Chapter 13
Customer Relationship Management
“What is a customer?
A customer is the most important visitor on our
premises.
He is not dependent on us, we are dependent
on him.
He is not an interruption on our work. He is the
purpose of it.
He is not an outsider on our business. He is a
part of it.
We are not doing a favor by serving him. He is
doing us a favor by giving us an opportunity
to do so. (Mahatma Gandhi , 1890)
Meaning of Customer Relationship
Management (CRM)
• A set of activities designed with the purpose of acquiring
new customers and retaining the old customers in a
business with profitability.
• CRM is a comprehensive strategy and process of acquiring,
retaining and partnering with selective customers to
create superior value for the company and the customer.
(Atul Parvatiyar and Jagdish Sheth)
Relevance of CRM in Corporate
Following trends have been observed worldwide:
• Customer is looking for better value now rather than brand
alone.
• The Internet has reduced the knowledge and information gap in
customers so many of them are very logical in their buying
approach.
Relevance of CRM in Corporate
• Products are globally competitive and focusing on more benefits
to the customers.
• Use of interactive communication technology (ICT) enabling the
companies to come out with innovative strategies to influence
the customers in the market.
Relevance of CRM in Corporate
• Customization of products in market by companies requires
continuous updating of customer database.
• Many companies are ensuring involvement of customers in
product development as a strategy which was not happening
earlier.
Evolution of Customer Relationship
Management
It can be described as below:
• Barter Age: Customers used to exchange the surplus
commodity for the other commodities amongst themselves as
per the requirement. This was the time when barter exchange
started. The parties were playing both the roles of buyer and
seller in the barter exchange system.
Evolution of Customer Relationship
Management
• Customized Product Age: This was the time when products
were developed as per the requirements of specific customers
and delivered personally to them in order to have direct
relationship with customers. The needs were identified during the
interaction between buyers and sellers and products were
modified as per the modified needs if required.
Evolution of Customer Relationship
Management
• Mass Production Age: The mass production was done with
lesser cost as the result of industrial revolution. The sellers were
offering the services to buyers across the geographical area.
Markets were spread widely so the producers and buyers were
separated. The feedback received from customer was not timely
and updated because of distancing difficulties.
Evolution of Customer Relationship
Management
• Customization Age: The use of technology was made by the
sellers to interact with customers and customize the solutions as
per the need of them. This helped the companies to develop one
on one relationship with the customers easily.
Customer Relationship Management
Process
Combination of 3 domains in
Customer Life Cycle Customer Life Cycle
• Reach + Acquisition =
Marketing Domain
• Conversion = Sales Domain
• Retention + Loyalty =
Customer Service Domain
Customer Relationship Management
Process
Combination of 3 domains in
CRM Process CRM Process
• Generate Brand Awareness +
Acquire Leads = Marketing Domain
• Convert Leads into Customers =
Sales Domain
• Provide Superior Support + Drive
Upsells and Referrals = Customer
Service Domain
Types of Customer Relationship
Management
The broader classification of CRM from strategic point of
view is:
(i)Proactive versus Reactive Customer Relationship
Management
(ii)Operational, Collaborative and Analytical Customer
Relationship Management.
Proactive versus Reactive Customer
Relationship Management
• Proactive CRM: A company anticipates the needs of customers
in advance and prepare their offers in such a manner that
customers feel it as best solution for their needs.
• Reactive CRM: is based on the company’s reaction to the made
by the customers or following some competitors CRM strategy to
influence the customer life cycle.
How to Shift from Reactive to
Proactive Customer Service in Business
• Develop customers feedback practices
• Tell the customers about mistakes before they find out
• Design customer loyalty programs and reward the loyal
customers with offers, contests, sweepstakes, discounts,
etc.
• Consider the thoughts expressed by customers online.
• Create FAQs and content answering all common questions
raised by the customers
Operational, Collaborative and Analytical
CRM
Operational CRM: It is also called front office CRM as it deals
with the areas where the customers come in direct touch with
the company and have interactions with the front line executives.
These points of interaction are known as customer touch
points. There are various types of customer touch points like:
• Face to face touch points
• Database driven touch points
• Mass Media touch points
Operational, Collaborative and
Analytical CRM
Collaborative CRM: When company is looking for two way
communication with the customers, interaction is made possible
with the use of multiple channels. Collaborative CRM is
integrating the activities of various functions of a company like
Marketing, Sales, Customer Service Support etc to enhance life
time value of customer and other stakeholders.
Operational, Collaborative and
Analytical CRM
Analytical CRM: The companies collect the data at the front
office and this data is analyzed and interpreted to know about
the customer activities and engagement pattern. This data is
correlated with the data which is already procured through data
warehousing and data mining. This cross functional data is used
for the purpose of developing the strategies for up selling and
cross-selling.
Benefits of Customer Relationship
Management
• Improvement in customer services
• Better customer satisfaction
• Better customer retention
• More sales due to up selling and cross-selling
• Developing new business
Benefits of Customer Relationship
Management
• Able to share and distribute the data
• Marketing the product effectively
• Better market intelligence
• Reduced cost of customer acquisition and retention
Benefits of Customer Relationship
Management
• Able to share and distribute the data
• Marketing the product effectively
• Better market intelligence
• Reduced cost of customer acquisition and retention
CRM Software benefits
• A centralized database across the sales organization
• Automate data entry
• Reminder to follow up with prospects
• Organized contact data
• Segmenting the customers
CRM Software benefits
• Create sales reports
• Automate forecasting for your sales performance
• Scaling the sales processes
• Facilitation of team communication
• Efficiency in administrative tasks
Limitations of Customer Relationship
Management
• Human Element
• Measurement parameters
• Poor CRM planning – no strategic framework
• Poor commitment of people involved in CRM usage
• Poor assessment of implementation costs, timeframes
Limitations of Customer Relationship
Management
• Poor orientation towards using information
• Lacking front and back-end integration
• No customer centricity
• Departmental politics stops the flow of sharing information
• No proper customer strategy and service design
• Underutilization of CRM tools