Customer Relationship Management

I. History

a. Industrial Revolution

• Created economies of scale

• Product-focused marketing

• Mass production

• Difficult product-differentiation lower-price competition

b. Technological innovation

• Ways to interact with customers opened

• Learn about your customers and their needs

• Learn how to tailor products to customer needs and wants

• Customer-focused marketing was born

II. Customer Relationship Management (CRM)

• Customer-focused approach

• Represents a break with past marketing strategies

• Keeping customers over the long term is the road to profitability

• Production, IT and channel-management functions need to be integrated to be successful

III. The four-step process of CRM

1. Identify your customers

2. Differentiate in terms of customer needs and their value to your company

3. Interact with customers: improve cost efficiency and effectiveness of interaction)

4. Customize some aspects of your product or service: treat them differently

Over time:

• Becomes easier and cheaper to serve customers

• Better and better meet the needs of customers

IV. CRM metrics

1. Lifetime value of the customer

Principle: Customers are more valuable than what they spend in any given time period-and some are much more valuable

2. Share of customer

What is the opportunity for increasing lifetime value by offering more than you offer now

V. Who needs CRM and who cannot really use it?

Needs CRM No real benefit from CRM

• Industries where customers have highly differentiated needs and/or valuations

• Quick results in B2B marketing

• Examples: financial, telecommunication companies • Businesses where customer is not in contact with marketer

• Where lifetime value of customer is low

• Where location is critical to success

• Example: gas stations