Concept of Customer Relationship Marketing (CRM)
In
marketing literature, the term Customer Relationship Management/Marketing (CRM) and Relationship Marketing (RM) are used interchangeable.
CRM
is attracting, maintaining and enhancing customer relationships. CRM is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers, to create superior value for the company and the customer.
Bucket theory of Marketing: James L. Schorr explains the importance
of relationships by prospecting a theory called Bucket Theory of Marketing. He views the market as a big bucket. The sales, advertising and promotional programmes pour businesses into the top of the bucket. As long as these programs are effective, the bucket stays full. However, there is a hole in the bucket. 2
2
Effective CRM
Promotional Programme
Sales Advertising
Bucket theory of marketing
Ineffective CRM
When
the business is running well and very few customers fall through, the problem may not be serious. When the operation is weak and the customers are not satisfied, people fall out through the bucket faster than they can be poured in through the top, problem will be serious. This theory illustrates how a relationship strategy that focuses on plugging the holes in the bucket makes so much sense. 5
5
Goals of Relationship Marketing
Building relationships: - Companies should offer a package of promises to build relationships with selected set of persons, organizations and groups. - All the parties may not always be right. Maintaining relationships: - The maintenance of relationship is possible only when a company fulfills its promises to the satisfaction of the respective parties. - Research studies have shown that retaining a party is less costly than building a relationship with a new party. Enhancement of relationships: -Companies should strive for promoting relationships beyond the line of transactions. - They have to carefully promote each party from the stage of prospect to buyer, buyer to customer, customer to client, client to supporter, supporter to an advocate and advocate to a partner in the hierarchy of relationships.
Customer Development Process
Suspects Prospects First time consumer
Repeat customer
Ex-Customer Pool
Partners
Advocates
Members
Clients
Relationship Strategies
i. Financial bonds: The customer is tied to the firm primarily through financial incentives lower prices for greater volume purchases or lower prices for regular customers. ii. Social bonds: At this level, the firm intends to develop long-term relationships with customers through social as well as financial bonds. iii. Structural bonds: Organization develops structural or technical relationship with a customer by providing a special equipment or technology in order to enhance the customers performance and profit.
Tiering the Customer Base/To whom to maintain relation?
Platinum: Heavy users who are not price sensitive and who are willing to try new offerings. iii. Gold: Who are heavy users but more price sensitive than those in the higher tier, ask for more discounts, and are likely to buy from several providers. iii. Iron: customers whose spending volume and profitability do not merit special treatment from the company. i.
9
9
iv. Lead: Customers who generate low revenues to the firm and entertaining them is a costly matter for the company. They claim more than their spending, tie up com-pany resources, and spread negative word-of-mouth.
10
10
Few
High
Good
Platinum Gold
Volume of Customer Profit generation Relationship
Iron
Lead
Many
Low
Poor
11
11
What to Do then?
Firm could not provide all services to all levels. Platinum tier will receive some exclusive
benefits not available to other segments. The benefit levels for platinum and gold customers are often designed with retention in mind. For lead-tier customers, the options are to either move them to the iron segment or terminate them. Migration can be achieved via a combination of strategies, including base fees and price increases.
12
12
Thank You.
13
13
