effective scalability.
Acquiring the Right Customers

 Customer portfolio management

• the process of creating value across a firm’s customer
relationships—from transactional to collaborative—with an
emphasis on balancing the customer’s desired level of relationship
against the profitability of doing so

 Value
• represents a tradeoff in the customer’s mind between total
customer value (i.e., product value, service value, personnel
value, and image value) and total customer cost (i.e., monetary
cost, time cost, energy cost, and psychic cost
Crafting the Right Value Proposition
 Value proposition : Represents the products, services, ideas, and solutions
that a business marketer offers to advance the performance goals of the
customer organization
 The Bandwidth of Strategies
✓ Buyer-Seller Relationship strategy in the Industry could be specific to
Industry type & could be followed
 Flaring Out by Unbundling
✓ Customers desirous of unbundling & interested more with Transactional
Approch
 Flaring Out with Augmentation
✓ Collaborative offering with augmented product & enriched values i.e cost
reduction, committed delivery schedules, technical assistance etc.
 Creating Flexible Service Offerings
✓ Cusomized Offerings
Instituting the Best Processes
 Best Practices at IBM
• To ensure consistent strategy execution, IBM identifies three
customer-contact roles for each of its accounts, specifies desired
measurable actions for each role, and monitors the customer’s
degree of satisfaction with each role.

 Research suggests that the performance attributes that influence the

customer satisfaction of business buyers include
• The responsiveness of the supplier in meeting the firm’s needs
• Product quality
• A broad product line
• Delivery reliability
• Knowledgeable sales and service personnel
Motivated Employees : Service – Profit
Chain
Learning to Retain Customers
“Cost of Servicing a long-standing customer is often far lesser
than the cost of acquiring a new customer”

 Business marketers earn customer loyalty by providing superior

value that ensures high satisfaction and by nurturing trust and
mutual commitments.
• Developing a Customer Reference Program : Video Uploads

• Pursuing Growth from Existing Customers: Estimate Current

share of wallet- opportunities to increase it-Profitability (Win-Win)

• Evaluating Relationships : Matching of Relationship approach :

Transaction Level or Collaborative expectations
Why Customers Defect ?
Competitive Environment - CRM
Relationship Marketing Success

 Relationship marketing Activities

• represent dedicated relationship marketing programs, developed and implemented
to build strong relational bonds
 Drivers of Relationship Marketing Effectiveness & influence on Seller’s
Performance
I. Relationship Quality
II. Relationship Breadth
III. Relationship Composition
Drivers of Relationship Marketing
Effectiveness

 Relationship quality
• represents a high-caliber relational bond with an exchange partner
that captures a number of interaction characteristics such as
commitment and trust
 Relationship breadth
• represents the number of interpersonal ties that a firm has with an
exchange partner
 Relationship composition
• centers on the decision-making capability of relational contacts at
the customer firm; a contact portfolio that includes high-level
decision makers increase a seller’s ability to effect change in
customer organizations
Drivers of Relationship Marketing
Effectiveness
 Relationship strength
• reflects the ability of a relationship to withstand stress and/or conflict, such that
multiple, high-quality relational bonds result in strong, resilient relationships
 Relationship efficacy
• captures the ability of an interfirm relationship to achieve desired objectives
Relationship Marketing (RM) Programs

 Social RM programs use social engagements or frequent, customized

communication to personalize the relationship and highlight the customer’s
special status.
 Structural RM programs are designed to increase productivity and/or
efficiency for customers through targeted investments that customers would
not likely make themselves.
 Financial RM programs provide economic benefits, such as special discounts,
free shipping, or extended payment terms, to increase customer loyalty.
Because competitors can readily match the economic incentives, the
advantages tend to be unsustainable.
Financial Impact of RM Programs

 Do RM programs pay off? They are measured in the return on investment

(ROI).
 Social RM investments have a direct and significant (approximately 180
percent) impact on profit.
 The return on structural RM investment is approximately 120 percent for
those customers who receive frequent contact from the seller.
 Financial RM programs generally fail to generate positive economic returns.
Targeting RM Programs & Its Limitations

 Relationship orientation (RO)

• represents the customer’s desire to engage in strong relationships with a current or
potential supplier
 Allocating RM Resources
• Research demonstrates that the returns on RM investments improve if business
marketers are able to target customers on the basis of their RO rather than on size.
 Limitation of RM Programs :
❖ Customers not receiving “White Glove Treatment”- generates negativity with
others
❖ Changed values of customer business may push them down on RM
❖ Privacy Issues
❖ “Red Lining”Business Allignments – can have adverse effect
Thank You