Module 2

Managing Customer
Relationship

Building Customer Relationship

Four key steps in the relationship
building process: Identify
Differentiate
Interact
Customize

The Ladder of Loyalty

Partner
Advocate

Developing
&
enhancing
the

Supporter

relationship

Client
Customer
Prospect

Customer
attraction

Relationship Building
Strategies
Communicate Frequently

Offer Customer rewards

Hold special events

Launch multicultural programs

Build two-way communication
Enhance your customer service

ZERO CUSTOMER
DEFECTIONS
Customer Defections are the loss of clients or
customers.
Customer defection is the rate at which customers
defect or stop the usage of products of a
company. Business with high defection rate,
would be losing their existing customers.
In order to overcome this they use another term of
customer retention, in simple words its to retain
or prevent the existing customers to defect the
product.

ZERO CUSTOMER
DEFECTIONS

NPV of
Profits
from a
Customer

Defection Rate
AVG Customer Life

50%
2yr

40%
2.5yr

30%
3.3yr

20%
5yr

10%
10yr

5%
20yr

Why Customer Defect?

Categories of Customer
Defect
Price

defectors
Product defectors
Service defectors
Market defectors
Technology defectors
Organisational defectors

Retentions Stages or steps to

reduce customer defection
Measure

customer retention
Interview former customers
Analyse complaint and service
data
Identify switching barriers

Market Share vs. Share of

Customer

Customer Centric Marketing

Marketing
practice and
philosophy

Segment Centric Marketing

Product Centric Marketing

1960s

1980s

The Evolution of Marketing Practices

1990s

vs.

Needs Satisfied

Needs Satisfied

Market share
Customer Share

1980s

Customers Reached

Customers Reached

Share of Customers Expenses

Lifetime Value of Customers

The lifetime value calculation looks at the

customers from the point of view of their
lifetime revenue or profit contribution to a firm.
Lifetime value of a customer depends on:
The length of an average lifetime
The average revenues generated per relevant
time period over the lifetime
Sales of additional products and services
during that time
Referrals generated by the customers over
the lifetime

Lifetime Value of Customers

Lifetime value refers to lifetime profitability

when cost data is readily available else it refers
to the lifetime revenue stream.
Example of Credit cards

Acquisition cost
Base profit
Profits from revenue growth
Cost savings
Referrals
Price premium

Customer Retention Strategies

The easiest way to grow your customers is not to lose them

16

Customer Retention
Strategies
Welcome
Reliability
Responsiveness
Recognition
Personalization
Reward

Strategies

17

A welcome strategy
The organizations appreciation for the initiation
of a relationship.

Creating a delightful surprise, making a good

first impression
First touch: additional customer information
Reassure the buyers that they have made the
correct choices.
Treat like a first date. Dont overdo it!

18

Reliability
The organization can repeat the exchange
time and time again with the same
satisfying results.

Keep promise
Ensure consistent quality
Continuous promotion is still the key.

19

Responsiveness
The

organization shows customers it really

cares about their needs and feelings.
Loyal employees create loyal customers.
Internal marketing.
Customer-contacted employees should have
the authority as well as the responsibility for
date to date operational activities and CRM
decision.

20

Recognition
Special

attention or appreciation that

identifies someone as having been known
before.
People respond to recognition.
Recognition and appreciation help maintain
and reinforce relationships.

21

Personalization
Use CRM system to tailor promotions and
products to the specific customers.
Offer engine: take customer data after it is
analyzed and applies it to create the offer or
message that is appropriate to the individual
customer. Ex., My site, Click stream analysis,
free ride, etc.

22

Reward strategies
Frequent,

best customers
Partnership Management Program
Switching costs: financial penalty, time
loss, psychological barrier
Termination Penalty

Customer Retention
Strategies

Other customer retention strategies include:

Blogs
CRM Systems
Loyalty Programs
Magic Moments
Overcome Buyers Remorse
Personal Touches
Premiums and Gifts
Questionnaires and Surveys
Regular Reviews
Social Media
Welcome Book

Customer ValueConcept
and Characteristic
Customer value is the customers
perception of what outcome he expects
in a specific use situation with the help
of a product or service offering in order
to accomplish a desired purpose/goal.

 The

process includes collecting customer

data, analyzing this data to make
decisions which helps to make new
customers and satisfy the existing ones.
A customer-centric business strategy
which
Focuses on managing and optimizing
entire customer life cycle.
Demand re-engineering of work
processes with customer in focus
It consists of three phases:- Planning,
Assessment and Execution phases

Planning Phase :
Planning Phase:
Plan to approach the customers
Plan for making new campaigns
This phase includes
Marketing tools
Various Software's
Marketing & Sales personnel are
involved in this phase

Assessment Phase :

Assessment Phase-Select customer base for analysis

Analyze customer requirements
This phase includes technologies like
Data warehousing
Data Mining
Online analytical processing (OLAP)
A certified personnel sets up the CRM package while
a business analyst analyzes the data

Execution Phase :
Execution

Phase
Customer interaction
Executes campaigns
Track customer feedback
This phase uses

Internet
Call centers
Direct mails etc.

CRM Process:

CRM

process is defined as any group

ofaction that is instrumental in
theachievement of the output of
anoperation system, in accordance with
aspecified measure of effectiveness.

CRM Process:

Objectives of a CRM Process:

The main objective of CRM process isto originate
a powerful new tool forcustomer retention

CRM implementation & success ratepurely

depend upon the process, whichincludes the
future, revenue, customervalue customer
retention, customeracquisition & profitability

CRM Process:

Benefits of a CRM Process:

Ability to retain loyal & profitable customers.
Rapid growth of business project.
Acquiring the right customers, hence
drivesgrowth & increased profit margins.
Increased individual customer margins,
whileoffering the right products at the right
time.

A Closed-loop CRM Process:

Gathering information:
gather information aboutcustomer.
Perform data aggregation:
data is merged &compressed into a complete view of the customer.
Create exploration warehouses:
are extracts ofcustomer data needed to support specific
analysis(like customerprofitability etc.).
These are engines for analytical applicationsthat support
identification of opportunities & developingstrategies.
Execution of strategies:
execute these strategies bydeveloping & launching marketing
campaigns across targetedcustomer segment.
CUSTOMER INTERACTION

Four Cs(elements) of CRM Process:

Correlate:
series of transaction & interaction that makeup a dialogue between
customer/channel/end user/ org. I.e.data is collected from all contact
points.
Combine:
mapping & management of interaction pointsbetween a customer
customer/channel/end user/ org.
Cognize
(to know):insight gained through capture &analysis of detailed
information is to create continuouslearning from data warehouse.
Connect:
application of insight to create relevantinteraction with consumers,
customers,channels, suppliers,partners that build value relationships
.