CRM Fundamentals, Applications and

Future Directions
(V. Kumar & Werner Reinartz, Springer Texts in Business and Economics )

Prescribed reading of Chapters 1,2,3,4,5,6 &7

 Learning Objectives (1 of 2)

• Understanding why Managing Customers is More Critical Than Ever

• Understanding the Evolution and Growth of CRM
• Different Level to manage the customers
• Understanding of the Strategic CRM
• Elements of a CRM Strategy
• Steps in Developing a CRM Strategy
• Understanding the Customer-Value
 Learning Objectives (2 of 2)

• Extending the Concept of Customer Value

• From Value for Customers to Value from Customers: The Satisfaction-Loyalty-Profit Chain
• The Benefits of the Customer Value Management Approach
• Understanding CRM and the IT Revolution: The View from the Industry
• Implementing the CRM Strategy
 Why Managing Customers Is
More Critical Than Ever (1 of 2)
1. Changes with Respect to Consumers
 Why Managing Customers Is
More Critical Than Ever (2 of 2)
2. Changes with Respect to the Market-place
• Intensified Competition for Customers in Fragmented Market
• Difficult Differentiation
3. Changes with Respect to the Marketing Function
• Media Dilution and Channel Multiplication
• Decreasing Marketing Efficiency and Effectiveness
 CRM (1 of 2)

• CRM is the strategic process of selecting customers that a firm can most profitably serve
and shaping interactions between a company and these customers. The ultimate goal is to
optimize the current and future value of customers for the company.
Hence Important focus to design a CRM is:
• Strategic process
• Selection
• Interactions
• Customers (Taste, diversity, expectations)
• Current and future value of the customer
Evolution and Growth of CRM (2 of 2)

Fig. 1: Timeline of the CRM evolution

 ERP and CRM

Fig. 3: Integration of front-end customers with back-end systems

 CRM Perspectives (1 of 2)
1. Functional level: Customer relationship management can be practiced on a very limited
functional basis (e.g., sales force automation in the sales function, campaign management
by the marketing function).
2. Customer-facing front-end level: This type of CRM focuses on the total customer
experience. The goal is to build a single view of the customer across all contact channels
and to distribute customer intelligence to all customer- facing functions.
3. Strategic level: This perspective tries to free the term CRM from any technology
underpinnings and from specific customer management techniques. It describes CRM as a
process to implement customer centricity in the market and build shareholder value.
 CRM Perspectives (2 of 2)

• 4. Agile and Flexible Strategic CRM

• 5. Social CRM
Understanding the Customer-Value (1 of 5)

. Fig. 2.1 Alignment of value to the customer and value to the firm
 Understanding the Customer-Value (2 of 5)

From Value for Customers to Value from Customers : The Satisfaction-Loyalty-Profit Chain
• The Level of Analysis
• The Direct Link Between Customer Satisfaction and Profits
• The Link Between Satisfaction and Retention
• The Link Between Loyalty and Profits
 Understanding the Customer-Value (3 of 5)

Fig. 2.3 Illustration of the satisfaction-retention link. Fig. 2.2 The satisfaction-loyalty-profit chain (Source: Adapted from
(Source: Anderson & Mittal, 2000,) Anderson & Mittal, 2000, p.107)
 Understanding the
Customer-Value (4 of 5)

Fig. 2.4 How the competitive environment

affects the satisfaction loyalty relationship.
Note: Loyalty was measured as the
customers stated intent to repurchase
(Source: Jones & Sasser, 1995, p.5)
Understanding the Customer-Value (5 of 5)

Fig. 2.6 Association of profitability and longevity of customers (Source: Reinartz &
Kumar, 2002, p.86)
 Extending the Concept of Customer Value

• Customer Lifetime Value (CLV)

• Customer Influencer Value (CIV)
• Customer Referral Value (CRV)
• Customer Knowledge Value (CKV)

Fig. 2.7 The facets of value in CRM

 The Benefits of the Customer
Value Management Approach
A successful data-based CRM system, with customer value as its driving metric, empowers a company
to perform ten actions that will lead to strategic advantages.
• Integrate and consolidate customer information
• Provide consolidated information across all channels
• Manage customer cases
• Personalize
• Automatically and manually generate new sales opportunities
• Generate and manage campaigns
• Yield faster and more accurate follow-up
• Manage all business processes
• Give top managers a detailed and accurate picture
• Instantly react to changing market environments
Elements of a CRM Strategy

Fig. 3.2 The elements of a CRM strategy

 Approach for CRM Implementation

. Fig. 3.3 CRM implementation matrix: Specific CRM activities and processes
 Steps in Developing a CRM Strategy

Fig. 3.4 Developing a CRM strategy

1. Top-down 1. Management 1.Identify the services and products 1. Value Proposition
management 2. IT/technical 2. Map current workflows, interfaces, and 2. Customer Strategy
commitment personnel interdependencies. 3. Business Case
2. Bottom-up buy-in 3. Sales, marketing, 3. Review existing technologies, features, 4. Enterprise
from system users and service and capabilities. Transformation plan
3. A dedicated full- groups 4. Discuss the vision for the business & plan. 5. Management of other
time project team 4. Financial staff 5. Define business requirements. Stakeholders
4. Budget allocation 5. External CRM 6. Develop business workflows & processes.
for the total expert 7. Identify gaps in technology functionality.
solution 8. Map functionality to business processes.
9. Develop a new technology –functionality
framework.
10. Develop a Conceptual design and
prototype plan.
 Defining CRM Strategy

. Fig. 3.5 Characteristics of a defined CRM strategy

 Implementing the CRM Strategy

• Types of CRM Implementation Projects

• CRM Implementation Effectiveness
• Why Do CRM Implementation Projects Fail?
 Types of CRM Implementation Projects
• Operational CRM Projects & Analytical CRM Projects
Table 4.1 Components of CRM infrastructure
 CRM Implementation Effectiveness (1 of 3)
Application Projects Deploying Operational and Analytical Outputs

Table 4.2 Key issues to consider in computing ROI for CRM activities
 CRM Implementation Effectiveness (2 of 3)

• Costs Associated with a CRM Implementation : Organizational Requirements,

Technology Needs, Database Needs, Human Resource Potential, Implementation Factors
• Financial Benefits from a CRM Implementation
• Computing the ROI of CRM Initiatives (Table 4.3)
 CRM Implementation Effectiveness (3 of 3)
Table 4.3 Stages of ROI estimation
 Why Do CRM Implementation Projects Fail?

1. Assumption that CRM is a software tool that manages customer relationships for you.
2. Implementing CRM before having a CRM strategy.
3. Poor match between CRM system and organizational processes.
4. Resistance from Employees
5. Poor Data Quality
6. Low ‘Actionability’ of the Information
. Fig. 4.1 Improving profitability by investing in CRM (Source: Adapted from Bergeron, 2002)
 Case Study

For your Reading

CRM at Capital One (United Kingdom)
Chapter 4 (page no 60-73)
 Customer Analytics
1 Traditional Marketing Metrics
Market Share
Sales Growth
2 Customer Acquisition Metrics
Acquisition Rate
Acquisition Cost
3 Customer Activity Metrics
Objective of Customer Activity Measurement
Average Inter-Purchase Time
Retention and Defection Rate
Survival Rate
Lifetime Duration
P(Active)
Popular Customer-Based Value Metrics
Size of Wallet
Share of Category Requirement
Share of Wallet
Transition Matrix