Prof. Sameer V.

Charania CRM Introduction

CHAPTER 1: INTRODUCTION TO CUSTOMER RELATIONSHIP

MANAGEMENT
CHANGE:
Change is occurring at an accelerating rate. Today is not like yesterday, and tomorrow will be
different from today. Continuing today’s strategy is risky, so is turning to a new strategy.
Marketing is the most dynamic & challenging function of modern business. The ability of
any firm to survive in today cut-throat competitive world largely depends on its marketing
function. There are a few certainties that must be heeded:
1. Global forces will be continued to affect everyone’s business and personal life.
Manufacturing will move to more economically favorable locations
2. Technology will continue to advance and amaze us.
3. There is a continuous push toward deregulation of the economic sector. More people, in
more countries are convinced that market works better under relatively free condition
were buyers can decide what and where to buy and companies are free to decide what to
make and sell.
These three developments – globalization, technological advances, and deregulation spell
endless opportunities.
CORE MARKETING CONCEPTS:
1. Target Market and Segmentation:
A Marketer cannot satisfy everyone’s need. Needs & Wants differs from person to person.
All do not have the same lifestyle, preferences. Not everyone likes the same soft drink,
automobile, restaurant. Thus marketer creates Market Segment. Market Segmentation is the
process of dividing the market based on the needs & wants of the customer. Marketers
identify & profile distinct groups of buyers with similar needs & wants. The opposite of
Market Segmentation is Mass Marketing. Mass Marketing focuses on having one product for
the entire market, whereas Segmentation focuses on having one product for each segment. A
marketer always targets a particular segment.
What is Market?
Traditionally, a “market” was a physical place where buyers & sellers gathered to exchange
goods & services for a monetary value. Economists now describe a market as collection of
buyers and sellers who transact over a particular product or product class. But marketers view
sellers as comprising the industry & buyers as constituting the market. Following diagram
shows the relationship between industry & market.
INFORMATION

COLLECTION Goods & Services COLLECTION

OF SELLERS OF BUYERS

Monetary Value
INDUSTRY MARKET

FEEDBACK
Sellers & buyers are connected by four flows. The sellers send goods & services &
communications (ads, direct mail) to the market; in return they receive money & information
(feedback/response).

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2. Marketplace & Marketspace:

Marketplace is physical, when one goes shopping in store. Marketspace is digital, as when
one goes shopping on the internet. In India, scope of Marketspace has not picked up well
except in few sectors like airlines, where the customers first preference is to book an airline
ticket online.
3. Marketers and Prospects:
A Marketer is someone who is seeking a response from another party called prospect.
Marketer is one who initiates the 4 P’s of Marketing. A Prospect is a future or potential
customer. A prospect may or may not become customer.
4. Needs, Wants and Demand:
Marketers try to understand the target marketers need, wants and demand. Needs describe
basic human requirements. People need food, water, clothing and shelter to survive. People
also have strong need for recreation, education and entertainment. These needs become wants
when they are directed to specific object that might satisfy the needs. Example: We need
food. But we want French fries, burger, pizza, etc. Wants are shaped by one’s society.
Demands are wants for specific product backed by ability to pay & willingness to buy. Many
people want a Mercedes; only few are able to and willing to buy one. Companies must major
not only how many people want the product but also how many would actually be willing and
able to buy it.
5. Product or Offering:
People satisfy their needs and wants with product. A product is any offering that can satisfy a
need or want. Major types of basic offerings are goods, services, experiences, events,
persons, places, properties, organization, information and ideas. Product is also known as
Market Offering as the marketer creates the product & offers the product in the market by
making the product available at all places.
6. Values and Satisfaction:
The product or offering will be successful if it delivers values and satisfaction to the target
buyer. The buyer chooses between different offerings on the basis of which is perceived to
deliver the most value. Value is defined as relation between Benefits & Costs. The customer
gets benefits at a cost. The benefits include Functional benefit and Emotional Benefit. The
cost includes monetary cost, time cost, energy cost and psychic cost. Thus value is given by:
Value = Benefit = Functional Benefit + Emotional Benefit
Costs Monetary Cost + Time Cost + Energy Cost + Psychic Cost
The marketer can increase the value of the customer offering in several ways;
 Raise Benefit
 Reduce Cost
 Raise Benefit and Reduce Cost
 Raise benefit by more than the raise in cost
 Lower benefit by less than the reduction in cost.
7. Exchange and Transaction:
A person can obtain a product through exchange. Exchange is process which involves
obtaining a desired product from some one by offering something in return. Exchange that
involves a monetary value is a transaction.
Example: A sells TV to B for a monetary value of Rs. 15,000. Transaction may or may not
include the element of negotiation.
8. Customer & Consumer:
Traditionally speaking, customer is one who purchases the product & a consumer is one who
consumes or uses the product. But this interpretation is confusing for the marketer, whom
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should it focus on: customer or consumer. Actually a marketer never differentiates between
customer and consumer. We are all customers of a specific brand & consumers of that
industry.

STAGES IN EVOLUTION OF MARKETING CONCEPT

The concept of marketing emerged after the industrial revolution; the change in business in
terms of adapting to the concept came gradually. It took many years for businesses to realize
that satisfying customers is the key to making sales & profits in the long run. Businesses have
gone through the following phases or stages:
1. The Production Concept:
The Production Concept is one of the oldest concepts in business. The Production Concept
holds that consumer will prefer product that are widely available and inexpensive. Managers
of production oriented business concentrate on achieving high production efficiency, low cost
and mass distribution. They assume that consumer are primary interested in product
availability and low price. This orientation make sense in developing countries were
consumer are more interested in obtaining the product then it features.
2. The Product Concept:
The Product Concept holds that consumers will favor those products that offer the most
Quality, Performances, or Innovative features. Managers in these organization focus on
making superior products and improving them over time. They assume that buyers admire
well-made products and can appraise quality and performance. However, these managers are
sometimes caught up in a love affair with their product and do not realize what that market
needs.
Product oriented companies often design their product with little or no customer input. They
trust that their engineers can design exceptional products. Very often they will not even
examine competitor’s product. The product concept can lead to marketing myopia.
Myopia means short sightedness. Marketing myopia is the short sightedness on the part of the
organization of not looking into the future needs & wants of the customer. Such organizations
very often are looking into the mirror when they should be looking out of the window.
Example: Bajaj Chetak.

3. The Selling Concept:

The Selling Concept holds that consumers and businesses, if left alone, will ordinarily not
buy enough of the organization products. The organization must, therefore, undertake an
aggressive selling and promotion effort.
This concept assumes that consumers typically shows buying inertia or resistance and must
be coaxed into buying. It also assumes that the company has a whole battery of effective
selling and promotion tools to stimulate more buying.
The selling concept is practiced most aggrievedly with unsought goods, goods that buyers
normally do not think of buying, such as insurance, credit cards, encyclopedias. These
industries have perfected various sale techniques to locate prospects and hard sell them on
their product’s benefits.
Prospects are bombarded with TV commercials, Newspapers ads, direct mail, and sales call.
At every turn, someone is trying to sell something. As a result, the public often identifies
marketing with hard selling and advertising.
But marketing based on hard selling carries high risk. It assumes that customers who are
coaxed into buying a product will like it; and if they don’t, that they won’t bad-mouth it or
complain to consumer organization and will forget their disappointment and buy it again.
These are indefensible assumptions. One study showed that dissatisfied customers may bad-

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mouth the product to 10 or more acquaintance; bad news travels fast & even faster & further
with the Internet.
4. The Marketing Concept:
The Marketing Concept holds that the key to achieving its organizational goals consists of the
company being more effective than competitors in creating, delivering, and communicating
customer value to its chosen target markets.
The marketing concept rest on 4 pillars
(A) Target Market
(B) Customer Needs
(C) Integrated Market and
(D) Profitability.
(A) Target Market:
Companies do best when they choose the target market carefully and prepare tailored
marketing program. Target market focuses on selecting the right audience for their product
offering
(B) Customer Needs:
A company can define its target market but fail to understand the customer need.
Understanding customer needs and wants is not always simple. Some customer have needs of
which they are fully conscious. Or they cannot articulate this needs. Or they use words that
require interpretation. Example: Instant Roti maker’s target market was well defined i.e
working women or house wife, but the company failed to understand the customers needs in
an appropriate manner.
Consider the consumer who says he want an inexpensive car. The marketer must probe
further. We can distinguish among 5 types of needs:
 Stated needs (the customer wants inexpensive car)
 Real needs (the customer wants a car whose operating cost, not its initial price, is low)
 Unstated needs (the customer expects good service from the dealer)
 Delight needs (the customer would like the dealer to include a gift)
 Secret needs (the customer want to see by friends as a savvy customer)
TYPES OF MARKETER:
There are three types of marketer:
1. Responsive Marketer
2. Anticipative Marketer, and
3. Creative Marketer
1. Responsive Marketer: A Responsive Marketer finds stated needs and fulfills them. He
responds to an already existing product in the market
2. Anticipative Marketer: An Anticipative Marketer looks ahead into what needs customer
may have in the near future. He makes an attempt to understand the customer needs &wants
by conducting market research. Example: DNA newspapers.
3. Creative Marketer: A creative marketer discovers and produces solution customer did not
ask for but to which they enthusiastically respond. Example: Sony exemplifies a creative
marketer because it has introduced many successful new products that customer never asked
for or even thought were possible: Walkman’s, VCR’s, video cameras, CD’s and so on. Sony
goes beyond customer-led marketing it is a market driving firm, not just a market driven firm.
Akio Morita, its founder, proclaimed that he does not serve markets; he creates markets.
Why is it supremely important to satisfy target customer?
Because a company’s sales each period come from two groups: New customer and Repeat
customers. One estimate is that attracting a new customer can cost 5 times as much as
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pleasing an existing one. And it might cost sixteen times as much to bring the new customer
to the same level of profitability as the customer. Customer retention is thus more important
than customer attraction.
(C) Integrated Marketing:
When all the company’s department’s work together to serve the customer’s interests the
result is integrated marketing. The following example highlights the coordination problem:
The marketing vice president of a major European airline wants to increase the airline’s
traffic share. His strategy is to build up customer satisfaction through providing better food,
cleaner cabins, better trained cabin crews and lower fares. Yet he has no authority in these
matters. The catering department chooses food that keeps down food costs; the maintenance
department uses cleaning service that keep down clearing costs; the human resources
department hires people without regard to whether they are naturally friendly; the finance
department sets the fares. Because these departments generally take a cost or production
point of view, the vice president of marketing is stymied in creating an integrated marketing
mix.
Integrated marketing takes place on two levels.
First, the various marketing functions- sales force, advertising, customer service, product
management, marketing research- must work together.
Second, marketing must be embraced by the other departments. To foster teamwork among
all departments company carry internal marketing as well as external marketing. External
marketing is marketing directed to the people which is directed outside the company. Internal
marketing is the task of hiring, training and motivating able employee who wants to serve
customer as well. In fact, internal marketing must precede external marketing. It makes no
sense to promise excellent service before the company staff is ready to provide it.
(D) Profitability:
The ultimate purpose of marketing concept to help organization to achieve these objectives.
In case of private firms the major objective is profit; in the case of non-profit organization, it
is surviving and attracting enough funds to perform useful work private firms should not aim
for profit as such but to achieve profit as a consequence for of creating superior customer
value.
Difference between Marketing & Selling
Selling focus on the need of the seller; marketing on the need of the buyer. Selling is pre-
occupied with the seller’s need to convert his production into cash; marketing with idea of
satisfying with the needs of the consumer by the mean of product and the whole cluster of
thing associated with creating, delivering and finally consuming.
It start with the factory, focuses on existing product and calls for heavy selling and promoting
to produce profitable sells. The marketing concept take an outside- in perspective it starts
with well-defined market focused on consumer need and producer profit by satisfying
consumer.
STARTING FOCUS MEANS ENDS
POINT
Selling Factory Product Selling & Profits
Promoting
Marketing Target Market Customer Needs Integrated Profits +
marketing Customer
Satisfaction

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5. The Customer Concept:

Today many companies are moving beyond the marketing concept to the customer concept.
Many companies are now shaping separate offers, services & messages to individual
customer. These companies collect information on each customer past transaction,
demographics, psychographic & media & distribution preference. The company hopes to
achieve profitable growth by building customer loyalty & focusing on Customer Lifetime
value (CLV). Example: Travel Company Make My Trip which offers customization with
respect to an individual customer.
STARTING FOCUS MEANS ENDS
POINT
Customer Indivual Customer Needs One to One Profits +
Concept Customer Marketing Customer
Satisfaction +
Customer life
time value
(CLV)

DEFINITION OF CRM:
Customer Relationship Management is a comprehensive strategy & process of acquiring,
retaining & partnering with selective customers to create superior value for the company &
the customer.

BROAD GROUP OF CUSTOMERS:

A customer is anyone who receives a product – either a good or a service – from an
organization. A customer can be Internal Customers – are members of staff that provide
service to external customers. Example: Employees of the organization. External
Customers – are the people that actually buy or use an organization’s product. An External
Customer can be further classified into B2B Customers & B2C Customers.

WHY BUSINESSES SHOULD ADOPT CRM

We believe that a combination of demand and supply led factors will accelerate the adoption
of CRM in the coming years. On the demand side, rising customer expectations will force
businesses to adopt CRM. And on the supply side, technological advances and the declining
costs of information and communication technology will reduce the barriers to adoption of
technology led CRM initiatives.
1. Rising Customer Expectations:
Customer expectations are rising due to increasing affluence in the emerging economies,
greater awareness due to media explosion and increasing customer diversity.
(a) Increasing affluence in the emerging economies: The economic growth in the emerging
economies have created a large middle class. This middle class is very demanding and quality
conscious. The transition of these markets from sellers to a buyer’s market and the buying
power of the middle class make them attractive to all businesses.

(b) Greater awareness due to explosive media growth: Customers in the emerging markets
have greater access to marketplace information about products, services and lifestyles
through the explosion in the traditional media like the newspapers and television as well new
media like cable television and the internet. The information explosion has played a
significant role in raising customer aspirations as well as expectations.

(c) Customer Diversity: Increasingly customers prefers choices, tailored to their needs and
are personalized in nature. Many of the mass marketing practices fail with customers who are
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diverse in their lifestyles, age, income and ethnicity. Rising customer expectations will make
CRM a necessity for businesses to .be able to customize all elements of marketing mix: to
satisfy these customers. Fortunately for businesses, advances in affordable technology will
help them meet these divergent needs from demanding customers. Example: Make My Trip

2. Affordable Technological Advances:

Advances in technology have made an impact on all stages from production to final
consumption. They are allowing marketers to offer unique solutions to individual customers.
Some of the key technology advances are in production, distribution, facilitation and
consumption and their impact on marketing practices
(a) Production: Breakthroughs, including Computer-Aided Design and Computer-Aided
Manufacturing (CAD-CAM) and processes like Flexible Manufacturing Systems (FMS) and
Just-In-Time operations JIT), have helped improve the quality while reducing the costs across
the supply chain. Example; Production technology leaders like Toyota and Dell Computers
have gained significant competitive advantage in their respective markets by being early
adopters of these technologies. Consumers will benefit as they are offered products and
services tailored to their specific requirements through mass-customization at prices
comparable to mass-marketed products.

(b) Distribution: Distribution capabilities of firms have been enhanced due to computer-
aided logistics (CALS) and scanner technology which allows faster response for
replenishment with fewer stock-outs. Example: Levis. Improvements in forecasting and
database technologies allow fine tuned targeted approaches to marketing and close to real-
time fulfilment in many cases, specially information intensive services. Distribution
intermediaries and third party logistics providers leverage technology to rapidly deliver
products at affordable prices and increase market coverage.

(c) Facilitation: The use of internet to connect enterprise within and outside with suppliers as
well as customers through e-commerce technologies has resulted in major improvements in
facilitating commercial as well informational exchanges. Reductions in transaction costs have
allowed even small businesses to aspire for a global reach. In many industries the sellers as
well as the buyers have benefited by this process of disintermediation, i.e. cutting down
layers of intermediaries. New class of intermediaries has emerged to facilitate transactions
between sellers and buyers. Example: Amazon.com, Flipkart.com. Customer shopping habits
are changing with the convenience of information availability, evaluation, and purchase
through the click of a mouse.

(d) Consumption: Breakthroughs in consumption occurred due to the development of

affordable personal IDs. It allows the seller to determine the transaction, purchase and usage
history at the level of an individual to personalize the offerings. For the consumer, it has
given the power to be a co-producer by intervening and providing direct inputs into the
making of the product. Example: Dell.com allows buyers to configure the computer of their
choice by co-opting them as co-producers during the design stage.

TYPES OF CUSTOMERS
Customers play the most significant part in business. In fact the customer is the actual boss in
a deal and is responsible for the actually profit for the organization. Customer is the one who
uses the products and services and judges the quality of those products and services. Hence
it's important for an organization to retain customers or make new customers and flourish
business. To manage customers, organizations should follow some sort of approaches like

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segmentation or division of customers into groups because each customer has to be

considered valuable and profitable. Customers can be of following types:
1. Loyal Customers:
These types of customers are less in numbers but promote more sales and profit as compared
to other customers as these are the ones which are completely satisfied. These customers
revisit the organization over times hence it is crucial to interact and keep in touch with them
on a regular basis and invest much time and effort with them. Loyal customers want
individual attention and that demands polite and respectful responses from supplier.

2. Discount Customers:
Discount customers are also frequent visitors but they are only a part of business when
offered with discounts on regular products and brands or they buy only low cost products.
More is the discount the more they tend towards buying.
These customers are mostly related to small industries or the industries that focus on low or
marginal investments on products. Focus on these types of customers is also important as
they also promote distinguished part of profit into business.

3. Impulsive Customers:
These customers are difficult to convince as they want to do the business in urge or caprice.
They don't have any specific item into their product list but urge to buy what they find good
and productive at that point of time. Handling these customers is a challenge as they are not
particularly looking for a product and want the supplier to display all the useful products they
have in their tally in front of them so that they can buy what they like from that display. If
impulsive customers are treated accordingly then there is high probability that these
customers could be a responsible for high percentage of selling.

4. Need Based Customers:

These customers are product specific and only tend to buy items only to which they are
habitual or have a specific need for them. These are frequent customers but do not become a
part of buying most of the times so it is difficult to satisfy them. These customers should be
handled positively by showing them ways and reasons to switch to other similar products and
brands and initiating them to buy these. These customers could possibly be lost if not tackled
efficiently with positive interaction.

5. Wandering Customers:
These are the least profitable customers as sometimes they themselves are not sure what to
buy. These customers are normally new in industry and most of the times visit suppliers only
for confirming their needs on products. They investigate features of most prominent products
in the market but do not buy any of those or show least interest in buying. To grab such
'customers they should be properly informed about the various positive features of the
products so that they develop a sense of interest.
An organization should always focus on loyal customers and should expand or multiply the
product range to leverage impulsive customers. For other types of customers strategies should
be renovated and enhanced for turning out these customers to satisfy their needs and modify
these types of customers to let them fall under loyal and impulsive category.

ORIENTATION OF CUSTOMERS
Orientation of customer means how the customer's preferences are possessed or in what areas
of business the customers are conscious. A customer can be cost oriented, value oriented or
technology oriented as discussed below:

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1. Cost Oriented Customers:

A cost-oriented customer focuses on least costs, products and is ready to compromise on
efficacy, performance and quality.' These types of customers are always prone to loss as
when they have sudden problems with the products they always blame the supplier without
judging that they themselves are responsible for this loss. Some of the related type customers
have a tendency to fix problems locally without taking supplier's direct help as it is anyway
cheaper. For example, some customers try to repair costly machines by local vendors. These
vendors do the work with marginal profit, so accountably are very cheap, but whatever they
do is not quality work as they are not the actual manufacturer of that particular product and
may lack in many' aspects while repairing the machine. In case the machine fails the second
time,' these customers put the blame to the original supplier and he then has to pay for that. In
some' cases these customers are also ready to buy second "hand' products and then
challenging it to perform as a new one. Hence the suppliers should always focus on strategies
which are not only performance or quality driven but also self driven, otherwise they always
find themselves arrested in payment related problems and they again have to put a lot of
effort and cost on running for payment from these customers.

2. Value Oriented Customers:

Value oriented customers will always stick to efficient and high performing products as they
know that during a long run this would be a profitable deal. They are interested in investing
higher initial capital cost and then enjoy the cost free benefits in future. According to these
customers this type of deal is like a long term investment with higher future profit. In some
cases these types of customers are also ready to pay premium because they know that this
would make a better economic sense during a long run and there will always be lesser
maintenance efforts required. These customers are tended towards maintaining a healthy
relationship with suppliers as they are the satisfied customers.

3. Technology Oriented Customers:

These customers opt for best technology rather than less cost or good quality and
performance. These customers are technology conscious because they feel that usage of best
and newest technological products would help them to remain sustained in the changing
technological environment. For suppliers who are based on making or launching trended
technological products have a good chance in capturing these customers and finding business
out of them. These customers are innovative and have zeal towards technical aspects. They
also have a tendency for experimenting new things and do interact with people of same
nature or tendency, so the suppliers are helped by them in creating new referrals and increase
the business. These customers are also satisfied customers and ends by making worthy
relationships with suppliers.
It is necessary for a supplier to study the orientation of customers before dealing with them as
it will help them to identify the specific customer needs and transact accordingly. By
identifying the orientation of customers the suppliers could easily make their strategies to
grab customers by fulfilling their aspirations and turn them to satisfy customers.

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