UNIT-I

CRM- DEFINITION- BENEFITS- CRM AND SCM- THE ROLE OF INTERNET IN CRM-
IMPORTANCE OF EMAIL, INTRANET, EXTRANET IN MAINTAINING EFFECTIVE CRM
1. GIVE AN INTRODUCTION ON CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
 Customer relationship management (CRM) is a term applied to processes implemented by a
company to handle its contact with its customers. CRM software is used to support these
processes, storing information on current and prospective customers.
 Information in the system can be accessed and entered by employees in different departments,
such as sales, marketing, customer service, training, professional development, performance
management, human resource development, and compensation. Details on any customer contacts
can also be stored in the system. The rationale behind this approach is to improve services
provided directly to customers and to use the information in the system for targeted marketing.
 While the term is generally used to refer to a software-based approach to handling customer
relationships, most CRM software vendor’s stress that a successful CRM strategy requires a
proper approach.

2. DEFINE CRM.
CRM is a combination of policies, processes, and strategies implemented by a company that unify its
customer interaction and provide a mechanism for tracking customer information.

3. WHAT ARE THE MAJOR ASPECTS OF CRM? /MENTION THE VARIOUS STRATEGIES
FOR BUILDING RELATIONSHIP. / STATE THE WAYS TO BUILD RELATIONSHIP.
CRM includes many aspects which relate directly to one another:
1. FRONT OFFICE OPERATIONS — Direct interaction with customers, e.g. face to face
meetings, phone calls, e-mail, online services etc.
2. BACK OFFICE OPERATIONS — Operations that ultimately affect the activities of the front
office (e.g., billing, maintenance, planning, marketing, advertising, finance, manufacturing, etc.)
3. BUSINESS RELATIONSHIPS — Interaction with other companies and partners, such as
suppliers/vendors, retail outlets/distributors, industry networks (lobbying groups, trade
associations). This external network supports front and back office activities.
4. ANALYSIS — Key CRM data can be analyzed in order to plan target-marketing campaigns,
conceive business strategies, and judge the success of CRM activities (e.g., market share, number
and types of customers, revenue, and profitability).

4. STATE THE VARIOUS BENEFITS OF CRM. / WHAT ARE THE VARIOUS ADVANTAGES
AN ORGANISATION ENJOYS AFTER SUCCESSFUL IMPLEMENTATION OF CRM?
The following are the benefits enjoyed by the organisation:
 Excellent customer service.
 CRM helps to understand, anticipate and respond to your customer needs in a consistent way, right
across your organization.
 If you view it as a set of tools that let you to do more for, and get more from, your customer.
 Develop better communication channels
 Collect vital data, like customer details and order histories
 Create detailed profiles such as customer preferences
 Deliver instant, company-wide access to customer histories
 Identify new selling opportunities
 Customers are Profitable over a period of time
 Customer probability is skewed

5. HOW CAN YOU MEASURE THE BENEFITS OF CRM?

CRM benefits can be measured and quantified. CRM applications can lead to increases in revenue from:

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  Reductions in operating costs - It costs around £25 to handle a customer call via a call centre but
only £2 via a website.
 A higher percentage of cross-selling due to offering a single point of contact with your company
 More success in attracting new customers and closing deals faster, through quicker and more
efficient responses to customer leads and customer information
 Simplification of marketing and sales processes by understanding customer needs
 Better customer service - through improved responsiveness and understanding that builds
customer loyalty and decreases customer "churn"

6. WHAT ARE THE DIFFERENT TYPES OF CUSTOMER RELATIONSHIP MANAGEMENT?

There are three parts of application architecture/ Types of CRM.
1. Operational CRM
 Operational CRM means supporting the so-called "front office" business processes, which include
customer contact (sales, marketing and service).
 Tasks resulting from these processes are forwarded to employees responsible for them, as well as
the information necessary for carrying out the tasks and interfaces to back-end applications are
being provided and activities with customers are being documented for further reference.
2. Analytical CRM
 In analytical CRM, data gathered within operational CRM are analyzed to segment customers or
to identify cross- and up-selling potential.
 Data collection and analysis is viewed as a continuing and iterative process.
 Ideally, business decisions are refined over time, based on feedback from earlier analysis and
decisions.
 Business Intelligence offers some more functionality as separate application software.
3. Collaborative CRM
 Collaborative CRM facilitates interactions with customers through all channels (personal, letter,
fax, phone, web, e-mail) and supports co-ordination of employee teams and channels.
 It is a solution that brings people, processes and data together so companies can better serve and
retain their customers.
 The data/activities can be structured, unstructured, conversational, and/or transactional in nature.
Collaborative CRM provides the following benefits:
 Enables efficient productive customer interactions across all communications channels.
 Enables web collaboration to reduce customer service costs.
 Integrates call centres enabling multi-channel personal customer interaction.
 Integrates view of the customer while interaction at the transaction level.

7. WHAT ARE THE DIFFRENT TYPES OF IMPLEMENTATION METHOD FOR CRM?

CRM has to two typical implementation methods:
 On-premise and
 On-demand/hosted

Each method has its advantages and disadvantages as described below.

ON-PREMISE CRM IS APPROPRIATE FOR:

 Companies seeking to implement highly customized customer-management practices.
 Companies that need specialized data structures.
 Companies with complex or real-time integration requirements.
 Companies with available in-house IT resources and support systems.
 Companies who can afford the up-front capital investment and fixed costs.
 Companies who deal with sensitive data that don't want other parties to see.
ON-DEMAND/HOSTED CRM IS APPROPRIATE FOR:
 Customers seeking to implement standard processes from a variety of industries and companies.
 Companies those are able to use standard data structures.

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  Companies with more basic integration requirements.
 Companies with limited technical resources and support personnel.
 Companies seeking variable pricing and lower up-front costs.
 Companies dealing with non-proprietary data.

8. WRITE A NOTE ON THE ENABLES FOR THE GROWTH OF CRM

The tremendous growth of interest and investment in CRM across the globe can be attributed to the
following macro – environmental factors:
Emergence of Service Economy
 The emergence of service economy is a global phenomenon.
 The increasing contribution of service sector is not limited to develop countries.
 In the year 2001, the service sector contributed to 48 per cent of GDP in India, 54 per cent in
Philippines and 33per cent in China.
 The average annual growth rate of the services during the decade of 1990s was 8 per cent in India
(Statistical Outline of India, 2002 – 2003).
 Advanced countries progressed from agriculture to industrial and then to post – industrial
economies.
 The shift from manufacturing to services was spread over a few decades of the last century.
 However, in developing countries, the growth is lead by all three sectors of the economy in
varying proportions.
 The growing importance of services resulted in greater customer orientation.
 It implies that the production and consumption of services are inseparable.
 In services, one needs to be close to the customers to deliver the service offering.
 The factory is where the customer is and services offered in real time.
 The customer perceives the production process as part of service consumption, not just the
outcome of production process as in traditional marketing of physical goods.
 Therefore, it is not surprising that service businesses like hotels, airlines, banking, financial
services, telecom and retailing where the early adopters of CRM.
Emergence of Market Economy
 In addition to the shift towards service, there is a global emergence of the market economy. The
power is more to the market as compare to the controlled economy.
 Market regulation was in place all over the world including the US, Europe, USSR, China and
India. The 1990s witnessed acceleration in the deregulation of many large industries including
banking, telecommunications, broadcasting and airlines across the world.
 As a result, market – orientation firms operating intensely competitive market now takes decision
that was once controlled by the government.
 The focus has shifted from capacity creation under control to the markets.
 Market – oriented economy necessitated a customer focus and boosted the importance of CRM.
Global Orientation of Businesses
 National boundaries are giving way to either a borderless world or at least a regional world
resulting in the emergence of trading blocs like North American Free Trade Agreement (NAFTA),
European Union and the Association of South – East Asian Nations (ASEAN).
 The abolishment of the General Agreement on Tariffs and Trade (GATT), and the emergence of
World Trade Organization (WTO) helped create a global orientation for business establishment.
 Increasing international trade became the growth engine for the global economy.
 Liberalisation of markets and trade proved to be a far stronger growth engine.
 It has eased the entry into foreign markets.
 Firms need stronger customer – orientation to be able to tab opportunities in new markets while
defending themselves in their home markets.
Aging Population in Economically Developed Countries
 The economically advanced nations are witnessing an aging of their population.
 This trend is visible in most part of Europe, except in Ireland (Leeflang and Raij, 1995).

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  Aging of population has been attributed to the combined effects of a slowdown in birth rate and an
increased in life expectancy.
 While an aging population creates new opportunities for wellness, financial wellbeing, safety and
security and recreation (Sheth and Mittal, 2004), it has also slowed the markets for traditional
goods and services designed for a younger population.
 Therefore, in these markets, growth is being achieved by increasing the ‘share of wallet’ and not
through ‘growth of markets’ driven by a growing population.
 Marketers are now forced to develop a deep understanding of their existing customers and meet
their ever changing needs through suitable products and services.
 Indeed, most large companies, especially the services sector, wants to become One-Stop-Shop for
the customers.
Thus these were the early enablers for the growth of CRM in the organisations.

9. HOW CAN AN ORGNISATION APPLY CRM PRINCIPLES?

The key to CRM is to build on the 'relationship' angle and to focus on both receiving and delivering
value.
Information about your customers can be analysed to answer the question 'why' do customers buy, as well
as 'what' do they buy.
 Understand what motivates your customers –
 What do customers want? , What do they value? , How do they want to interact with your
business?
 Customise services and products –
 What do customers want to buy? , Product development should be driven by customer
needs.
 Deliver good service –
 You may interact with your customers online, in person or over the 'phone. , You may be
selling, delivering or providing customer service. , Gear your message and the medium
accordingly and offer a quick response.
 Make it easy and useful –
 Customer service initiatives must be easy to use and offer real benefits such as self care or
customized pricing.
 Prioritise profitability –
 The more you learn about your customers, the easier it is to pinpoint yours most profitable
relationships, Focus on these and you prioritise the most valuable parts of your business.

10. STATE THE NEED FOR IMPLEMENTING CRM IN AN ORGANISATION. / MENTION

OBJECTIVES OF CRM:
The needs for implementing CRM in an organization are as follows

 Enable the company to identify, contact attract and acquire new customers:
 CRM allows the company to focus its limited marketing resources on the most promising
target markets with the highest potential value.
 This is typically done using the information generated by CRM application which
 Automatically generates customer and market profiles
 Identify and target market with high revenues
 Generates, leads, tracks marketing campaigns across a variety of media
 Selects appropriate contact media, plans promotions and incentives
 Manages the proposal process through negotiations to close.

 Obtains a better understanding of the customers- their wants and needs:

 CRM applications, often used in combination with data warehousing, e-commerce
applications and call centers, allow companies to gather and access information about
customers buying behavior, wants in terms of products or services provided by the company.
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  The information is used in planning and execution go marketing campaigns. It enables
customers to seek products and reveal their preferences in an interactive manner.

 Defines the appropriate product and service offering and match it to the unique needs of the
customer:
 CRM provides customization and personalization capabilities that gives customers the power
to view the enterprise in a way that they can relate to, thereby making it easier for them to do
business with it.
 This includes configuration, pricing, quotation, catalog and personal generation capabilities
that harness the power of Internet while ensuring the flexibility to respond quickly to changing
technical and business conditions.

 Manages and optimizes company’s sales cycle:

 The productivity of the sale process is increased by the contracting process and improving
revenue velocity.
 This is accompanied to capabilities such as online order entry, credit card processing, tax
calculations, auctions, billing, order status and payment processing.
 CRM solutions also include tools, which provide the ability to communicate important
information from supply chain modules to the customer interface in real time.
 These tools can help in determining feasibility, profitability and delivery dates, while
understanding the constraints of the entire supply production and logistics chain across
multiple channels and enterprises.

 Increases retention of existing customers through improved sales, service and support:
 CRM applications document all post –close service and support related interaction with
customers, record customer requests and collect feedback from variety of communication
channels and use the information to anticipate the demand for service and technical assistance
and maximize customer satisfaction and retention while maximizing customer service staff.
 The goal is to ensure greater customer loyalty.
 CRM provides capabilities for providing online support information, online product
registration to an electronic help desk, self service support logging and tracking and
integration with call centers.

 Identifies Cross selling and up selling opportunities:

 CRM can help in identifying opportunities for cross selling and up selling of higher value
added services to the existing customers, based on their past purchasing behaviour.

11. EXPLAIN THE ROLE OF CRM IN THE CONTEXT OF SCM (SUPPLY CHAIN
MANAGEMENT).
In the context of SCM, where Alliances and Partnerships are keys to success,
 CRM plays an important role in building long-term relationships.
 Apart from the end-users, it involves internal employees, channel members and other external
entities such as advertising agencies and consulting organizations.
 The success of relationships depends upon sharing of savings from the supply chain, which may
be reinvested to further enhance its efficiency, and sustain the competitive advantage.
 The supply chain of tomorrow will look like a virtual organization, seamlessly integrated through
sharing data and savings as well. The bonding between partners will be closely held by CRM
practices.

12. STATE THE ADVANTAGES ENJOYED BY AN ORGANISATION BY USIING SCM

SOFTWARE.
The following are the advantages enjoyed by an organization by using SCM Software, they are:
1. Reduces the inventory
2. The steps of supply chain management are automated
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 3. The efficiency and flow of products are increased
4. Automatically routes the orders from firms manufacturing plant to the suppliers for raw materials.

13. EXPLAIN CRM FROM THE CUSTOMER LIFE CYCLE (CLC) PERSPECTIVE.
 The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC).
However, CLC focuses upon the creation of and delivery of lifetime value to the customer i.e.
looks at the products of services that customers need throughout their lives.
 It is marketing orientated rather than product orientated.
 Essentially, CLC is a summary of the key stages in a customer's relationship with an organization.
 The problem here is that every organization’s product offering is different, which makes it
impossible to draw out a single Life Cycle that is the same for every organization.
 Let's consider an example from the Banking sector.
 HSBC has a number of products that it aims at its customers throughout their lifetime relationship
with the company. Here we apply a CLC.
 You can start young when you want to save money. 11-15 year olds are targeted with the Livecash
Account, and 16-17 year olds with the Right Track Account. Then when (or if) you begin College
or University there are Student Loans, and when you qualify there are Recent Graduate Accounts.
 When you begin work there are many types of current and savings account, and you may wish to
buy property, and so take out a mortgage.
 You could take out a car loan, to buy a vehicle to get you to work. It would also be advisable to
take out a pension. As you progress through your career you begin your own family, and save for
your own children's education.
 You embark upon a number of savings plans and schemes, and ultimately HSBC offer you
pension planning (you may want to insure yourself for funeral expenses - although HSBC may not
offer this!).

 This is how an organization such as HSBC, which is marketing orientated, can recruit and retain
customers, and then extend additional products and services to them - throughout the individual's
life. This is an example of a Customer Life Cycle (CLC).

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13. EXPLAIN CRM FROM THE BUSINESS STRATEGY PERSPECTIVE.
 The diagram below shows the Marketing Teacher Model of CRM and Business Strategy. The
model contains three key phases
 Customer acquisition,
 Customer retention and
 Customer extension,
 And three contextual factors
 Marketing orientation,
 value creation and
 Innovative IT.

1. Customer Acquisition –
 This is the process of attracting our customer for the first their first purchase.
 We have acquired our customer.
 Growth- Through market orientation, innovative IT and value creation we aim to increase the
number of customers that purchase from us for the first time.

2. Customer Retention –
 Our customer returns to us and buys for a second time.
 We keep them as a customer.
 This is most likely to be the purchase of a similar product or service, or the next level of product
or service.
 Growth- Through market orientation, innovative IT and value creation we aim to increase the
number of customers that purchase from us regularly.

3. Customer Extension –
 Our customers are regularly returning to purchase from us.
 We introduce products and services to our loyal customers that may not wholly relate to their
original purchase.
 These are additional, supplementary purchases.
 Of course once our loyal customers have purchased them, our goal is to retain them as customers
for the extended products or services.

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  Growth - Through market orientation, innovative IT and value creation we aim to increase the
number of customers that purchase additional or supplementary products and services.

4. Marketing Orientation –
 Means that the whole organization is focused upon the needs of customers.
 Customer needs are addressed by the Three Levels of a Product whereby the organizations not
only supplies the actual, tangible product, but also the core product and its benefit, and also the
augmented product such as a warranty and customer service.
 Marketing orientation will focus upon the needs of consumers for all three levels of a product.
(N.B. 'market' orientation and 'marketing' orientation are not the same).

5. Value Creation –
 Centers on the generation of shareholder value based upon the satisfaction of customer needs (as
with marketing orientation) and the delivery of a sustainable competitive advantage.

6. Innovative IT –
 It is exactly that - Information Technology must be up-to-date.
 It should be efficient, speedy and focus upon the needs of customers.
 Even as IT and/or software are not the entire story for CRM, it is vital to its success.
 CRM software collects data on consumers and their transactions.
 Huge databases store data on individuals and groups of individuals.
 In some ways, CRM means that an organization is dealing with a segment of one person, since
every consumer displays different purchasing habits and preferences.
 Organizations will track individuals, and try to market products and services to them based upon
similar buyer behavior seen in other individuals (e.g. When Amazon tells you those customers that
viewed/bought the same product as you, also bought another product).

14. WHAT ARE THE RECENT TRENDS IN CUSTOMER RELATIONSHIP MANAGEMENT?

There are many recent trends in Customer Relationship Management followed by the organization they
are as follows:
 Enterprises have increasing started to focus more on Hosted solutions in ASP’s.
 The integration of other activities with CRM activities have become a fast emerging trend for the
recent years.
 The increasing trends for integration of CRM activities with Supply chain, manufacturing and
B2B Market places.
 Providing online access to product information and technical assistance around the clock
 Identifying what customers value and devising appropriate service strategies for each customer
 Providing mechanisms for managing and scheduling follow-up sales calls
 Tracking all contacts with a customer
 Identifying potential problems before they occur
 Providing a user-friendly mechanism for registering customer complaints
 Providing a mechanism for handling problems and complaints
 Providing a mechanism for correcting service deficiencies
 Storing customer interests in order to target customers selectively
 Providing mechanisms for managing and scheduling maintenance, repair, and ongoing Support.

15. WHAT ARE THE DIFFERENT TYPES OF MARKETS?

The different types of markets are as follows:

1. Customer markets – existing and prospective customers as well as intermediaries.
2. Referral markets – existing customers who recommend to other prospects, and referral sources or
‘multipliers’ such as doctors who refer patients to a hospital or a consultant who recommends a specific
IT solution
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3. Influence markets – government, consumer groups, business press and financial analysts.
4. Recruitment markets – for attracting the right employees to the organization
5. Supplier markets – suppliers of raw materials, components, services, etc., and
6. Internal markets - the organization including internal departments and staff.

16. HOW SHOULD A CRM SYSTEM BE?

A CRM system should-

 Identify factors important to clients
 Promote a customer-oriented philosophy
 Adopt customer-based measures
 Develop end-to-end processes to serve customers
 Provide successful customer support
 Handle customer complaints
 Track all aspects of sales

17. EXPLAIN THE ROLE OF INTERNET ON CRM.

 A business can use an Internet presence to reach customers all around the world, explain that the
concept of presence is central to the use, and therefore the usefulness and profitability, of the new
technologies such as the World Wide Web.
 Internet presence has been selected from among six Web site characteristics outlined by Hoffman,
Novak & Chatterjee (1995) because it is the only aspect of Web sites that dominates in business
activities (Hoffman & Novak, 1996).
 In addition, presence on the Internet encompasses the concept of virtual information space as
described by Angehrn (1997).
 This latter concept consists of the new Internet-based channels through which economic agents
can display information about themselves and the products and services they offer.
 Essentially, the level of presence on the Internet refers to the virtual presence of firms and their
offerings.
 The concept of interactivity is complex and multi-dimensional (Lombard & Ditton, 1997).
 Two major aspects distinguishing the Internet from other communication media are the
opportunities for two-way interaction, and the capacity for multimedia.
 A virtual communication space, as defined by Angehrn (1997), will be incorporated in our
definition of the level of interactivity on the Internet, as it is an extension of the traditional spaces
economic agents use to meet, interact, exchange valuable ideas and experiences, influence
opinions, negotiate potential collaborations, engage in relationships, and create communities.
 Therefore, the level of interactivity on the Internet refers to the extent to which organizations
engage in online communication without being affected by distance and time constraints.

18. MENTION THE ADVANTAGES AND DISADVANTAGES BY THE USAGE OF E-MAIL FOR
ORGANISATION.

Email is a system of sending and receiving messages electronically. It is a mode of communication in

which a computer user can compose a message at one terminal and would be received by the recipient
when they check their account. The message can be in the form of the text entered from the keyboard or
the electronic files, which have been stored on the storage media.
 E-mail is free, fast and proactive!
 Sending effective e-mails on a regular basis will help increase your registration numbers, drive
traffic to your website, and build loyalty with your participants. Here’s how:
• E-mail is free. With no production, materials or postage expenses, you can easily and
affordably communicate event information.

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• E-mail is fast. Time-sensitive information including updates pertaining to events and
breaking news can be received within minutes, not days or weeks.
• E-mail generates an immediate response. By providing links within your e-mail, you
give potential participants the opportunity to register right then and there. You can see
the results of your efforts instantly.
• E-mail is targeted. You can easily segment your lists into groups so your e-mails go to
the individuals who are most likely to respond to that particular message.
• E-mail is proactive. Instead of passively waiting for participants to visit your Web
site, e-mail enables you to aggressively communicate with and educate your existing
participants.
• E-mail expands your reach. Grow your database by sending information to your
participants and encourage them to forward the message onto their own friends and
family.
• E-mail allows you to foster long lasting relationships. Build a regular, ongoing
dialogue with those registrants/participants who appreciate the routine communication.
Those who do not can easily opt-out.
• E-mail will grow your organization. Maintaining and growing your e-mail database
will allow you to fully utilize our services, including free Broadcast e-mails and an
upgraded version of HTML e-mails (fee applies) in order to reach more participants.

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 VYSYA COLLEGE, SALEM-103
NAME : ARCHANA.K CLASS: III BBA
SUBJECT : CUSTOMER RELATIONSHIP MANAGEMENT D.O.I : 18/01/10

CONINUATION OF UNIT I....

19. DEFINITION OF INTRANET

An Intranet is an internal information system that works much the same way as the Internet. With one
very important difference - only the people in your organization can access or post information within
your Intranet. Because an Intranet requires private identifications and passwords, it's closed to the rest of
the world. Often, Intranets are used to share calendars, documents and to provide a secure forum for
discussion and commentary.

20. MENTION WHY INTRANET IS IMPORTANT

The intranet is very much important for the organization for the following reasons:
 Improved Communication
 Information sharing and management
 Application access
 Low overall cost
 Cross-platform and cross-database support
 Flexibility
 Vendor independence

21. DEFINITION OF EXTRANET

An Extranet is really just an Intranet that also allows selected outside people in. You decide who can
provide and access information within your Extranet. An Extranet solution can connect your organization
to your clients, customers, and partners - all within a private, secure network.

20. MENTION WHY EXTRANET IS IMPORTANT

 The ability to connect quickly and meaningfully with business partners and customers...is now a
competitive imperative." The fundamental concept behind the Extranet is clear: automated
processing of information is more efficient than doing it manually, bringing about decreased
communication costs, increased procurement efficiencies, and improved supply chain
management.
 Compare an organization that performs manual processing to an organization that not only saves
on the steep staffing costs brought on by manual processing but also reduces inventory levels by
sharing sales transaction information with its suppliers. "Simply put, it costs less to do business
online than it does via traditional channels...which require human intervention."

21. EXPLAIN CUSTOMER INTERACTION MANAGEMENT (CIM)

The Genesys Customer Interaction Management (CIM) Platform ― the powerful, proven core of the
Genesys software suite ― automatically captures, routes, manages, integrates, and reports on inbound and
outbound customer interactions of all types, based on a company’s specific business criteria, to guarantee
the timely and proper treatment of each individual interaction.
The platform centralizes the creation, administration, and management of the customer interaction
process, and integrates with the broadest range of contact center infrastructure, at both the network and
premise levels. With the Genesys CIM Platform, your customer service processes can seamlessly align
with your overall business processes.

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22. STATE THE ADVANTAGES ENJOYED BY ORGANISATATION BY USING CUSTOMER
INTERACTION MANAGEMENT (CIM).

The various benefits enjoyed by organization by implementing CIM are as follows:

 Provides the industry’s most flexible and scalable engine for processing customer interactions, so
that contact centers can add capabilities as their needs change
 Maximizes agent productivity by integrating real-time customer interactions such as voice, chat,
fax, and e-mail with service-related activities such as off-line work item processing
 Creates a universal queue of all interaction types and routes by business priority to the best
available resource, so all customer segments are serviced according to business objectives
 Improves customer service by applying business rules to initiate automatic escalation or trigger
interactions across channels (such as an e-mail triggering an outbound call)
 Leverages existing investments and provides migration choice by integrating with the largest
variety of contact center infrastructure, including next generation IP infrastructure
 Unifies control of all customer contact points

23. WHY ORGANISTIONS LOSE THEIR CUSTOMERS?

Every organization in the current scenario designs an effective customer relationship plan that is very
much required in the current scenario. Even though the plan is focused on retaining the customer there are
certain reasons why organizations lose customers. The reasons for which the organization lose their
customers can be listed down in the following categories:

 Price related reasons

 Product related reason
 Service related reasons
 Benefit related reason
 Competitor related reason
 Personal reasons.

24. WHAT ARE THE RULES FOR SUCCESSFUL CUSTOMER RELATIONSHIP

MANAGEMENT?

 Provide good information. Customer service has to have access to the customer marketing
database. They have to know what each customer has bought in the past, and their profitability.
They have to have a record of past complaints and compliments. They have to know who the key
people are in each firm, and what their attitude is towards their own company and its products.

 Empower customer service. If customer service personnel are just message takers, no one will
unburden themselves to them. Customer service personnel have to represent your firm. They
have to be able to do what the owner of the firm would do: make decisions in the interest of the
customer and the firm. They must be delegated authority to act to solve problems.
 Set up test and control groups. Good customer service is not just “nice to have”. It is highly
profitable. You must prove to management that the money spent on customer service is creating
customer loyalty and profits for the firm. The only way that can be done is to set up control groups
so as to measure correctly the performance of the test groups. Many executives will oppose the
creation of control groups, saying “We must treat all customers alike.” Fight this old fashioned
way of thinking with all your might. Without control groups, you can never prove that what you
are doing is having the desired effects and justifies your enlarged customer service budget.

**** END OF UNIT I****

UNIT II
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CUSTOMER LOYALTY- CUSTOMER DECISION MAKING PROCESS- LOYALTY LADDER-
SIGNIFICANCE OF LOYAL CUSTOMERS- IMPACT OF LOYAL CUSTOMERS
CUSTOMER LOYALTY:
1. DEFINITION OF LOYALTY:

Loyalty may be defined as “The biased behavioural response, expressed over time by some decision
making unit with respect to one out of a set of processes resulting in brand commitment”.

2. RELATIONSHIP THROUGH LOYALTY

It was though that more loyal customer would do more repeat business and develop a larger acceptance
which therefore increases the profit of the firm. Building the customer loyalty form the basic platform for
building the relationship with the customers. For the present competitive environment the organisations
are blessed with more number of loyal customers who form an inventory for the customer database. Thus
an organisation can form a competitive edge comparing to their competitors by the usage of CRM
Practices which in turn increases the number of loyal customers.

3. MENTION THE ADVANTAGES FOR ORGANISATION BY SETTING UP LOYALTY

PROGRAMMES./ SIGNIFICANCE OF LOYAL CUSTOMERS.
 Building lasting relationships with customers by rewarding them for their patronage
 Gathering high profits through extended product usage and cross-selling
 Gathering customer information
 Decommodifying brands i.e., differentiating from crowds
 Defending market position
 Planning against competitive activity.

4. CLASSIFICATION OF CUSTOMERS WITH REFERENCE TO LOYALTY:

There are six classifications of customers in respect of loyalty:

 CURRENT LOYAL CUSTOMERS who will continue to use the product or service
 CURRENT CUSTOMERS who may switch to another brand
 OCCASIONAL CUSTOMERS who would increase consumption of the brand if the incentives
were right.
 OCCASIONAL CUSTOMERS who would decrease consumption of the brand if competitor
offered the right incentive.
 NON-USERS who could become customers.
 NON- USERS who could never become customers.

It is important to distinguish between loyalty to the generic, product and brand of particular supplier.
 Many people drink coffee as beverage. Those who drink considerable quantity of coffee can be
described as having a product loyalty. Within the group, there will be some that buy just the
cheapest coffee or drink whatever available. They are product loyal but not brand loyal.
 They are not disloyal as that implies that there has been a loyalty, but they have no loyalty at all to
a particular brand. Those who have a particular brand loyalty, they always buy a particular brand
or at least a brand from the same product.

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5. WHAT ARE THE DIFFERENT TYPES OF CUSTOMER LOYALTY?

The different types of customer loyalty can be classified under the following categories as:
1. Supplier Loyalty:
 Many customers are not only loyal to a particular brand, but also loyal to particular
supplier, a type of customer known as hostage i.e., somebody who has no choice but to be
a customer of a particular brand or supplier.
 Such a situation could occur in a small village community where there is only a shop
selling perhaps just one brand of bread. A customer who is without transport could be
forced, if they really want bread beans, to be loyal to that one brand and that one supplier.
The term introduced for this is PSEUDO-LOYALTY.
2. Supra-Loyalty :
 Supra-loyalty is a term that can be applied to those who are extremely loyal to an
organization, product or service.
 In the case of loyalty to an organization, that have normally build up a personal
relationship with the organization over a period of time or in these of product/service,
identify themselves with it.
 It is as if they have internalized relationship and consider themselves almost part of the
organization instead of being a customer.
3. De-loyalty:
 A customer who makes a deliberate decision to move to another organization because he
or she has been let down by an organization that they were previously loyal can be
described as being DE-LOYAL.
 This is not same as disloyalty, which suggests that it is the customer who is doing
something wrong. In the case of de-loyalty, it is the organization which has let the
customer down.
 There is evidence that people are willing to forgive one mistake or one case of poor
service. Customer loyalty can be retained even after a mistake provided that rectification
(an apology) is speedily forthcoming.
 However, if a super-loyal customer becomes disenchanted, they may take their business
elsewhere, in effect becoming de-loyal. If they are very disappointed they may become
ANTI-LOYAL, seek retribution against the organization.
4. Disloyalty:
 It is a mute point as to whether a customer can actually be disloyal. Customers owe
nothing, in terms of loyalty to suppliers. Many customers may feel that they are being
disloyal if they go elsewhere but feeling disloyal is not the same as being disloyal.
 The only obligation actually placed on the customer is to render payment for the product or
service provided by payment of monetary and other terms. Organizations, having a
responsibility to their customers, can be disloyal too.
 Disloyalty is not providing a product or service deliberately to a previously loyal customer.
An example of this would be an organization that treated a new customer better,
deliberately or unintentionally than the existing customers.
 In this case, the organization would be being disloyal to relationship that had been built up.
If the existing customer decides to go elsewhere, then they would be making a perfectly
valid and proper decision. Disloyalty implies an act and not the customer is capable of
such an act.
 The customer may be a – loyal, de-loyal or even anti-loyal but never disloyal

6. DEFINE COMFORT ZONES.

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In terms of relationship between customer relations and loyalty, the concept of comfort zones can be used
to explain why customers stay loyal to an organization or product even if another is convenient.
Customers tend to stick to what they know. This form of loyalty is termed as Comfort Loyalty.
Linked to the effect of comfort zones is the cost of customer of switching to no other supplier or product.
In the case of everyday house hold goods (FMCG), there may be no cost. However, switching, say
computer operating systems may require a purchase of new software, changing to another make of a car
may require building up a relationship with a new supplier and dealer and these costs can be perceived as
too high. They may not be monetary at all; often they are time and effort consuming and cost the
consumer never the less.
7. EXPLAIN CUSTOMER LIFE TIME VALUE:
Customer lifetime value has
 Intuitive appeal as a marketing concept, because in theory it represents exactly how much each
customer is worth in monetary terms, and therefore exactly how much a marketing department
should be willing to spend to acquire each customer.
 In reality, it is difficult to make accurate calculations of customer lifetime value. The specific
calculation depends on the nature of the customer relationship.
 Customer relationships are often divided into two categories.
o In contractual or retention situations, customers who do not renew are considered "lost for
good". Magazine subscriptions and car insurance are examples of customer retention
situations.
o The other category is referred to as customer migrations situations. In customer migration
situations, a customer who does not buy (in a given period or from a given catalogue) is
still considered a customer of the firm because she may very well buy at some point in the
future. In customer retention situations, the firm knows when the relationship is over. One
of the challenges for firms in customer migration situations is that the firm may not know
when the relationship is over (as far as the customer is concerned).

8. MENTION THE MODELS / TYPES TO CALCULATE CUSTOMER LIFE TIME VALUE.

The models make several simplifying assumptions and often involve the following inputs:
 Churn rate: The percentage of customers who end their relationship with a company in a given
period. One minus the churn rate is the retention rate. Most models can be written using either
churn rate or retention rate. If the model uses only one churn rate, the assumption is that the churn
rate is constant across the life of the customer relationship.
 Discount rate: The cost of capital used to discount future revenue from a customer. Discounting
is an advanced topic that is frequently ignored in customer lifetime value calculations. The current
interest rate is sometimes used as a simple (but incorrect) proxy for discount rate.
 Retention cost The amount of money a company has to spend in a given period to retain an
existing customer. Retention costs include customer support, billing, promotional incentives, etc.
 Period The unit of time into which a customer relationship is divided for analysis. A year is the
most commonly used period. Customer lifetime value is a multi-period calculation, usually
stretching 3-7 years into the future. In practice, analysis beyond this point is viewed as too
speculative to be reliable. The number of periods used in the calculation is sometimes referred to
as the model horizon.
 Periodic Revenue The amount of revenue collected from a customer in the period.

15
  Profit Margin Profit as a percentage of revenue. Depending on circumstances this may be
reflected as a percentage of gross or net profit. For incremental marketing that does not incur any
incremental overhead that would be allocated against profit, gross profit margins are acceptable.

9. HOW CAN THE LOYALTY OF THE CUSTOMER ADD STRATEGIC VALUE OF BRAND
FOR AN ORGANISATION?

Loyalty is at the heart of equity and is one of important brand assets. Brand loyalty is a conscious or
unconscious decision expressed through intention or behavior to repurchase a brand continually. When
the consumer buys with respect to product features, price and convenience, with little concern to the
brand there is likely little equity. But, if the consumers prefer the brand even at the face of competitors
with superior features and offers, then brand is said to have high brand equity. Loyalty reflects the
consumer’s attitude towards the brand, especially when there is a change, either in price or product
features. As the brand loyalty increases, the openness of the customer base to competitive action gets
reduced.

As per Aaker’s point of view the above factors produce a strategic value to the organization by brand
loyalty of customers.

Reduced Marketing Cost:

Loyal customers minimize the cost of running business because the amount spent on getting new
customers is far more than retaining present customers. The higher the loyalty, the easier it is to keep
customers happy. Loyal customer becomes an advocate for the brand, without any incentive. Loyalty base
of customers, act as a strong entry barrier for potential entrants by which an organization can minimize
the risk.

Trade Leverage:
A brand having strong loyalty base force the retailers to maintain adequate stock and allot enough shelf
space to accommodate the brand. At the extreme, customer’s shop choice depends on where their
preferred brand is available. So, at the retail brands enjoy special recognition and treatment.

Attracting New Customer:

The Existing loyal customers help the marketers to get more business through prospective customer. They
create awareness of the brand among friends and colleagues, who develop positive attitude towards the
brand by actually seeing the brand in action. Brand image is projected by these customers especially when
16
the product requires after sales service or, prospective customers require assurance of product
performance.

Time to Respond to the Competitive Threats:

Loyalty base also supports marketers against competitor’s innovation by providing sufficient time for
them to retaliate.

10. METHODS / STRATEGIES TO BUILD AND MAINTAIN LOYALTY

Retaining the customers, keeping them happy, enhancing their satisfaction level is the continuous
endeavor of any organization as it cannot afford to miss any of the loyal customers. Ever changing Indian
consumer, cut throat competition and emerging new technologies are the thrown challenges to develop
loyalty programmes.
Some of the strategies that suit the Indian context are discussed below.

 Customer Relationship Management (CRM)

In simple words,
 CRM is the process of acquiring, retaining and growing profitable customers.
 It is not a mere technique, but a management culture to build and sustain an effective
customer relationship.
 Organizations must significantly revamp their traditional learning and knowledge
management programs.
 The customer relationship management model, with its customer-centric focus, places the
customer’s needs first. IT involves the fundamental steps:

1. Understanding customer completely

2. Aligning organizational capability in order to better deliver what its customers
may perceive as high value.
 Facilitating the information which available both inside and outside the organization.
 The result of successful implementation of CRM creates great value of marketers and
customers which leads to mutual trust and loyalty.

Following are the advantages of it over traditional loyalty building methods:

 Reduce advertising cost
 Makes it easier to target specific customers by focusing on their needs
 Allows organizations to complete for customers based on service, but not on price
 Prevents over spending on low-value clients or under spending on high-values ones.

In India the CRM model is widely used in manufacturing and service organizations as a brand loyalty
tool.

 Brand Relationship Management (BRM)

 BRM is newly developed holistic approach to retain customers and create brand loyalty. It
stands for all activities linked with ‘relational exchanges’ and ‘transactional exchanges’.
 It helps to establish, maintain, and develop the relationship between a brand and its
consumers. Its integrated effort continuously strengthens the relationship through
interactive, individualized, and value added contacts.
 This leads to a mutual exchange and fulfillment of promises in future.
 BRM Process: BRM focuses on generating trials and repeat purchases, builds high share
of requirement (i.e. product’s market share for a specific consumer). This result in
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 customer’s affinity towards the brand and builds brand relationship. The bond between
brand and customer becomes strong and thereby leads to mutual trust which eventually
results in brand loyalty.
 Key steps to manage BRM
 Identifying the key driving force of brand preference
 Estimating expected brand utility of consumers
 Analyzing the customer response for each market stimuli
 Grouping target customers into actionable segments based on profitability, usage
and characteristics
 Defining offers and corresponding value proposition that meets the identified need

 Communicate. Whether it is an email newsletter, monthly flier, a reminder card for a tune up, or a
holiday greeting card, reach out to your steady customers

 Customer Service. Go the extra distance and meet customer needs. Train the staff to do the same.
Customers remember being treated well.

 Employee Loyalty. Loyalty works from the top down. If you are loyal to your employees, they
will feel positively about their jobs and pass that loyalty along to your customers.

 Employee Training. Train employees in the manner that you want them to interact with
customers. Empower employees to make decisions that benefit the customer.

 Customer Incentives. Give customers a reason to return to your business. For instance, because
children outgrow shoes quickly, the owner of a children’s shoe store might offer a card that makes
the tenth pair of shoes half price. Likewise, a dentist may give a free cleaning to anyone who has
seen him regularly for five years.

 Product Awareness. Know what your steady patrons purchase and keep these items in stock. Add
other products and/or services that accompany or compliment the products that your regular
customers buy regularly. And make sure that your staff understands everything they can about
your products.

 Reliability. If you say a purchase will arrive on Wednesday, deliver it on Wednesday. Be reliable.
If something goes wrong, let customers know immediately and compensate them for their
inconvenience.

 Be Flexible. Try to solve customer problems or complaints to the best of your ability. Excuses —
such as "That's our policy" — will lose more customers then setting the store on fire. Read our 60-
Second Guide to Managing Upset Customers for more information.

 People over Technology. The harder it is for a customer to speak to a human being when he or
she has a problem, the less likely it is that you will see that customer again.

 Know Their Names. Remember the theme song to the television show Cheers? Get to know the
names of regular customers or at least recognize their faces.

11. WHY IS LOYALTY PROGRAMMES NEEDED? EXPLAIN IT WITH SOME EXAMPLES OF

BRAND LOYALTY PROGRAMS.

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  Loyalty programs are designed to optimize every customer contact by offering an incentive to his
buying behavior.
 Though it varies from category to category, today’s programs are mainly focused on this area.
 The main objective of these programs is aimed at the highest end customer’s retention.
 Some loyalty programs are intended to achieve new customers and maximize the use of the brand.

Following are some of the popular loyalty programs designed for Indian consumers by different
companies.

 Indian Club (From Tata Indica):

- Loyalty program includes 30,000-odd Indica customers from a client base of more than
1.35lakhs. These club members are provided with several benefits such as preferential
treatment and discount at retail showrooms of Titan, Tanishq, hotels attached to the Taj
Group and some restaurants.

 First Citizen Club (From Shopper’s Stop):

- Shopper’s stop is one of the first major chains that have been working on ways to manage
its customer information for competitive advantage. It started ‘First Citizen Club’ for
regular visiting customers. Its major functions include customer information capture,
intelligent warehousing and mining of transaction behavior. It emerged successfully by
generating sales and continuously adding more people to it.

 Book Reward Programs (From Crossword):

- Mumbai based chain of book stores runs this programs to increase the frequency of
regular customers. Crossword has developed a benefit system quite differently based on
the points that members earn, which can be redeemed against purchases. Members get
benefit every month. The benefit could be a free gift, a discount or an every month. The
benefit could be a free gift, a discount or an event. The idea is that the customers have to
come to the store to pick up the gift.

 Taj Inner Circle Card (From Taj Hotels):

- Taj hotels provide both tangible and intangible benefits to their regular customers in the
form of discounts and image building.

 Jet Privilege Program (From Jet Airways):

- This program is to recognize the most loyal customers and also to focus on customers who
are not so frequent, but who at some point will be made most loyal. This program awards
points to the customers for special discounts and packages.

 Mobile Industry (From BPL & Orange):

- Unique features of this industry is to built-in barriers to switching brands as changing the
brand gives the inconvenience of changing the number. In this industry, loyalty programs
are designed more towards increasing a customer’s usage and their tenure by offering more
discounts in shops and restaurants.

12. EXPLAIN THE MEASUREMENT OF BRAND LOYALTY

 The criteria and factors considered for loyalty measurements is different at each level of loyalty as
the degree of loyalty and nature of relationship changes.
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  In the bottom levels loyalty is not recognizable. Loyalty measurement at this level is in terms of
sales turnover, product’s profit margins, price attractiveness and price sensitivity.
 These are the major factors for purchase and repurchase behavior of customers at these levels.
 At the middle level, loyalty is measured through satisfaction level. Total spending on brand, liking
– which is scaled in variety of ways like respect, friendship, trust etc, and the reasons attributed.
 Another important measurement for customer’s commitment is their involvement in spreading
good word of mouth and number of people to whom they refer the brand.
 Measurement tools include structured questionnaire (both closed-end, open –end), likert scale,
semantic differential scale, attitude rating scales, projective techniques and in-depth interviews.

13. WHAT IS THE LADDER OF LOYALTY? EXPLAIN IT WITH BRIEF EXLANATION.

The ladder of loyalty shows the different stages through which a prospect becomes a customer, a client
and finally a partner.

Prospect:
 The prospect is an individual in a retail market or an organization in the business market, which
fulfils the requirement of the marketer’s definition of target.
 For example, a cellular service provider may segment the market and target executives in blue
chip companies with a special offer.

Customer:
 The prospect becomes a customer when she /he gets attracted by the offering of the marketer and
buys the product / service.

Client:
 A customer becomes a client when she /he purchase the product or service more than once.
 While a customer may make the initial purchase as a trial or test, the client is one who does a
repeat purchase.
 It is likely that the trial was a satisfactory experience for the client. In several buying situation,
customers becomes client due to the nature of the product or service.
 For example, the purchase of a durable product like a PC, TV or Car result in the customer
becoming a client of the associated services like servicing.

20
  Some services like banking, insurance, club, fixed line telephone services etc., are ‘membership’
services which makes it difficult, if not impossible, for customers to switch.
 Prospects may spend a lot of time and efforts in searching for information, making comparisons
and then making the selection.
 After all the efforts, once we open an account, take an insurance policy / a club membership / a
telecom service is brought, the customer continues patronizing the service provider.
 It does not mean that this customer is a long term loyal client. Many a time it is the sheer inertia
that makes customer continue in a relationship.
 Therefore in these categories, the customer and the organization are likely to have an association
of a longer duration.
 However, in many buying situation like retailing, hospitality, airlines or fast moving consumer
goods, customer can switch after trial, i.e. testing it and then decide to use a competitor’s offering.
 The nature of the product or service does not ensure repeat purchase. It is a customer’s satisfaction
with the first purchase and consumption that determine repurchase.
 Customers can also become client when organization crosses – sell multiple products to an
existing customer.
 A good example of such a firm is Wells Fargo, a leading financial services firm in the US. On an
average this firm sells more than four of its services to each customer (more than twice the
industry average). This has ensured that customers do not switch as frequently from this firm,
increasing its profitability as whole.

Supporter:
 A client becomes a supporter when he satisfies with the offering and recommends it to his friend,
relatives and acquaintances. This positive Word – Of – Mouth (WOM) has tremendous positive
impact as it helps the company get new customer. WOM is a most influential source of
information in converting prospects into customer.

Advocate:
 An advocate is a supporter who, in addition to referrals that gives increases sales, proactively
works with the company to improve its product and services.
 While developing new products software companies regularly depend on the feedback from the
lead users of their clients during the Beta test phase.
 So is a case in new product development situation in several industrial firms, who set up the
prototype in their client’s premises for usage and feedback, which helps in improvement.
 In this situation, the level of interaction between the customer and the company is at a much
higher plane.
 There is sharing of vital information and the comfort level as well as the confidence between the
parties is high.

Partner:
 An advocate becomes a partner when they become actively involved in the decisions of the
company. Any relationship that attempts to develop customer value through partnering activities is
likely to create greater bonding between customers and marketers.
 In many cases, there are joint investments resulting in a structural bonding. Examples include the
kind of relationship that exists between Procter and Gamble and Wal Mart, the world’s largest
retailers. This relationship is characterized by genuine partnership.
 Wal Mart shares the scanner data from its checkout counters in it’s over 4,500 stores through
satellite. This information gives the movement of P & G’s products, the status of stocks in its
21
 outlets and helps the joint teams comprising of P&G and Wal Mart executives to plan
replenishments.
 It helps P&G plan its production, better management of its production runs and keep its
inventories low as it no longer depends on sales forecasts but actual sales data. Overall, it reduces
the selling costs to P&G.
 Wal Mart gains as it does not have to keep inventories, gets faster replenishments, incurs low cost
and is able to pass on the saving to the customers, thus, reinforcing its image of ‘Everyday Low
Prices’ among its customers.

13. HOW CAN AN ORGANISATION INCREASE CUSTOMER LOYALTY?

The organization can increase the customer loyalty by following a three-phase approach that in turn
increases customer satisfaction and loyalty.
Steps
Step 1 - From dissatisfied to satisfied customer
Step 2 - From satisfied to totally satisfied
customer
Step 3 - To maintain total customer satisfaction
(highly loyal)
Action
Deliver, at competitive prices, basic products or
services as expected by anyone in the industry.
 Examine your product and service from the
customer's perspective to pinpoint and eliminate
irritants (making it very easy to do business with
you).
 Constantly improve product or service
delivery to meet (and even exceed) customer
expectation (providing more than yesterday and
less than tomorrow).
 Develop proactive service recovery to make
amends when something goes wrong and provide
customers with feedback of results.
 Repeat actions from Step 2.
 Be consistent and very dependable.

Examples

In the last decade, a large number of car dealerships have expanded their services to include overnight
and express drop-off, loaner vehicles, and free washing and waxing. Some also have instituted the
practice of checking back with customers within 24 hours to make sure the problem was fixed properly. If
there is still a problem, fixing it becomes a top priority.
14. WRITE A NOTE ON THE FACTORS THAT RELATE TO BUILD LOYALTY.

 UNDERSTANDING BRAND
 It is essential to understand everything about brand.
 The underlying fact is that, brand plays a key role towards attracting and retaining
sustainable relationships with customers.
 Brand is not merely a term, symbol or a mark that is associated with a certain class of
product for the purpose of easy identification.
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  It is more than that. Brand represents that combination of tangible and intangible motives
of a customer looking for satisfying his core as well as augmented needs.
 Brand is an identification that reveals what attributes is embodied in it, the specific values
it stands for, and the associated aspects.

 PROCESS OF BRAND CHOICE

 The process of brand choice is a purposeful action plan of selecting a specific brand from
the total brands available. The process will take the following sequences.

 The criterion that guides the action plan is matching expectations of the customer with
what the brand could do.
 The expectations are shaped by the influence of various factors that are interrelated and
not easily justifiable or predictable.

 CUSTOMER LOYALTY AND TYPES

 Loyalty in the marketing context may be defined as willful, voluntary, respected choice of
a specific brand of a product or type of service.
 Loyalty fulfills a particular category of need. In the case of one-sided purchase, loyalty
could be explained in terms of the extent of commitment to the brand selected; the positive
attitude developed towards using the brand selected and the positive image the customer
projects about the brand he owns.
 Loyalty may be explained further. Suppose a buyer visits a shop in anticipation of selecting
a brand by opting for a specific service, the buyer would prefer not to buy any substitute in
the case of non-availability of a brand he has specifically opted for. He would prefer
waiting for the brand of his preference.
 Loyalty in a sense is willful commitment to the brand in view of perceived satisfaction.
 Customer loyalty may fall into several types that include:
- Loyalty towards brands
- Loyalty towards stores
- Loyalty towards organization
- Loyalty towards sales persons
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 - Loyalty towards any other related aspect in the process of purchase and
consumption

 BRAND SWITCHING BEHAVIOUR OF CUSTOMERS

 Brand switching is the behavioral action of the customer with reference to their choice of
brand.
 A number of factors are responsible in initiating the brand switching behavior. These
include:
- Dissatisfaction with present brand
- Change in fashion
- Promises made by competitors
- Change in perceived benefits
- Personal characteristics of the customer concerned
- Pressure of sales persons and so on
- Personal reasons
 Every organization aiming to build customer loyalty must concentrate on the pattern of
brand switching to safeguard them with suitable marketing strategies.

 STEPS TO BE FOLLOWED TOWARDS REACHING LOYAL CUSTOMERS

 The reach of loyal customer involves a sequence of actions, starting with identification of
the market for the product concerned. The sequence has been illustrated as below:

 The market for a brand constitutes the potential customers for the brand.
 When the brand already exists, the market comprises of current customers for brand would
have been manufactured in tune with the minimum requirements or in tune with the
brand’s characteristics, a market is to be developed.
 From mass marketing, the marketers have switched over to targeting segmented markets.
 This approach is because of a number of advantages being associated therewith.
 Under the mass marketing approach, marketers consider the whole market as an
undifferentiated one and adopt the same marketing mix strategies without any
differentiation to attain marketing goals.
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  In the target market, potential customers would be identified by means of a systematic
approach.
 The prospecting would help in identifying large number of potential customers in the
target market, who are the foundation of loyal customers and therefore he prospect
identification could be called as the lifeblood of the entire scope of marketing activities.
 In a broader sense, all those who are involved in the process of transfer of partnership of a
product from the production centre to the consumption centre are customers, and not
merely the one who merely enjoys the benefit of a product or service.
 A customer reaches the status of a loyal customer by going through a series of stages.

15. WHY DOES ORGANIZATION NEED LOYAL CUSTOMERS?

 Loyal customers are the assets of an organization. Loyal customers play six important roles, and
through each role they contribute effectively towards the betterment of the organization.
 The role played by the customers is those of:
- The partner
- The advisor
- The custodian
- The resource provider
- The change driver
- The experience shaper
 Loyal customers are resources in the sense that the organization can depend on them with respect
to the brands and brand extension programs. If the hardcore loyal customers are more in the
customer inventory, the risk in relation to all marketing decisions minimum.
 The loyal customer provides a simulated experience to the prospective customers and thereby
helps in attracting new customers.
 The role of the loyal customers play as change drivers and experience shapers are more
significant.
 In view of cultural, social, technological background of the loyal customers, they would show the
new directions in which the organization could diversify in future.
 As such, the organization would emerge as a customer driven responsive organization capable of
providing their customers, products and services meant for meeting their life-maintenance, life-
changing and life-enhancing requirements.
 Loyal customers enable the organizations to run on very less operational costs.
 There is no acquisition cost or very little acquisition cost from the view point of recruiting
customers for new products, a the existing loyal customers will yield themselves as customers as
volume of purchase by loyal customers will be more by the same efforts put forth by the
organization.

16. WHAT ARE THE STEPS INVOLVED IN CUSTOMER DECISION MAKING PROCESS?

The decision process has the following sequence of actions. They are:

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17. WHO IS A LOST CUSTOMER AND WHAT ARE THE IMPACTS OF LOST CUSTOMERS?

A lost customer is a person who no more acts as a loyal customer for the organization. The impacts of lost
customers on organizations are:
 The dangers of new entrants
- Way for a new potential supplier to enter inside the market by implementing the changes
expected by the customers
 New proposals
- When the need of customer is not fulfilled there are chances for the chances of new
proposal by the competitors
 Reduction of market share
- Heavy loss on profits, market share and revenues that are gained due to the customers.

18. WHAT ARE THE REASONS WHY A CUSTOMER DEFECTS?

It is essential for an organization to identify why a customer becomes a defector for an organization. The
reasons for which the customer defects can be listed down as follows:
 Customer needs not fulfilled
 Movement to different product category
 Not satisfied with the marketing mix
 Earning a better value of the product from the competitor
 Misunderstanding of product value system
 Not satisfied with the point of purchase
 External compulsion to shift to new trends
 Personal reasons.

****END OF UNIT II****

VYSYA COLLEGE, SALEM-103

NAME : ARCHANA.K CLASS: III BBA
SUBJECT : CUSTOMER RELATIONSHIP MANAGEMENT D.O.I : 28/02/10

UNIT III

26
CUSTOMER DATABASE- MEANING- DEFINITION-TYPES- BASED ON
INFORMATION- BASED ON NATURE- DATABASE MARKETING- PROCESS OF
DATABASE MARKETING- APPROACHES OF DATABASE MARKETING -
RELATIONSHIP BETWEEN CRM AND DATABASE MARKETING- APPLICATIONS
OF DATABASE MARKETING IN RELATIONSHIP MANAGEMENT
1. DEFINE DATABASE.

 A database is a collection of information that is organized so that it can easily be accessed,

managed, and updated.
 In one view, databases can be classified according to types of content: bibliographic, full-text,
numeric, and images.
 A database management system is a suite of software applications that together make it possible
for people or businesses to store, modify, and extract information from a database.

2. WHAT DO YOU MEAN BY A CUSTOMER DATABASE?

Meaning of Customer Database

 Collection of records of consumer purchasing patterns and histories stored in a computer system
and organized so that it can be retrieved quickly to provide information for a variety of uses.
 Information contained in a customer database is obtained from store receipts, credit card
purchases, mail-order requests, information inquiries, and other sources demonstrating customer
preferences or predisposition to purchasing a product.
 Customer databases are useful to marketers when planning promotions for new products, repeat
sales, or cross-selling techniques.

3. WHAT ARE THE DIFFERENT TYPES OF DATABASES?

The types and nature of databases depend on the criteria we can use to group databases. If we do not limit
the discussion to marketing or customer database, database used in companies can first be categorized
using the main business functions. We can differentiate the databases as the following:
 Databases supporting decision making activities. For example: marketing databases, product
development databases
 Databases managing business operations. For example: account payable database, cost accounting
database, pay roll database

4. WHAT ARE THE DIFFERENT KINDS OF DATABASES BASED ON THE INFORMATION

INCLUDED IN THE DATABASES?

There are four types of databases that are classified on the basis of the information included in the
databases. They are as follows:
 Customer database
 Prospects database
 Cluster database
 Enhancement database

5. WHAT ARE THE DIFFERENT KINDS OF DATABASE CLASSIFIED ON THE BASIS OF

THE NATURE OF UNDERLYING ACTIVITIES?

The different kinds of databases classified on the basis of the nature of underlying activities are as
follows:
 Passive marketing database
 Active marketing database

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PASSIVE MARKETING DATABASE:
 A passive marketing database involves generating a customer list and then storing this list in the
database.
 Future marketing efforts target the same customer in the list.
 The database is only a mailing list passively storing information about acquired customers and has
no active influence on the company’s strategic marketing decisions.
 This may be a suboptimal use of the company’s data resources.
 Most of the customer databases can be used as a passive database where in a company keeps
buying related database every time it need information for campaigns.

ACTIVE MARKETING DATABASE

 An active marketing database can be used to develop strategic marketing plans.
 Every marketing plan is designed to carry out the plan will then be data driven.
 The results of the program would be used to update the database.
 The updated database finally helps the marketers to redesign the strategic marketing plan.

6. WHAT ARE THE DIFFERENT KINDS OF DATABASE CLASSIFIED ON THE BASIS OF

DATABASE TECHNOLOGY?

The databases can be categorized according to their underlying technology. They are as follows:

 Hierarchical database
 Inverted database
 Relational database

HIERARCHICAL DATABASE
 A hierarchical database is useful when the queries are standard and routine, but high speed
processing is paired.
 They are preferred in banking, airline and hotel industries.
 All information regarding to the customers will be in master record
 Hence cross referring is not needed.
 They are used in mainframe technology.
 They are huge in size and they are still used in all database supporting critical applications.

INVERTED DATABASE
 Best suited for direct marketing
 Have speed and flexibility of responding to unanticipated questions
 Easy to add new data and also access it very easily

RELATIONAL DATABASE
 They are composed with many simple
 User can create queries to extract information from these tables to recombine it
 Compared to others level of flexibility is high
 Whereas the speed of accessibility is comparatively slower.
7. DEFINE DATABASE MARKETING

 Database marketing is the analysis and use of customer databases to aid in the direct marketing of
products.
 One of the biggest challenges any sales enterprise faces is in finding potential customers for their
products.

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  Billions are spent each year in product marketing, though much of this expenditure is wasted
through the use of inaccurate data and bad marketing decisions

8. EXPLAIN DATABASE MARKETING

 Database marketing (DBM) is often viewed as a tactical marketing tool rather

than a strategic one, and as a capability that is easily developed (Cooke, 1994).
 In fact, DBM is a sophisticated process that requires a systemic approach that
integrates a number of organizational departments.
 Without a systemic approach to DBM, the marketing capability of an organization
may be underdeveloped.
 The term ‘database marketing’ will be used in this paper to include business-to-
consumer applications of direct marketing, where direct contact is made with a
customer.
 DBM is an interactive approach to marketing using individually addressable
media and channels (Shaw, 1993).
 The terms ‘data mining’ and ‘predictive modeling’ are used interchangeably to
mean the process of analyzing customer data to produce models that predict the
behavior of the population in question.
 Much of the advanced practice in DBM is performed within private organizations,
which may explain partly the lack of articles published in the academic literature
that study DBM issues (Blat berg, 1987; Bult and Wansbeek, 1995; DeTienne and
Thompson, 1996; Dwyer, 1989).
 The successful use of DBM as a strategic tool can give competitive advantage to
an organization.
 The benefits of DBM include improvements in the ability to control costs, plan
budgets and measure marketing plan performance, the identification of strategic
advantage through better use of customer and market information, the
facilitation of long-term customer relationships that increase lifetime value and
loyalty, improved accuracy in customer segmentation, and the ability to relate
customer characteristics to behavior (Desai et al., 2001; Desai et al., 1998;
Lewington et al., 1996).
 However, a major inhibitor to DBM is that it requires strategic and organizational
changes beyond technological superiority to gain many of the benefits of its
capabilities.

9. EXPLAIN THE PROCESS OF DATABASE MARKETING.

A database marketing practice integrates data, people, systems, reporting, analytics, statistics, strategy,
and processes to improve marketing performance. It provides the platform required to support marketing
performance measurement. It must support an organization’s mission and overall strategy. Misalignment
with strategy, poor planning, conflicting goals, over-simplification of tasks, and limited resources lead to
failed attempts and wasted resources.

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Database marketing is not a standalone practice – its reach crosses functional areas, processes and
multiple data sources. To support a successful practice, an organization must:
 Dedicate the appropriate resources: data, processes, and people
 Create marketing objectives to support the overall company business goals
 Evaluate and perhaps change long standing processes
 Support database marketing activities across many functional departments
 Institutionalize the database marketing concept
 Practice patience
Implemented successfully, the end result will be tangible marketing intelligence in the form of reports,
analytics and models that leads to improved marketing performance.

10. EXPLAIN THE APPROACHES OF DATABASE MARKETING

A database marketing initiative will typically follow a three-part approach.

Discovery/Insights
 Establish company alignment around business goals and marketing objectives
 Identify internal resources and evaluate functional competencies

 Recognize gaps and create a plan to fill the gaps

 Document existing marketing processes and critically evaluate each
 Create a process and functionality wish list and select only the most important
 Audit existing data sources, formats, availability, and quality
 Identify additional data sources to be included
 Assess each data source for usefulness and necessity. Take care not to store unnecessary data

Formulation/Validation
 Develop a database marketing strategy to support marketing objectives and company goals
 Prioritize initiatives using ROI metrics, resource availability, and dependencies

 Define database requirements

 Design a database
 Establish data hygiene and cleansing routines
o Deducing

o House holding

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 o Merge/Purge

o Standardization

o Match codes

o Migrating prospects to customers

o Suppression

o Coding for promotions

 Develop the marketing campaign

 Create metrics and measurements

Deployment/Optimization
 Launch and run the marketing campaign
 Capture campaign history and response data

 Develop meaningful, insightful reports

 Execute and automate campaign/event analysis
 Expand customer knowledge through profiling and segmentation
 Optimize marketing efforts through testing
 Utilize statistics, modelling, and data mining to improve marketing effectiveness and efficiency
 Implement a Marketing Performance Measurement system

Ideally, an organization would have the luxury of following this path as prescribed above. Though in
reality, many of these initiatives must be addressed in tandem. In the beginning, campaigns may have to
be analyzed in the absence of a database, lists have to be pulled before data is fully cleansed, and models
are often built without complete data. Successful database marketing professionals will be able to juggle
individual initiatives at different stages while simultaneously guiding the entire organization onto a
smoother path.

Persistence pays off. Getting an initial database marketing practice launched and incorporated into the
operations of an organization can be a long endeavor. Once this hurdle is passed, the benefits of
maintaining discipline to follow the processes designed will have great benefits. The creation of a
database marketing practice and a repository of marketing results are valuable assets for the company.
They will provide the intelligence that marketing organizations lack to prove that company goals are
being met. And if all goes well, restore credibility to the marketing team.

11. RELATIONSHIP BETWEEN DATABASE MARKETING AND CRM

Database marketing is a data driven approach towards providing an integrated multichannel customer
centric environment for a customer better customer experience.
Also CRM is a process driven approach towards providing an integrated multichannel customer centric
environment for a customer better customer experience.
So finally the difference between the above two just drops down to one being a data driven or product
driven approach and the other being a process driven approach.

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12. APPLICATIONS OF DATABASE MARKETING IN RELATIONSHIP MANAGEMENT

In an effort to more effectively target potential customers, many enterprises use database marketing to
build models of their target demographic group, track down these groups and focus their advertising
budgets on them in the hope that it will result in an improved return on investment (ROI) from their
advertising spend.

Data Sources
At its most basic level, database marketing is the analysis of databases holding information about
previous or potential customers. These databases usually consist of basic personal details of customers
along with details of their past transactions. The information is either gathered from internal sales data or
bought in from other organisations.
Business to Consumer (B2C)
Consumer information is gathered by enterprises in a number of ways, many of which consumers remain
oblivious to (see CRM). These methods can range from requesting that the consumer fill in and return a
warranty card to running promotional contests and sweepstakes.
Ideally, enterprises prefer to gather as much information as possible about potential customers, so they
will employ any available methods to milk consumers for personal data. The more information contained
within a database, the more accurate the results of its analysis.
Business to Business (B2B)
B2B data is usually much more limited than consumer information, but it can also be easier to procure.
Enterprises hoping to target businesses can simply get in touch personally or gather publicly available
information about them. However, since B2B databases will usually only contain a few hundred or
thousand pieces of information at most (compared to potentially millions of pieces in a consumer
database) it is more difficult to build a targeted marketing plan.
Data Analysis
Once a consumer or business database has been compiled it can then be broken down and analysed to
produce valuable marketing information. If the database is extremely limited this analysis can be
performed manually, but most consumer databases will contain so much data that specialised software
tools are necessary to generate useful results.
Predictive analytics software allows data analysers to construct high quality predictive models of
customer behaviour. By studying the past purchases of consumers it can be possible to predict broad
trends in their purchasing habits, resulting in a somewhat accurate prediction of their future purchasing
(though, of course, it is impossible to make 100% accurate predictions in this area).
Using these trends it is possible to further refine the information by grouping individuals according to any
other personal data held on file about them (such as income, age, gender, etc.). This grouping results in a
targeted mailing list of potential customers, each of whom share a set of desired characteristics.
Marketing
Once the raw data has been analysed and a mailing list produced there is simply the matter of contacting
the potential customers with targeted advertising.
Traditionally, database marketing results in the mailing of advertisements (what many people would call
‘junk mail’). The development of technology, however, has enabled enterprises to contact potential
customers much more quickly than through the mail.
While a great many enterprises still use the postal service to generate leads, modern marketing methods
also involve the use of e-mail and SMS messages to potential customers. As well as being less expensive
than traditional mail shots, electronic messages come with the additional benefit that recipients can
respond instantly, either by following a link in an email or opting-in through an SMS or asking for a
callback.

13. EXPLAIN THE FUTURE OF DATABASE MARKETING.

 The development of the Internet has offered enterprises a highly effective way to gather customer
information.

32
  Internet users are now perfectly comfortable with completing electronic forms for everything from
online purchasing to setting up e-mail accounts, so the amount of consumer information available
has increased greatly.
 At present, we are seeing the development of a new form of database advertising. Online
advertisers now use surfing habits as a method of directing advertising towards Internet users.
 Search engines such as Google serve ads according to users' keyword searches, while vendors
such as Amazon use details of previous transactions to build a list of user-targeted
recommendations.
 We can expect this trend to continue until all online activities are tracked for marketing purposes.

14. STATE THE CHARACTERSTICS OF FULLY FLEDGED DATABASE MARKETING.

 Each actual or potential customer is identified as a record on the marketing databases, markets and
market segments are groups of individual customers.
 Each customer record contains not only identification and access information but also a range of
market information.
 It also includes information about the past transactions and about campaign communications.
 The information is available to the company during the process of each transaction with the
customer enable it to decide how to respond to the customer’s needs.
 The database is used to record customer responses to company initiatives.

END OF UNIT III

UNIT IV

CRM AND MARKETING- CRM AND SERVICES- FIELD SERVICES- CUSTOMER SERVICES-
CRM AND SALES - FIELD SALES - TELE SALES- WEB BASED SALES- PROFESSIONAL
SERVICES MANAGEMENT- PRODUCT OR BRAND MANAGEMENT
1. RELATIONSHIP BETWEEN CRM AND MARKETING

To continuously attract and retain the most valuable customers, companies must act aggressively to
increase the economic value of both their brand and customer relationships. In addition, they must sustain
bottom-line performance in the face of skyrocketing marketing costs. To realize these goals, companies
must continue their efforts to maximize their investments in the sales and service technologies that help
reach, understand and interact intelligently with customers.

 The concept of managing relationships with customers is not new.

 Companies have been interfacing with customers since the beginning of trade.
 However, the focus has always been to sell the products or services, as opposed to focusing on
Customer Retention. Competition, driven by globalization and the Internet, has changed the face
of business.
 Customers now have a variety of choices and, most importantly, they are becoming far more
knowledgeable and demanding.
 The power has truly shifted to the customer. With this scenario, most companies realize that they
need to treat their customers with more care.
 Companies are now desperately searching for different ways to manage customer relationships
effectively, not only to acquire new customers, but also to retain the existing ones.
 According to a Harvard Business Review Study, some companies can boost their profits by almost
100% by retaining just 5% or more of their existing customers.

2. RELATIONSHIP BETWEEN CRM AND SERVICES

33
  Customer service is the provision of labour and other resources, for the purpose of increasing the
value that buyers receive from their purchases and from the processes leading up to the purchase.
 With the rising dominance of the service sector in the global economy, customer service has
grown in importance, as its impact on individuals, households, firms, and societies has become
widespread.
 As a database marketer, you understand that some customers present much greater profit potential
than others.
 Strategic advantage: A company can outperform rivals only if it can establish a difference that it
can preserve.
 Customer service can be such a difference. It is very difficult to control, and therefore difficult to
imitate. It is difficult to control because of its variability.
 The level of service may vary greatly between two providers in the same organization.
 It may also vary from one moment to another, even as delivered by the same provider.
 The difficulty is compounded in multi-unit operations: in addition to variability within units, there
is also variability among units.
 That is both the challenge and the opportunity. The consistent delivery of superior service requires
the careful design and execution of a whole system of activities that includes people, capital,
technology, and processes.
 The few companies that can manage this system do stand out, and are sought out. This is the
foundation of their sustainable competitive advantage.

3. IMPORANCE OF CUSTOMER SERVICE TO AN ORGANISATION?

 Delivering customer service begins with understanding what customers want. And this
understanding begins with the understanding that they do not always know what they want, or
why they want it. Traditional market research assumes that they do.
 Newer methods recognize that as much as 95% of our decision making is subconscious. Common
research methods (e.g. surveys and focus groups) more often reveal what customers think their
motivations are, rather than what their motivations truly are.
 When respondents do not comprehend their true motivations, they tend to state how they think
they ought to be motivated.
 Recent progress in neuroscience and in observational technologies has yielded more reliable, less
biased, results. Companies have Interaction Designers that use User Centered Design methods,
among others, to understand what customers need.
 They often use Personas to represent the research outcomes, i.e., to describe the customer they are
designing for. Regardless of how they arrived at their findings, most researchers agree on the
factors listed in this table to the right.
 Suppliers that meet these requirements are likely to give their customers a satisfactory experience.
In a competitive environment, however, satisfaction may not be enough.
 To stay in business, firms must be at least as satisfactory as their competitors. Moreover, firms that
aim to gain profitable growth must increase the number of their customers, while reducing the cost
of customer acquisition.
 This is particularly true of companies that compete in mature industries. The objective then is not
merely to satisfy customers, but to convert them into promoters (customers who recommend a
company to others).
 Promoters serve to increase a firm’s clientele, without increasing its cost of acquisition – i.e. with
no additional marketing or promotional expense. But customers do not make recommendations
lightly.
 When they make a recommendation, they put their own reputations on the line. Firms must earn
that recommendation through the consistent delivery of outstanding customer service

4. MENTION THE BENEFITS ENJOYED BY A CUSTOMER SERVICE PROVIDER

34
  Higher income (more sales, repeat business, referred business)
 Recognition
 Personal satisfaction & fulfillment
 Less stress
 Higher self-awareness and self-control
 Greater authenticity
 Happier life at work
 Stronger social networks, family ties
 Happier life outside work
 Organizations
 Quality sales (more add-ons, more service sales)
 More repeat business
 More referred business
 Fewer returns
 Better reputation
 Higher morale, happier employees
 Lower employee turnover
 Higher caliber of job applicants
 Fewer complaints
 Higher productivity
 Better work environment
 Higher inventory turnover
 Higher profits
UNIT IV CONTINUED….
VYSYA COLLEGE, SALEM-103
NAME : ARCHANA.K CLASS: III BBA
SUBJECT : CUSTOMER RELATIONSHIP MANAGEMENT D.O.I : 28/02/10

CONTINUATION OF UNIT IV...

5. MENTION THE MARKETING IMPLICATIONS OF BRANDING.

A name becomes a brand when consumers

Field service management (FSM), also known as field force automation (FFA), is an attempt to optimize
processes and information needed by companies who send technicians or staff "into the field" (or out of
the office.) Optimization is difficult, since it involves intelligent scheduling and dispatching of multiple
technicians to different locations daily, while minimizing cost and maintaining good customer service.
FSM most commonly refers to companies who need to manage installs, service or repairs of systems or
equipment.
Field service management involves a combination of some or all of the following: CRM applications,
work order management, dispatch, wireless technology, and historical customer service data. Field service
software combines many of these functions into one unified solution. The software may also utilize
databases containing details on customer premise equipment, access requirements, and parts inventory.
Many Field Service Management solutions integrate with other software such as accounting programs
like QuickBooks, MYOB, SAP, Mainpac, Oracle, MFGPro etc.
Field service management creates a mobile system that connects the field worker with the backend. In
turn, this type of software improves field worker productivity, enhances customer service, automates
paper processes, assists with regulatory compliance, reduces human error, inventory turnover etc. In this
field power scheduling is often most important because it determines how effective field service
management will become. Proper scheduling maximizes work time, minimizes travel time, matches
technicians skills and certifications to the work, prioritizes work by service level agreement (SLA),

35
consider the availability of parts, and attempts to avoid technician overtime all while maintaining an
acceptable level of customer service.
"In the typical mobile field service scenario, the customer contacts the call center. A call center
representative enters a work order. Once the work order is processed, the job notes, billing, and parts
information from the order are automatically updated in the systems dispatch and accounting applications.
This information is then sent to the relevant field technician's handheld PC, and the technician performs
the work. In the case of a problem, the technician can use the handheld device to communicate with the
dispatch center directly. The dispatchers thus have real-time, accurate status information about any
technician or work order."

THE CUSTOMER SERVICE / SALES PROFILE

Now you understand that the power of CRM lies in its ability to help you create, maintain, and expand
customer relationship. You’re excited and ready to begin delving into the process of creating your own
CRM strategy, whether at the organization level or as it applies to your specific area or department.
Before you do that, we’d like you to take a more in – depth look at who your current customers are and
what their relationships with you look like. Our model, the Customer Service / Sales Profile, will help you
to do three things.
First, it will show you what kind of customer relationships you’re trying to create. Is your success based
in initial, stand-alone transactions? Or does the nature of your product or service put customers in
partnership with you over longer periods of time? How important is it for you to have satisfied customers
acting as a word – of – mouth advocates for you in the market place
Second, the Customer Service / Sales Profile will help you identify strengths in your current CRM
practices. Even in cases where there’s no formal CRM strategy, if you’re still in business, you must be
doing some thing right, may be several or many things. Knowing what right practices have evolved
naturally will help you create the greatest possible improvement with the least amount of expense.
Third, because this process creates a visual image of your customer relationship, you will find it helpful in
communicating to others throughout the organization. Knowing your current profile and the desired
profile will naturally help you focus your energy and attention.
Why call it the Customer Service / Sales Profile?
We call this model the Customer Service / Sales Profile because every business activity is ultimately
justified by half its serves the customer. Even if you and your team never see cash – paying external
customer, the contribution you make must have some positive impact on those external customer
relationship or else you should strongly question its value and purpose. We use the phrase “Service /
Sales” to remind us of three important rules.
Truth # 1: Sales do not equal relationships. Way back in 1983, Theodore Levitt wrote an article for the
Harvard Business Review titled “After the Sale Is Over.” In it he explained that the sale is just the
beginning of the relationship with your customer – a relationship more akin to a marriage then to a one –
night stand. And consultants, practitioners, researchers, and authors have been building on this theme ever
since. Yes, the sale is a very important point in customer relationship. However, it is bracketed by the
quality of service you are willing to offer, able to deliver, and credited with providing to your customers.

Truth # 2: Service extends beyond the buyer. Whether you’re selling in – home plumbing repair or
pace makers or e-business solutions, creating a customer relationship, and extending the opportunities you
have to do business together mean more than wooing the individual who writes the check or sign the
contract. You need to consider all the people who touch or who are touched by your product or service.

Truth # 3: Service and sales are on the same team. All too often, we are called into sales organizations
or customer service departments that claim that everything would be better if “those other people”, in
service or sales “would just straighten up and get their act together.”
The sales people lament that the customer service people just complain, complain, and complain about
pesky details like a few over – promises or a couple of tight delivery deadlines. “Don’t they know that
we’ve got to promise those things to get the sale?” The customer service people roll their eyes at visions
of golf club-swinging sales types teeing off with unrealistic promises and assurances that “the customer

36
service team will be happy to move mountains for you.” “Don’t they know we have policies? If we did
that for this customer, we’d have to make the same exception for every customer.”
The truth is that to win the game of business, sales and services have to be plain on the same team. The
phrase Service / Sales can serve as a reminder for both groups that you win only when you work together.

The Three Levels of Service / Sales

There are three service / sales levels to the Customer Service / Sales Profile model

Level 3:
Customer Advocates
……………………………………
Level 2:
Repeat Customers
……………………………………
Level 1:
Initial Transactions

Level 1 is initial transactions. At this level you are focused on discrete, initial interactions or stand-alone
sales. This is the foundation for every business or organization. Yet, we know that the more money, time,
and energy you must invest in getting customers to come to you in the first place, the harder it is to be
profitable just working at this level. As we noted, it’s not unusual for customers to actually cost you
money the first time they do business with you. Just consider the acquisition costs for you customers.
As you can see, in order for our Nature Retreat Center to be profitability at level 1, they need to:
• Identify customers at risk of leaving, never to return, and find out how they can woo them back.
• Look for ways to teach new customers more about what the Nature Retreat Center offers and how it
works so that there are fewer avoidable service issues.
Give staff tools and training on ways to turn the interaction into revenue – generating opportunities while
at the same time making guests feel well served. It will be important for the Nature Retreat Center to
focus on this improvement. When initial transactions run smoothly, with the minimum of fuss or error, it
provides a strong foundation for future business.

Level 2 represents repeat customers. At this level you’re focus on getting customers to return for a
second, third or fourth time. Customers may come back for the same purchase – like the loyal Carivou
Coffee customer, cordially known by the staff as the “extra large, skillets with Carivou cookie”. Or the
customer may turn to you for a variety of products and services – like a car insurance customers who
comes back to a agent for home owner’s, this ability, and life insurance.
Repeat customers develop greater economy and emotional ties with you. And they bring with them and
expectation that you will value those ties. For example, the Caribou Coffee customer may expect you to
save the last Carivou cookie for him. And the insurance customer will look for her discount for having
car, home, and life insurance with the same provider. Yours CRM strategy will tell your team how much
importance to place on repeat customers. CRM tools will help your team identify these precious members
of your customer mix and prompt team members to notice and value the extended relationship with you.
The top level of model is customer advocates.

Level 3 represent those customers who are not just satisfied and willing to do business with you again.
These customers actively tell others about their positive experience they spread the good word. You might
even consider them to be active participants on your marketing team.

As you can see, each level builds upon the level before without quality initial transactions,
customers won’t want to do business with you again. And it’s the customer who seems
himself or herself in a positive relationship with you who can provide the strongest
advocacy for you and your product and services.
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The Shape of your Custom Service/ Sales Profile
The Shape of your Customer Services / Sales Profile reflects the relationship among this
three levels. It is driven by the nature of the product or service you offer, the expectation of
your customer base, and the forces of market competition.
There are three basic Customer Service / Sales Profiles: The Pyramid, the Hourglass and
the Hexagon.
The Pyramid Profile
The Pyramid is the conventional way to see the relationship among the three levels. It
applies to the majority of businesses. Consider a retail department store, such as
Minneapolis – based Target Stores. Each days hundreds of customers walk through the
doors of any one Target location. Still more customers shop online at Target.com. Those
customers represent the base level of initial level. The percentage of those customers who
are loyal to target, who regularly seek Target in preference to its competitors, make a level
2. At the top are those customers who actively send their friends, family members, and even
business associates to Target. They tell positive stories about staff and service.
As you might imagine not every pyramid looks like a perfect isosceles triangle. For
example, in some business model, there’s a very strong emphasis on repeat customers but
less on customer advocates. As one sales person for a large – scale computer application
told us, “Yes, I think my customers are happy enough to keep business with me. And I’m
working very hard to keep them happy. But, no. I wouldn’t want to put my existing
customers in a room with my prospects.”
If you don’t trust your repeat customers to help you “sell” a prospect, then you have
pyramid with a broad middle and a small top. It might be tempting to tell this sales
professional to go out and create more advocates. And that would be a dangerous shift if it
meant losing focus on the repeat customer group. In a Pyramid Profile, customer advocates
grow directly out of exceptionally well – satisfied repeat customers.

The Hourglass Profile

The Hourglass Profile is less common. In the Hourglass, you have a broad base of initial
transaction, only a few of which become repeat customers. However, you seek to create
customer advocate from as many of those initial transaction as possible.

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Consider the relationship between a real – estate agent and her customer. Diane, and agent
in the business for over a 15 years, explains that she sometimes gets a second sale, butrarely a third from
most of a customers. “I get a second sale where the initial house is their
‘starter home’. After two or five years they are ready to move up. Many of my clients are
selling because they are moving out of the area. I don’t get a second chance with them.”
Yet Diane’s business is booming. Her company has recognized her as a top performer for
several years in a row. “I think my secret is really no secret. My clients are my biggest sales
force. They are constantly recommending me to people they know who are buying or
selling a home”.
And Hourglass is most stable when it has a strong base of initial transaction and those
transactions are handle in such a superior way that customers are eager to tell others about
their experience. When this happens, the Profile creates its own self-renewing energy.
Diane, for example, does put considerable time and effort into maintaining contract with
past client, sending them calendars and other reminders, and keeping a name and phone
number easily accessible so client who have an inclination to recommend her will find it
easy to do so. But Diane is a first to admit that this process work with more ease and flow
then in the yearly years of business, when she was less sure of herself and less sure about
satisfying her clients.

The Hexagon Profile

In the Hexagon Profile describe a business that is very stable. It has all the repeat business
it can handle or wants, so it feels little motivation to actively seek for level 3, customer
advocates. It also feel no strong motivation to focus on initial transaction, since there are
already plenty of repeat customers: for the movement. This is a vulnerable profile. Should
anything disrupt the core of repeat customers, the business will be hard-pressed to replace
them. The Hexagon Profile can self – destruct when supply and demand are no longer in balance
and no longer working in your favor. We watch a small advertising agency go under
because it was operating under this profile. Secure with its three major clients and a study
mix of small “filler” jobs, the team focused on doing the work. They paid little attention to
growing their “filler” jobs into something more, or to get in their name out to encourage
new client, or even to inviting their current clients to recommend them. When first one and
then two of the core clients move their business, the team couldn’t replace them quickly
enough to stay viable. “I haven’t done marketing in so long. I don’t know where to begin,”
one owner sighed. How much easier it would have been if they’d asked for letters of
recommendation and referrals months before, when their core customers were active and
satisfied.

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Pitfalls of the Customer Service / Sales Profile
There are two common pitfalls that cause individuals and department to become misaligned
around their Customer Service / Sales Profile
1. Focusing on the top. It’s personally and professionally satisfying to have customer
advocate. Human nature yearns for their positive affirmation. Beware of taking
their praise so much to heart that you begin to think that anyone who isn’t and
advocate is just too picky and hard to please.
2. Focusing on the Front door. Initial transaction are critical, but they’re only one
step in the customer relationship. When a rush of activity comes… and especially
when it stays… it’s easy to get caught up in processing customers through faster
and faster – “Don’t worry if it’s not perfect, someone else is waiting to be served!”
yet when the rush is over and you’re waiting in vain for the next new customer, all
those initial transaction will be looking for someone else, someone more service -
oriented, for their next transaction.
CRM and your Profile
So what’s your Customer Service / Sales Profile? Are you operating as a pyramid? As an
Hourglass? Or as a Hexagons? It’s important to know what kind of customer relationship
you’ve being creating so that you can be thoughtful and strategic in choosing what kind of
customer relationship you want to create from this point forward.
What’s work about your current profile? And what would you like to change? The answer
to these questions will help to shape your CRM strategy. You will find that it’s easier to
align your team-and your organization-around a clear and consistent CRM strategy if you
all share a common vision of your Customer Service / Sales Profile

The Future of CRM

With the increased penetration of CRM philosophies in organizations and the
concomitant rise in spending on people and products to implement them, it is clear we
will see improvements in how companies work to establish long-term relationships with
their customers. However, there is a big difference between spending money on these
people and products and making it all work: implementation of CRM practices is still far
short of ideal. Everyone has his or her own stories about poor customer service and emails
sent to companies without hearing a response. Despite several years of experience, Web-based companies
still did not fulfill many Christmas orders in 2000 and customers
continue to have difficulties returning unwanted or defective products.
We can expect that the technologies and methodologies employed to implement
the steps shown in Exhibit 1 will improve as they usually do. More companies are
recognizing the importance of creating databases and getting creative at capturing
customer information. Real-time analyses of customer behavior on the Web for better
customer selection and targeting is already here (e.g., Net Perceptions) which permits
companies to anticipate what customers are likely to buy. Companies will learn how to
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develop better communities around their brands giving customers more incentives to
identify themselves with those brands and exhibit higher levels of loyalty.
One way that some companies are developing an improved focus on CRM is
through the establishment or consideration of splitting the marketing manager job into
two parts: one for acquisition and one for retention. The kinds of skills that are need for
the two tasks are quite different. People skilled in acquisition have experience in the
usual tactical aspects of marketing: advertising, sales, etc. However, the skills for
retention can be quite different as the job requires a better understanding of the
underpinnings of satisfaction and loyalty for the particular product category. In addition,
time being a critical scarce resource makes it difficult to do an excellent job on both
acquisition and retention. As a result, some companies have appointed a chief customer
officer (CCO) whose job focuses only on customer interactions.
A possible marketing organizational structure is shown in Exhibit 6. In this
organization, the person overseeing the company’s marketing activities, the VPMarketing,
has both product management and the CCO as direct reports. The CCO’s job is to provide intelligence to
the VP from marketing research and the customer database
for use by product managers in formulating marketing plans and making decisions. In
addition, the CCO manages the customer service operation. Although it would perhaps
seem more logical for the CCO to report to product management, the reporting
arrangement to the VP-Marketing is a signal to the company of the prominence of the
position. The CCO also interacts with other company managers whose operations may
have a direct impact on customer satisfaction.
The CCO at EqualFooting.com, a company offering streamlined purchasing,
financing, and shipping services for small manufacturing and construction businesses, has
the job of integrating marketing and operations to make sure that customers are
satisfied.28 An alternate conceptualization is to create two jobs, customer managers and
capability managers.29 The former oversee the relationship with customers while the
latter make sure that their requirements are fulfilled.
The notion of customer satisfaction is being expanded to change CRM to CEM,
Customer Experience Management.30 The idea behind this is that with the number of
customer contact points increasing all the time, it is more critical than ever to measure the
customer’s reactions to these contacts and develop immediate responses to negative
experiences. These responses could include timely apologies and special offers to
compensate for unsatisfactory service. The idea is to expand the notion of a relationship
from one that is transaction-based to one that is experiential and continuous.
The “bottom line” is that companies that are not taking a customer-centric view of
their business operations are going to be passed by those that view relationship-activities as the key to
long-term profitability. In this paper, it has been shown specifically what
steps must be taken to implement such a system.

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