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Understanding CRM and Customer Loyalty

CRM stands for Customer Relationship Management. It is a business strategy that uses technology to manage a company's interactions with current and potential customers. It allows companies to better understand customer needs and provide personalized customer service. The document provides examples of companies like McDonald's, British Airways, Uber, Coca-Cola, and Unilever that use CRM solutions from vendors like Astute Solutions, Teradata, Salesforce, and SAP to improve customer insights, communications, and service.

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sindhu palanisamy
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16 views30 pages

Understanding CRM and Customer Loyalty

CRM stands for Customer Relationship Management. It is a business strategy that uses technology to manage a company's interactions with current and potential customers. It allows companies to better understand customer needs and provide personalized customer service. The document provides examples of companies like McDonald's, British Airways, Uber, Coca-Cola, and Unilever that use CRM solutions from vendors like Astute Solutions, Teradata, Salesforce, and SAP to improve customer insights, communications, and service.

Uploaded by

sindhu palanisamy
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Module 5 - suggested content

What is CRM?
What is CRM?

“ CRM is the core business strategy that integrates internal


processes and functions, and external networks, to create and
deliver value to targeted customers at a profit. It is grounded
on high quality customer data and enabled by information
“
technology
Some examples of companies using CRM solution providers

McDonald’s partners with Astute Solutions, allowing the restaurant chain greater insights
into consumer feedback and satisfaction levels

BA has been using a CRM solution called Teradata since 2002. It allows the airline to keep
track of all the customers on its books, and re-engage them with offers and deals

Salesforce helps Uber extract data from people engaging with its brand on social media

With Salesforce, Coca-Cola Germany’s team can easily log issues with customers or suppliers,
and then respond by dispatching field service technicians in real time

With the help of SAP CRM, Unilever improved its call centre capabilities, and boosted the
productivity of its consumer advisory representatives

Source: [Link] 4
Customer Lifetime Value (CLTV / CLV)
Customer Lifetime Value (CLTV / CLV)

 Customer should not be viewed as a set of independent transactions…..but as a LIFETIME


revenue stream

 CLTV or CLV (Customer Lifetime Value) is a measure for profit generation for a company

 It is the present day value of all net margins earned from a relationship with a customer
or a customer segment

 It focuses on current and future estimates. And does not consider the past

 Major strategic goal of many companies today is to identify customers that have the highest
CLTV potential
Customer Lifetime Value (CLTV / CLV)

Profit margins tend to grow and accelerate over time. WHY?


Defining customer loyalty
Defining customer loyalty

 Loyalty is EMOTION ! It is not a rating


 Satisfaction is a rating ! It is not an emotion

 Usually resulting from series of


positive experiences that have
occurred over period of time
Defining customer loyalty

Loyalty occurs when an individual has a interest in maintaining a close relationship, usually
resulting from series of positive experiences that have occurred over period of time

Tangible Intangible
experiences experiences

Product quality, Brand Image


Ease of use, Reliability, Effective Respectful communication
service Self Expressive and Emotional
benefits

Product Brand
The relationship between customer satisfaction and Loyalty (Tepeci, 1999)

Loyalty

Highly Somewhat Natural Somewhat Highly


dissatisfied dissatisfied satisfied satisfied

Satisfaction
Relationship between
Satisfaction
Loyalty
and
Business performance
Satisfaction, Loyalty and Business performance

Satisfaction-Profit Chain

Customer Business
Customer Loyalty
Satisfaction Performance

• Understand • Behavioral Loyalty • Revenue growth


Customer • Attitudinal Loyalty • Share of customer
Requirements • Customer Tenure
• Meet customer
expectations
• Deliver Customer
Value
Satisfaction, Loyalty and Business performance

Customer Customer satisfaction is the customer’s fulfillment response to a


Satisfaction customer experience, or some part thereof.

Satisfaction is a ‘pleasurable’ response Vs Dissatisfaction is ‘unpleasurable’ response

Satisfaction / Dissatisfaction evaluation can be directed at any or all elements of customer experience
- Product
- Service
- Process
- any other components of customer experience

Expectations-Disconfirmation Model :
- Positive confirmation when expectations are met … Happy
- Negative disconfirmation when expectations are underperformed…Unhappy
Satisfaction, Loyalty and Business performance

Customer Loyalty Two approaches in defining and measuring loyalty.

Behavioral Loyalty Attitudinal Loyalty

Measured by customer Measured by reference to attitudes


purchasing behavior - beliefs, feelings and purchasing
- Patronage in buying intention
- Repeat buying

RFM measure of behavioral loyalty

R = time elapsed since last buying


F = number of purchases in a given time period
M = monetary value of purchases
Satisfaction, Loyalty and Business performance

Business
Performance

Customer Linked KPIs in a CRM focused Company can be…

1 Customer Satisfaction Levels (CSAT)

2 Customer Retention Rates (or Churn rates)

3 Customer Acquisition Costs

4 Number of new customers required (Acquisitions)

5 Customer Tenure

6 Customer Loyalty (Attitudinal and Behavioral)

7 Share of Wallet (Share of Customer)


What is
Customer
Lifecycle?
What is Customer Lifecycle?

= Customer lifecycle (CLC) = the customer lifecycle describes the various stages a consumer goes through
before, during and after they complete a transaction
What is
Customer
Acquisition?
What is Customer Lifecycle?

1 Acquiring new customers ? Which prospects will be targeted?

Who is a new customer?

New to the product category New to the company


- Customers who identified new - Customers who are won from
need OR competition
- Customers who have found a
new category of solution for
existing need

In matured stage of industry : Who would you focus on for acquisitions?


= New-to-company customers
What is
Customer
Retention?
What is Customer Lifecycle?

2 Retaining existing customers


Types of Customer retention strategies

Locking customers by
Positive retention rewarding them for
strategies remaining in
relationship

Negative retention Locking customers by - imposing high switching costs


penalising them to - Retained customers spread
strategies
avoid shifting negative word-of-mouth
What is Customer Lifecycle?

2 Retaining existing customers


Types of Customer retention strategies

1 Creating customer delight / pleasantly surprising customers


Positive retention CD = P>E
strategies CD=Cust Delight, P=Perceived customer experience, E=Customer expectations

2 Adding customer-perceived value


Loyalty schemes, Customer clubs, Sales promotion (Vouchers, Rebates, Free
premiums, Collection schemes,

3 Creating social and structural bonds


Social bonding = cultural bonding, geographical bonding etc
Structural bonding = suppliers and customers commit resources to relationship.
(Financial / legal / Knowledge based / technological etc)

4 Building customer engagement


Customer engagement
Customer Co-creation
What is Customer Lifecycle?

2 Retaining existing customers


Types of Customer retention strategies

1 Creating customer delight / pleasantly surprising customers


Positive retention CD = P>E
strategies CD=Cust Delight, P=Perceived customer experience, E=Customer expectations

3 Quality forms

Basic Qualities Linear Qualities Attractive Qualities


(Basic Needs) (Performance Needs) (Delighters / Excitement)
Kano’s customer delight model
Customer
P>E
delight High
High
High
l
ona
ti
cep
Ex

Level of achievement
Low

High

ate
equ
d
I na
g
Low is s
in
Low
M

Low Customer
P<E dissatisfaction

Basic Qualities Linear Qualities Attractive Qualities


(Basic Needs) (Performance Needs) (Delighters / Excitement)
What is Customer Lifecycle?

2 Retaining existing customers

Measure of Customer Loyalty

+ve A Customer Satisfaction / CSAT ( Ex: Scale 1-7, 1-5)


= Score is average of ratings the customers have given for a product /service

+ve or -ve B Net Promoter Score (NPS)


= % of promoters minus % of detractors

+ve C Customer Effort Score (CES)


= is average of scores the customers have given for how much they struggle
with the brand to get expected service
What is Customer Lifecycle?

2 Retaining existing customers

Measure of Customer Loyalty

SOW (Share of Wallet) or Share of


Customer is – Company’s share of
chosen customers’ spending
Developing
Customer Value
What is Customer Lifecycle?
3 Developing customer value Customer development
= is the process of growing the value of retained customers

Customer development strategies

Up-selling Cross-selling

Selling higher priced Selling additional


or higher margin products to existing
products to existing customers
customers

Big Challenge is: Customers don’t respond positively to these methods of up-selling and cross-selling

Common questions

Powered by AI

Challenges include customer resistance due to perceived aggression or misalignment with their needs. Successfully implementing these strategies requires understanding customer preferences and timing, ensuring offers are seen as beneficial upgrades rather than intrusive sales attempts .

Companies can use CRM data to personalize customer interactions, tailor marketing strategies, and offer timely, relevant promotions. For instance, Salesforce enables Uber to extract actionable insights from social media interactions, enhancing engagement and driving better business outcomes .

Positive retention strategies, such as creating customer delight and adding perceived value, foster loyalty by rewarding customers for their continued relationship. Negative strategies, like imposing high switching costs, aim to prevent defection but can result in negative word-of-mouth, impacting long-term relationships adversely .

Customer satisfaction influences both behavioral and attitudinal loyalty, where behavioral loyalty is measured by repeat purchases and patronage, and attitudinal loyalty is measured by the customer's beliefs, feelings, and purchase intentions. CRM strategies leverage these relationships to enhance business performance through improved satisfaction and loyalty metrics .

NPS measures customer loyalty by gauging their likelihood to recommend the company, reflecting overall satisfaction and advocacy. CES, on the other hand, evaluates ease of customer interaction, highlighting friction points. While NPS predicts long-term loyalty through advocacy, CES identifies short-term improvement areas to enhance customer experiences .

The Kano model categorizes satisfaction into basic, linear, and attractive qualities, where basic needs prevent dissatisfaction, linear needs fulfill customer expectations, and attractive qualities create delight by exceeding expectations, thereby enhancing loyalty .

CLTV measures the profit generation from a customer's lifetime relationship, considering both current and future net margins, unlike viewing customers as independent transactions which only focus on individual sales without considering long-term value .

CRM integrates internal processes and functions with external networks to create and deliver value to targeted customers profitably. Technology plays a crucial role by enabling the processing of high-quality customer data, allowing businesses to gain insights into consumer feedback and satisfaction levels, as seen in McDonald's partnership with Astute Solutions .

The Expectations-Disconfirmation Model evaluates satisfaction by comparing perceived experiences against set expectations. Positive disconfirmation, when experiences exceed expectations, results in customer happiness, whereas negative disconfirmation, when experiences fall short, leads to unhappiness .

Customer satisfaction is the fulfillment response to an experience, leading to pleasurable feelings, while customer loyalty is an emotional commitment resulting from positive experiences over time. Satisfaction typically impacts immediate post-purchase behavior, whereas loyalty influences repeat business and long-term revenue growth .

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