Chapter 15:
Customer Relationship Management
Learning Objectives
Building Customer Relationships, 1:1
According to Harvard Business Review authors Thomas Jones and Earl Sasser,
“Increased customer loyalty is the single most important driver of long-term
performance.” In an environment of scarce attention and customer control, a
firm’s ability to build and maintain relationships with customers, suppliers, and
partners may be more important than a firm’s land, property, and financial assets.
Relationship Marketing Defined
Relationship marketing is about establishing, maintaining, enhancing, and
Stakeholders
Firms also use relationship marketing to build bonds with other stakeholders,
including employees and suppliers in addition to consumers. The four most
affected by internet technologies are: employees, business customers in the supply
chain, lateral partners, and consumers.
Three Pillars of Relationship Marketing
Relationship marketing involves much more than promise fulfillment. Experts
Customer Relationship Management (CRM 1.0)
CRM is the process of targeting, acquiring, transacting, servicing, retaining, and
building long-term relationships with customers. Firm’s now focus on the idea
that if they do not keep their customers happy, someone else will.
Social Customer Relationship Management (CRM 2.0)
Social CRM (CRM 2.0) retains all the tenets of CRM 1.0, however, it adds social
media technology and customer collaborative conversations to the process. Social
CRM means that companies must interact with customers on their terms, and not
based solely on the company’s data, strategy and desires.
CRM Benefits
CRM Building Blocks
Businesses are aware that CRM is necessary to be successful, but nearly all firms
are currently losing money on the investment of CRM software. Businesses want
to use CRM technology, but want to know how to use it effectively and
efficiently.
CRM Vision
Any business that purchases CRM technology simply to be part of the
CRM movement is destined to fail. Management must start with a vision
that fits the company culture and makes sense for the firm’s brands and
value propositions. Many firms underestimate the costs and fail to realize
how pervasive CRM projects are.
CRM Strategy
CRM strategies and objectives may involve any stakeholders, and will
likely entail targeting, acquiring, retaining, and growing specified
relationships. B2B and B2C are different markets; therefore have different
strategies.
Customer Experience Management
critical strategic component for 91 percent of companies,
according to Forrester Research.
Customer Collaboration Management
CCM is widely accepted to employ five measures of success including:
monitoring, mapping, management, middleware, and measurement.
Organizational Collaboration
E-marketers collaborate both within and outside of the organization.
Internal cross-functional teams may focus on customer satisfaction.
Externally, two or more companies may join forces to exceed results that
each might have accomplished alone.
CRM-SCM Integration – CRM usually refers to front-end
CRM Processes
The CRM Process includes the following stages: target, acquire, transact,
service, retain, and grow.
Hear Now or Gone Tomorrow — This is the name of a report,
created by Nice and Peppers & Rogers Group to describe the
importance of listening to customers and gathering interaction data
across all marketing channels.
CRM Information
The more information a firm has the better it can provide to each customer
and prospect in terms of more accurate, timely, and relevant offerings.
CRM Technology
Technology enhances the CRM process through toll-free telephone
numbers, electronic kiosks, fax-on-demand, voice mail, and other services
available. These tools can be categorized into company-side tools and
client-side tools.
Company-Side Tools – These tools are pushed onto customers who
are generally unaware that marketers are collecting data.
Cookies – Cookie files allow companies to see the path
users take form site to site and assist in serving advertising
banners, track shopping baskets, and other tasks so that
users can quit in the middle and return later
Web Analytics – Conducting web log analysis allows firms
Outgoing E-mail – E-mail is used to communicate with
individuals or lists of individuals in an effort to increase
their purchases, satisfaction, and loyalty.
Social Media – Companies build community and learn
about customers and products through blogs, social
Client–Side Tools – These tools come into play based on a user’s
action at the computer, thus pulling the information.
Agents – Shopping agents and search engines match user
input to databases and return customized information.
Individualized Web Portals – Individualized web portals
are more often used to build relationships in the B2B
market than the B2C market. These portals allow supply
chains to access inventory and account information and
track various operations.
CRM Metrics
Some experts believe the three most important metrics to be
customer retention rates, ROI, and customer lift (increased
response or transaction rates). An emerging metric that many e-
marketers are placing extreme importance on is customer lifetime
value (LTV), as explained in Exhibit 15.19.
Ten Rules for CRM Success
A. From Chris Selland, Managing Director of Reservoir Partners
1. Recognize the customer’s role
2. Build a business case
4. Make every contact count
6. Measure and manage the marketing return
8. Choose the right tools and approach
10. Seek outside help
Chapter Summary
Marketers have practiced relationship marketing for some time; however,
internet technologies made it possible to manage many relationships one at a time.
In the move from mass marketing to relationship marketing, the emphasis has
become long-term customer retention rather than many discrete transactions with
new customers. The three pillars of relationship management are customer
companies and consumers.
Customer relationship management is used to create and maintain
relationships with employees, business customers in the supply chain, lateral
partners, and final consumers. CRM’s benefits include cost-effective acquisition,
retention, and growth of current customers as well as word-of-mouth referrals.
The Gartner Group amended model of CRM covers nine building blocks: CRM
vision, CRM strategy, customer experience management, customer collaboration
management, organizational collaboration, CRM processes, CRM information,
CRM technology, and CRM metrics.
The CRM vision must include guarding of customer privacy and building
user trust. CRM strategy starts by defining what the company wants to
An important trend in CRM is the integration with supply chain
management (SCM). When the firm’s front end, back end, and supply chain all
focus on the consumer, value is delivered, satisfaction is increased, and the firm
has a competitive edge. The customer care life cycle covers the stages of
targeting, acquiring, transaction, servicing, retaining, and growing customers by
Chapter Outline
Opening Vignette: The Best Buy Story
Have the class read the opening vignette on Best Buy Co. How has the company
utilized social media channels to maximize its CRM efforts? How has Best Buy
created communities and involved employees in the process?
www.bestbuy.com
I. Building Customer Relationships, 1:1
Increased customer loyalty is the single most important driver of long-term
performance. Many experts believe that relationship capital is the most important
asset a firm can have.
A. Major shift in marketing practice
1. Old style was mass marketing
2. New style is individualized marketing
II. Relationship Marketing Defined
A. Relationship marketing is about establishing, maintaining, enhancing,
and commercializing customer relationships through promise
fulfillment
B. Promise fulfillment means that when companies make offers in their
marketing communications programs, customer expectations are met
through actual brand experiences
C. Relationship marketing is more than promise fulfillment
III. Stakeholders
Relationship marketing can be used to build mutually supportive bonds with
stakeholders other than consumers, such as employees and suppliers. The
following groups are those most affected by Internet technologies:
A. Employees
1. It is difficult for a firm to persuade buyers when employees are
not happy
B. Business Customers in the Supply Chain
2. Both business customers and suppliers are extremely important
C. Lateral Partners
2. Not-for-profit organizations
D. Consumers
1. The end users of the product or service
2. Marketers must differentiate between business customers and
final customers
IV. Three Pillars of Relationship Marketing
Relationship marketing involves much more than promise fulfillment. Two-way
communication is vital to the success of this relationship.
A. Customer relationship management (CRM)
2. Requires much data
B. Customer experience management (CEM)
1. Involves discipline, methodology and process
C. Customer collaboration management (CCM)
1. Also called CRM 2.0
V. Customer Relationship Management (CRM 1.0)
CRM is the process of targeting, acquiring, transacting, servicing, retaining, and
VI. Social Customer Relationship Management (CRM 2.0)
A. Adds social media technology and customer collaborative conversations to
the process
B. Companies must interact with customers on their terms, and not based
solely on their own data, strategy and desires
E. CRM Benefits
1. Increased revenue from better prospecting
a. Most companies use customer data and mathematical
promotional offers
2. Increased wallet share with current customers
3. Retaining customers for longer periods of time
a. It is five times more expensive to attract new customers
4. More customer leads to more sales
5. Word-of-mouth communication among customers is the heart
of CRM
6. Cost Saving
a. US businesses saved $155 billion between 1998 and
VII. CRM Building Blocks
A. CRM Vision
Any business that purchases CRM technology simply to be part of the
CRM movement is destined to fail. Management must start with a vision
that fits the company culture and makes sense for the firm’s brands and
value propositions. Many firms underestimate the costs and fail to realize
how pervasive CRM projects are
1. Guarding Customer Privacy
a. Overusing customer information can be very tempting
2. TRUSTe
a. A non-profit, independent organization to help web
users build and earn trust in companies.
B. CRM Strategy – CRM strategies and objectives may involve any
stakeholders, and will likely entail targeting, acquiring, retaining, and
growing specified relationships. B2B and B2C are different markets,
therefore have different strategies
1. Relationship Intensity
a. CRM goals refer to customer loyalty
2. Relationship Levels
a. Marketers build a financial bond
i. Use pricing strategies
ii. Price promotions are easily imitated
b. Marketers stimulate social interaction with customers
c. Marketing relies on creating structural solutions to
customer problems
C. Customer Experience Management
D. Customer Collaboration Management (CCM)
1. CCM recognizes the change from a transaction focus online to
an interaction focus
3. CCM is about managing customer relationships and
E. Organizational Collaboration
1. Marketers must collaborate both internally and externally
2. Internally
3. Externally
a. Companies join forces to create results that would reach
4. CRM-SCM Integration
a. CRM refers to front-end operations
b. SCM refers to back-end operations
i. Usually includes the entire supply chain
5. Extranet
a. Two or more intranet networks joined for the purpose
F. CRM Processes – Firms monitor and attract customers, both online
and offline and they progress through: target, acquire, transact, service,
retain, and grow (the stages of customer care life cycle).
1. Hear Now or Gone Tomorrow — describes the importance of
listening to customers and gathering interaction data across all
marketing channels
a. Customization occurs when companies tailor their
2. Build a Dynamic Customer Profile: Gather data to profile each
3. Sales Force Automation (SFA)
a. this means increasing your sales, not the sales force
manage schedules; and more
4. Marketing Automation – Activities that aid marketers in
effective targeting, efficient marketing
G. CRM Information – The more information a firm has the better it can
provide more accurate, timely, and relevant information. Factors in
facilitating customer relationship management:
1. Target the right customers
2. Own the customer’s total experience
4. Provide a 360-degree view of the customer relationship
6. Help customers do their jobs
8. Foster community
H. CRM Technology – Technology enhances the CRM process and can
be categorized into company-side and client-side tools
1. Company-Side Tools (push information to users)
a. Cookies – allow ad-server companies to track user
activities and shopping tasks
d. Behavioral Targeting – using customer profiling to
offer instant promotions or coupons based on
2. Client-Side Tools (pull information from customers)
a. Agents – shopping agents and search engines match
user input to databases and return customized
information
I. CRM Metrics
1. Some experts believe the three most important metrics to be
customer retention rates, ROI, and customer lift (increased
VI. Ten Rules for CRM Success
A. From Chris Selland, Managing Director of Reservoir Partners:
1. Recognize the customer’s role
2. Build a business case