Customer Relationship Management (CRM)

1
Chapter 15 Customer Relationship Management (CRM)
Learning Objectives Define CRM Understand the
importance of CRM Explain the determinants of
CRM and the key stages in its development Discus
s the main functions and various models of
CRM Explain the role of salespeople as
relationship developers Discuss the management
of customer relationships.
2
Chapter 15 Customer Relationship Management (CRM)
What is Customer Relationship Management (CRM)?
CRM is the development and maintenance of
mutually beneficial long-term relationships with
strategically significant customers (Buttle,
2000) CRM is an IT enhanced value process,
which identifies, develops, integrates and
focuses the various competencies of the firm to
the voice of the customer in order to deliver
long-term superior customer value, at a profit to
well identified existing and potential customers.
(Plakoyiannaki and Tzokas, 2001)
3
Chapter 15 Customer Relationship Management (CRM)
Understanding Customer Relationship Management
(CRM)? CRM is a business philosophy based on
upon individual customers and customised
products and services supported by open lines of
communication and feedback from the participating
firms that mutually benefit both buying and
selling organisations. The buying and selling
firms enter into a learning relationship, with
the customer being willing to collaborate with
the seller and grow as a loyal customer. In
return,, the seller works to maximize the value
of the relationship for the customers
benefit. In short, CRM provides selling
organisations with the platform to obtain a
competitive advantage by embracing customer needs
and building value-driven long-term
relationships.
4
Chapter 15 Customer Relationship Management (CRM)
Determinants of CRM Trust The willingness to
rely on the ability, integrity, and motivation of
one company to serve the needs of the other
company as agreed upon implicitly and
explicitly. Value The ability of a selling
organisation to satisfy the needs of the
customer at a comparatively lower cost or higher
benefit than that offered by competitors and
measured in monetary, temporal, functional and
psychological terms.
5
Chapter 15 Customer Relationship Management (CRM)
Determinants of CRM In addition to trust and
value, salespeople must Understand customer
needs and problems Meet their
commitments Provide superior after sales
support Make sure that the customer is always
told the truth (must be honest) and Have a
passionate interest in establishing and retaining
a long- term relationship (e.g., have long-term
perspective).
6
Chapter 15 Customer Relationship Management (CRM)
Stages in the development of a Customer
Relationship The Pre-relationship Stage The
event that triggers a buyer to seek a new
business partner. The Early Stage Experience is
accumulated between the buyer and seller although
a great degree of uncertainty and distance
exists. The Development Stage Increased levels
of transactions lead to a higher degree of
commitment and the distance is reduced to a
social exchange. The Long-term
Stage Characterised by the companies mutual
importance to each other. The Final Stage The
interaction between the companies becomes
institutionalized.
7
Chapter 15 Customer Relationship Management (CRM)
Stages in the Development of a Key-Account
Relationship
High
Synergistic KAM
Partnership
Degree of involvement
Mid-KAM
Early-KAM
Low
Pre-KAM
Transactional
Collaborative
Nature of customer relationship
(Millman and Wilson, 1995)
8
Chapter 15 Customer Relationship Management (CRM)
A Relationship Life Cycle Model
High cooperation Low competition
Pre- relationship stage
Decline stage
Development stage
Maturity stage
Low cooperation High competition
Time
(Wilkinson and Young, 1997)
9
Chapter 15 Customer Relationship Management (CRM)
Class Exercise What should the focus and
main activities of a global salesperson be in
each stage of the relationship development
process? Why? (Please justify your answer)
10
Chapter 15 Customer Relationship Management (CRM)
Functions of Customer Relationship
Management Direct functions (are the basic
requirements of a company that are necessary to
survive in the competitive marketplace) Profit
Volume and Safeguard Indirect functions
(are the actions necessary to convince the
customer to participate in various marketing
activities). Innovation Market Scout and
Access.
11
Chapter 15 Customer Relationship Management (CRM)
Functions of Customer Relationship Management
Value Creation Process

• Technology delivery process
• RD
• Technology integration
• Efficiency, effectiveness
• learning

• Management
• Decision
• Process
• Customer sensitivity
• Diversity
• Information
• Differentiated
• offering

• Value-based
• Strategies
• Pricing
• Communication

• Product delivery process
• Concept to launch
• Manufacturing process

• Customer delivery process
• Supply chain
• Distribution
• Infomediation (distribution
• of information)

(Sharma et. al., 2001)
12
Chapter 15 Customer Relationship Management (CRM)
The role of salespeople as relationship builders
and promoters Salespeople by identifying
potential customers and their needs approaching
key decision makers in the buying
firm negotiating and advancing dialogue and
mutual trust coordinating the cooperation
between the customers and their
company encouraging the inter-organisational
learning process contributing to constructive
resolution of existing conflicts and leading
the customer relationship development team are
the individuals in any organisation who act both
as relationship builders and as relationship
promoters.
13
Chapter 15 Customer Relationship Management (CRM)
Models of Customer Relationship Management
The Evans and Luskin (1994) model for
effective Relationship Marketing

• Relationship marketing inputs
• Understanding customer expectations
• Building service partnerships
• Empowering employees
• Total quality management

• Relationship marketing outcomes
• Customer Satisfaction
• Customer loyalty
• Quality products
• Increased profitability

• Assessment state
• Customer feedback
• Integration

(Evans and Luskin, 1994)
14
Chapter 15 Customer Relationship Management (CRM)
Models of Customer Relationship Management
The Brock and Barcklay (1999) model of
selling partner relationship effectiveness
Independence
Selling partner relationship effectiveness
Mutual trust
Cooperation
Relative influence
15
Chapter 15 Customer Relationship Management (CRM)
Managing Customer Relationships
The global salesperson must be involved in the
following activities in order to initiate,
develop and enhance the process that is aimed at
building trust and commitment with the
customer. Initiating the relationship Engage
in strategic prospecting and qualifying Gather
and study pre-call information Identify buying
influences Plan the initial sales
call Demonstrate an understanding of the
customers needs Identify opportunities to
build a relationship and Illustrate the value
of a relationship with the customer
16
Chapter 15 Customer Relationship Management (CRM)
Managing Customer Relationships
The global salesperson must be involved in the
following activities in order to initiate,
develop and enhance the process that is aimed at
building trust and commitment with the
customer. Developing the relationship Select
an appropriate offering Customise the
relationship Link the solutions with the
customers needs Discuss customer
concerns Summarize the solution to confirm
benefits and Secure commitment.
17
Chapter 15 Customer Relationship Management (CRM)
Managing Customer Relationships
The global salesperson must be involved in the
following activities in order to initiate,
develop and enhance the process that is aimed at
building trust and commitment with the
customer. Enhancing the relationship Assess
customer satisfaction Take action to ensure
satisfaction Maintain open, two-way
communication and Work to add value and
enhance mutual opportunities.
18
Chapter 15 Customer Relationship Management (CRM)
Managing Customer Relationships
Qualifying prospects for relationship building
High
Use a non customized approach
Build a strong and lasting relationship
Opportunities for adding value
Seek better opportunities elsewhere
Focus on loyalty-building program
Low
Low
High
Potential profitability of customer
19
Chapter 15 Customer Relationship Management (CRM)
Relationship networks The ultimate outcome of a
successful CRM strategy is the creation of a
unique company asset known as a relationship
network. A relationship network consists of the
company and its major customers with whom the
company has established long and enduring
business relationships. The additional aspects
of a global salespersons job are to Manage
customer value Act as customer advocate
and Enhance customer loyalty and build a
health and profitable network of
relationships.
20
Chapter 15 Customer Relationship Management (CRM)
Summary CRM is a new business philosophy based
on trust and value The core function of CRM is
the value creation process Customer
relationships develop over time The role of
global salespeople in the process is that of both
relationship builders and relationship
promoters and The basic premise of CRM is to
offer superior value to customers in an effort
to turn prospects into customers, customers
into loyal customers, and loyal customers
into partners.