customerrelationshipmanagement-121122012156-phpapp02
TRANSCRIPT
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Unit 14 Customer Relationship Management
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Contents
Introduction
Relationship marketing vs. relationship management
Definitions of customer relationship management
Forms of relationship management
Managing customer loyalty and development Reasons behind losing customers by organizations
Significance of customer relationship management
Social actions affecting buyer-seller relationships
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Introduction In marketing, it is often said that retaining customer is more important than
acquiring one. Organizations use communication tools to make the consumer aware about their
products and brands.
It uses supply chain and human resources to sell its products.
All these have a cost to the company and in this competitive world organizations
want to reduce cost. For this organizations develop a database which helps in creating loyalty programs.
Many Indian companies like Infosys, Wipro and others started offering CRM
software to companies.
The benefits of CRM software are quicker, better quality, and timely services to the
customers.
This increases the word of mouth communications and reduces the cost of mass
media.
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Learning ObjectivesAfter studying this unit, you will be able to
Explain the meaning, need and relevance of customer relationship
management.
Mention the forms of relationship management.
Cite the reasons for losing customers by organizations.
Bring out the significance of customer relationship management.
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Relationship Marketing Vs. Relationship Management
The relationship marketing approach considers customers as part of the business
and aims at building a long term and never-ending relationship with them.
The focus of relationship marketing approach is on developing hard core loyal
customers and retaining them forever.
The relationship marketing approach has slowly taken the form of customer
relationship management.
Relationship marketing focuses only on the marketing function of the organization.
Customer relationship management focuses on customers and the entire functions
connected with value creation and delivery chain of the organization.
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CRM is not a new concept but
a very old practice, which has
grown because of the benefits
it offers in the present
marketing scenario. CRM today is a discipline and
also a set of software and
technology which automates
and improves the business
process associated with
managing customer
relationships in the area of
sales, marketing, customer
service and support.
CRM helps companies
understand, start and developlong-term relationships with
clients as well as help in
retaining current customers.
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Forms of Relationship ManagementThe 10 different forms of relationship marketing are:
1. The partnership involved in relational exchanges between manufacturers
and their external goods suppliers.
2. Relational exchanges between service providers, as between advertising
or marketing research agencies and their clients.
3. Strategic alliances between firms and their competitors, as in technology
alliances; co-marketing alliances and global strategic alliance.
4. Alliances between a firm and non-profit organizations, as in public-
purpose partnerships.
5. Partnerships for joint research and development, as between firms and
local, state, or national governments.
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6. Long-term exchanges between firms and customers, particularly in the services
marketing area.
7. Relational exchanges of working partnerships as in channels of distribution.
8. Exchanges involving functional departments within a firm.
9. Exchanges between a firm and its employees, as in internal marketing.
10. Within firm relational exchanges involving such business units as subsidiaries,
divisions or strategic business units.
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Managing Customer Loyalty and Development
Managing customer development is
one of the important aspects of
relationship marketing.
The focus is on two things customer
catching and customer keeping.
Customer catching is the process of
attracting new customers (inviting new
blood), while customer keeping is the
process of retaining the existing ones
(encouraging old blood).
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Customer Development Process
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1. Suspect: Suspect is everyone who might conceivably buy the product or service.
2. Prospects: Prospects are those people who have a strong potential interest in the
product and the ability to pay for it. The company rejects the disqualified
prospects because they have poor credit or would be unprofitable.3. First time customers: The company wants to convert the qualified prospects into
first time customers.
4. Repeat customers:The company wants to convert satisfied first time customers
into repeat customers. First time and repeat customers may also buy from the
competitors.
5. Clients: The company then tries to convert repeat customers into clients. Clients
are those people who buy only from the company.
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6. Advocates: The next step is to convert the
clients into advocates. Advocates are those
people who speak good about the companyand encourage others to buy from it.
7. Partners: The ultimate goal of the company is
to convert advocates into partners. After
reaching this stage, the customer and the
company work actively together.
Some customers may become inactive or may
drop out due to many reasons leading to end of
the relationship. The challenge is to re-activate
dissatisfied customers through customer win back
strategies
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4. Benefit related reasons: The customers may be attracted by greater
benefits offered by the competitors. Such benefits may be more
attracting and cause customers to change brand.
5. Competitor related reasons: Technological advancement, attractive
offers, value added services, etc., offered by competitors may also
encourage customers towards brand switching.
6. Personal reasons: The personal reasons for brand switch over may be
The customer has moved away from the market area where thebrand is sold.
Role changes in life cycle may lead to changes in brand preference.
Anger, disgust, distress developed during the process of product
delivery.
Sentimental reasons. Influence of other members of the family.
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Significance of Customer Relationship Management
Reduction in customer recruitment cost.
Generation of more and more loyal customers.
Expansion of customer base.
Reduction in advertisement and other sales promotion expenses.
Increase in the number of profitable customers.
Easy introduction of new products.
Easy business expansion possibilities.
Increase in customer partnering.
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Traditional Organizational Chart Vs Modern Customer
Oriented Company Organization Chart
Top
Manage
ment
MiddleManagement
FrontLine people
Customers
Customers
Front Line people
Middle
management
Top
Manag
ement
Traditional Chart Modern Chart
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Soft and Hard Versions of Relationship Marketing
Soft version of relationship marketing suggests humanistic
relationship development,whereas the hard version reflects
a utilitarianinstrumentalism.
The soft version focuses on the term relationship,thus laying
importance on relationship management. It strongly
advocates that all management is basically relationship
management and all managers are relationship managers. Itfocuses on developmental humanism as a foundation to
build and develop long lasting relationships in marketing
exchanges.
On the other hand, the hard version stresses on the idea ofmarketing, that is something to be used unemotionally and
in a formally sensible manner.
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Social Actions Affecting Buyer-Seller Relationships
Good things
Initiate positive phone calls
Make recommendations
Candor (frankness) inlanguage
Use we problem solving
language
Get to problems Use jargon or shorthand
Accept responsibility
Plan the future
Bad things
Make only callbacks
Make justifications
Accommodative language Use legal language
Only respond to problems
Use long-winded
communications Shift blame
Rehash (repeat) the past
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