Customer-Relationship-Management.pdf

CUSTOMER RELATIONSHIP MANMAGEMENT

UNIT - 1

1. INTRODUCTION

2. CUSTOMER LOYALTY

3. SUCCESS FACTORS

4. THREE LEVELS OF SERVICE

5. SERVICE – LEVEL AGREEMENTS

CUSTOMER RELATIONSHIP MANMAGEMENT

LEARNING ASPECTS

Evaluation of CRM

Schools of thought in CRM

Benefits of CRM

Customer loyalty

Success factors

Service levels

Service level agreements

1. INTRODUCTION

EVALUATION OF CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management (CRM) is to create a competitive advantage by being

the best at understanding, communicating, delivering, and developing existing customer

relationships, in addition to creating and keeping new customers. It has emerged as one of

the largest management buzzword. Popularised by the business press and marketed by the

aggressive CRM vendors as a panacea for all the ills facing the firms and managers, it

means different things to different people. CRM, for some, means one to one marketing

while for others a call centre. Some call database marketing as CRM. There are many

others who refer to technology solutions as CRM. If so, what is CRM?

Merchants and traders have been practicing customer relationship for centuries. Their

business was built on trust. They could customize the products and all aspects of delivery

and payment to suit the requirements of their customers. They paid personal attention to

their customers, knew details regarding their customers tastes and preferences, and had a

personal rapport with most of them. In many cases, the interaction transcended the

commercial transaction and involved social interactions. Even today, this kind of a

relationship exists between customers and retailers, craftsmen, artisans – essentially in

markets that are traditional, small and classified as pre-industries markets.

These relationship oriented practices have changed due to industrial revolution.. Businesses

adopted mass production, mass communication and mass distribution to achieve economics

of scale. Manufactures started focusing on manufacturing and efficient operations to cut

costs. Intermediaries like distributors, wholesalers and retailers took on the responsibilities

of warehousing, transportation, distribution and sale to final customers. This resulted in

greater efficiencies and lower costs to manufacturers but brought in many layers between

them and the customers. The resulting gap reduced direct contacts and had a negative

impact on their relationships.

The post-industrial era saw the re-emergence of relationship practices. Marketing

academicians.

(a) Rapid advances in technology,

(b) Intensive competition in most markets,

High

Relationship

Orientation

Low

Pre-Industrial Era Industrial Era Information era

(Relationship (Product Centric) (Relationship

Centric-Small Scale) Centric-Large Scale)

Figure 1.1 The Evolution of Relationship Orientation

(d) Adoption of total quality management programs

Technological Advancement

More information, communication and production technologies have helped marketers

come closer to their customers. Firms operating in diverse sectors ranging from packaged

goods to services started using these technologies to know their customers, learn more

about them, and then build stronger bonds with them through frequent interactions.

Marketers could gain knowledge about customers, which helped them respond to their

needs through manufacturing, delivery, and customer service. Technology also enabled

ordering and product-use related services.

Though the emergence of CRM in recent times coincided with the information age, one

must remember that technology is just an enabler. Technology enabled marketers overcome

several long felt shortcomings of mass marketing. Some of these included:

- Inefficiencies of mass marketing: 1980s and early 1990s witnessed some of the

most radical business transformations that resulted in cost reductions in almost all

functional departments except marketing. Manufacturing and related operations

costs were reduced through business process reengineering, human resource costs

were reduced through outsourcing, restructuring and layoffs, financial costs were

reduced through financial reengineering but marketing costs kept increasing due to

increased competition and product parity in virtually every industry.

- Lack of fast, effective and interactive models of customer contact, feedback and

information.

- Lack of consolidated information about customer interactions, purchase behavior

and future potential.

Intensive Competition

In competitive markets, specially the ones that were maturing and witnessing slow or no

growth, marketers found it more profitable to focus on their existing customers. Studies

have shown that it costs up to 10-12 times more to attract a new customer than to retain an

existing customer. Marketers have now started focusing on the lifetime value of customers.

They are moving away from just trying to sell their products to understanding, customers

needs and wants and then satisfying their needs. This has led to a relationship orientation

which creates opportunities to cross sell products and services over the lifetime of the

customer.

Growing Importance of the Service Sector

The service sector contributes to over two-third of the GDP of most advanced economies.

In India, the services sector contributes to over 50 per cent of the economy. One of the

characteristics of the service industries is the direct interaction between the marketer and

the buyer. In services, the provider is usually involved in the production as well as delivery

directly. For example, professional service providers like a doctor or consultant are directly

involved in production as well as delivery of their services. Similarly, the customers are

directly involved in production in the purchase and consumption of these services. These

direct contacts create opportunities for better understanding, a better appreciation of needs

as well as constraints and emotional bonding all of which facilitate relationship building.

Therefore it should come as no surprise when you see the service firms pioneering many of

the customer relationship initiatives. Firms operating in the financial services, hospitality

business, telecom, and airlines are the early adopters and extensive users of CRM practices.

Adoption of total Quality Management (TQM) Programmes

Total quality management programmes help companies offer quality products and services

to customers at the lowest prices. To enable this value proposition, organizations needed to

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