CUSTOMER

RELATIONSHIP
MANAGEMENT
PRESENTED BY
VISHAKH.S
VIVEK
GOPAN
NITIN NAIR
ZAKARIYA. K

 Customer relationship
management(CRM) is a system
formanaginga company's
interactions with current and future
customers. It often involves using
technology to organize, automate
and synchronize, sales, marketing,
customerservice and technical
support.

Different Perspectives On BuyerSeller Relationship

The Economics Of Loyalty

Why loyal customers are more
profitable ?
Acquisition Cost
Base Profit
Revenue Growth
Operating Costs
Referrals
Price premium.

A FRAMEWORK FOR
CUSTOMER RELATIONSHIP
MANAGEMENT

 Means different things to different people

May be salesforce contact software like the
ones sold by salesforce.com
May be telephone call centers for contact
management
May be loyalty programs

CUSTOMER RELATIONSHIP
MANAGEMENT MODEL
Many companies
use CRM as a key
source of
competitive
advantage
E.g.: UPS

1
.
2
.
3
.
4
.
5
.
6
.

CREATE A DATABASE
ANALYSE THE
DATABASE
CUSTOMER
SELECTION
CUSTOMER
TARGETING
RELATIONSHIP
MARKETING
PRIVACY ISSUES
METRICS

CREATING THE DATABASE

Customer Information File (CIF)
Repository of information about customers
Basis for identifying and targeting current and potential
customers
Asses value to the firm of each customer & develop
relationship programs customized in content and intensity
CUSTOM
ER
1.
2.
.
.
.

CHARAC
TERISTICS

CUSTOMER
INFORMATION
PURCHA
CONTAC
RESPON FILE
VALUE
SE
TS
SE
HISTORY

5 AREAS OF CONTENT IN CIF

Important 3rd
dimension
Time
CIF has to
contain
information on
these
dimensions
over time
Identify
customers
becoming
better and
worse

Basic customer
description
Purchase
history
Contact history
Response
information
The value of
the customer

GETTING MORE CUSTOMER

INTERACTION
Customer
Interaction
DIRECT
INDIRECT

Interaction
Frequency

Banks
HIG Telecom
Retail
H

Personal
computers
LO Internet
W infrastruct
ure

Airlines
Packaged
goods
Drugs

Upper left
quadrant:
relatively
easy to
develop CIF

Furniture
Autos

2 quadrants
on the right
have to work
harder to
collect
information

CIF key source of competitive advantage e.g.:

UPS

 Companies create special programs

and events
e.g.: Kellogg's EET & ERN
Management consultant firms host
free seminars in specialized topic
areas information about
prospective clients
Another challenge Multiple touch
points
Acxiom centralized database

ANALYZING THE DATABASE

Data mining segments, purchasing patterns,
trends etc.
LIFETIME CUSTOMER VALUE (LCV)
Purchase information + information about profit margin on
each product purchase
projected profit
implication of each customer or row in CIF.
Ultimate goal is to place a monetary value on each
customer and make resource allocation decisions

BERGER & NASR, 1998

Uses available purchase information in the CIF to calculate
each customers cumulative profitability in the past .

Customer Profitability = [(P C) - MC]

i

t
j
Where
k
k
t = the number of past and current rime periods
measured
j = the number of products purchased in a time period
k = the number of marketing tools used in a time period
P = Price
C = Cost
MC = cost of marketing tool

The formula can be used for purposes

other than computing profitability:
Increasing P & j by cross selling or upselling
Reducing market cost over time as customer
loyalty will increase
Increasing the number of time periods t that the
customer is purchasing.

Gupta & Lehmann, 2003

Margin multiple
= r/(1+i-r)
In this formula r is the retention rate
i is the discount rate
Discount
rate

10%

12%

14%

16%

60%

1.20

1.15

1.11

1.07

70%

1.75

1.67

1.59

1.52

80%

2.67

2.50

2.35

2.22

90%

4.50

4.09

3.75

3.46

Retention
Rate

LCV- CUSTOMER ACQUISITION COST

PERSPECTIVE
Customer Life Cycle Profit Pattern in the Credit Card Industry
150
100
50
0
-50
-100

Annual profit

10
AGE OF
ACCOUNT
( IN YEARS)

Profit acquisition cost = customer

value.
Take into account time value of
money
Gives an idea of how much we would
spend to retain a customer

Customer Selection
Customer Profitability Analysis can
be used to separate the customer
who provide long term value to the
firm.
80-20 rule
Helps in decision making:
Which customer to keep
How much money to spend on them

Customer Targeting
After selecting targeted customer
Direct Marketing approach often
referred to as 1 to 1 marketing.
Special promotion, prices, perks,
products and other offers are made
through telemarketing, direct mail
and personal sales calls

Relationship Marketing
Programs

Customer Satisfaction
Requirements of customer loyalty is
satisfaction.
Customer Satisfaction Model
Customer Satisfaction Scale
Customersat.com & Zoomerang.com are
customer satisfaction software sold via
web.

Customer Satisfaction
Model

Customer Satisfaction
Scales

Customer Service
Customer Satisfaction Customer
Service
Level of Customer Service delivered
is equivalent to product quality.
Have to go beyond expectation by
offering levels of customer services
that competitors cannot match.
Service Guarantees
Service Recovery

CUSTOMER LOYALTY

LOYALTY PROGRAMS
One of the Major trends in marketing
is the ubiquity of loyalty programs.
Ex: Frequent-flier programs.
Technology is changing the way.
Smart cards- Microprocessor built in
to them.

Several issues of Loyalty

Programs.
Making the reward too high.
Ubiquity.
What kind of loyal customers are you
actually getting?
Lack of inspiration.
Lack of communication with
customers.
Insufficient analysis of data.

When Loyalty programs seem to

work best
The programs support and is
consistent with the brand value
proposition.
The programs add value to the
product or service.
Lifetime customer value is high.

MASS CUSTOMIZATION
Customer retention and loyalty are
also being affected by a marketing
process called mass customization.
It imparts a feeling that the products
was made especially for the
customer.
Most of the attention on mass
customization has been in the
Manufacturing sector.
Ex: Dell online ordering system.

Four Different Approaches to Mass

Customization
Collaborative Customizers
Adaptive Customizers
Cosmetic Customizers
Transparent Customizers
Commonality: All realize that
customers are heterogeneous and
want different combination of
product features and benefits.

COMMUNITY BUILDING
The main challenge for marketing
managers is to create a sense of
affinity to their companies and
brands in their customers.
Share information between the
customers and the company.
Online communities offer real
opportunities.