CUSTOMER RELATION MANAGEMENT MSc (CR) DR. K K RAHEJA
WHAT WE WILL LEARN? • CUSTOMER CENTRIC APPROACH • CUSTOMER SATISFACTION, VALUE,LOYALTY • VALUE CONCEPT • CUSTOMER PERCEIVED VALUE (CPV) • TOTAL CUSTOMER COST/TOTAL CUSTOMER VALUE • VALUE PROPOSITION • TOTAL CUSTOMER SATISFACTION • MEASUREMENT TOOLS FOR SATISFACTION • QUALITY/ TQM • CRM
UNDERSTANDING BUSINESS • A CUSTOMER IS NOT AN OUTSIDER TO OUR BUSINESS • .HE IS A DEFINITE PART OF IT. • A CUSTOMER IS NOT AN INTERRUPTION OF OUR WORK. • HE IS THE PURPOSE OF IT. • A CUSTOMER IS DOING US A FAVOUR BY LETTING US SERVE HIM. • WE ARE NOT DOING ANY FAVOUR TO HIM. • A CUSTOMER IS NOT A COLD STATISTIC. • HE IS A FLESH AND BLOOD HUMAN BEING WITH FEELINGS
A CUSTOMER IS NOT SOMEONE TO ARGUE OR MATCH WITS WITH. • HE DESERVES COURTEOUS AND ATTENTIVE TREATMENT • A CUSTOMER IS NOT DEPENDENT ON US. • WE ARE DEPENDENT ON HIM. • A CUSTOMER BRINGS US HIS WANTS. • IT IS OUR JOB TO HANDLE THEM PROPERLY AND PROFITABLY- BOTH TO HIM AS WELL AS US • A CUSTOMER MAKES IT POSSIBLE TO PAY US OUR SALARY. • A CUSTOMER IS THE MOST IMPORTANT PERSON IN OUR BUSINESS. MKG
3M company claims that two thirds of its product improvement ideas come from listening to customers
CUSTOMER CENTRIC APPROACH • Moving from sale & product philosophy to Marketing philosophy… a better chance to the company to outperform the competitors • Corner stone of a well conceived marketing orientation is strong Customer Relationship • Connect with customers – informing, engaging, energizing them in the process • “MAKE THE CUSTOMERS THE CENTRE OF YOUR CULTURE” – John chambers – CEO Cisco systems
ADDING VALUE TO CUSTOMERS • HDFC Bank/ other private banks were the first to offer on-line real time banking across all channels such as ATMs, Internet Banking, mobile banking • Many new value added services- • collecting and delivering DDs, checks from customers’ premises, • at par check facilities • Technological conveniences + modern, classy, efficient branch banking environment created a paradigm shift in quality of customer experience in the banking sector
BUILDING CUSTOMER VALUE, SATISFACTION & LOYALTY • Successful marketers are the ones who add superior value to their customers. • E-bay epitomises the New World Order • With rise of technology, customer expect more than connect , more than satisfy and more than delight
MODERN CUSTOMER ORIENTED ORG CHART C U S T O M E R C U S T M E R
CUSTOMER PERCEIVED VALUE (CPV) • Customers tend to be value maximisers, within the bounds of search costs, and limited knowledge, mobility and income • difference between prospective customer’s evaluation of all benefits and all costs of an offering and perceived alternatives • TOTAL CUSTOMER VALUE- perceived monetary value of bundle of economic, functional, and psychological benefits customers expect from a given market offering.
The real price of anything is toil & trouble of acquiring it – Adam Smith • TOTAL CUSTOMER COST- the bundle of costs, customers expect to incur in evaluating, obtaining, using and disposing of the given market offering including monetary, time, energy, and psychic costs • V1:V2 – choose • V1 if ratio is >1/ • V2 if <1
CUSTOMER DELIVERED VALUE TOTAL CUSTOMER COST TOTAL CUSTOMER VALUE MONETARY COST PRODUCT VALUE SERVICE VALUE TIME COST PERSONAL VALUE ENERGY COST IMAGE VALUE PSYCHIC COST
APPLICATION OF VALUE CONCEPT • Tractor – M& M v/s TAFE • Reliability, durability, performance, resale value • Differences in accompanying services- delivery, training, maintenance • Corporate image • VALUE from 4 sources- product, services, personnel & image – perceives M & M delivering greater customer value • Examines total cost of transacting which is more than money – “real price of anything is toil & trouble of acquiring it”
How this decision making theory can be applied to M&M to succeed in selling? • Improve its offering in 3 ways • Increase total customer value • Reduce buyer’s nonmonetary costs • Reduce product’s monetary costs
REASONS FOR NOT CHOSING THE IDEAL • Buyer might be under order to buy at the lowest price • Buyer will retire before company realises the TAFE tractor is more expensive to operate • Buyer enjoys long term relation with TAFE sales person
IMPLICATIONS OF CPV • Seller must assess the total customer value and total customer cost with each competitor’s offer • Seller who is at CPV disadvantage has two options- • to increase TCV – augmenting offer’s product/ services/ personnel/ image • or decrease TCC – by reducing price, simplifying the ordering and delivery process or absorbing buyer’s risk by offering warranty.
DELIVERING HIGH CUSTOMER VALUE • LOYALTY – “ a deeply held commitment to re-buy or re-patronise a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behaviour.”- Oliver • Key to generating high customer loyalty is to deliver high customer value- superior value proposition- specific market segment- superior delivery system
VALUE PROPOSITION • Whole cluster of benefits the company promises to deliver: more than core positioning of the offering • A statement about the resulting experience, customers will gain from company’s market offering and from their relationship with suppliers • Whether promise is kept will depend upon company’s ability to manage its value-delivery system
VOLVO – positioning is “SAFETY” but buyer is promised other benefits – long lasting car, good service, long warranty period • BRITISH AIRWAYS flying First Class Executives– beats others by • meeting customer’s needs for conveniences and • rest at every step of journey. • Express check-in and security clearance, • pre flight meals in first class lounge, • putting reclining seats into flat beds, • in UK fast tracked custom area speeds them on their way
“competing on Value” – SIMON KNOX & STAN MAKLAN- too many companies create a value gap by failing to align brand value with customer value • Marketers should spend as much time influencing company’s core processes as they do designing the brand profile
TOTAL CUSTOMER SATISFACTION • Offer’s performance in relation to buyer’s expectations • Satisfaction is person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance in relation to his expectations • Try to deliver a high level of customer satisfaction subject to delivering acceptable levels of satisfaction to other stakeholders, given its total resources.
MEASURING SATISFACTION • IBM tracks how satisfied customers are with each IBM salesperson and makes this a factor in each salesperson’s compensation. • a highly satisfied customer • stays longer, • buys more (new & upgrades of company), • talks favourably, • pays less attention to competitor’s products, • is less sensitive to price. • Offers product or service ideas to company, • costs less to serve than new as transactions are routine
Measure customer satisfaction regularly- key to customer retention- • Link between customer satisfaction & customer loyalty is not proportional • At lower level of satisfaction customer are likely to abandon the company • At middle level- fairly satisfied but easy to switch when a better offering comes in way • High satisfaction level – repurchases/ spreads good works
METHODS OF MEASURING CUSTOMER SATISFACTION • Periodic survey • Monitoring customer loss rate • By hiring mystery shoppers • Asking the right questions is important • perhaps one questions matters the most- • “would you recommend this product or service to a friend?”
High satisfaction rating – make sure that target market knows about it. • Internet – a tool for spreading words
PRODUCT & SERVICE QUALITY • “fitness to use” • “Conformance to requirements” • “freedom from variations” • American Society for Quality Control – “ the totality of features and characteristics of products or service that bear on its ability to satisfy stated or implied needs.” – a customer centric definition
Quality of Selling- whenever the seller’s product or service meets or exceeds the customer’s expectations • Quality of company- that satisfies most of its customers’ needs most of the time • Conformance quality v/s performance quality • TOTAL QUALITY - key to value creation and customer satisfaction. • Quality is everybody’s job just as marketing is everybody’s job
Responsibilities of marketer in a quality centred company- • Participate in formulating strategies and policies of the company win through total quality excellence • Deliver marketing quality alongside production quality- delivering each marketing activity to highest standards- research/ sales training/ advertising/ customer service
TQM • An organisation wide approach to continuously improve quality of all organisation’s processes, products and services • GE’s former chairman, John F Welch Jr- “Quality is our best assurance to customer’s allegiance, our strongest defense against foreign competition, and the only path to sustained growth and earnings
DETERMINANTS OF SERVICE QUALITY • RELIABILITY • RESPONSIVENESS • ACCESS • COURTESY • COMPETENCE • COMMUNICATION • CREDIBILITY • SECURITY • UNDERSTANDING • TANGIBLES SOURCE: PARSURAMAN et al (1985)
TO ENCOURAGE QUALITY • DEMING’S PRIZE – Japan • MALCOLM BALDRIDGE NATIONAL QUALITY AWARD – in U.S. • EUROPEAN QUALITY AWARD • QUALITY CIRCLES (QCFI)
Product and service quality, customer satisfaction, company profitability are intimately connected. Higher levels of quality result in higher level of satisfaction, support higher prices and sometimes lower costs. • In following TQM, some may lose focus – on processes & how they are doing business rather than customer needs and wants & why they are doing business • ROQ – improve quality only on those dimensions that produce tangible customer benefits, lower costs, increased sales
A STUDY • Companies who adopt primarily • revenue boosting approach ( externally focusing on growing demand through increasing customer’s preferences for quality) • do better than those who primarily focus on cost reduction emphasis (internally focusing on improving efficiency of internal processes)-
CUSTOMER LIFETIME VALUE • James V Putten of American Express- “best customers outspend others by 16 to 1 in retailing, 13 to 1 in restaurant, 12 to 1 in airlines, 5 to 1 in hotel and motel business • 80-20 rule – top 20% customers generate 80% profit • Sherden – 20-80-30 modification – top 20% customers generate 80% profit half of which are lost in serving 30 % of unprofitable customers • IMPLICATION- company could benefit by “firing” its worst customers
Conversely, it is not the largest customer who yield most profit. They demand considerable service and deepest discounts • Small customers pay full price but receive minimal service, but cost of transacting them reduces profitability • Midsize customers – pay full price, receive good service and offer best profitability
PROFITABLE CUSTOMER • A person, household or company that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling and servicing that customer • Emphasis is on life time stream of revenue and cost and not on profit from a particular transaction • Banks lose money on 45% of retail customers • Handling unprofitable customers by • Raising fees • Reduce service support
CUSTOMER PROFITABILITY ANALYSIS • PRODUCT • CUSTOMER • P1, P2, P3, P4 • C1, C2, C3,
CLV • Maximising long term customer profitability • Net present value of stream of future profit expected over customer’s life time purchases • E.g. cost of acquisition of new customer • Cost of average sales calls(incl salary, commission, incentives ) – 300/- • Av no. of sales calls to convert an average prospect to a customer – 4 • Cost of attracting new customer- 1200 • Add to it cost of advertising/ promotion
Average CLV is estimated as under • Annual customer revenue -500 • Av no, of loyal years – 20 • Company profit margin- 10% • CLV- 1000 • Spending more to attract customer than they are worth • Fewer sales calls/ spend less pre sales call, stimulate higher spending/ retain customer longer/ sell them high profit product • A CONCEPT TO HELP MARKETERS TO ADOPT LONG TERM PERSPECTIVE
CUSTOEMR EQUITY • Aim of CRM is to produce high customer equity- A total of discounted life time values of all firm’s customers • 3 drivers of customer equity • VALUE EQUITY- objective assessment • BRAND EQUITY- subjective & intangible assessment • RELATIONSHIP EQUITY • Value management • Brand management • Relationship management
STRUCTURE OF PRESENTATION • CRM PROCESS • e- CRM (electronic – web based) • h- CRM (human resource management ) • s –CRM (supplier based) • LOYALTY & REPEAT VISITS TO EARN POINTS/ SPECIAL DISCOUNTS IN BILLING) • p- CRM (Partners of Hospitals– GPs/ Nursing Homes) • Partners of CRO ?
MARUTI (AUTOCARD) • http://www.slideshare.net/saurabh2821/maruti-summer-project-presentation
WHAT IS CRM • CRM is a business strategy to select and manage customers to optimize long-term value. It requires a customer-centric business philosophy and culture to support effective marketing, sales and service processes. The CRM has been transformed recently from one-to-many mass-communication philosophy to more individualized, one-to-one communication.
According to experts, while every rupee spent on advertising yields Rs. 250 in revenues, the same spent on customer services yields Rs. 2500 in revenues. (Internetworld-August'2001)
CRM….. • A process of managing detailed information about customers and carefully managing all customers “touch points” to maximise customer loyalty • A customer “touch point” is any occasion on which a customer encounters the brand and product- form actual experience to personal or mass communication to causal observation
For a hotel – • reservations-check in- check out- frequent stay programmes- room service-business services- exercise facilities- laundry service- restaurant- bars • For a hospital- …………. • For a CRO - ……………..
ADVANTAGES OF CRM AIDS CUSTOMER SERVICE- • Improved customer satisfaction rating • acquire and retain customers • every customer interaction converted into healthcare management opportunity • provides support to customer service representative with relevant information • transforms healthcare org into customer centric healthcare providers • provides solutions to deal with customer related issues – decision making
BOOSTS SALES AND MARKETING • caters to demands of sales , marketing and customer service • helps increase existing sales effectiveness (spending more time with customers, spending less time chasing, needed information)- productivity improvement • helps in business forecast • increases effectiveness of call centres • increase sales globally • Increased win rates • Increased margins – knowing customers better, providing a value sale, discounting prices)
AIDS OVERALL PROFITABILITY • excellent industry knowledge and thus reducing medical errors • Decreased general sales and marketing admin cost – specified target customer- needs & wants; not wasting money on mailing to all customers • reduces operating costs, reduces errors and improves patient relations • improves overall efficiency • latest IT tech