1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

Strategic Marketing

CHAPTER 4CHAPTER 4

STRATEGIC CUSTOMER STRATEGIC CUSTOMER RELATIONSHIP RELATIONSHIP MANAGEMENTMANAGEMENT

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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PIVOTAL ROLE OF CUSTOMER PIVOTAL ROLE OF CUSTOMER RELATIONSHIP MANAGEMENTRELATIONSHIP MANAGEMENT

DEVELOPING A CRM STRATEGY CRM Levels CRM Strategy Development CRM Implementation

VALUE CREATION PROCESS Customer Value Value Received by the Organization CRM and Value Chain Strategy

CRM AND STRATEGIC MARKETING Implementation Performance Metrics Short-Term Versus Long-Term Value Competitive Differentiation

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CUSTOMER RELATIONSHIP CUSTOMER RELATIONSHIP MANAGEMENTMANAGEMENT

CRM is a cross-functional core CRM is a cross-functional core business process concerned with business process concerned with achieving improved shareholder value achieving improved shareholder value through the development of effective through the development of effective relationships with key customers and relationships with key customers and customer segments.customer segments.CRM Recognizes That

Customers:

Vary in their economic value to the company Differ in their expectations toward the firm

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CUSTOMER LIFETIME VALUECUSTOMER LIFETIME VALUE

Customer lifetime value (CLV) calculates past Customer lifetime value (CLV) calculates past profit produced by the customer for the firm profit produced by the customer for the firm – the sum of all the margins of all the – the sum of all the margins of all the products purchased over time, less the cost products purchased over time, less the cost of reaching that customerof reaching that customer To this is added a forecast of margins on

future purchases (under different assumptions for different customers), discounted back to their present value.

This process provides an estimate of the profitability of a customer during the time span of the relationship.

The CLV calculation is a powerful tool for focusing marketing and promotional efforts where they will be most productive.

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PERSPECTIVES TOWARD CRMPERSPECTIVES TOWARD CRM

STRATEGIC- THE ENTIRE COMPANY

REQUIRED MARKETING FUNCTIONS

THE CUSTOMER

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THE STEPS IN DEVELOPING A CRM THE STEPS IN DEVELOPING A CRM STRATEGYSTRATEGY

Gain enterprise commitment

Build a CRM project team

Business needs analysis

Define the CRM strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & Sons, Inc.), 2006, 39.

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DEFINE THE CRM STRATEGYDEFINE THE CRM STRATEGY

CRM STRATEGY

Value Proposition

Business Case

Other Stakeholders

Enterprise Transformation

Plan

Customer Strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006, 42.

1

2

34

5

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IMPLEMENTATION DANGERSIMPLEMENTATION DANGERS

Implementing Without Developing a Implementing Without Developing a Customer StrategyCustomer Strategy

Failing to Initiate Necessary Failing to Initiate Necessary Organizational ChangeOrganizational Change

Allowing Technology to Dominate Allowing Technology to Dominate the CRM Processthe CRM Process

Focusing on the Wrong CustomersFocusing on the Wrong Customers

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VALUE CREATION PROCESSVALUE CREATION PROCESS

THE VALUE EXCHANGE

Value Received by the Customer

Value Received by the Organization

Successful Value Exchange

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METRICS FEATURE

How General Electric Co. Measures Customers’ Experience

Happy (And Not-So-Happy) CustomersGeneral Electric is a big user of the “Net Promoter” concept of customer satisfaction, popularized by Fred Reichheld of Bain & Co. Below, questions similar to those on which GE’s Capital Solutions unit asks customers to rate the unit’s performance on a 0 – 10 scale.

• How willing are you to recommend us to a friend or associate?

• How would you rate our ability to meet your needs?

• How would you rate our people?

• How would you rate our processes?

• What is your impression of our market reputation?

• How would you rate the cost of doing business with us?

• How would you rate the overall value of our product or service as being worth what you paid?

Source: Kathryn Kranhold, “Client-Satisfaction Tool Takes Root,” The Wall Street Journal, July 10, 2006, B3.

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CRM AND VALUE CHAIN STRATEGYCRM AND VALUE CHAIN STRATEGY

The Perfect Customer Experience“The perfect customer experience, which must be affordable for the company in the context of the segments in which it operates and its competition, is a relatively new concept. This concept is now being embraced in industry by companies such as TNT, Toyota’s Lexus, Oce, and Guinness Breweries, but it has yet to receive much attention in the academic literature. Therefore, multi-channel integration is a critical process in CRM because it represents the point of co-creation of customer value. However, a company’s ability to execute multi-channel integration successfully is heavily dependent on the organization’s ability to gather and deploy customer information, from all channels and to integrate it with other relevant information.”Adrian Payne and Pennie Frow, “A Strategic Framework for Customer Relationship Management,” Journal of Marketing

(October 2005), 173.

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CRM AND STRATEGIC MARKETINGCRM AND STRATEGIC MARKETING

CRM STRATEGIC MARKETING

From the perspective of strategic marketing, there are several reasons why CRM is important and why there should be extensive marketing involvement in decisions about CRM. Importantly, an organizational perspective is needed in guiding the CRM strategy.

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