Module Digital Customer

Management (DCM) -
Introduction
Customer Management
from a customer and a
company perspective

Business
The HSLU DCM Reference Model
Company Integration and Customer
Relationship Level

Strategic Customer Management Customer Perceived Value

• CRM Goals and Strategies
• Customer Perceived Value Design
& Customer Experience Management
• Customer Journey and Touchpoint
Management
Customer Satisfaction

Customer Experience Design

Customer Experience
Relationship

Analytical CRM/Technology
• Customer Lifetime Value Assessment
Customer Loyalty
• Big Data and Customer Analytics Memory (KPI: e.g. NPS)

Operational Customer Management Interaction per episode at the

• CRM in Marketing, individual touchpoints Customer Behavior
Campaign Management, (Repurchase, Recommendation)
Individualization
• CRM in Service, Interaction Center
and Self Service
• Loyalty Programs
• Data Protection applied Customer to Customer
Interactions

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Binding rules for cooperation

• We expect you to have a scientific working style (citing, researching).

• We work with the most modern teaching and research opinions. "state-of-the-art" research is
largely written in academic English.
• As a matter of principle, we do not disclose material delimitations. All material discussed
in class is relevant to the exam.
• Group work: The HSLU usually defines the group composition.
• Free riding will not be accepted.
• We expect you to show up on time for (online) class and to meet deadlines.
Late submissions will result in a grade of 1.
• The instructor has the right to request that the webcam has to be turned on for individual
or group discussions.
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Certificate of Achievement

• Group project CRM (40%)

- In groups of 5 to 6 students, a concrete CRM assignment is worked out from a given catalogue of topics.
The aim is to apply the theories, methods and instruments learned in the module to the solution of a
management problem. The concrete assignment and the formal requirements are described in a separate
document.

• Written examination (60%)

- At the end of the semester a 60 minutes exam will be completed, which consists of a case study with
questions to test the ability to transfer the theory and concepts using a case study. It is an open book exam.

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Learning objectives
Students…

• have a strategic understanding of CRM, understand the CRM concept and the application of CRM
principles in practice
• know psychological, behavioral and economic success metrics and the concept of the success
chain in CRM
• know the differences between transactional and relationship-oriented Marketing and know the
effects on the business model
• know the stage model of CRM
• know the essential added values and also disadvantages of CRM
• know the CRM management process according to Bruhn and can describe it
• know the most important customer-related concepts and can describe them
• understand the necessity for a constant change of perspective in CRM
• have an overview of the main CRM topics presented during the module and
• can apply the CRM reference model of the module.
Page 5
The HSLU DCM Reference Model
Company Integration and Customer
Relationship Level

Strategic Customer Management Customer Perceived Value

• CRM Goals and Strategies
• Customer Perceived Value Design
& Customer Experience Management
• Customer Journey and Touchpoint
Management
Customer Satisfaction

Customer Experience Design

Customer Experience
Relationship

Analytical CRM/Technology
• Customer Lifetime Value Assessment
Customer Loyalty
• Big Data and Customer Analytics Memory (KPI: e.g. NPS)

Operational Customer Management Interaction per episode at the

• CRM in Marketing, individual touchpoints Customer Behavior
Campaign Management, (Repurchase, Recommendation)
Individualization
• CRM in Service, Interaction Center
and Self Service
• Loyalty Programs
• Data Protection applied Customer to Customer
Interactions

Page 6
Table of contents

1 CRM – Definition and development

2 The benefits and value of CRM

3 The CRM management process

4 The customer side of DCM

5 The company side of DCM

Customer Management as integration of customer and

6
company perspective
Page 7
1 CRM – Definition and Development

Page 8
Once upon a time...

... knew the customers by name

... understood the customer needs

... offered personal service

and thus gained customer loyalty

But expensive!
Customer effectively paid for the
relationship

Over the years...

Customers traded relationships for anonymity, standard service and lower prices.

Page 9
Source: Maklan, Knox and Peppard (2011)
What is customer Management? - CRM definitions

A relationship is a chain of interaction. Here, an interaction is to be understood as action in relation to the partner's
action. Like a meaningful dialogue, for example. (Max Weber 1922)

CRM is a business strategy combined with technology to manage the complete customer life cycle (Smith 2001).

A term for methods, technologies and e-commerce capabilities that companies use to manage customer relationships
(Stone and Woodcock 2001).

CRM is a strategic approach concerned with creating increased shareholder value through the development of appropriate
relationships with key customers and customer segments (Payne and Frow 2005)

Aims to provide a strategic bridge between IT and marketing strategies to build long-term relationships and
profitability. This requires 'information intensive strategies'. (Glazer 1997)

CRM is seen as a customer-focused business strategy that uses modern information technology to try to build and
strengthen profitable customer relationships over the long term (Hippner and Wilde 2006)

Customer Relationship Management comprises the establishment and consolidation of long-term profitable
customer relationships through coordinated and customer-specific marketing, sales and service concepts with
the help of modern information and communication technologies (Hippner and Hubrich 2011).
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CRM Development – Big Data and Automation

Data analysis and

Data Input from Sales Sales Activity
Recommendation

I
Until 2000

Manual recording of customer Manual derivation of Human decisions for

interactions recommendations customer contact

II
2000 +

Introduction of Manual derivation of Human decisions for

CRM System recommendations customer contact

III
2010 +

Use of Introduction of Human decisions for

CRM System Data Mining customer contact

IV
2015 +

Use of Use of Introduction of

CRM System Data Mining Marketing Automation

Degree of Automatization

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Source: Krämer/Tachilzik/Bongaerts, 2016
Increasing complexity of CRM

Competitors

CUSTOMERS PRODUCTS TECHNOLOGY

Budget Restrictions
Cross-divisional

Distribution Capacity
Individualization of
customer needs flexibilization and Increase of touchpoints
differentiation

Increasing service/
performance requirements Accelerated product Development of CRM
innovation and introduction systems (more data)

Increasing number of
customer segments
E-commerce in
all industries
Insufficient database/
target group approach
INCREASING COMPLEXITY
of CUSTOMER RELATIONSHIP
MANAGEMENT Big Data and AI
Preferred touchpoints

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2 The benefits and value of CRM

Page 13
How can you measure the value of relationships?

Behavioral factors

Buying behavior: does cross selling/upselling

succeed?

Recommendation behavior

Customer integration, e.g. co-innovation

Information level of the customer/about the

customer

Psychological factors Economic factors

Perceived quality of the product Customer profitability

and service
Customer lifetime value
Quality of relationship, trust
Market share
Customer satisfaction and
commitment Share of wallet
Page 14

Source: Bruhn (2016)

Study by Reichheld/Sasser (1990)
80

70
Preisprämien
Price Premiums
60
/ Customer
Gewinn/Kunde

Weiterempfehlungen
Recommendations
50

40 Kosteneinsparungen
Cost Savings

30
Profit

Umsatzwachstum/Kunde
Sales Growth / Customer
Jährlicher

20
Annual

10 Basisgewinn
Base Profit

0
0 1 2 3 4 5 6 7 Akquisitionskosten
Acquisition Costs
-10

-20
Year
Jahr

Source: Reichheld et al. (1990) Page 15

Marketing and CRM – Integration

Lower Operating
Defensive Marketing (CRM) Costs

Cross- / Upselling
Customer Margin
Loyalty Mgmt
Price Surcharges
Product / Service
Quality Recommendations Profit

Brand Management Market Share

Sales
Advertising
Price Surcharges

Offensive Marketing Sales Promotion

Page 16
Source: Michel, St. (2005)
Chain of success according to Bruhn

External moderating effects

Input of the Psychological Behavioral Output for the

company customer effects on the company
effects customer

Internal moderating effects

Page 17

Source: Bruhn (2016)

Chain of success according to Bruhn – External factors

Heterogeneity of Varity seeking motives Customer potential

customer expectations
Reputation Customer needs
Market dynamics
Number of alternatives Price sensitivity
Market complexity
Convenience of Flexibility of the customer
customers

Marketing Customer Customer Economic

Satisfaction Loyalty Success

Internal moderating effects Page 18

Source: Bruhn (2016)

Chain of success according to Bruhn – Internal factors

External moderating effects

Marketing Customer Customer Economic

Satisfaction Loyalty Success

Individuality of the Change barriers CRM systems

service
Contractual obligation Employee turnover
Service portfolio
Service Network Restrictions on pricing
Service complexity
Choice of products and
services
Page 19

Source: Bruhn (2016)

CRM benefit categories for companies
Benefits through Agility – Time to Repeat Purchases Cross Selling Potential Savings
individualization Market
• Better customer • Knowing the market • Knowledge of the • Identification of • Identification of
understanding needs optimal sales opportunities non-profitable
• Customized • Faster reaction to replacement time • Identification of customers
products changes • After sales service complementary • More targeted
• Advice to the • Faster presentation • Loyalty programs products marketing
customer of new products • Identification of • Learning effects
• Presentation of the and offers sales opportunities • Automation in
products for higher value marketing sales
offers and service

Higher purchase
Higher prices
volumes

More new More turnover Lower costs

customers
Higher revenues Page 20

Source: Bruhn (2016)

The connection between relationships and shareholder value

SHAREHOLDER
VALUE
TOTAL VALUE OF
PORTFOLIO =
CUSTOMER EQUITY
ECONOMIC VALUE

CUSTOMER
LIFETIME VALUE

CUSTOMER
PROFITABILITY

Page 21

Source: Bruhn (2016)

Stage model of CRM

Long-term committed customer

Customer loyalty Increasing

economic benefit
Customer satisfaction for the company

Customer integration

Customer proximity

CRM activities

Page 22

Source: Bruhn (2016)

3 The CRM management process

Page 23
CRM Management Process

IMPLEMEN-
STRATEGY
TATION
PHASE
PHASE

CON-
ANALYSIS OPERATING
TROLLING
PHASE PHASE PHASE
Page 24

Source: Bruhn (2016)

 Analysis Phase
Goals of the success chain

External situation
analysis

ANALYSIS
PHASE
Internal situation
analysis

Customer segmentation based on

the success chain

Page 25

Source: Bruhn (2016)

Strategy Phase Definition of market strategies
§ Competitive strategies

§ Customer oriented strategies

Definition of the phase § Dealer oriented strategies

strategy
§ Acquisition strategy

§ Retention strategy
Definition of
Strategy
§ Recovery strategy segment-specific
Phase
targets

Definition of segment-specific
strategies

Page 26

Source: Bruhn (2016)

Operating Phase

OPERATING
PHASE
Definition of the phase- Definition of the cross-
oriented instruments phase initiatives
§ Acquisition § Quality Management

§ Retention § Customer Experience Management

§ Recovery § Complaint Management

§ Service Management

§ Customer Value Management

Page 27

Source: Bruhn (2016)

 Implementation Phase
CRM systems

Goals and phases of CRM structures

implementation IMPLEMEN-
TATION
PHASE

CRM culture

Page 28

Source: Bruhn (2016)

CRM Implementation

Organization
People 30%
50%
CRM

IT Systems
20%

Relative influence of three key CRM implementation dimensions on CRM project success.

Page 29
Source: Michalski 2004
Controlling Phase
CRM controlling systems

Premonetary Qualitative
criteria CON- criteria
TROLLING
PHASE

Monetary criteria

Page 30

Source: Bruhn (2016)

4 The customer side of DCM

Page 31
The HSLU DCM Reference Model
Company Integration and Customer
Relationship Level

Strategic Customer Management Customer Perceived Value

• CRM Goals and Strategies
• Customer Perceived Value Design
& Customer Experience Management
• Customer Journey and Touchpoint
Management
Customer Satisfaction

Customer Experience Design

Customer Experience
Relationship

Analytical CRM/Technology
• Customer Lifetime Value Assessment
Customer Loyalty
• Big Data and Customer Analytics Memory (KPI: e.g. NPS)

Operational Customer Management Interaction per episode at the

• CRM in Marketing, individual touchpoints Customer Behavior
Campaign Management, (Repurchase, Recommendation)
Individualization
• CRM in Service, Interaction Center
and Self Service
• Loyalty Programs
• Data Protection applied Customer to Customer
Interactions

Page 32
The essential customer concepts
Concept Definition

Customer Perceived Value Customer value is the customer's perceived preference for and evaluation of those product
features, feature services, and consequences occurring through use that support (or block) the
achievement of the customer's goals and intentions in utility situations. (Woodruff 1997)

In short: "What you get for what you give".

Customer Satisfaction The level of a person's perceived state, which results from comparing the perceived performance
of company offerings in relation to the person's expectations. (Oliver 1997)

Customer Loyalty Loyalty is defined as "a deep-seated devotion to purchase or support a product or service again
in the future despite situational influences and marketing efforts that have the potential to
generate switching behavior." (Oliver 2007)

Customer Behavior A reaction of an individual or group to an action, environment, person, or stimulus. Relevant
CRM behavior: e.g. repurchase behavior, purchase decision behavior, churn behavior,...

Customer-Customer Customer-customer interactions have a large and, especially through the influence of social
Interactions media, growing impact on customer behavior (e.g., the decision-making process) and perceived
customer value (e.g., service quality, customer experience).

Page 33
How does customer satisfaction arise?

Needs Experiences Promises Reputation

Customer Expectation Customer Perception

Comparison

Negative comparison Expectation = Positive comparison

result Perception result

Overachievement.
Dissatisfaction Satisfaction
Surprise?

Page 34

Source: Töpfer (2004)

What is customer loyalty?
Economic influencing factors
Perceived economic factors of
influence

Switching costs
Familiarity

Social influencing factors

Common values

Relationship-driven Values

Company-related influencing factors

Preferred treatment

Brand reputation
Page 35
5 The company side of DCM

Page 36
The HSLU DCM Reference Model
Company Integration and Customer
Relationship Level

Strategic Customer Management Customer Perceived Value

• CRM Goals and Strategies
• Customer Perceived Value Design
& Customer Experience Management
• Customer Journey and Touchpoint
Management
Customer Satisfaction

Customer Experience Design

Customer Experience
Relationship

Analytical CRM/Technology
• Customer Lifetime Value Assessment
Customer Loyalty
• Big Data and Customer Analytics Memory (KPI: e.g. NPS)

Operational Customer Management Interaction per episode at the

• CRM in Marketing, individual touchpoints Customer Behavior
Campaign Management, (Repurchase, Recommendation)
Individualization
• CRM in Service, Interaction Center
and Self Service
• Loyalty Programs
• Data Protection applied Customer to Customer
Interactions

Page 37
Strategic customer Management – the idea in a nutshell

Customer segmentation strategies

Buying cycle strategies

Lifecycle strategies

Strategisches
Customer
Management Customer contact strategies
Channel strategies

Referral strategies
Customer service strategies

Strategies and goals serve as guidelines for many decisions at the operating level,
and for the many operational metrics that - theoretically - could be used.

Page 38
Analytical CRM – the idea in a nutshell

What is the value of the customer to the

company?

Customer Lifetime Value (CLV) /

Customer Equity

How valuable is the company to the

customer?

Customer Perceived Value (CPV)

&

How satisfied are customers?

Which customers stay,
which customers leave?
Page 39
Operational Customer Management – the idea in a nutshell

Operational CRM includes:

1. The design of processes for company and customer interfaces, i.e. the most important marketing, sales
and service processes as well as the necessary support processes.

2. The design of processes in a way that supports positive customer experiences and developing individual
customer relationships.

3. The automation and personalization of processes in marketing, sales and service.

4. The design of 1:1 campaigns and marketing automation
(in some cases, however, campaigns are also assigned to "tactical CRM" in the literature).

Page 40
Operational Customer Management – Designing processes at the customer
interface...

Marketing Campaigning
Process

Opportunity Mana- Lead Mana-

gement Process gement Process

Sales Sales
Process

Cross-/Upselling Complaint
Process Process

Service (After Sales)

Service Process

Page 41
Source: Gronover, Riempp, Gebert und Bach 2002
Relationship between analytical and operational Customer Management

invest
Collection Ensuring
of customer the quality and
use sustainably and market data the data access

Identify

Differentiate
Customize Analysis of the
products and customer’s
1

Improve
services attractiveness

4 2
Learning and
deriving CRM 3 Needs-oriented
segmentation
rules of conduct
Interact

Implementation Planning of the

Source: According to of the customer customer
Peppers & Rogers 2004 interaction interaction

use Page 42
 Data Information bereitgestellt, die den einzelnen Kunden zugeordnet werden können, z. B.
die zentralen Dimensionen Kundenbedürfnisse und Kundendeckungsbeitrag
(Bongaerts/Krämer, 2014). Auf dieser Basis können dann gezielte Marketingmaßnahmen wie
in den Bereichen Kunden-Feedback, Kundenmanagement oder Direktmarketing-Kampagne
Relationship between analytical and operational Customer Management,
etc. angestoßen werden.
e.g. for Marketing Automation

Challenges
Herausforderungen Customer Centricity
Kundenzentrierung Operational
OperativesMarketing
Marketing
Datenmanagement
Data Management Marketing-Steuerung
Marketing Steering Aktions-Portfolio
Activity Portfolio

Lifetime Value
Lifetime-Value
Volume:
Volume: Velocity:
Velocity: Value of the
1 2 Focus:
Fokus: High-
Data volume Permanent Value of the Customer

high
High
ValueValue +

hoch
Datenvolu- Permanenter Customer +
increased data flow (Cash-flow, den der Feedback
Feedback- Unsatisfied
Unsatisfied
men erhöht Datenfluss (Cash flow generated
(factor 300 in and analysis Kunden über seine Manage-
Manage- 3 4
(Faktor 300 und Analyse- by the customer over

gering
10 years) capability „Lebenzeit“ generiert)

low
(in 10 J.) möglichkeit its „lifetime“) ment
ment
Transactional
Transaktions-
hoch
high gering
low Satisfaction
Zufriedenheit
Lifetime Value
Lifetime-Value
1 2 Focus:
Fokus: High-
High
ValueValue
+ high+

hoch
high
Loyalty
Loyalty- High
churnChurn
Big Data
Big Data Customer Account
Kundenkonto Manage-
Manage- 3 4

gering
ment
ment

low
Churn
Abwanderungs-
low
gering high
hoch Risk
risiko
Lifetime Value
Lifetime-Value
1 2 Focus:
Fokus: High-
Variety: :
Variety Veracity:
Veracity: Value to the customer High
ValueValue
+ high+

high
hoch
Veränderte
Changed Misstrauen
Distrust of (Preferenz-, Auswahl-,
Customer Campaign
Kampagnen- High Response
response
Datenfor-
data formats ggü.
data Daten-
quality Reaktions-,
(customer Zufrieden-
preference, Manage-
Manage- 3 4

gering
/ sources
mate / on the rise
qualität heits-Muster
choice, responsedes
and ment
ment

low
-quellen steigt an Kunden)
satisfaction patterns) Response
Response
... low
gering high
hoch to Mail
auf Mail

Abb. 4: Von Big Data zur Automatisierung der Marketing-Prozesse

Source: Krämer, A. et al. (2016)
Page 43

Ausblick: Kundenzentrierung als Basis des digitalen Geschäftsmodells

In dem Maße wie Digitalisierung und Big Data die Geschäftsmodelle verändern, ändert sich
 Customer Management as integration of
6 customer and company perspective

Page 44
The HSLU DCM Reference Model
Company Integration and Customer
Relationship Level

Strategic Customer Management Customer Perceived Value

• CRM Goals and Strategies
• Customer Perceived Value Design
& Customer Experience Management
• Customer Journey and Touchpoint
Management
Customer Satisfaction

Customer Experience Design

Customer Experience
Relationship

Analytical CRM/Technology
• Customer Lifetime Value Assessment
Customer Loyalty
• Big Data and Customer Analytics Memory (KPI: e.g. NPS)

Operational Customer Management Interaction per episode at the

• CRM in Marketing, individual touchpoints Customer Behavior
Campaign Management, (Repurchase, Recommendation)
Individualization
• CRM in Service, Interaction Center
and Self Service
• Loyalty Programs
• Data Protection applied Customer to Customer
Interactions

Page 45
Integration and relationship level
A relationship is a chain of interaction. In this context, an interaction is to
be understood as action in relation to the action of the partner.
Max Weber (1922)

Customer relationship process:

- concerns the relationship of the customer Relationship process
with the company

Memory
Customer interaction process:
- concerns a single episode Interaction process
(transaction)

The customer/enterprise integration should be designed to enable a CRM-driven customer experience.

Page 46
Relationship level: types according to Fournier et al.

Page 47
Source: Avery J., Fournier S., Wittenbraker, J. (2014)
Relationship types and rules
Easy exchange

The customer enters into a relationship to get a good product or service at a fair price. The customer is looking for reliability and does
not want to have to think or do too much.

Example: A loyal customer remains loyal to a toothpaste brand.

Business partner

The customer wants to work with the company as a valued and reliable partner to solve problems in the long term.

Example: A customer of a food delivery service makes a number of sensible suggestions for improving the service, and the company
takes up the ideas.

Affair

The customer wants to experiment with a new identity. He expects the company to provide excitement, to fuel his passion with every
interaction, and not to encourage him to think or rationally consider his purchase.

Example: A customer of a watch manufacturer enjoys ever new models with dazzling designs - and buys them.

Page 48
Source: Avery J., Fournier S., Wittenbraker, J. (2014)
Relationship types and rules

Best Friends

The customer is looking for intimacy and emotional support. He wants honest two-way communication and expects the company not to reveal
personal information or exploit his vulnerability.

Example: A retail customer expects to be informed in advance about operational or price changes or other important business decisions, and the
customer offers loyalty and understanding in return.

Buddies

The customer is looking for a lasting interaction, but does not want a close or emotional relationship. He expects the company not to make
demands or restrict his freedom to interact with others.

Example: A beer lover wants to choose from a wide selection of beers for different occasions and resists efforts by individual brands to win his
loyalty.

Master(in) slave

The customer enters into this type of relationship to strengthen his self-esteem. He demands that the company listen to him, anticipate all his
needs, fulfill all his wishes, and ask no questions.

Example: An online retail customer breaks off your relationship after a discussion that signaled disrespect.

Page 49
Source: Avery J., Fournier S., Wittenbraker, J. (2014)
Sources
Avery, J; Fournier, S; Wittenbraker, J (2014): Unlock the Mysteries of Your Customer Relationships. In: Harvard Business Review, July/August 2014.
Bruhn, M. (2016): Kundenorientierung – Bausteine für ein exzellentes Customer Relationship Management (CRM), 5. Auflage, dtv 2016
Couldwell, C. (1999). Loyalty bonuses. Marketing Week, 22(3), 41-42.
Glazer, R. (1997). Strategy and structure in information-intensive markets: The relationship between marketing and IT. Journal of Market-Focused
Management, 2(1), 65-81.
Hippner, H. und Wilde, K. (2006). Grundlagen des CRM – Konzepte und Gestaltung, Wiesbaden.
Kane, G. C. (2014). How facebook is delivering personalization on a whole new scale. MIT Sloan management review, 56(1), 3.
Laney, D. (2001). 3D data management: Controlling data volume, velocity and variety. META Group Research Note, 6, 70.
Lemon, KN; Verhoef, PC: Understanding Customer Experience Throughout the Customer Journey, in: Journal of marketing: AMA/MSI Special Issue, Vo, 80,
November 2016, S. 69-96
Maklan S, Knox S, Peppard J & Knox S (2011) Why CRM fails - and how to fix it, MIT Sloan Management Review, 52 (4) 77-85.
Mayer-Schönberger, V., & Mayer-Schönberger, C. (2013). Big Data: die Revolution, die unser Leben verändern wird. Redline Wirtschaft.
Gronover, S. Riempp, G., Gebert, H. & Bach, V. (2003). Customer Relationship Management: Ausrichtung von Marketing, Verkauf und Service am Kunden. In:
Österle, H. und Winter, R. (eds.). Business Engineering, Springer.
Oliver, R. L. (1997). Satisfaction: A behavioral perspective on the customer. New York.
Oliver, R. (1999). Whence customer loyalty. Journal of Marketing, 63, 33-44.
Payne, A., & Frow, P. (2005). A strategic framework for customer relationship management. Journal of marketing, 69(4), 167-176.
Payne, A. (2006), Chapter I: A Strategic Framework for CRM, Handbook CRM, Butterworth Heinemann, Oxford, pp. 4-38.
Peppers, D., & Rogers, M. (2004). Managing customer relationships: A strategic framework. John Wiley & Sons.
Stone, M., & Woodcock, N. (2001). Defining CRM and assessing its quality. Successful customer relationship marketing, 3-20.
Woodruff, R. B. (1997). Customer value: the next source for competitive advantage. Journal of the academy of marketing science, 25(2), 139-153.

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