Strategic Marketing
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
CHAPTER 4
STRATEGIC
CUSTOMER
RELATIONSHIP
MANAGEMENT
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
VITAL ROLE OF CUSTOMER
RELATIONSHIP 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
MANAGEMENT
CRM is a cross-functional core business
process concerned with achieving
improved shareholder value through the
development of effective relationships
with key customers and customer
segments.
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CRM AT FUNCTIONAL LEVEL
* Set of processes to execute
marketing functions like
sales force automation or
marketing campaign
management.
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CRM AT CUSTOMER-FACING LEVEL
* Set of activities that provide
a single-view of customer
across all contacts
channels.
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CRM AT THE ORGANIZATIONAL
LEVEL
* Knowledge about
customers and their
preferences have
implications for the entire
organization.
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CUSTOMER RELATIONSHIP
MANAGEMENT
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 VALUE (CLV)
The lifetime value of a customer, or customer lifetime value (CLV), represents the
total amount of money a customer is expected to spend in your business, or on
your products, during their lifetime.
This is an important figure to know because it helps you make decisions about how
much money to invest in acquiring new customers and retaining existing ones.
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Example of CLV
* For example, the CLV of a Honda owner
might be as much as $100,000 if they are
happy with their car or minivan choice and
end up buying several through the years.
* Or the CLV of a regular coffee drinker
might be even higher than that, depending
on how many cups of coffee they drink a
day and where they buy it.
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Example of CLV
* Conversely, someone who buys a home
twice in their life might only be worth, say,
$15,000 to a real estate agent, because
while the value of the purchase is huge,
the percentage paid to an agent is only a
fraction of that.
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Calculating CLV
Average value of a Average
No. of times
CLV=
purchase
x the customer x length of the
customer
will buy each
relationship
year
(in years)
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Example:
A marathon runner who regularly
buys shoes from your shoe store the
average value of purchase is $100
per pair of shoes and he buys 4
pairs per year for 8 years.
Calculate the CLV.
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Calculating CLV
Average
Average value No. of times
CLV= of a purchasex the customer x length of the
customer
will buy each
relationship
year
=100 (in years)
4 8
CLV= $3,200
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CALCULATE THE CLV
* And the mom of a toddler might
be worth:
* $20 per pair
* 5 pairs per year
* For 3 years
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4-4
PERSPECTIVES TOWARD CRM
STRATEGIC-
THE ENTIRE
COMPANY
REQUIRED THE CUSTOMER
MARKETING
FUNCTIONS
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4-5
THE STEPS IN DEVELOPING A CRM STRATEGY
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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4-6
DEFINE THE CRM STRATEGY
Value
Proposition
1
5 2
Other Business
Stakeholders CRM Case
STRATEGY
Enterprise 4 3 Customer
Transformation Plan Strategy
Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006,
42.
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4-7
IMPLEMENTATION DANGERS
Implementing Without Developing a
Customer Strategy
Failing to Initiate Necessary
Organizational Change
Allowing Technology to Dominate the
CRM Process
Focusing on the Wrong Customers
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4-8
VALUE CREATION PROCESS
Value Received by Value Received by the
the Customer Organization
THE VALUE EXCHANGE
Successful Value
Exchange
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METRICS
FEATURE How General Electric Co. Measures Customers’
Experience
Happy (And Not-So-Happy) Customers
General 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. 4-21
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CRM 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 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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