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Customer%20Relationship%20Management%20A%20Databased%20Approach

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Title: Customer%20Relationship%20Management%20A%20Databased%20Approach


1
Customer Relationship ManagementA Databased
Approach
  • V. Kumar
  • Werner J. Reinartz
  • Instructors Presentation Slides

2
Chapter One
  • CRM, Database Marketing
  • and Customer Value

3
Overview
  • Topics discussed
  • Marketing concept
  • Link between CRM and Database Marketing
  • CRM and Customer value
  • Conceptualizations of CRM
  • Relevance of CRM
  • Data based Customer Value Management

4
Marketing-definition
  • Marketing is an organizational function and a
    set of processes for creating, communicating and
    delivering value to customers and for managing
    customer relationships in ways that benefit the
    organization and its stakeholders.
  • American Marketing Association,2004

5
Link Between CRM and Database Marketing
  • Database Marketing
  • Customer Databases
  • Identify and analyze customer population
  • Group based on similarities
  • Recommend separate marketing campaigns for
    different groups
  • CRM
  • Applies database marketing techniques at customer
    level
  • Develops strong company-to-customer relationships

CRM
DB
6
CRM
  • Capture customer data and interact with the
  • customer simultaneously
  • Develop specific strategies for interaction with
    each customer
  • Better relationships with profitable customers
  • Locating and enticing new customers that will be
    profitable
  • Finding appropriate strategies to deal with
    unprofitable customers, including termination of
    relationships

7
Link Between CRM and Customer Value
  • Customer Value The economic value of the
    customer relationship to the firm expressed on
    the basis of contribution margin or net profit
  • CRM is the practice of analyzing and utilizing
    marketing databases and leveraging communication
    technologies to determine corporate practices and
    methods that will maximize the lifetime value of
    each individual customer to the firm

8
Using Customer Value for Marketing Decisions
  • Benefits
  • Decrease in Costs
  • Maximization of Revenues
  • Improvement in Profits and ROI
  • Acquisition and Retention of Profitable
    Customers
  • Reactivation of Dormant Customers

9
Conceptualizations of CRM
  • Functional level focuses on technology
  • Sales force automation in the sales function
  • Campaign management in the marketing function
  • Customer facing front-end level focuses on total
    customer experience
  • To build a single-view of customers across
    contact channels
  • To distribute customer intelligence to all
    customer-facing functions
  • Strategy level focuses on customer satisfaction
  • Frees CRM from technology underpinnings
  • Describes CRM as a process to implement customer
    centricity in the
  • market and build shareholder value
  • Knowledge about customers affects the entire
    organization

10
Components of CRM from a Business Strategy
Perspective
  • Strategic process
  • Spans multiple organizational functions
  • Continuous effort towards becoming
    customer-centric
  • Selection
  • Resource allocation based on economic value of
    customer
  • Interactions
  • Exchange of information and goods between
    customer and firm evolves as a function of past
    exchanges

C
R
M
11
Components of CRM from a Business Strategy
Perspective (contd.)
  • Customers
  • End-users and intermediaries such as distributors
    and retailers
  • Greater fine-tuning of segmentation strategies to
    eventually target individual customers with
    customized product offerings
  • Optimizing current and future value of customer
  • Maximizing customer equity by maximizing profits
    over a series of transactions
  • Caution Managing fairness in the exchange
    process is important to sustain mutually
    profitable relationships

12
Relevance of CRM
  • Firms are facing changes with respect to
  • Consumers
  • Marketplaces
  • Technology
  • Marketing functions
  • CRM is a response to these changes

13
Changes with respect to Consumers
  • Growing consumer diversity- due to demographic
    and behavioral trends
  • Ageing of the population in developed countries-
    de-youthing
  • Increased diversity in ethnicity of population
  • Increasing individualization
  • Time scarcity
  • Activities compete for customers time
  • Value consciousness and intolerance for low
    service levels
  • Rise in customer expectations
  • Decline in consumer satisfaction level

14
Time Scarcity and Value Consciousness- Example
Average waiting time (in seconds) after
which calls are abandoned by customers
Source Merchants International Call Center
Report Figure shows that customers are less and
less satisfied with the treatment they get from
corporate call centers. The average time after
which calls are abandoned fell by about 19 in
just one year.
15
Declining Customer Satisfaction- Example
(American Customer Satisfaction Index) with
products and services Source http//www.theacsi.
org, University of Michigan
16
Changes with respect to Consumers (contd.)
  • Information availability and technological
    aptitude
  • Customers more knowledgeable in making purchase
    decisions
  • More comparisons across providers and
    transactions
  • Decrease in loyalty
  • Diversification of holdings across service
    providers even within same household
  • Consequences
  • Marketers should be wary of placing heavy time
    demands on consumers
  • The major challenge facing companies has become
    meeting consumer demands rather than cost
    reduction

17
Decreasing Customer Loyalty- Example
Number of different financial service providers
that respondents are associated with
Number of financial service providers
Source Unidex Report
18
Changes with respect to the Marketplace
  • More intense competition between firms for
    customers
  • Fragmentation of markets
  • Diminishing product-quality
  • differentiation
  • Consequences
  • Value added to customers by offering customized
    product and service propositions
  • To maintain market share, need to realign
    business strategy to become customer-centric

19
Product Parity of Grocery Private Label (US)
More switching to private-label products with
decrease in disposable income .
Switching back to national brands with
economy picking up and decreased unemployment.
This link broken today. (Source Information
Resources, Sloan Management Review, BCG Analysis)


20
Changes with respect to Data Storage Technology
  • Better technology, cheaper and larger storage
    units
  • Huge increase in demand for data storage
  • Increased popularity of data warehouses
  • Consequences
  • Better information about customer behavior and
    attitudes
  • Better prediction of customer buying behavior
  • Too much data can lead to misapplication and
    wrong analysis

21
Changes with respect to Marketing Function
  • Media dilution and multiplication of channels
  • Proliferation of communication media focused on
    the customer
  • Direct-to-consumer channels - email, telephone
  • Interactive media - internet, interactive TV etc
  • Reduced need for techniques focused on price
    alone due to
  • Availability of new data collection and
    communication tools
  • Marketing processes such as loyalty programs

22
Changes with respect toMarketing Function
(contd.)
  • Decreasing market efficiency and effectiveness
    due to
  • Focus on acquisition, price and short-term
    transactions
  • Proliferation of new contact channels
  • Increased or flat cost of contact
  • Decreased customer response
  • Reduced value for advertising in any medium
  • Consequences
  • Pressure on the marketing function
  • Marketing in danger of being restricted to
    advertising and media planning

23
Implications of Changesin Business Environment
  • Greater demand for learning about
  • Customer preferences
  • Product and service customization
  • Focus on customer-centric instead of
    product-centric strategies

24
Data Based Customer Value Management
  • To satisfy increasing customer heterogeneity
  • To address concerns of marketing accountability
  • To put available data to use
  • To use customer profitability as the key
    objective function

25
Benefits of Data Based Customer Value Management
Approach
  • Integrate and consolidate customer information
  • Provide consolidated information across all
    channels to assist in timely and relevant
    communication with customers
  • Manage customer cases
  • Personalize the service and products offered to
    each customer to meet expectations
  • Automatically and manually generate new sales
    opportunities
  • Provide flexibility to adapt campaigns to take
    changes in customer behavior or information into
    account

26
Benefits of Data Based Customer Value Management
approach (contd.)
  • Yield faster and more accurate follow-up on sales
    leads, referrals and customer enquiries
  • Manage all business processes by introducing a
    central point of control ensuring all business
    processes are executed in accordance with correct
    and effective business rules
  • Give top managers a detailed and accurate picture
    of all sales and marketing activities
  • Instantly react to a changing business environment

27
Summary
  • From a strategic perspective, CRM is the process
    of selecting the customers a firm can most
    profitably serve and shaping the interactions
    between a company and these individual customers
  • Assessing Customer Value is critical to CRM
  • Rapid changes are taking place in the environment
    in which firms operate with respect to customers,
    market places, technology, and marketing
    functions
  • These changes have driven the marketplace to
    become relationship-based and customer-centric
  • CRMs goal is to optimize the current and future
    value of the customers for the company
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