Unit-2

Concept of CRM

Concept of Customer Lifecycleo In customer relationship management (CRM), customer life

cycle is a term used to describe the progression of steps a customer goes through when considering, purchasing, using, and maintaining loyalty to a product or service.

o The Customer Lifetime Value (CLV) is a prediction of the total value (mostly expressed in net profit) generated by a customer in the future across the entire customer life cycle.

o It is simply the behavior of a customer with your company over time. Customers begin a relationship with you, and over time, either decide to continue this relationship, or end it. At any point in this LifeCycle, the customer is either becoming more or less likely to continue doing business with you, and demonstrates this likelihood through their interactions with you.

Lifecycle Stages

Reach– Your content must be properly marketed in places where people/businesses in your market will find your information. This way they will become aware of your company’s existence.

Acquire– You have to understand your potential customers wants/needs so you can provide a product/service they will want to purchase. Contact them directly with personalized communication in order to convert them from potential leads to paying customers.

Develop– After the first purchase, keep in touch and build a relationship with your customer. Ensure they are fully satisfied with their purchase.

Retain– One time customers will become repeat customers as long as you are satisfying their needs. Care for them and continue to cultivate a relationship with them. Do not be afraid to ask for feedback. They will be happy you care about their opinion and you can use their comments to improve your product/services. Make them feel a part of the process.

Inspire– If your customers are truly satisfied, they will become brand advocates. This will spread awareness within their social circles and the cycle will come full cycle when you reach potential new customers due to your existing customers.

Customer Lifecycle Managemento Customer Lifecycle Management (CLM) is simply the

measurement of your CRM program's success over time - providing you have CLM metrics from before and after your CRM implementation.

o CLM (Customer Lifecycle Management)however is a static entity, and is more based upon a single measurement (which incorporates multiple metrics) than a philosophy. Without practicing CRM whatsoever, a company can take various measurements of its customer lifecycles and find ways to improve, or 'manage' them better.

o Customer Lifecycle Management has the potential to turn your business on it’s head, focusing on customer needs first, and delivering profits for the long term.

Managing the customer Lifecycle

Acquiring new

customers

Enhancing profitability of existing customers

Retaining profitable customers

for life

Customer Lifetime Value Assessment Customer Lifetime Value can be explained as profits

that the customers contribute to the organization during the entire lifetime.

This is the Net Present Value (NPV) of the expected value of the profit on sales accrued from the customer during the lifetime.

CLV is a way to know how valuable a customer is going to be to you over some period of time.

CLV includes : Value – customers’ assessment of utility Brand – customers’ assessment of image Relationship - customers’ willingness to stay with brand

Advantages of CLVo Management of customer relationship as an asseto Monitoring the impact of management strategies and

marketing investments on the value of customer assetso Determination of the optional level of investments in

marketing and sales activitieso Implementation of sensitivity analysis in order to

determinate getting impact by spending extra money on each customer

o encourages marketers to focus on the long-term value of customers instead of investing resources in acquiring “cheap” customers with low total revenue value.

o Measurement of customer loyalty (proportion of purchase, profitability of purchase and repurchase, purchase frequency and sequence etc.)

Customer Product Profitability Analysis A customer profitability analysis is an evaluation

process that focuses on assigning costs and revenues to segments of the customer base, instead of assigning revenues and costs to the actual products, or the units or departments that compose the corporate structure of the producer.

According to Philip Kotler, “A profitable customer is a person, household or a company that overtime, yields a revenue stream that exceeds by an acceptable amount the company's cost stream of attracting, selling and servicing the customer“.

• Customers are arrayed along the columns and products along the rows. Each cell contains a symbol for the profitability of selling that products to that customer. • Customer1 is very profitable : he buys three profit

making products(P1,P2,and P4).• Customer 2 yields a picture of mixed profitability :he

buys one profitable product and one unprofitable product.• Customer 3 is a losing customer because he buys one

profitable product and two unprofitable products.• What can the company do about customers 2 and 3? 1) It can raise the price of its less profitable products or

eliminate them , or 2) It can try to sell them its profit making products.

Consumer Behavior Theories and CRMConsumer Behaviour is a branch which deals with the various stages a consumer goes through before purchasing products or services for his end use.Consumer behavior theories are used by businesses in order to optimize their selling and marketing strategies. These theories tend to concentrate on how consumers spend money, what causes them to spend more money, and how the spending of consumer money should impact the planning and strategies practiced by businesses.

• Why do you think an individual buys a product ?-Need-Social Status-Gifting Purpose

• Why do you think an individual does not buy a product ? - No requirement- Income/Budget/Financial constraints - Taste

• When do you think consumers purchase products ?- Festive season- Birthday -Anniversary -Marriage or other special occasions

Importance of consumer Behavior in CRM

• To design the best possible product or service that fully satisfies consumer's needs and demands.• To decide where the service or product would be made

available for easy access of consumers.• To decide the price at which the consumers would be

ready to buy that product or service.• To find out the best method of promotion that will prove

to be effective to attract customers to buy a product.• To understand why, when, how, what and other factors

that influence buying decision of the consumers.