INTRODUCTION

WHAT IS CUSTOMER
RELATIONSHIPS
MANAGEMENT ?
Learning Goals:
⚫ Define customer relationship
management (CRM), and explain its
importance to a small business.
⚫ Discuss the significance of providing
extraordinary customer service.
⚫ Understand how technology can be used to
improve customer relationships and the
techniques used to create a customer
database.
Learning Goals (cont.):
⚫ Explain how consumers are decision makers
and why this is important in understanding
customer relationships.
⚫ Identify certain psychological influences on
consumer behavior.
⚫ Recognize certain sociological influences on
consumer behavior.
What is Customer Relationship
Management?
⚫ Customer Relationship Management
(CRM)
A company-wide business strategy designed
to optimize profitability and customer
satisfaction by focusing on highly defined and
precise customer groups.
What is Customer Relationship
Management? (cont.)
⚫ Focus of CRM:
Customers rather than products
Changes in processes, systems, and culture
All channels and media involved in the
marketing effort, from the Internet to field
sales.
 Benefits of CRM to the Small
Firm
⚫ Economic benefits of maintaining
relationships with current customers:
◦ Acquisition costs for new customers are high.
◦ Long-time customers spend more money than
new ones.
◦ Happy customers refer their friends and
colleagues.
Benefits of CRM to the Small
Firm (cont.)
• Order-processing costs are lower for
established customers.
• Current customers are willing to pay more
for products.
Sources of the Next Sale
Essential Materials of a Successful CRM Program
Outstanding Customer Relationships
through Extraordinary Service
⚫ Transactional Relationship
An association between a business and a
customer that relates to a purchase or a
business deal
⚫ Beliefsabout Exceptional Customer
Service
Small firms possess greater potential for
providing superior customer service than do
large firms.
Outstanding Customer Relationships
through Extraordinary Service (cont.)
⚫ Beliefsabout Exceptional Customer
Service (cont.)
Superior service creates customer
satisfaction.
Customer satisfaction results in a positive
transactional relationship.
Positive relationships lead to increased firm
profits.
Managing Customer Satisfaction
⚫ Key Elements of Customer Satisfaction:
Providing the most basic benefits of the
product or service.
Offering general support services, such as
customer assistance.
Setting up a system to counteract customers’
bad experiences.
Delivering extraordinary services that excel in
meeting customers’ preferences and make the
product and/or service seem customized.
 Extraordinary Service: Personal
Attention
Ways to Provide
Extraordinary Service

Do business Address
on first-name problems
basis Find ways to promptly
help

Provide
Keep in
custom
touch
service
Managing Customer Satisfaction
⚫ Customer Experience Management
(CEM)
An approach that recognizes that with every
interaction, customers learn something about
a firm that will affect their desire to do
business there in the future.
Having a positive experience
with a business becomes part
of the firm’s value equation.
 Evaluating a Firm’s
Customer Service Health
⚫ Customer Service Strategies
❖ Provide an exceptional experience throughout
every transaction
❖ Provide sales materials that are clear and easy to
understand
❖ Respond promptly to customers’ requests and
concerns
 Evaluating a Firm’s
Customer Service Health (cont.)
⚫ Customer Service Strategies (cont.)
❖ Listen to customers and respond accordingly
❖ Stand behind products/services
❖ Treat customers as family members and best
friends
❖ Stay in the hearts and minds of customers
Customer Service Strategies
Consumer Options for Dealing with Product
or Service Dissatisfaction
 Using Technology to Support
Customer Relationship
Management
Blog, Wikis, Online
Social Networking Communities

CRM Software
Web 2.0
Customer
Information Hosted Call
Management Centers
Systems
Highly Recommended CRM Software Packages
for Small Businesses
 Creating a CRM Database
Categories for Building a Customer Database

Personal information Lifestyle and

psychographic data
Demographics
Profile of past
Internet information responses

Transaction data Complaints

 Using a CRM Database
Creating An 1. Capture relevant customer
data on interactions across
Effective CRM
important touch points
Program

2. Analyze those data to better

understand customers

3. Use those insights to

improve relationships
with customers
 Using a CRM Database (cont’d)
⚫ Customer Segmentation Strategy
A process of identifying customers that fit into smaller, more
homogeneous groups.
⚫ 80/20 Principle
A principle that maintains that 80 percent of a firm’s sales will come from
20 percent of its customers.
⚫ Recency-Frequency Monetary Analysis
An analysis that reveals customers most likely to buy from a firm in the
future because they have made purchases recently, frequently, and in
amounts exceeding an established minimum.
⚫ Customer Lifetime Value (CLV)
The total profit expected from all future sales to a long-term customer.
 Stage 1: Need Recognition
⚫ Need Recognition
Occurs when a consumer realizes that her or
his current state of affairs differs significantly
from some ideal state.
A consumer must recognize a need before
purchase behavior can begin.
Many factors can influence recognition of a
need.
Marketing strategy can be used to influence
need recognition.
 Stage 2: Information Search
and Evaluation
⚫ Evaluative Criteria
The features or characteristics of a product or
service that customers use to compare brands
⚫ Evoked Set
A group of brands that a consumer is both aware
of and willing to consider as a solution to a
purchase need.
Gaining inclusion into an evoked set requires
creating market awareness of a product or
service.
 Stage 3: Purchase Decision
⚫ Factors Affecting the Purchase Decision:
Brands in the evoked set
❖ Brand advertising
Purchase setting: store or non-store outlet
❖ Store, catalogs, TV shopping channels, the Internet
Intention to purchase:
planned or spontaneous
❖ Store layout, sales personnel,
and point-of-purchase displays.
❖ Ease of use of Web site
Stage 4: Post-Purchase
Evaluation
⚫ Post-Purchase Dissonance
Is the anxiety that occurs when a customer
has second thoughts immediately following a
purchase.
Can lead to customer complaints, brand
switching, or discontinuing use of the product.
Stage 4: Post-Purchase
Evaluation
⚫ Post-Purchase Dissonance (cont.)
Can reduced by:
❖ Reassurance by salespersons.
❖ Guarantees and trial periods.
❖ Customer follow-ups.
❖ Confirming information from other users.
Simplified Model of Consumer Behavior
(Customers as Decision Makers)
Understanding Psychological Influences
on Customers
⚫ Needs
Are the starting point for all behavior
❖ Need categories: physiological, social, psychological,
and spiritual.
Are seldom completely or permanently
satisfied (e.g., daily newspaper).
Function together (e.g., the desire for status
clothing).
❖ Consumers may purchase the same product to
satisfy different needs (e.g., Internet access).
Understanding Psychological Influences
on Customers (cont’d)
⚫ Perceptions
Are individual processes that give meaning to the
stimuli confronting consumers
❖ Whatever is perceived depends on the characteristics
of the stimulus and the perceiver.
⚫ Perceptual Categorization
Is the process of grouping similar things so as to
manage huge quantities of incoming stimuli.
Can create a barrier (i.e., brand loyalty) to
competing brands.
Understanding Psychological Influences
on Customers (cont’d)
⚫ Motivations
Are goal-directed forces that organize and give
direction to the tension caused by unsatisfied
needs.
❖ Behavior variables can be analyzed to determine
the motivations a consumer will internalize as an
impetus to purchase a good or service.
Understanding Psychological Influences
on Customers (cont’d)
⚫ Attitude
Is an enduring opinion based on knowledge, feeling,
and behavioral tendency.
Can discourage or foster behavioral tendencies to
purchase a product.
 Understanding Sociological
Influences on Customers

Culture Social Classes

Consumers

Opinion Leaders Reference Groups