Customer Relationship Management

Strategies for Business Markets

Dr. Neeraj Pandey

Cisco Systems
John Chambers, CEO, Cisco Systems, E-mail would be more
efficient but I want to hear the emotion, I want to hear the
frustration; I want to hear the callers level of comfort with the
strategy were employing
Each day John Chambers personally hears 15-20 voicemails
Providing superior value to customers, by satisfying the special needs of
even the most demanding customers and by understanding the factors that
influence individual customer profitability.

Relationship Marketing
Centers On:

Establishing,
Developing, and
Maintaining
Successful exchanges with
customers.

Why Relationship Marketing

Loyal Customers are far more profitable than
customers who are price sensitive and perceive
few differences among alternative offerings.
It provides important and durable advantages
that are hard for competitors to understand, copy or
displace.

Types of Relationships
Buyer-seller relationships positioned on a continuum with
transactional exchange and collaborative exchange serving as
end points.
The Relationship Spectrum

Transactional Exchange
Centers on timely exchange of basic products
for highly competitive market prices.

Collaborative Exchange
Features close information, social,
and operational linkages, as well as
mutual commitments.
Collaborative exchange involves a process where a customer
and supplier firm form strong and extensive social, economic,
service and technical ties over time, with the intent of lowering
total costs and/or increasing value, thereby achieving mutual
benefit.
Switching Cost: Hesitate to incur disruptions and switching costs.

Value-Adding Exchanges
Focus of the selling firm shifts from attracting
customers to retaining customers
Comprehensive understanding of a customers
needs
Providing continuing incentives to customers for
sustained business linkages
eg. Providing technical support, infrastructural support,
etc.

Buyers and sellers craft different types of relationships in response to:

a) market conditions and
b) characteristics of the purchase situation.
Spectrum of Buyer-Seller Relationships

Strategy Guidelines
1.

Overcoming the gravitational pull towards the transactional end

of the exchange spectrum

2. Determine which type of relationship matches purchasing

situation and supply-market conditions for particular customer.

3. Develop appropriate strategy for each type of purchasing situation

4.

Understanding of the customers business, its key competitors and

its goals and strategies is key to success

Customer Relationship Management

Customer Relationship Management (CRM) is a
cross-functional process for achieving:
Continuing dialog with customers across all contact
and access points
Personalized service to the most valuable customers
Increased customer retention
Continued marketing effectiveness

CRM Technology
CRM programs are software systems that capture
information and integrate sales, marketing and customer
service information.

CRM programs can gather information from many sources

including email, call centers, service and sales reps.

The information is available to the right people in the

organization in real time.

Architecture of a CRM System

Operational CRM
Sales Force Automation (SFA)
Supports day-to-day sales force activities
Customer Service and Support (CSS)
Automates service requests, complaints, product
returns, and information requests
Enterprise Marketing Management (EMM)
Improves the management of promotional campaigns

Analytical CRM
Analyzing customer behavior and perceptions
in order to provide the business intelligence
necessary to identify new opportunities and to
provide superior customer service
Key Analytical Technologies
Data mining
Decision support
Other business intelligence technologies

Analytical CRM: Digital Dashboards

Social CRM
Customers use Facebook and Twitter to comment on
products and services
Monitoring social media conversations helps to understand
public perceptions
Analytical CRM applications
Microsofts Social Networking Accelerator
Google Alerts
Dells Social Media Listening Command Center

Collaborative CRM
Systems for providing effective and efficient communication
with the customer from the entire organization
Greater Customer Focus
Understanding customer history and current needs
Lower Communication Barriers
Personnel have complete customer information
Personnel
use
customer-preferred
communication
methods
Increased Information Integration
Personnel know prior and ongoing communication

Ethical Concerns
CRM systems may facilitate coercive sales practices

Systems may categorize customers in a way customers take

offense to

Personalized communication may become too personal

CRM Software Programs

There are many types of CRM programs:
1.

Some companies develop their own proprietary

programs

2.

Some companies purchase off-the-shelf programs

Leading CRM Software Providers

PeopleSoft (Oracle)
Siebel (Oracle)
Oracle (CRM on Demand, E-Business Suite)
SAP
Convergys
Salesforce.com

Permission marketing
Not SPAM
Requires opt-in
Opt-out
Learning about the customer
Initial and continued relationship is based on incentives

Creating a CRM Strategy

A CRM program cannot help unless a company employs the
proper strategy to secure and retain profitable customers.
Special attention must be given to five areas:
1. Acquiring the Right Customers
2. Crafting the Right Value Proposition
3. Instituting Best Practices
4. Motivating Employees
5. Learning to Retain Customers

Managing Relationship Portfolio

Mix of relationships based on customers.
Collaborative Customers build relationships with
trust and commitment.
Transactional Customers focus efforts on
purchasing staff and offer attractive benefits.

Measuring Customer Profitability

ABC (Activity Based Costing): what activities are associated with

serving a particular customers and how these activities are linked to

revenues and consumption of resources

Unlocking Customer Profitability: Kanthal-GE Case ($150 Vs

$600)

The Profitable Few: why?

What to do with most unprofitable ones?

What to do with most unprofitable ones

Explore ways for reducing it (Inwards)
Focus on customer action leading to rise in costs
Opening sharing this information with the
customer
Putting premium on the services; reducing
discounts, eliminating or reducing technical or
marketing support (in case if unresolved)

Characteristics of High- versus Low-Cost-to-Serve Customers

High-Cost-to-Serve Customers

Low-Cost-to-Serve Customers

Order custom products

Order standard products

Order small quantities

Order large quantities

Unpredictable order arrivals

Predictable order arrivals

Customized delivery

Standard delivery

Frequent changes in delivery requirements

No changes in delivery requirements

Manual processing

Electronic processing (EDI)

(i.e., zero defects)

Large amounts of presales support

(i.e., marketing, technical, and sales resources)

Little to no presales support

(i.e., standard pricing and ordering)

Large amounts of postsales support

(i.e., installation, training, warranty, field service)

No postsales support

Require company to hold inventory

Replenish as produced

Pay slowly (i.e., high accounts receivable)

Pay on time

Customer Profitability
High

Net Margin Realized

Passive

is Crucial
Good Supplier Match

Price Sensitive but

Few Special
Demands

Costly to Service,
but Pay Top
Dollar

Aggressive
Leverage Their Buying
Power
Low Price and Lots of
Customized Features

Low
Low

High
Cost-to-Serve

Customer Relationship Management

A Continuing Dialogue with Customers,
Across all their Contact and Access Points, with
Personalized Treatment of the Most Valuable
Customers,
To Ensure Customer Retention and Effectiveness of
Marketing Initiatives.

Transactional and Collaborative Working Relationships

Pure
Transactional
Exchange

(a) Industry Relationship Bandwidths

Pure
Collaborative
Exchange
Medical Equipment
(e.g. imaging systems)

Hospital Supplies
(e.g. surgical gloves, syringes)

(b) Flaring Out from the Industry Bandwidth

Pure
Transactional
Exchange

Pure
Collaborative
Exchange
Hospital Supplies

Flaring Out Strategy

Flaring out strategy states that the seller can either
unbundle (point A), that is, reduce the service associated
with a lower price (transactional in nature), OR
Augment by adding more services to the core offerings
(point D) which adds cost to the services. This is
collaborative in nature.
The seller starts with a core service and adds customized
services to it that create more value

Why Retain Loyal Customers?

Established customers buy more.

Cost of serving loyal customers declines.

Less expensive than acquiring new customers.

Learning to Retain Customers

Provide superior value to ensure high satisfaction
Nurture trust and mutual commitment
If possible, helping customers grow their business

Pursuing Growth from Existing Customers

Identify and cultivate customers that offer the most growth
potential by:
Estimating current share of wallet (in %age terms)
Pursuing opportunities to increase share
Projecting and enhancing customer profitability

Why CRM fails at times?

Why CRM fails at times?

Some relationship-building efforts fail because
expectations of the parties dont mesh. For Example:
Seller wants a business relationship whereas the
customer responds in a transactional mode.
By understanding and isolating customer needs,
the marketer is better equipped to match their
product offerings to a particular customers needs.
Lack of Top Management Support

Why CRM fails at times?

Data is ignored
Politics rule
CRM is implemented for the enterprise, not the
customer
Flawed process is automated
No attention is paid to skill sets

Discussions