customer relationship management (crm )
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Customer Relationship Management (CRM)
CRM ?CRM ? “ “Strategy”Strategy”
““An approach to building and sustaining An approach to building and sustaining
long-term business with customers.”long-term business with customers.”
It is about creating a feel of high touch in It is about creating a feel of high touch in high tech environmenthigh tech environment
CRMCRM
Comprehensive approach for creating, maintaining and expanding customer relationships through the integration of people, process and technology
CRM is about managing relationships more effectively so as to drive down costs while at the same time increasing your sales & profits
CRM is CRM is notnot just just a a softwaresoftware
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People & Process
Information Technology
Business
Strategy
CRM strategy drives structure & technology
CRM applications & technologies are just a tool to support CRM strategy
Benefits of CRMBenefits of CRM
Competitive AdvantageCompetitive Advantage
Reduces costs, provides efficient operation Reduces costs, provides efficient operation
Increases customer satisfaction & LoyaltyIncreases customer satisfaction & Loyalty
Automate inefficient and expensive work processesAutomate inefficient and expensive work processes
Increased marketing and selling opportunities Increased marketing and selling opportunities
Benefits of CRMBenefits of CRM
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Identifying the most profitable customers
Making it easier for sales and channel partners to sell
Faster response to customer inquiries
Receiving customer feedback that leads to new and improved products or services
CRM StrategiesCRM Strategies
Reduce the rate of defection
Reduce the rate of defection
Increase longevity
Enhance “share of wallet”
Terminate low-profit customers
Focus more effort on high-profit customers
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Business facts! It costs six times more to sell to a new customer
than to sell to an existing one.
A typical dissatisfied customer will tell eight to ten people about his or her experience.
The odds of selling a product to a new customer are 15 percent, whereas the odds of selling a product to an existing customer are 50 percent.
90% companies don’t have sales and service integration
70% of complaining customers will do business again if their complaint quickly addressed.
Framework for CRMFramework for CRM
Identify prospects and customers
Differentiate customers by needs and value to company
Interact to improve knowledge
Customize for each customer
Three phases of Three phases of Customer Relationship ManagementCustomer Relationship Management
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Customer Acquisition
Techniques used to gain new customers
Customer Retention
Techniques to maintain relationships with existing customers
Customer Extension
Techniques to encourage customers to increase their involvement with an organization
Managing the Customer Life Cycle: Managing the Customer Life Cycle: The Three Phases of CRMThe Three Phases of CRM
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Differentiation• Innovation• Convenience
Acquire
Extend Retain
Bundling• Reduce Cost• Customer Service
Adaptability• Listening• New Products
Newspaper ExerciseNewspaper Exercise
Find ads with A, R & EFind ads with A, R & E
Personal Experience of a particular ad/brand Personal Experience of a particular ad/brand association / dissatisfaction ?association / dissatisfaction ?
Ads going for acquisition with DiscountsAds going for acquisition with Discounts
Is acquisition all about 2+ 5 Schemes/ Is acquisition all about 2+ 5 Schemes/ Discounts ? Discounts ?
Ads going for retention with brand powerAds going for retention with brand power
Any other issues with current ads..Do they Any other issues with current ads..Do they affect retention ?affect retention ?
Customer PyramidsCustomer PyramidsComponentsComponents of Customer Pyramid of Customer Pyramid
Active Customers Active Customers –that have purchased goods from –that have purchased goods from company within a given periodcompany within a given period
Inactive CustomersInactive Customers – that have purchased goods from – that have purchased goods from company in the past but not within the given period. company in the past but not within the given period.
Prospects –Prospects – with whom there is some kind of relationship – with whom there is some kind of relationship – but they have not yet purchased any goods. For example but they have not yet purchased any goods. For example those who have responded to a mailing. The prospects, of those who have responded to a mailing. The prospects, of course, are customers you expect to upgrade to active course, are customers you expect to upgrade to active customer status in the near future.customer status in the near future.
Customer PyramidsCustomer Pyramids
Suspects –Suspects –that company could be able to serve that company could be able to serve with products and services in future. Normally, with products and services in future. Normally, company seeks to begin a relationship with company seeks to begin a relationship with suspects and qualify them as prospectssuspects and qualify them as prospects
The Rest of the WorldThe Rest of the World – that simply have no need – that simply have no need or desire to purchase company’s products and or desire to purchase company’s products and services. services.
ActiveCustomers
InactiveCustomers
Prospects
Suspects
Rest of the World
Customer Pyramid
Segmenting Active CustomersSegmenting Active Customers ““Top: Customers Top: Customers – the top 1% of active customers in terms of – the top 1% of active customers in terms of
sales revenue. sales revenue.
““Big” CustomersBig” Customers – the next 4% of active customers in terms of – the next 4% of active customers in terms of sales revenuesales revenue
““Medium” CustomersMedium” Customers would be the next 15% customers the list. would be the next 15% customers the list.
““Small” CustomersSmall” Customers – the remaining are active customers in terms – the remaining are active customers in terms of sales revenue. of sales revenue.
Customer Pyramid SegmentsCustomer Pyramid Segments
Top>Rs
75,000
Big Rs 25- 75,000
Medium>3-25,000
Small>Rs 1-3000
Rest of the World
Inactives
Prospects
Suspects
Classify your customersClassify your customers
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The Customer PyramidThe Customer Pyramid
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The Platinum TierThe Platinum Tier
Most profitable customers, Most profitable customers, Heavy users of the product, not overly price sensitive, Heavy users of the product, not overly price sensitive,
willing to invest in and try new offerings, and are willing to invest in and try new offerings, and are committed to the firm.committed to the firm.
The Gold Tier The Gold Tier
Profitability levels are not as high, perhaps because the Profitability levels are not as high, perhaps because the customers want price discounts that limit margins. customers want price discounts that limit margins.
They might not be as loyal to the firm even though they are They might not be as loyal to the firm even though they are heavy users in the product category – they might minimize heavy users in the product category – they might minimize risk by working with multiple vendors rather than just the risk by working with multiple vendors rather than just the focal company.focal company.
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The Iron Tier The Iron Tier
Provide the volume needed to utilize the firm’s Provide the volume needed to utilize the firm’s capacity capacity
Spending levels, loyalty, and profitability are not Spending levels, loyalty, and profitability are not substantial enough for special treatment.substantial enough for special treatment.
The Lead Tier The Lead Tier
Costing the company money. Costing the company money. They demand more attention than they are due They demand more attention than they are due
given their spending and profitability, andgiven their spending and profitability, and they are sometimes problem customers – they are sometimes problem customers –
complaining about the firm to others and tying up complaining about the firm to others and tying up the firm’s resources.the firm’s resources.
The Customer Pyramid (Cont’d)
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Differentiating Business Customers in the Retail Real Estate Industry
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• Pay full commission on a home costing Rs 50
Lakh or more;• are motivated to purchase within the next six
months;• have purchased more than two homes in the
past;• and are members of social or professional
networks that make them candidates to refer
other high-end buyers.
Platinum customers:
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Purchase homes in the R25 L-50 L range but are more
price sensitive than the top tier. E.G. some Gold
customers want to negotiate on the commission or
have the realtors pay points at closing.
Some of these customers buy homes that are in the
same price range as Platinum customers but their price
sensitivity reduces their profitability.
Likely to refer others, but the types of customers to be
referred are not as valuable to the firm as those the
Platinum customers refer.
Gold customers:
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• Buy homes in the Rs 10 L- Rs25 L range, and include retirees, young professionals, and families.
• Young professionals have higher lifetime value potential and therefore market to them differently than to market to others in this group.
• Young professionals who purchase homes at the upper end are tagged as potential Gold customers and moved to that category approximately five years after the purchase of a home.
• Relocations from other areas and are pressed to buy homes quickly, making them good prospects for the company despite home prices that are lower than the top two tiers.
Iron customers:
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Shoppers rather than buyers.
• Some Lead customers spend as long as two years looking at homes, calling upon realtors to show them homes when they have free time
• While they might be looking at homes in all price ranges, the homes they buy are likely to be under Rs 10 L.
• Often dissatisfied with what they see, making them less likely than other tiers to send qualified referrals to the company.
Lead customers:
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Differentiating Business Customers in the Marketing Research Industry
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• Large accounts that are willing to plan a certain amount of
research during the year.
• The timing and nature of this research could be anticipated,
making it easy for the research firm to smooth supply and
demand.
• Tended to stay with the company and are willing to try new
services and approaches developed by the research firm.
• Therefore, they bought across research service types and
had minimal sales costs averaging only 2-5%.
• Willing to serve as references for the firm and are loyal to
the firm.
Platinum customers
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• had similar profiles except that they were more
price sensitive, inclined to spread their research
budgets across several firms.
• While they were large accounts and had been
customers for multiple years, they were not willing
to plan for a year in advance even though the
marketing research firm would give them better
quality if they did.
• They provided referrals but on an ad hoc basis.
Gold customers:
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• Moderate spenders and conducted research on a project
basis, sending out requests-for-proposals whenever
they were conducting studies.
• Look for the lowest price and often do not allow
sufficient time to perform the jobs.
• Because they have no overall plan, projects come in at
any time
• Selling costs are high because the firm continually kept
in personal and mail contact hoping to move these Iron
customers up the Pyramid.
Iron customers
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• Spent little on research, conducted isolated projects that
are usually of a “quick and dirty” nature.
• Selling costs are highest in this group since advertising
and almost all speculative presentations are targeted to
these accounts and salespeople have to spend multiple
visits to get them.
• Once they became clients, the maintenance cost is high
because they don’t understand the process of research.
• They often changed projects mid-stream and expected
the firm to absorb the costs.
Lead customers
When Should a Firm Use the Customer When Should a Firm Use the Customer Pyramid?Pyramid?
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When service resources, including employee time, are When service resources, including employee time, are limited.limited.
When customers want different services or service levels.When customers want different services or service levels.
When customers are willing to pay for different levels of When customers are willing to pay for different levels of service.service.
When customers define value in different ways.When customers define value in different ways.
When customers can be separated from each other.When customers can be separated from each other.
When service differentials can lead to upgrading customers When service differentials can lead to upgrading customers to another level.to another level.
When they can be accessed either as a group or When they can be accessed either as a group or individually.individually.
Customer-Product Profitability AnalysisCustomer-Product Profitability Analysis
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Customer alchemy is the art of turning less profitable Customer alchemy is the art of turning less profitable
customers into more profitable customers.customers into more profitable customers.
It can take place at any tier along the Customer Pyramid, It can take place at any tier along the Customer Pyramid,
but is more difficult at some levels than at others. but is more difficult at some levels than at others.
e.g: it is very difficult to move Lead customers up to Gold e.g: it is very difficult to move Lead customers up to Gold
or Platinum tiers, and it is often necessary to “get the or Platinum tiers, and it is often necessary to “get the
Lead out” rather than try to move those customers up. Lead out” rather than try to move those customers up.
Customer Alchemy
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If the decision is made to keep Lead customers, the If the decision is made to keep Lead customers, the
strategies used are typically different than those strategies used are typically different than those
used at other tiers.used at other tiers.
Managing Expectations can help to move the Managing Expectations can help to move the
customers up the ladder customers up the ladder
Customer Alchemy
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Growing “share of customer”
Increasing the share of the customer’s purchasing in your product category.
Best way is through cross-selling
– Getting more business from current customers by selling them additional or complementary services
e.g : yatra.com, mytrip.com etc
Customer Alchemy
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