overview of Customer Relationship Marketing

1. OVERVIEW OF Relationship Marketing
in the Millennium
Source: http://highered.mcgraw-hill.com/sites/0070583374
Relationship marketing –Text &Cases, McGraw-Hill

2. Market place has been
evolving under the
converging pressures of
changing demographics,
global politics, economics,
technology and so on.

3. PARADIGM SHIFT IN MARKETING
Prominent marketing scholars like
Philip Kotler and Frederick
Webster have expressed that there
has been a shift from a
transactions to a relationship focus

4. Customer orientation focus on profitability rather
than sales volumes and emphasis on market
segmentation are gaining importance.
New trend in marketing has replaced “products
and “services” with “value”
Relationship Marketing concept requires specific
resource commitments, key part of which is the
use of marketing research,
DRIVING FORCES

5. THEMES FOR NEW MARKETING
The 4Ps are also loosing credibility. They are more
production than customer oriented
and poses lot of flaws in its definition
A creative process to look at the market;
 Understand potential customer needs and wants
 Consider the basic capabilities of the firm;
 Conceive potential product offerings based on
the present and potential capabilities;
 Design and develop products and services for
their customers

6. Relationship marketing gives a solution for
many problems
Emphasis should be given to create value for
chosen customer value segments and gain
profitability for the company
The focus on value equity enables the company to
assume and exert control over matching customer’s
perception with the firm’s objective
Managing the customer as an asset is more
critical to a firm’s success
MOVING TOWARDS RELATIONSHIP MARKETING

7. Managers need to create a business model for
their organisations that uses technology for
strategic purposes
Customers gain near-perfect information on
their alternatives, dropping switching barriers
dramatically
Direct selling, target marketing, technological
marketing and cross selling are some of the
successful emerging practices in marketing
INTERGRATING RELATIONSHIP STRATEGIES
WITH INFORMATION TECHNOLOGY (IT)

8. ADOPTING RELATIONSHIP MARKEING
PRACTICES
Many companies sensing the pulse of the market
trend have opted for relationship marketing practices.
On an average, business firms spend six times more
to acquire customers than they do to retain them
Developments in IT, data warehousing and data
mining have made it possible for firms to maintain a
one-to-one relationship with their customers.
Contd….

9.  developing customer-centric processes,
 selecting and implementing technology solutions,
 employee empowerment,
 customer information and knowledge generation
capabilities and
 the ability of the organisation to learn from best
practices
Successful implementation of relationship
marketing practices requires a strategic approach
which encompasses

10. Winning confidence and loyalty of
customers are the prime foci of any
business
Market-driven organisations excel at
retaining their most valuable
customers

11. BASIS OF BUILDING RELATIONSHIP
Establishing a relationship can be divided into
two parts:
 Attracting right type of the customer
 Building relationship with that them in a
mutually beneficial manner

12. Every organisation irrespective of whether it is a
service firm or a manufacturing firm should learn to
cope with the new competition of the service
economy
Relationship marketing makes customers less price
sensitive
Mind share analysis and customer satisfaction
surveys inputs for building relationship strategies
Customer perceived quality (CPQ) is basically a
function of the customer perception of two
dimensions viz., technical quality and functional
quality
SERVICE COMPETITION

13. BUILDING BRAND EQUITY
Positive associations and predisposition in the
mind of the consumer brought by building
brand equity result in more favorable response
to the firm’s marketing efforts
A brand creates value by creating positive
attitude towards firm’s offer

14. RELATIONSHIP MARKETING AND VALUE CHAIN
The concept of relationship marketing is built
around the concept of customer value and the
value chain
Managing the customer as an asset is
becoming increasingly important where
emphasis is given to customer retention,
lifetime value and customer affinity

15. RELATIONSHIP MARKETING PROGRAMMES
Continuity marketing
Partnering
One-to-one marketing
Integrated telephone marketing

16. STRIVING FOR INTERRACTIVITY
Interactivity results in high lifetime value
Recency is the most powerful predictor

17. RFM MODEL
A customer who has visited the company
website recently (R) and frequently (F), and
created a lot of monetary value (M) through
purchase is the target audience for
e-promotion campaign
Higher the RFM score, more profitable the
customer is

18. Customer
Acquisition
Strategies

19.  A firm should
 focus on each stage in the customer life
cycle and develop more touch points for
expanding customer relationship
 recognise and act on customer’s
uniqueness
 A benchmark estimate of the potential
in this strategy is the Life Time value

20. CUSTOMER LIFE CYCLE
Stage 1: Prospects
Stage 2: First-time buyers
Stage 3: Early repeat buyers
Stage 4: Core customers,
Stage 5: Core defectors

21. TARGETING
The Acquisition Tactical Management
(Actman) model helps in detecting
various elements in the customer
acquisition process
The next in the set is to compute
acquisition equity

22. TARGETING
The Acquisition Tactical Management
(Actman) model helps in detecting
various elements in the customer
acquisition process
The next in the set is to compute
acquisition equity

23. Customer profiling is the basis of behaviour-
based relationship marketing
Major forms of profiling :
 Best customer profiling
 Indexing profiling
 Regression scoring
 Net present value of a new customer
Total new-customer investment as a percentage
of sales and profits are critical measures in
customer equity
PROFILING

24. The ADD-ON
Selling
Strategies

25. Customer relationship marketing strategies are built
around three core concepts:
 Acquisition
 Retention
 Add-on selling
The concept of add-on selling strategy is derived
from the firm’s ability to
 foster better decisions
 generate higher profits, and
 increase shareholder wealth

26. Add-on selling strategy assumes that not every
potential customer is worth the customer acquisition
investment
Add-on selling depends on many factors like:
 Number of add-on offers a firm can
economically provide per period
 Response rate to the product offers
 Sales quantity per offer
 The cost the company can afford while
making the offer
 Size of the customer universe
 Margins on the offered product

27. Customer affinity is a combination of
 the relationship a customer has with a
firm and
 the expertise that the customer
believes the firm possesses
Managing and delivering customer
expectations is one of the major tasks of
the firm

28. Cross-buying analysis
Collaborative filtering
Response modelling
TYPES OF ANALYTICAL METHODS
The impact of marketing mix on customer
value analysis are felt in areas of
acquisition, retention and add-on selling

29. MARKETING MIX BY STAGE IN THE
CUSTOMER LIFE CYCLE
High customer satisfaction or delight
creates an emotional bond with the brand or
company
Add-on selling strategies help companies to
strengthen their bond with customers

30. Information Technology
(IT)-Enabled Marketing

31. True relationship marketing
requires a fundamental shift in
attitude towards viewing the
customer as a partner and a
business asset to be managed

32. Each actual or potential
customer is identified as a
record on the marketing
database
DATABASE MARKETING

33. Types of data
 Transaction data
 Product data
 Promotion data
Prospect database
Merging data from different proprietary
sources may result in redundant data
SOURCES AND TYPES OF DATA

34. CHARACTERISTICS OF DATABASE MARKETING
Database marketing is an interactive approach to
marketing, which uses individually addressable
marketing media and channels
•To extend help to a company's target audience
•To stimulate their demand and
•To stay close to them by recording and keeping an
electronic database memory of customer, prospect
and all commercial contacts, to help improve all
future contacts and to ensure more realistic
planning of all marketing

35. ADVANTAGES OF DATABASE MARKETING
The use of databases for targeting and analysis is
powerful because it enables a shift from third-degree
segmentations (or self – selection) to first degree
segmentation: the creation of individually tailored
offerings based on customer characteristics and
behavior. It employs observation rather than
inference.

36. CUSTOMER PROFILE DATABASE
Profiling customers (or prospects) is the
process of obtaining detailed information about
them. This information can range from
demographic to psychographic data. The results
of profiling help a firm to determine the best
messages to convey, products to target, and
communications to avoid. There are six main
categories of profile data for a Shopping mall :
Contd…...

37. 1. Customer sales potential
2. Customer characteristics
3. Summary of customer acquisition, retention
and add-on-selling measures
4. Organisational/product charts of various
shops and key personnel
5. Influences and specifiers for the visit and
6. Customer attitudes and motivation to shop
CUSTOMER PROFILE DATABASE

38. CASUAL MARKETING DATABASES
Casual marketing databases capture data on
the marketing programs offered to individual
prospects and customers. They are
extremely complex to create, because firms
rarely track marketing activities at the
individual-customer level. However, they are
also extremely valuable, because the
information they contain can significantly
improve marketing efficiency and
effectiveness.

39. DATA QUALITY
Data quality is measured by the results of the
surveillance audit carried out by the firm from
time to time. During this period, every customer
or prospect interaction is tracked form different
angles. These contacts sometime may not
generate revenue, but each one can be linked to
an expected or potential monetary value in the
future. Hence the quality of data in the data
warehouse is more important.

40. DATA WAREHOUSES AND DATAMINING
Data mining involves the use of
sophisticated statistical and mathematical
techniques such as cluster analysis,
automatic interaction detection, predictive
modeling, and neural networking. Through
data mining, marketing statisticians can
extract useful information about individuals,
trends, and segments from the mass of data

41. Database marketing help the firm
to focus on the data and
undertake certain analyses like
Deciles and the RFM
The RS Matrix is a tool used to
target defectors
MEASUREMENT IN DATABASE MARKETING

42. TECHNOLOGICALSHIP MARKETING
In technologicalship marketing,
IT tools are used to provide
relationship-building credibility
and opportunities

43. COST EFFECTIVENESS OF MAKING OFFERS
THROUGH DATADRIVEN MARKETING
A well-integrated application of
technology, staff and operations
that respond instantaneously to
customer needs can produce
miraculous results