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Module I
Conceptual Foundation of
CRM
Evolution of CRM
Benefits of CRM
Schools of thought on CRM
Different Definitions of CRM
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Product marketing Direct Marketing Target Marketing

Relationship Marketing

MASS MARKET RELATIONSHIP

MARKETING SEGMENTATION MARKETING

ONE TO ONE MARKETING

CUSTOMER RELATIONSHIP MANAGEMENT

 Customer Relationship Management
(CRM) Amity Business School
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• CRM is the strategic use of information, processes,

technology and people to manage the customer’s
relationship with your company ( Marketing, Sales, Services
and Support) across the whole customer life cycle.
• CRM is the process of storing and analyzing the vast
amounts of data produced by sales calls, customer-service
centers and actual purchases, supposedly yielding greater
insight into customer behavior. CRM also allows
businesses to treat different types of customers differently
in some cases, for instance, by responding more slowly to
those who spend less or charging more to those who
require more expensive handholding.
Wall Street Journal, 21 May’2006.
 More definition of CRM
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“Process of creating and maintaining relationships with

business customers or consumers”.

“A holistic process of identifying, attracting,

differentiating, and retaining customers”.

“Integrating the firm’s value chain to create enhanced

customer value at every step”.

“An integrated cross-functional focus on improving

customer retention and profitability for the company.”
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Online insurance company view on CRM:

Motivating customers to initiate revenue generating contacts with us.

A catalog retailer on CRM :

Increasing the likelihood of the right response by a customer segment.

A mid market financial institutions view on CRM:

We want to attract customers both old and new through more personalized
communications.
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• CRM , the term often referred to

marketing. This is because CRM can be
considered from a number of perspectives.

– Information Technology (IT) perspective

– The Customer Life Cycle (CLC) perspective
– Business Strategy perspective
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Business Strategy and CRM

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• Three key phases:

– Customer Acquisition
– Customer Retention
– Customer Extension

• Three contextual factors:

– Marketing Orientation.
– Value Creation.
– Innovative IT.
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Information Technology (IT) perspective

• CRM is more than just software. For the
purposes of this introduction - Information
Technology (IT) and CRM have three key
elements,

– Customer Touch Points,

– Applications, and
– Data Stores.
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 Amity Business School
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The Customer Life Cycle (CLC)

perspective
• The Customer Life Cycle (CLC) has obvious
similarities with the Product Life Cycle (PLC).

• CLC focuses upon the creation of and delivery of

lifetime value to the customer.

• CLC is a summary of the key stages in a

customer's relationship with an organization.
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 Objectives of CRM
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• Identification of potential customers.

• Understanding of customer needs, Both current and latent.
• Differentiating profitable from unprofitable customers and
segments.
• Decreasing attrition by increasing value and satisfaction.
• Increasing usage of current products and services.
• Increasing referrals.
• Winning back lost customers.
• Moving customers up the relationship hierarchy from strangers
to acquaintances to friends to partners.
• Integrating marketing and sales efforts throughout the various
channels used by the company.
 GOALS OF CRM
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DIFFERENTIATING CUSTOMER
• All the customers are not equal, recognize and reward the best
customer. For this the CRM needs to understand.
• Sensitivity, tastes, preference and personalities.
• Life style and age
• Culture background and education
• Physical and psychological characteristics.
DIFFERENTIATING OFFERING
• A CRM solution needs to differentiate between low value
customer and a high value customer.
• High Value customer requiring high value customer offerings.
• Low Value customer with potential to become high value in
near future.
• High Value customer requiring high value service.
 Amity Business School
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KEEPING EXISTING CUSTOMER

• Grading customer from satisfied to very dissatisfied shall help the

organization in always improving its customer satisfaction level and scores.
As satisfaction level of each improves so shall the customer retention with
the organization.

– Attempts to “own” the lion share of customer spending and/or “share of

mind” in a particular product category
– Building brand equity, maintaining vigilant customer contact, keeping
current with the market trends is critical
– 5% points increase in customer retention=20-125% increase in profit
• CUSTOMER LIFE TIME VALUE

• By identifying life stage and life event trigger the points by customer
,marketers can maximize share of purchase potential.
– Refers to the net present value of the potential revenue stream for any
particular customer over a # of years
– Starts with current purchase activity then extrapolates to include
potential additions from cross-selling, upgrades, total ownership, etc.
 Goal of CRM Amity Business School
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Increased Customer Loyalty = Increased Profits

Integrated and personalized interaction
that increases value to customers
Data Enabled processes

Integrated Customer Knowledge

Customer Transaction Data Silos

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Lifetime Value (LTV)

– Refers to the net present value of the potential revenue
stream for any particular customer over a # of years
– Starts with current purchase activity then extrapolates to
include potential additions from cross-selling, upgrades,
total ownership, etc.
Customer Ownership
– Attempts to “own” the lionshare of customer spending
and/or “share of mind” in a particular product category
– Building brand equity, maintaining vigilant customer
contact, keeping current with the market trends is critical
– 5% points increase in customer retention=20-125% increase
in profit
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THE CRM VALUE CHAIN

Customer data Customer information Customer Knowledge

Customer wisdom
 CRM BUSINESS CYCLE
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1.1.
Understand
Understand
customer’s
customer’s 2.2.
Differentiate
Differentiate
needs
needs based onon
based
8.8.
Retain
Retain customer needs,
customer needs,
valuable
valuable characteristics
characteristics
customers.
customers. and behavior.
and behavior.

3.3.
Develop
Develop
7.7.
Acquire
Acquire product
product
customers
customers services
services
and
and CRM
CRM Channels
Channels toto
prospective
prospective meet
meet
customers.
customers. customer’s
customer’s
needs.
needs.

6.6.
Deliver
Deliver 4.4.
Customize
Customize
increased
increased bybycustomer
customer
value toto
the 5.5.
Interact
Interact
value the segment.
customer. with segment.
customer. with
customers
customers
and
and
prospective
prospective
customers.
customers.
 CRM Concepts
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Customer Life Cycle

The total time that the customer is engaged with your company from the
customer’s experience and view point.
Consider Purchase Set up Use

Customer Asset
Loyal customers continue to buy more as they perceive value in the relationship.

Customer Information: It is a tangible company asset that can be inventoried and

managed. Critical element for building loyalty.

Customer Value: It is calculated on the basis of purchases made by an

individual.
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Components
of CRM
Information
Technology
Process
People
 The components
of CRM Amity Business School
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1.Information: Information is the raw material of

CRM. These types of information are useful to
CRM.
– Identification Data
-Marketing Data

2.Process: Customer –centered processes are

the product of CRM. Some examples are:
-Customer Touch points
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3.Technology: Technology is the machinery that

enables CRM to work.
-Software Products
-Networking
-Databases

4.People:People are the power supply of CRM.

-Training and education
-Measurements and rewards
 Customer Touch points
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Touch points are the means (media) that we use to

interact with our customers.
1. Mail
2. Toll-free-Number
3. Phone / fax
4. Event
5. Internet
6. Kiosks
7. Broadcast
8. E-Mail
9. Personal
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 Common myths about CRM
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1. CRM is the solution that will solve all our customer

problems, it’s all the software tools that make it easier for a
customer to do business with us.
2. CRM is the internet.
3. CRM is just the latest name for Direct Marketing.
4. CRM means recognizing a customer wherever he interacts
with our company, a 360 degree view of the customer.
5. CRM means scoring and measuring customer value.
6. CRM is sales rep productivity tools.
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 Types of CRM Amity Business School
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• Operational CRM

• Analytical CRM

• Collaborative CRM
CRM Architecture Amity Business School
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 Operational CRM
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The operational application of CRM enables effective interaction with

customers. For this purpose various tools are used.
Operational CRM provides support to “Front Office" business processes,
including sales, marketing and service.
Each interaction with a customer is generally added to a customer's
Contact history, and staff can retrieve information on customers from the
Database when necessary.
These contact management tools aim to reduce costs by improved
Process efficiency and use of media based communication channels.
These are also aimed to provide customers with a consistent interface
Across all communication channels.
Banks are an exemplary implementation of CRM as customer contact
management.
Channel management tools aim to understand how customer interacts
with the company. It aims to deliver products and services across
multiple channels in effective, efficient, and consistent manner.
 Analytical CRM Amity Business School
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The data collected in operational management is analyzed to segment
customers. The valuable information thus obtained is used to satisfy
customers. Analytical CRM is composed of:

• Pattern discovery component

• Product and customer analysis component
• Multitude component
• Sorting and customer fractionation component
• Customer value evaluation component

Analytical solutions provided for most companies are integrated view of

customer across all channels and applications, campaign performance
analysis, customer profitability analysis, cross-selling and up selling. The
analytical solutions help answer questions like:

Who are their best customers?

Whom they are likely to loose?
How to retain them?
How to attract new customers?
How to improve profitability of customers?
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Analytical CRM analyzes customer data for a variety of purposes:

Design and execution of targeted marketing campaigns to optimize
marketing effectiveness.
Design and execution of specific customer campaigns, including
customer acquisition, cross-selling, up-selling, retention.
Analysis of customer behavior to aid product and service decision
making (e.g. pricing, new product development etc.)
Management decisions, e.g. financial forecasting and customer
profitability analysis
Prediction of the probability of customer defection (churn analysis)
Analytical CRM generally makes heavy use of data mining..
 Collaborative
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The various departments of company like the sales, technical

support, and marketing, share the information they collect
about customers. The objective is to improve the quality of
customer service and increase customer loyalty.

It allows the company to synchronize and manage efficient,

productive interaction with customers, prospects, partners,
and internal associates across all communication channels.
The customers' viewpoint is taken care of at every transaction
level thus enabling better service to the customer.
Collaborative CRM also reduces web service costs by enabling
web collaboration.
• Collaborative CRM covers the direct interaction with
customers, for a variety of different purposes, including
feedback and issue-reporting. Interaction can be through a
variety of channels, such as web pages, email, automated
phone (Automated Voice Response AVR) or SMS.

• The objectives of collaborative CRM can be broad, including

cost reduction and service improvements
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Integrated CRM Architecture
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TECHNOLOGICAL ARCHITECTURE
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 Case Study-Right Number
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The “Say Cello not Hello” promotional scheme for cello

thermoware which ran in Mumbai in the week beginning
14, seems to be one of those crazy ideas that make
great marketing sense.
The brain child of ad agency Situations, the scheme
involved trained teams of callers ringing up 33,000
randomly chosen Mumbai telephone numbers. If the
person who picked up the phone at the other end
side”Cello” instead of “Hello” he or she became eligible
for a a free cello Thermaware water jug worth Rs.111
information about the scheme had been disseminated
widely through a highly visible ad campaign using press
also banners, stickers and leaflets.
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Says anjan Chatterjee, Managing Director of situations, “the

idea was born in a hotel lounge in Bangalore. We were toying
around with a headline that had proved rather popular :“Say
hello to Cello”.Suddenly it struck us:why not call people at
random all over Bangalore and tell them to say Cello instead
of Hello”?. First tried out in Bangalore the scheme was a big
success, achieving its aim of creating top of mind awareness
of the product.

Chatterjee claims that in Mumbai the scheme took the city’ s

residents by storm. According to him the message on the
telephone answering machines in house had been changed
for the week to cello, just in case the call came through when
no one was around. Over the week the schemes leased prizes
were delivered to more than 3800 winners.As the ad for these
schemes says:”Idea accha Hai”.