Home > CRM > CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

31 December 2010

Now is customer capitalism, which to build customer equity, you need follow up customer and keep relationship with the customer. So we must set up our strategic objective to keep our customer. Customer Relationship Management (CRM) is core strategic approach to increase your competitive advantages in keeping relationship with the customer, not just as a tool or IT issues.

 According to Francis Buttle (2009), there is four type of CRM as follows:

Type of CRM:

  • Strategic
    Is a core customer centric business strategy that aims at winning and keeping profitable customers?
  • Operational
    Focuses on automation of the customer facing processes of the business, such as selling, marketing, customer service
  • Analytical
    Focuses on the intelligent mining of customer related data for strategic or tactical purposes
  • Collaborative
    Applies technology across organizational boundaries with a view to optimizing company, partner and customer value

 

IDIC MODEL

According to IDIC Model which developed by Peppers and Rogers, Consultancy Firm, companies should take four actions in order to build closer one-to-one relationships with customers:

–        IDENTIFY who your customers are and build a deep understanding of the customer

–        DIFFERENTIATE your customers to identify which customers have most value now and which offer most for the future

–        INTERACT with customers to ensure that you understand customer expectations and their relationships with other suppliers or brands

–        CUSTOMIZE the offer and communications to ensure that the expectations of customers are met

 

THE QCi MODEL

Based on the QCi Model, Customer management activities are contain of Aqcuisition, Penetration, Retention the Customer.

 

CRM VALUE CHAIN

CRM processes are to understand customer requirements, Meet customer expectations, and Deliver customer value. Steps to develop this CRM Strategy are:

  • Find the segmentation
  • Profitability for each segment
  • Make a goal for each segment
  • Make the strategy for each segment

In development and implementation of a CRM strategy, there are five key steps which are modelled as figure below:

Customer portfolio analysis (CPA) and customer intimacy (CI) are primarily analytical activities, which customer portfolio analysis is segmentation and customer intimacy is customer needs analytics. Network development is step how to partner marketing funds. And the last, managing the customer lifecycle means campaigns and events.

 

Customer Portfolio Analysis

Classify customers into different groups that are then managed on a portfolio or collective basis, which different customer have different services so company can increase the profit performance and maximize resource effectiveness. In other words, company make segmentation of its customer. Here is Market Segmentation Process:

  1. Identify the business you are in
  2. Identify relevant segmentation variables
  3. Analyze the market using these variables
  4. Asses the value of market segments
  5. Select target market(s) to serve

 

Customer Intimacy

The purpose of customer intimacy is to get to know customers better so that more intelligent CRM decisions can be made.

 

Network Development (SCOPE)

Major Forms of Network are Supplier Networks and Distribution Networks. But actually, SCOPE consist of Supplier, Customer (belong to the focal firms), Owner and Investor, Partners, Employee. Management in networks is both about managing individual relationships and managing clusters of relationships. Partner in value delivery are agents, brokers, management contractors, consortia, franchisees, licensees

 

Value Proposition Development

Value is the customer’s perception of the balance between benefits received and sacrifices made to experience those benefits.

Value = Benefits / Sacrifices

Three major types of sacrifice have been identified: money, search and psychic costs. Companies can offer improved value to customers by creating and delivering better solutions to customers’ problems.

 The sources of customer value are represented by what marketers call the marketing mix. These are the 4Ps: product, price, promotion and place. In the services environment, the 4Ps are supplemented by three additional Ps: process, physical evidence and people. In the B2B environment, value propositions have long been customized. Customization is now emerging as a powerful force in the B2C environment too. Any of the 7Cs can be customized.

 Management can create additional value by their management of the 7Ps. For example, product innovation, branding and product–service bundling are ways to create additional value. Similarly, service quality (RATER) improvement programmes, service guarantees, service-level agreements (SLA) and service recovery programmes may be seen as value adding.

 

Manage the Customer Life Cycle

The customer lifecycle has been collapsed into three major management activities:

  • Acquisition: acquiring new customers
    The acquisition of carefully targeted customers or market segments
  • Retention: retaining existing customers
    The retention and development of strategically significant customers or market segments
  • Development: developing customer value
    The continuous development and delivery of competitively superior value propositions and experiences to the selected customers

These major management activities also are the strategic goals of CRM.

In B2B Prospecting, First, find the leads, and then qualified them based on: Do the leads need our products? Do they have ability to pay? Is the lead authorized to buy? If all yes, leads become prospect.

 Customers to be retained are customers who have high lifetime value (High volume customer, Inspirations or door openers customer), highly committed customers, and recently acquired customers. Strategies for Customer Retention can be in negative or positive one.

  • Negative retention strategy:
    • Lock the customer in by penalizing their exit from a relationship
    • Involved high switching cost for customer à they feel being trapped
    • Positive retention strategy:
      • Reward a customer for remaining in a relationship
        • Loyalty schemes
        • Customer clubs
        • Sales promotion

 Strategies for customer development are:

  • Cross sell by Selling additional products and services. In means not only sell 1 product.
  • Up sell by Selling higher value products and services or add more products by making different size of products

 

SUMMARY

CRM is the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit. It is grounded on high-quality customer data and enabled by information technology.

The main strategic goals of CRM are:

  • Develop relationship to make differentiation
  • Customer retention
  • Continuous in giving competitive advantages

Critical Success Factors (CSF) to CRM consists of:

  1. Customer Portfolio Analysis (CPA)
  2. Customer Intimacy
  3. Network (SCOPE)
  4. Value Proposition Development
  5. Managing Customer Life Cycle
  • Acquisition
  • Retention à loyalty program
  • Development àcross-selling, up-selling

By knowing customer needs, company is allowed to identify new business opportunities and create service that will provide competitive advantage and differentiation. But these primary stages must supported by Leadership and Culture, Technology (Data and IT), People, and Processes.

 

REFERENCES

  • Francis, B. (2009). Customer Relationship Management, Concepts and Technologies. Amsterdam; London: Butterworth- Heinemann
  • PPM Management School Lecturer Material
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