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Chapter 15
Customer Relationship Management (CRM)
   Learning Objectives

   Define CRM;
   Understand the importance of CRM;
   Explain the determinants of CRM and the key stages in its development;
   Discuss the main functions and various models of CRM;
   Explain the role of salespeople as relationship developers
   Discuss the management of customer relationships.
Chapter 15: Customer Relationship Management (CRM)


     What is Customer Relationship Management (CRM)?


  CRM is “the development and maintenance of mutually beneficial
  long-term relationships with strategically significant customers”
                                              (Buttle, 2000)


  CRM is “an IT enhanced value process, which identifies, develops,
  integrates and focuses the various competencies of the firm to the
  ‘voice’ of the customer in order to deliver long-term superior
  customer value, at a profit to well identified existing and potential
  customers”.
                                              (Plakoyiannaki and Tzokas, 2001)
Chapter 15: Customer Relationship Management (CRM)

  Understanding Customer Relationship Management (CRM)?

  CRM is a business philosophy based on upon individual customers
  and customised products and services supported by open lines
  of communication and feedback from the participating firms that
  mutually benefit both buying and selling organisations.

  The buying and selling firms enter into a “learning relationship”,
  with the customer being willing to collaborate with the seller and
  grow as a loyal customer. In return,, the seller works to maximize
  the value of the relationship for the customer’s benefit.

  In short, CRM provides selling organisations with the platform
  to obtain a competitive advantage by embracing customer needs
  and building value-driven long-term relationships.
Chapter 15: Customer Relationship Management (CRM)


                          Determinants of CRM

                                    Trust

 The willingness to rely on the ability, integrity, and motivation of
  one company to serve the needs of the other company as agreed
                  upon implicitly and explicitly.

                                     Value

    The ability of a selling organisation to satisfy the needs of the
    customer at a comparatively lower cost or higher benefit than
       that offered by competitors and measured in monetary,
            temporal, functional and psychological terms.
Chapter 15: Customer Relationship Management (CRM)


  Determinants of CRM

  In addition to trust and value, salespeople must:

          Understand customer needs and problems;

          Meet their commitments;

          Provide superior after sales support;

          Make sure that the customer is always told the truth
                (must be honest); and

          Have a passionate interest in establishing and retaining a long-
                 term relationship (e.g., have long-term perspective).
Chapter 15: Customer Relationship Management (CRM)

 Stages in the development of a Customer Relationship
 The Pre-relationship Stage
          The event that triggers a buyer to seek a new business partner.

 The Early Stage
          Experience is accumulated between the buyer and seller although a great
          degree of uncertainty and distance exists.

 The Development Stage
          Increased levels of transactions lead to a higher degree of commitment and
          the distance is reduced to a social exchange.

 The Long-term Stage
          Characterised by the companies’ mutual importance to each other.

 The Final Stage
          The interaction between the companies becomes institutionalized.
Chapter 15: Customer Relationship Management (CRM)

  Stages in the Development of a Key-Account Relationship

       High
                                                             Synergistic KAM


                                                     Partnership
 Degree of
involvement                             Mid-KAM

                          Early-KAM


       Low     Pre-KAM

                Transactional                                     Collaborative
                                Nature of customer relationship
                                                                     (Millman and Wilson, 1995)
Chapter 15: Customer Relationship Management (CRM)

     A Relationship Life Cycle Model

High cooperation
Low competition        Pre-       Development   Maturity       Decline
                   relationship      stage       stage          stage
                       stage




Low cooperation
High competition


                                                Time
                                                           (Wilkinson and Young, 1997)
Chapter 15: Customer Relationship Management (CRM)




                              Class Exercise



    What should the focus and main activities of a global
    salesperson be in each stage of the relationship
    development process?

    Why? (Please justify your answer)
Chapter 15: Customer Relationship Management (CRM)


   Functions of Customer Relationship Management

   Direct functions (are the basic requirements of a company that are
   necessary to survive in the competitive marketplace)
          Profit;
          Volume; and
          Safeguard

   Indirect functions (are the actions necessary to convince the
   customer to participate in various marketing activities).
          Innovation:
          Market;
          Scout: and
          Access.
Chapter 15: Customer Relationship Management (CRM)

 Functions of Customer Relationship Management
                              Value Creation Process
                             Technology delivery process
                             •R&D
                             •Technology integration
 Management                  •Efficiency, effectiveness
 Decision                      learning
 Process
                                                              Value-based
 Customer sensitivity        Product delivery process         Strategies
                             •Concept to launch               •Pricing
 •Diversity                  •Manufacturing process           •Communication
 •Information
 •Differentiated
   offering                  Customer delivery process
                             •Supply chain
                             •Distribution
                             •Infomediation (distribution
                               of information)
                                                            (Sharma et. al., 2001)
Chapter 15: Customer Relationship Management (CRM)

The role of salespeople as relationship builders and promoters

Salespeople by:

        identifying potential customers and their needs;
        approaching key decision makers in the buying firm;
        negotiating and advancing dialogue and mutual trust;
        coordinating the cooperation between the customers and
                their company;
        encouraging the inter-organisational learning process;
        contributing to constructive resolution of existing conflicts; and
        leading the customer relationship development team

are the individuals in any organisation who act both as relationship
builders and as relationship promoters.
Chapter 15: Customer Relationship Management (CRM)

   Models of Customer Relationship Management
                 The Evans and Luskin (1994) model for effective
                            Relationship Marketing


  Relationship marketing inputs
  •Understanding customer expectations
  •Building service partnerships
  •Empowering employees
  •Total quality management
                                                 Relationship marketing outcomes
                                                 •Customer Satisfaction
                                                 •Customer loyalty
                                                 •Quality products
                                                 •Increased profitability

               Assessment state
               •Customer feedback
               •Integration
                                                             (Evans and Luskin, 1994)
Chapter 15: Customer Relationship Management (CRM)

   Models of Customer Relationship Management
                 The Brock and Barcklay (1999) model of selling
                       partner relationship effectiveness

     Independence



                                Mutual trust            Selling partner
                                                        relationship
                                Cooperation
                                                        effectiveness




    Relative influence
Chapter 15: Customer Relationship Management (CRM)

  Managing Customer Relationships
 The global salesperson must be involved in the following activities in order to initiate,
 develop and enhance the process that is aimed at building trust and commitment with the
 customer.

 Initiating the relationship
          Engage in strategic prospecting and qualifying;
          Gather and study pre-call information;
          Identify buying influences;
          Plan the initial sales call;
          Demonstrate an understanding of the customer’s needs;
          Identify opportunities to build a relationship; and
          Illustrate the value of a relationship with the customer
Chapter 15: Customer Relationship Management (CRM)

  Managing Customer Relationships
 The global salesperson must be involved in the following activities in order to initiate,
 develop and enhance the process that is aimed at building trust and commitment with the
 customer.

 Developing the relationship
          Select an appropriate offering;
          Customise the relationship;
          Link the solutions with the customer’s needs;
          Discuss customer concerns;
          Summarize the solution to confirm benefits; and
          Secure commitment.
Chapter 15: Customer Relationship Management (CRM)


  Managing Customer Relationships
 The global salesperson must be involved in the following activities in order to initiate,
 develop and enhance the process that is aimed at building trust and commitment with the
 customer.

 Enhancing the relationship


          Assess customer satisfaction;
          Take action to ensure satisfaction;
          Maintain open, two-way communication; and
          Work to add value and enhance mutual opportunities.
Chapter 15: Customer Relationship Management (CRM)

   Managing Customer Relationships
       Qualifying prospects for relationship building

         High
                          Use a non                   Build a strong
                         customized                    and lasting
                          approach                     relationship
Opportunities
for adding value


                       Seek better                       Focus on
                      opportunities                   loyalty-building
                        elsewhere                        program
          Low
                   Low        Potential profitability of customer   High
Chapter 15: Customer Relationship Management (CRM)

     Relationship networks

     The ultimate outcome of a successful CRM strategy is the creation
     of a unique company asset known as a relationship network.

     A relationship network consists of the company and its major
     customers with whom the company has established long and
     enduring business relationships.

     The additional aspects of a global salesperson’s job are to:

             Manage customer value;
             Act as customer advocate; and
             Enhance customer loyalty and build a “health” and
                    profitable network of relationships.
Chapter 15: Customer Relationship Management (CRM)


  Summary

           CRM is a new business philosophy based on trust and value;

           The core function of CRM is the value creation process;

           Customer relationships develop over time;

           The role of global salespeople in the process is that of both
                  relationship builders and relationship promoters; and

           The basic premise of CRM is to offer superior value to
                  customers in an effort to turn prospects into
                  customers, customers into loyal customers, and
                  loyal customers into partners.

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Chapter15

  • 1. Chapter 15 Customer Relationship Management (CRM) Learning Objectives Define CRM; Understand the importance of CRM; Explain the determinants of CRM and the key stages in its development; Discuss the main functions and various models of CRM; Explain the role of salespeople as relationship developers Discuss the management of customer relationships.
  • 2. Chapter 15: Customer Relationship Management (CRM) What is Customer Relationship Management (CRM)? CRM is “the development and maintenance of mutually beneficial long-term relationships with strategically significant customers” (Buttle, 2000) CRM is “an IT enhanced value process, which identifies, develops, integrates and focuses the various competencies of the firm to the ‘voice’ of the customer in order to deliver long-term superior customer value, at a profit to well identified existing and potential customers”. (Plakoyiannaki and Tzokas, 2001)
  • 3. Chapter 15: Customer Relationship Management (CRM) Understanding Customer Relationship Management (CRM)? CRM is a business philosophy based on upon individual customers and customised products and services supported by open lines of communication and feedback from the participating firms that mutually benefit both buying and selling organisations. The buying and selling firms enter into a “learning relationship”, with the customer being willing to collaborate with the seller and grow as a loyal customer. In return,, the seller works to maximize the value of the relationship for the customer’s benefit. In short, CRM provides selling organisations with the platform to obtain a competitive advantage by embracing customer needs and building value-driven long-term relationships.
  • 4. Chapter 15: Customer Relationship Management (CRM) Determinants of CRM Trust The willingness to rely on the ability, integrity, and motivation of one company to serve the needs of the other company as agreed upon implicitly and explicitly. Value The ability of a selling organisation to satisfy the needs of the customer at a comparatively lower cost or higher benefit than that offered by competitors and measured in monetary, temporal, functional and psychological terms.
  • 5. Chapter 15: Customer Relationship Management (CRM) Determinants of CRM In addition to trust and value, salespeople must: Understand customer needs and problems; Meet their commitments; Provide superior after sales support; Make sure that the customer is always told the truth (must be honest); and Have a passionate interest in establishing and retaining a long- term relationship (e.g., have long-term perspective).
  • 6. Chapter 15: Customer Relationship Management (CRM) Stages in the development of a Customer Relationship The Pre-relationship Stage The event that triggers a buyer to seek a new business partner. The Early Stage Experience is accumulated between the buyer and seller although a great degree of uncertainty and distance exists. The Development Stage Increased levels of transactions lead to a higher degree of commitment and the distance is reduced to a social exchange. The Long-term Stage Characterised by the companies’ mutual importance to each other. The Final Stage The interaction between the companies becomes institutionalized.
  • 7. Chapter 15: Customer Relationship Management (CRM) Stages in the Development of a Key-Account Relationship High Synergistic KAM Partnership Degree of involvement Mid-KAM Early-KAM Low Pre-KAM Transactional Collaborative Nature of customer relationship (Millman and Wilson, 1995)
  • 8. Chapter 15: Customer Relationship Management (CRM) A Relationship Life Cycle Model High cooperation Low competition Pre- Development Maturity Decline relationship stage stage stage stage Low cooperation High competition Time (Wilkinson and Young, 1997)
  • 9. Chapter 15: Customer Relationship Management (CRM) Class Exercise What should the focus and main activities of a global salesperson be in each stage of the relationship development process? Why? (Please justify your answer)
  • 10. Chapter 15: Customer Relationship Management (CRM) Functions of Customer Relationship Management Direct functions (are the basic requirements of a company that are necessary to survive in the competitive marketplace) Profit; Volume; and Safeguard Indirect functions (are the actions necessary to convince the customer to participate in various marketing activities). Innovation: Market; Scout: and Access.
  • 11. Chapter 15: Customer Relationship Management (CRM) Functions of Customer Relationship Management Value Creation Process Technology delivery process •R&D •Technology integration Management •Efficiency, effectiveness Decision learning Process Value-based Customer sensitivity Product delivery process Strategies •Concept to launch •Pricing •Diversity •Manufacturing process •Communication •Information •Differentiated offering Customer delivery process •Supply chain •Distribution •Infomediation (distribution of information) (Sharma et. al., 2001)
  • 12. Chapter 15: Customer Relationship Management (CRM) The role of salespeople as relationship builders and promoters Salespeople by: identifying potential customers and their needs; approaching key decision makers in the buying firm; negotiating and advancing dialogue and mutual trust; coordinating the cooperation between the customers and their company; encouraging the inter-organisational learning process; contributing to constructive resolution of existing conflicts; and leading the customer relationship development team are the individuals in any organisation who act both as relationship builders and as relationship promoters.
  • 13. Chapter 15: Customer Relationship Management (CRM) Models of Customer Relationship Management The Evans and Luskin (1994) model for effective Relationship Marketing Relationship marketing inputs •Understanding customer expectations •Building service partnerships •Empowering employees •Total quality management Relationship marketing outcomes •Customer Satisfaction •Customer loyalty •Quality products •Increased profitability Assessment state •Customer feedback •Integration (Evans and Luskin, 1994)
  • 14. Chapter 15: Customer Relationship Management (CRM) Models of Customer Relationship Management The Brock and Barcklay (1999) model of selling partner relationship effectiveness Independence Mutual trust Selling partner relationship Cooperation effectiveness Relative influence
  • 15. Chapter 15: Customer Relationship Management (CRM) Managing Customer Relationships The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Initiating the relationship Engage in strategic prospecting and qualifying; Gather and study pre-call information; Identify buying influences; Plan the initial sales call; Demonstrate an understanding of the customer’s needs; Identify opportunities to build a relationship; and Illustrate the value of a relationship with the customer
  • 16. Chapter 15: Customer Relationship Management (CRM) Managing Customer Relationships The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Developing the relationship Select an appropriate offering; Customise the relationship; Link the solutions with the customer’s needs; Discuss customer concerns; Summarize the solution to confirm benefits; and Secure commitment.
  • 17. Chapter 15: Customer Relationship Management (CRM) Managing Customer Relationships The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Enhancing the relationship Assess customer satisfaction; Take action to ensure satisfaction; Maintain open, two-way communication; and Work to add value and enhance mutual opportunities.
  • 18. Chapter 15: Customer Relationship Management (CRM) Managing Customer Relationships Qualifying prospects for relationship building High Use a non Build a strong customized and lasting approach relationship Opportunities for adding value Seek better Focus on opportunities loyalty-building elsewhere program Low Low Potential profitability of customer High
  • 19. Chapter 15: Customer Relationship Management (CRM) Relationship networks The ultimate outcome of a successful CRM strategy is the creation of a unique company asset known as a relationship network. A relationship network consists of the company and its major customers with whom the company has established long and enduring business relationships. The additional aspects of a global salesperson’s job are to: Manage customer value; Act as customer advocate; and Enhance customer loyalty and build a “health” and profitable network of relationships.
  • 20. Chapter 15: Customer Relationship Management (CRM) Summary CRM is a new business philosophy based on trust and value; The core function of CRM is the value creation process; Customer relationships develop over time; The role of global salespeople in the process is that of both relationship builders and relationship promoters; and The basic premise of CRM is to offer superior value to customers in an effort to turn prospects into customers, customers into loyal customers, and loyal customers into partners.