Chapter15

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)


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.


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.


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).


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.


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)


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)


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)


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.


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)


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.


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)


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


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


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.


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.


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


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.


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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