Chapter15: Customer Relationship Management (CRM)

Chapter 15Customer Relationship Management (CRM)

Learning Objectives

Define CRM;

Understand the importance of CRM;

Explain the determinants of CRM and the key stages in its development;

Discuss the main functions and various models of CRM;

Explain the role of salespeople as relationship developers

Discuss the management of customer relationships.

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 superiorcustomer value, at a profit to well identified existing and potentialcustomers”.

(Plakoyiannaki and Tzokas, 2001)


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 customer’s 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.


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.


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).


Stages in the development of a Customer Relationship

The Pre-relationship StageThe event that triggers a buyer to seek a new business partner.

The Early StageExperience is accumulated between the buyer and seller although a great degree of uncertainty and distance exists.

The Development StageIncreased levels of transactions lead to a higher degree of commitment andthe distance is reduced to a social exchange.

The Long-term StageCharacterised by the companies’ mutual importance to each other.

The Final StageThe interaction between the companies becomes institutionalized.


Stages in the Development of a Key-Account Relationship

Degree ofinvolvement

High

Low

Nature of customer relationship

Transactional Collaborative

Pre-KAM

Early-KAM

Mid-KAM

Partnership

Synergistic KAM

(Millman and Wilson, 1995)


A Relationship Life Cycle Model

High cooperationLow competition

Low cooperationHigh competition

Time

Pre-relationship

stage

Developmentstage

Maturitystage

Declinestage

(Wilkinson and Young, 1997)


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)


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.


Functions of Customer Relationship Management

Management DecisionProcess

Customer sensitivity

•Diversity•Information•Differentiated offering

Value Creation Process

Technology delivery process•R&D•Technology integration•Efficiency, effectiveness learning

Product delivery process•Concept to launch•Manufacturing process

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

Value-basedStrategies•Pricing•Communication

(Sharma et. al., 2001)


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; andleading the customer relationship development team

are the individuals in any organisation who act both as relationship builders and as relationship promoters.


Models of Customer Relationship Management

The Evans and Luskin (1994) model for effectiveRelationship 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)


Models of Customer Relationship Management

The Brock and Barcklay (1999) model of sellingpartner relationship effectiveness

Independence

Relative influence

Mutual trust

Cooperation

Selling partnerrelationshipeffectiveness


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 customer’s needs;

Identify opportunities to build a relationship; and

Illustrate the value of a relationship with the customer




Developing the relationship

Select an appropriate offering;

Customise the relationship;

Link the solutions with the customer’s needs;

Discuss customer concerns;

Summarize the solution to confirm benefits; and

Secure commitment.




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.



Qualifying prospects for relationship building

Opportunities for adding value

Potential profitability of customer

High

Low

Low High

Use a noncustomizedapproach

Seek betteropportunities

elsewhere

Build a strongand lastingrelationship

Focus onloyalty-building

program


Relationship networks

The ultimate outcome of a successful CRM strategy is the creationof 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 salesperson’s job are to:

Manage customer value;Act as customer advocate; andEnhance customer loyalty and build a “health” and

profitable network of relationships.


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.

Education

Chapter15: Customer Relationship Management (CRM)