customerrelationshipmanagement-121122012156-phpapp02

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Unit 14 Customer Relationship Management


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Contents

Introduction

Relationship marketing vs. relationship management

Definitions of customer relationship management

Forms of relationship management

Managing customer loyalty and development Reasons behind losing customers by organizations

Significance of customer relationship management

Social actions affecting buyer-seller relationships


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Introduction In marketing, it is often said that retaining customer is more important than

acquiring one. Organizations use communication tools to make the consumer aware about their

products and brands.

It uses supply chain and human resources to sell its products.

All these have a cost to the company and in this competitive world organizations

want to reduce cost. For this organizations develop a database which helps in creating loyalty programs.

Many Indian companies like Infosys, Wipro and others started offering CRM

software to companies.

The benefits of CRM software are quicker, better quality, and timely services to the

customers.

This increases the word of mouth communications and reduces the cost of mass

media.


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Learning ObjectivesAfter studying this unit, you will be able to

Explain the meaning, need and relevance of customer relationship

management.

Mention the forms of relationship management.

Cite the reasons for losing customers by organizations.

Bring out the significance of customer relationship management.


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Relationship Marketing Vs. Relationship Management

The relationship marketing approach considers customers as part of the business

and aims at building a long term and never-ending relationship with them.

The focus of relationship marketing approach is on developing hard core loyal

customers and retaining them forever.

The relationship marketing approach has slowly taken the form of customer

relationship management.

Relationship marketing focuses only on the marketing function of the organization.

Customer relationship management focuses on customers and the entire functions

connected with value creation and delivery chain of the organization.


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CRM is not a new concept but

a very old practice, which has

grown because of the benefits

it offers in the present

marketing scenario. CRM today is a discipline and

also a set of software and

technology which automates

and improves the business

process associated with

managing customer

relationships in the area of

sales, marketing, customer

service and support.

CRM helps companies

understand, start and developlong-term relationships with

clients as well as help in

retaining current customers.


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Forms of Relationship ManagementThe 10 different forms of relationship marketing are:

1. The partnership involved in relational exchanges between manufacturers

and their external goods suppliers.

2. Relational exchanges between service providers, as between advertising

or marketing research agencies and their clients.

3. Strategic alliances between firms and their competitors, as in technology

alliances; co-marketing alliances and global strategic alliance.

4. Alliances between a firm and non-profit organizations, as in public-

purpose partnerships.

5. Partnerships for joint research and development, as between firms and

local, state, or national governments.


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6. Long-term exchanges between firms and customers, particularly in the services

marketing area.

7. Relational exchanges of working partnerships as in channels of distribution.

8. Exchanges involving functional departments within a firm.

9. Exchanges between a firm and its employees, as in internal marketing.

10. Within firm relational exchanges involving such business units as subsidiaries,

divisions or strategic business units.


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Managing Customer Loyalty and Development

Managing customer development is

one of the important aspects of

relationship marketing.

The focus is on two things customer

catching and customer keeping.

Customer catching is the process of

attracting new customers (inviting new

blood), while customer keeping is the

process of retaining the existing ones

(encouraging old blood).


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Customer Development Process


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1. Suspect: Suspect is everyone who might conceivably buy the product or service.

2. Prospects: Prospects are those people who have a strong potential interest in the

product and the ability to pay for it. The company rejects the disqualified

prospects because they have poor credit or would be unprofitable.3. First time customers: The company wants to convert the qualified prospects into

first time customers.

4. Repeat customers:The company wants to convert satisfied first time customers

into repeat customers. First time and repeat customers may also buy from the

competitors.

5. Clients: The company then tries to convert repeat customers into clients. Clients

are those people who buy only from the company.


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6. Advocates: The next step is to convert the

clients into advocates. Advocates are those

people who speak good about the companyand encourage others to buy from it.

7. Partners: The ultimate goal of the company is

to convert advocates into partners. After

reaching this stage, the customer and the

company work actively together.

Some customers may become inactive or may

drop out due to many reasons leading to end of

the relationship. The challenge is to re-activate

dissatisfied customers through customer win back

strategies


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4. Benefit related reasons: The customers may be attracted by greater

benefits offered by the competitors. Such benefits may be more

attracting and cause customers to change brand.

5. Competitor related reasons: Technological advancement, attractive

offers, value added services, etc., offered by competitors may also

encourage customers towards brand switching.

6. Personal reasons: The personal reasons for brand switch over may be

The customer has moved away from the market area where thebrand is sold.

Role changes in life cycle may lead to changes in brand preference.

Anger, disgust, distress developed during the process of product

delivery.

Sentimental reasons. Influence of other members of the family.


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Significance of Customer Relationship Management

Reduction in customer recruitment cost.

Generation of more and more loyal customers.

Expansion of customer base.

Reduction in advertisement and other sales promotion expenses.

Increase in the number of profitable customers.

Easy introduction of new products.

Easy business expansion possibilities.

Increase in customer partnering.


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Traditional Organizational Chart Vs Modern Customer

Oriented Company Organization Chart

Top

Manage

ment

MiddleManagement

FrontLine people

Customers

Customers

Front Line people

Middle

management

Top

Manag

ement

Traditional Chart Modern Chart


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Soft and Hard Versions of Relationship Marketing

Soft version of relationship marketing suggests humanistic

relationship development,whereas the hard version reflects

a utilitarianinstrumentalism.

The soft version focuses on the term relationship,thus laying

importance on relationship management. It strongly

advocates that all management is basically relationship

management and all managers are relationship managers. Itfocuses on developmental humanism as a foundation to

build and develop long lasting relationships in marketing

exchanges.

On the other hand, the hard version stresses on the idea ofmarketing, that is something to be used unemotionally and

in a formally sensible manner.


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Social Actions Affecting Buyer-Seller Relationships

Good things

Initiate positive phone calls

Make recommendations

Candor (frankness) inlanguage

Use we problem solving

language

Get to problems Use jargon or shorthand

Accept responsibility

Plan the future

Bad things

Make only callbacks

Make justifications

Accommodative language Use legal language

Only respond to problems

Use long-winded

communications Shift blame

Rehash (repeat) the past


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