Unit-2

Concept of
CRM
 Concept of Customer
Lifecycle
o In customer relationship management (CRM), customer life
cycle is a term used to describe the progression of steps a
customer goes through when considering, purchasing, using,
and maintaining loyalty to a product or service.
o The Customer Lifetime Value (CLV) is a prediction of the
total value (mostly expressed in net profit) generated by a
customer in the future across the entire customer life cycle.
o It is simply the behavior of a customer with your company
over time. Customers begin a relationship with you, and
over time, either decide to continue this relationship, or end
it. At any point in this LifeCycle, the customer is either
becoming more or less likely to continue doing business with
you, and demonstrates this likelihood through their
interactions with you.
Lifecycle Stages
 Reach– Your content must be properly marketed in places where
people/businesses in your market will find your information. This way
they will become aware of your company’s existence.
 Acquire– You have to understand your potential customers
wants/needs so you can provide a product/service they will want to
purchase. Contact them directly with personalized communication in
order to convert them from potential leads to paying customers.
 Develop– After the first purchase, keep in touch and build a
relationship with your customer. Ensure they are fully satisfied with
their purchase.
 Retain– One time customers will become repeat customers as long as
you are satisfying their needs. Care for them and continue to cultivate
a relationship with them. Do not be afraid to ask for feedback. They
will be happy you care about their opinion and you can use their
comments to improve your product/services. Make them feel a part
of the process.
 Inspire– If your customers are truly satisfied, they will become brand
advocates. This will spread awareness within their social circles and
the cycle will come full cycle when you reach potential new customers
due to your existing customers.
Customer Lifecycle
Management
o Customer Lifecycle Management (CLM) is simply the
measurement of your CRM program's success over time -
providing you have CLM metrics from before and after your
CRM implementation.
o CLM (Customer Lifecycle Management)however is a static
entity, and is more based upon a single measurement (which
incorporates multiple metrics) than a philosophy. Without
practicing CRM whatsoever, a company can take various
measurements of its customer lifecycles and find ways to
improve, or 'manage' them better.
o Customer Lifecycle Management has the potential to turn
your business on it’s head, focusing on customer needs first,
and delivering profits for the long term.
Managing the customer
Lifecycle

Enhancing Retaining
Acquiring
profitability profitable
new
of existing customers
customers
customers for life
Customer Lifetime Value
Assessment
 Customer Lifetime Value can be explained as profits
that the customers contribute to the organization
during the entire lifetime.
 This is the Net Present Value (NPV) of the expected
value of the profit on sales accrued from the customer
during the lifetime.
 CLV is a way to know how valuable a customer is going
to be to you over some period of time.
 CLV includes :
Value – customers’ assessment of utility
Brand – customers’ assessment of image
Relationship - customers’ willingness to stay with
brand
Advantages of CLV
o Management of customer relationship as an asset
o Monitoring the impact of management strategies and
marketing investments on the value of customer assets
o Determination of the optional level of investments in
marketing and sales activities
o Implementation of sensitivity analysis in order to
determinate getting impact by spending extra money
on each customer
o encourages marketers to focus on the long-term value
of customers instead of investing resources in acquiring
“cheap” customers with low total revenue value.
o Measurement of customer loyalty (proportion of
purchase, profitability of purchase and repurchase,
purchase frequency and sequence etc.)
Customer Product
Profitability Analysis
 A customer profitability analysis is an evaluation
process that focuses on assigning costs and revenues to
segments of the customer base, instead of assigning
revenues and costs to the actual products, or the units
or departments that compose the corporate structure
of the producer.
 According to Philip Kotler, “A profitable customer is a
person, household or a company that overtime, yields a
revenue stream that exceeds by an acceptable amount
the company's cost stream of attracting, selling and
servicing the customer“.
• Customers are arrayed along the columns and products
along the rows. Each cell contains a symbol for the
profitability of selling that products to that customer.
• Customer1 is very profitable : he buys three profit
making products(P1,P2,and P4).
• Customer 2 yields a picture of mixed profitability :he
buys one profitable product and one unprofitable
product.
• Customer 3 is a losing customer because he buys one
profitable product and two unprofitable products.
• What can the company do about customers 2 and 3?
1) It can raise the price of its less profitable products or
eliminate them , or
2) It can try to sell them its profit making products.
Consumer Behavior
Theories and CRM
Consumer Behaviour is a branch which deals with
the various stages a consumer goes through
before purchasing products or services for his
end use.
Consumer behavior theories are used by
businesses in order to optimize their selling and
marketing strategies. These theories tend to
concentrate on how consumers spend money,
what causes them to spend more money, and
how the spending of consumer money should
impact the planning and strategies practiced by
businesses.
• Why do you think an individual buys a product ?
-Need
-Social Status
-Gifting Purpose

• Why do you think an individual does not buy a product

?
- No requirement
- Income/Budget/Financial constraints
- Taste

• When do you think consumers purchase products ?

- Festive season
- Birthday
-Anniversary
-Marriage or other special occasions
Importance of consumer
Behavior in CRM
• To design the best possible product or service that fully
satisfies consumer's needs and demands.
• To decide where the service or product would be made
available for easy access of consumers.
• To decide the price at which the consumers would be
ready to buy that product or service.
• To find out the best method of promotion that will prove
to be effective to attract customers to buy a product.
• To understand why, when, how, what and other factors
that influence buying decision of the consumers.