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1. CUSTOMER RELATIONSHIP
MANAGEMENT
PRESENTED BY
VISHAKH.S
VIVEK GOPAN
NITIN NAIR
ZAKARIYA. K

2. • Customer relationship management (CRM) is
a system for managing a company's
interactions with current and future
customers. It often involves using technology
to organize, automate and synchronize, sales,
marketing, customer service and technical
support.

3. Different Perspectives On Buyer-Seller
Relationship

4. The Economics Of Loyalty
Why loyal customers are more profitable ?
• Acquisition Cost
• Base Profit
• Revenue Growth
• Operating Costs
• Referrals
• Price premium.

5. A FRAMEWORK FOR CUSTOMER
RELATIONSHIP MANAGEMENT

6. • Means different things to different people
 May be salesforce contact software like the ones sold
by salesforce.com
 May be telephone call centers for contact
management
 May be loyalty programs

7. CUSTOMER RELATIONSHIP
MANAGEMENT MODEL
1.
2.
3.
4.
5.
6.
7.
Many companies use
CRM as a key source of
competitive advantage
E.g.: UPS

8. CREATING THE DATABASE
CUSTOMER CHARACTER
-ISTICS
PURCHASE
HISTORY
CONTACTS RESPONSE VALUE
1.
2.
.
.
.
n
Customer Information File (CIF)
• Repository of information about customers
• Basis for identifying and targeting current and potential customers
• Asses value to the firm of each customer & develop relationship programs –
customized in content and intensity
CUSTOMER INFORMATION FILE

9. 5 AREAS OF CONTENT IN CIF
• Important 3rd
dimension – Time
• CIF has to contain
information on
these dimensions
over time
• Identify customers
becoming better
and worse

10. GETTING MORE CUSTOMER
INTERACTION
HIGH
LOW
DIRECT INDIRECT
InteractionFrequency
Customer Interaction
 Upper left
quadrant:
relatively easy to
develop CIF
 2 quadrants on
the right have to
work harder to
collect
information
CIF – key source of competitive advantage e.g.: UPS

11. • Companies create special programs and
events
e.g.: Kellogg's “EET & ERN”
• Management consultant firms host free
seminars in specialized topic areas –
information about prospective clients
• Another challenge – Multiple touch points
Acxiom – centralized database

12. ANALYZING THE DATABASE
• Data mining – segments, purchasing patterns, trends etc.
LIFETIME CUSTOMER VALUE (LCV)
 Purchase information + information about profit margin on each product
purchase projected profit implication of each customer or row
in CIF.
 Ultimate goal is to place a monetary value on each customer and make
resource allocation decisions

13. BERGER & NASR, 1998
• Uses available purchase information in the CIF to calculate
each customers cumulative profitability in the past.
Customer Profitability = ∑[∑(P – C) - ∑ MC]
Where
t = the number of past and current rime periods measured
j = the number of products purchased in a time period
k = the number of marketing tools used in a time period
P = Price
C = Cost
MC = cost of marketing tool
t j k
i j k

14. The formula can be used for purposes other than
computing profitability:
 Increasing P & j by cross selling or upselling
 Reducing market cost over time as customer loyalty will
increase
 Increasing the number of time periods t that the customer is
purchasing.

15. Gupta & Lehmann, 2003
Margin “multiple”
= r/(1+i-r)
In this formula ‘r’ is the retention rate
‘i’ is the discount rate
Discount rate
Retention
Rate
10% 12% 14% 16%
60% 1.20 1.15 1.11 1.07
70% 1.75 1.67 1.59 1.52
80% 2.67 2.50 2.35 2.22
90% 4.50 4.09 3.75 3.46

16. LCV- CUSTOMER ACQUISITION COST
PERSPECTIVE
-100
-50
0
50
100
150
1 2 3 4 5 6 7 8 9 10
Customer Life Cycle Profit Pattern in the Credit Card
Industry
Annual profit
AGE OF ACCOUNT
( IN YEARS)

17. Profit – acquisition cost = customer value.
Take into account time value of money
Gives an idea of how much we would spend to
retain a customer

18. Customer Selection
• Customer Profitability Analysis can be used to
separate the customer who provide long term
value to the firm.
• 80-20 rule
• Helps in decision making:
– Which customer to keep
– How much money to spend on them

19. Customer Targeting
• After selecting targeted customer
• Direct Marketing approach often referred to
as 1 to 1 marketing.
• Special promotion, prices, perks, products and
other offers are made through telemarketing,
direct mail and personal sales calls

20. Relationship Marketing Programs
Customer Satisfaction
• Requirements of customer loyalty is
satisfaction.
• Customer Satisfaction Model
• Customer Satisfaction Scale
• Customersat.com & Zoomerang.com are
customer satisfaction software sold via web.

21. Customer Satisfaction Model

22. Customer Satisfaction Scales

23. Customer Service
• Customer Satisfaction  Customer Service
• Level of Customer Service delivered is
equivalent to product quality.
• Have to go beyond expectation by offering
levels of customer services that competitors
cannot match.
• Service Guarantees
• Service Recovery

24. CUSTOMER LOYALTY

25. LOYALTY PROGRAMS
• One of the Major trends in marketing is the
ubiquity of loyalty programs.
Ex: Frequent-flier programs.
• Technology is changing the way.
• Smart cards- Microprocessor built in to them.

26. Several issues of Loyalty Programs.
• Making the reward too high.
• Ubiquity.
• What kind of loyal customers are you actually
getting?
• Lack of inspiration.
• Lack of communication with customers.
• Insufficient analysis of data.

27. When Loyalty programs seem to work
best
• The programs support and is consistent with
the brand value proposition.
• The programs add value to the product or
service.
• Lifetime customer value is high.

28. MASS CUSTOMIZATION
• Customer retention and loyalty are also being
affected by a marketing process called mass
customization.
• It imparts a feeling that the products was
made especially for the customer.
• Most of the attention on mass customization
has been in the Manufacturing sector.
Ex: Dell online ordering system.

29. Four Different Approaches to Mass
Customization
• Collaborative Customizers
• Adaptive Customizers
• Cosmetic Customizers
• Transparent Customizers
Commonality: All realize that customers are
heterogeneous and want different
combination of product features and benefits.

30. COMMUNITY BUILDING
• The main challenge for marketing managers is
to create a sense of affinity to their companies
and brands in their customers.
• Share information between the customers and
the company.
• Online communities offer real opportunities.