Strategy and Organization

PRESENTED BY-
BALRAM
JAY KUMAR NAHATA
ARVIND JOSHI
APARNA PAL
 Topics Covered

■ History of CRM

■ Dynamics of Customer Supplier Relationships

■ Nature and context of CRM strategy

■ The relationship oriented organization

 History

Objective of marketing activity

Long standing and clear tendency
To focus on SALE

Consequences
Feelings of salesman and buyers during
PURCHASE and USE process
 Emotions

Better synchronization of emotions

Precondition for customer & supplier

Development of long term relationship
 After the sale is over

Relation seldom ends

Relation intensifies after sales
Helps buyer’s choice next time

Examples
Financial services
Consulting
General contracting
Capital goods
 Marriage

Sales
Consummates courtship
Marriage begins

Good marriage
Depends on how seller manages the relationship
Quality of marriage determines whether it will
continue, be troubled or end in divorce
 Transactional Mktg

Focuses on salesmen
Not on marketing

Objective of transactional marketing

Make customers happy
This happiness to translate into future repeat
purchases
Marketing as exchange process
Between buyer and seller

Formed subsequent conceptualization of

relationship marketing
Various exchanges are involved
 Relationship

Feelings that two people have for each

other
Mutual attraction and respect
Consideration
Dependency

These aspects will appear only if certain

conditions are met again

 Conditions

Interactions between two parties

Activities of one influences others &vice-versa

Certain degree of continuity

Interactions from past influence present and future
interactions

Actual events
Interactions dependent on occurrence
 Primary vs Secondary reln’

Primary ( Love relationship between a man

and a woman )
Basic long term inter-personal relations
Emotional bonding
Comprise roles, behaviors, situations
Not limited by strict route governing contract
People involved generally know one another well
One person cannot be automatically replaced
 Primary vs Secondary reln’

Secondary ( between a customer & a

supplier )

Short term interpersonal relation

Limited degree of social interaction
Fairly clear of etiquette
Reasonably well defined social rules
Deep emotional involvement rarely occurs
People can be easily replaced in general
 Example

Neighborhood grocer
Delivers bead every morning

Cashier
Reliance Fresh
Interactions
Pyramid of relationships
 Degree of reln’ depends on

1. Cooperation or competition

2. Equal or unequal distribution of power

3. Dependence or independence

4. A task or social-emotional orientation

5. A formal or informal form of contract

 1. Cooperation or competition

Competition
Customer plays a number of suppliers against one
another
Chooses one with the best offer

Cooperation
Both work to achieve best results
 2. Distribution of power

Unequal distribution of power

Knowledge and skill oriented services
Customer fate depends on expertise of service
provider

Supermarket chain
Responsible for 30% turnover of a brand
 3. Dependence or independence

Inversely proportional to balance of power

Powerful party is independent

The other is dependent
 4. Task or emotional orientation

Task orientation
Supermarket

Social – emotional orientation

Neighbor grocer
 5. Formal or informal contract

Difference in contract
Lawyer
Hairdresser
 Negative considerations

Some relations are continued

Lack of options

Microsoft
 Interactions and reciprocity

Reciprocity is critical to relationships

Giving
Receiving
Giving again

Calculated return ( Receiving creates

obligation to give something )

A positive gift is returned by a +ve gift
A negative one with a negative one
 Reciprocity

Reciprocity assumes
Moral norm exists to give back something
A precise return is not desirable – equilibrium needs
to be created in long run
Occurs in all cultures – is Universal
It makes interaction possible

Goal of Reciprocity
Survival of group
Better oneself in economic sense
 Objects of exchange

Personal
Value of resource is dependent on person providing it
Love, Status, Information

Tangible
Goods
Products, Services, Money
 Objects of exchange
26

High
Love

Services
Status
Personal
Infor-
mation Products

Low Money

Low Tangibility High

05/25/09
 Commitment

Definition
Enduring desire to maintain a valued relationship
Exchange of resources influence the level of
commitment

Types
1. Personal
2. Moral
3. Structural
 1. Personal Commitment

Demonstrated by will that someone

displays in continuing a relationship

Example
Satisfied customer at a car dealership will continue
relation with that company
 2. Moral Commitment

People feel a sense of obligation

Example
Buy bread from neighborhood grocer who is facing a
tough time today
Even though it may be cheaper in supermarket
 3. Structural Commitment

Perception ‘There is no escape from it’

Example
Investment in operating system
New OS may require new software, training &
transition period
Characteristics of 3 forms
 Trust

Definition
Willingness to rely on an exchange partner in whom
one has confidence

Foundations
Honesty
Overcome insecurity & doubt
Dynamics of Customer Supplier
Relationships
 Dynamics

Trust & commitment cannot be forced

Short
 Growth of relationship

Capacity for empathy

Ability to see the world through someone else’s eye,
moment to moment

Necessity
Both parties must supply open and honest info
Dare to expose themselves ( self-disclosure )
Have a positive attitude
 5 phases of relationship

1. Awareness of each other

2. Exploration or sounding out

3. Growth phase

4. Commitment or saturation

5. Decline
 Product Life cycle

Maturity

Growth Decline

Introduction

Time

37
 Relationship Life cycle

Saturation
Growth

Decline

Exploration Purchases

Time

Commitment
3
 Commitment = f ( satisfaction, attractiveness, switching cost )
 Phase 1. Awareness

Both parties become aware

Both parties position themselves

Take actions designed to demonstrate appeal to the
other party
 Phase 2. Exploration

Begins with attraction

Both think they aspire to the same goals
Perceived personality ( He / she is honest )
Supplier’s products are good and customer has a
great deal to spend

Characteristics
Interactions
Negotiations ( willingness )
Reciprocity
 Phase 3. Growth

Interactions continue
Both continue to attract
Negotiations continue
Norms / expectations become specified

Characteristics
More risks are taken
Activities performed to test relationships
Mutual dependency increases
 Phase 4. Saturation

Relations reach maximum levels

Commitment, dependence, trust, respect
Many resources are exchanged
Problems discussed fairly & openly

Characteristics
Social and non-social environment also contributes
 Phase 5. Decline

Directedness & focus on others

Indicate continuity of relationship is an issue
Differences in expectations

Characteristics
Differing needs for freedom / renewal
External influences make their effects felt
Analysis
 Challenge

Marketer needs to look into dynamic of

relationship
For long term profitable relation
Anticipate critical moments early
Influence relationship in most efficient manner

Effort to prevent customer from ending

relationship
 Airline story

Endeavour to delight customers

AI : Just flying
Jet : Joy of flying
Kingfisher : Enjoy flying
Airline story
Airline story
Airline story
Airline story
Airline story
Nature and context of CRM strategy
 Nature of CRM Strategy

Successful companies have three ‘Value

disciplines’

1. Operational excellence
2. Product leadership
3. Customer intimacy
 1. Operational excellence

Companies practice combination of

Guaranteed low price
Good quality
Ease of purchase
Problem free service

Examples
McDonald’s, Dell, EasyJet
Ford, Wal-Mart
 Business model

Achieving cost leadership

Products purchased at low price & large volumes

Efficiency
Info system follows flow of goods closely and remove
inefficiencies
Staff maintains high level of efficiencies
Efficiency is rewarded and waste despised
 2. Product leadership

Companies practice
Innovation
Amaze customers & push limits

Examples
Mercedes
Nike, Swatch, Apple, Sony
 Business model

Innovations
Recognize good ideas & expand to develop products
Inspirational vision of new product is indispensible

Efficiency
Develop portfolio of new ideas
Minimize the risk and counterbalance failure
Quick decisions necessary
 3. Customer intimacy

Companies practice
Building relations with customers
Individual wishes of customers count
Lifetime value of customer recognized

Examples
Private banks
Hotel Hyatt
 Business model

Ability to supply
Products and services
Reliable time tested solution

Efficiency
Thorough knowledge of customer
Planners rewarded for keeping and satisfying them
 Inference

Value discipline that fits best in CRM

strategy
Customer intimacy
It is difficult to excel in all areas

Critical
Even a company seeking operational excellence
Will have to maintain minimum level of innovation
and attention to customers
 Strategic perspective

Offensive strategy
Conquest of Market Share
Acquisition of new customers

Defensive strategy
Maintaining and defending one’s position
Barriers to keep competition at bay
Strategic perspective
 Context of CRM Strategy

Applicability of a strategy
Determined by context

Necessary to understand
Capability of organization to implement
Current market context
Relevance to external environment
 Internal

CRM should not be based on –ve

considerations
Problem with quality of product
Their positioning and logistics
Competition breathing down the neck

Current situation
Supermarkets
Airlines
Car manufacturers
 Internal

+ve arguments at the heart necessary

Clarity on what company hopes to achieve
Business model needs to be established
Reason for existence should be the customer

Heroes
People who work closely with the customers
They must be allowed freedom and authority
 External

CRM should be in tune with market and

environment

1. Customers
2. Competition
3. Distribution
 1. Customer

Customer attitude
Customers appreciate relationship with supplier
Insufficient for supplier alone to have interest

Necessity
Customers should accept differentiated marketing
approach
 2. Competition

Type of competition
Monopoly – less effort
Heavy competition – High effort

Necessity
Customers should accept differentiated marketing
approach
 2. Competition

Non
Competitive Mobile
Zone
Airlines

Hospitals

Loyalty
PC

Automobile

Highly
Competitive
Zone

Satisfaction
 2. Competition

Non
Competitive Airtel
Zone
Kingfisher

Apollo

Loyalty
Dell

Santro
Highly
Competitive
Zone

Satisfaction
 3. Distribution

Employment of intermediaries

Need right CRM strategy to strengthen ties with

customers
There can be alienation between customer and
supplier