CUSTOMER

RELATIONSHIP

MANAGEMENT CRM: Is It Right For Your Company?

Ch. 1 – Commerce in the 21st Century

Judith W. Kincaid

Customer? • Oxford: A person of a specified kind with whom one

has to deal

• Webster’s: An individual usually having some specified

distinctive trait

• The one who is buying a product but it includes all

other individuals who influence (influencers) the

decision, directly visible or not;

• wife, son, daughter, toddlers and small kids, a close

friend or the informal/formal group the customer belongs

to or likes to be identified as member of that group

• In B2B, all members of buying committee or the

influencers like Finance Manager, Production Manager,

Buying Manager, CEO or a consultant

Loyalty?

• Oxford: A strong feeling of support or allegiance (commitment)

• Webster’s: A feeling of strong support for someone or something

• Customer loyalty is a behavior, built on positive experiences and value with a product, company or retailer. The behavior may not sometimes be supported by rational logic.

• Customer loyalty is the result of consistently positive emotional experience, physical attribute-based satisfaction and perceived value of an experience, which includes the product or services.

• Buying a specific brand

• Buying a product of a specific company, the new product may not be better than available alternatives

• Loyalty is when a customer is prepared to wait for few days to buy the specific product/brand and/or is prepared to travel a distance to buy the specific product

Customer Loyalty

Understanding the Background

• The Internal Situation

• The competitive advantage built on:

• Operational Excellence (best cost)

• Product Leadership (best product)

• Customer Intimacy (strong customer relationship)

• Focus to build one and keep other two at

reasonably acceptable level

Understanding the Background • The New (e)Marketplace

• “Brick and Mortar” to “Brick and Click” company. What has changed:

• Access: more information and at faster rate for the customer due to Internet

• Control: Opportunity to do business 24 hours due to 24/7 online

• Speed: Immediate response on internet, No physical visits, no waiting of sales rep response

• Globalization: Entire world opened as marketplace for everyone, no border restriction

• Automation: Many employees; administrators, coordinators, eliminated due to automated response through internet

Impact of (e)Marketing

Internet

Effects

Operational

Excellence

Product Leadership Customer Intimacy

Access Easy

comparison with

other products

and swap

Commoditization easy.

Leadership lost due to

information availability

to competitors

Providing human

contact

Control Always on 24/7 Broader choice, less

differentiation

Interaction preference

Speed Quick Process

expectations

Uniqueness for shorter

period/ copy able

Efficiency preferred

and not loyalty

Globalization Language

issues,

Localization

Localization of products Unknown language

and culture

Automation Process

disconnects

Distance from

customer needs

Loss of human

memory/connection

Loyalty in new Marketplace?

• Increase in Loyalty by 5%, increases profits from 18 to

125% (both B2C and B2B) ~ (Bain and Company)

• Loyalty due to positive experience has not changed with

internet and automation

• Negative experiences do reduce loyalty

• Reversing negative experience a strong way to ensure improved

loyalty ~ (Vevra, 1992)

• Internet has reduced human interaction so is the loyalty

• However use of information for better interaction with customers

can help improve loyalty

Loyalty and Operational Excellence

• Outsourcing to third party at lower costs

• Moving internal processes to internet

• Order management product delivery, product support and fulfillment

• Customers Expectations raised

• Comparison with competitors product easy

• Competitors can emulate (match, copy) your processes

• Any improved process is matched or improved by competition easily

• Not as quick as price slashing

• Counter Competitors by using knowledge only you have

• Respond to their needs and specific requirements in cost efficient manner

• Duplication by competitors of product and processes is possible but not the knowledge

• Deliver as per needs of customer at best possible price

Loyalty and Product Leadership

• Product differentiation harder to sustain

• Competitor can copy without heavy investment of time

and money

• Sustained advantage is lost

• Commoditization occurs

Commoditization & its impact

Commoditization

Lower Profits

Less R & D

Less differentiation

Less

Differentiation

Commoditization Lower Profits

Less R & D Budget

Loyalty and Customer Intimacy

• Internet

• No direct contact with customer/employee

• Historically humans managed relationship with customers

• Now no human interaction is involved due to internet

• Issue is to How to develop customer intimacy without

human interaction?

• We will learn how to do this in context of too few or

too many persons responsible for relationship