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Customer Relationship Management (CRM)

Learning Objectives
Define CRM; Understand the importance of CRM;

Explain the determinants of CRM and the key stages in its development;
Discuss the main functions and various models of CRM; Explain the role of salespeople as relationship developers Discuss the management of customer relationships.

What is Customer Relationship Management (CRM)?

CRM is the development and maintenance of mutually beneficial long-term relationships with strategically significant customers CRM is an IT enhanced value process, which identifies, develops, integrates and focuses the various competencies of the firm to the voice of the customer in order to deliver long-term superior customer value, at a profit to well identified existing and potential customers.

Understanding Customer Relationship Management (CRM)? CRM is a business philosophy based on upon individual customers and customised products and services supported by open lines of communication and feedback from the participating firms that mutually benefit both buying and selling organisations. The buying and selling firms enter into a learning relationship, with the customer being willing to collaborate with the seller and grow as a loyal customer. In return,, the seller works to maximize the value of the relationship for the customers benefit. In short, CRM provides selling organisations with the platform to obtain a competitive advantage by embracing customer needs and building value-driven long-term relationships.

Determinants of CRM Trust The willingness to rely on the ability, integrity, and motivation of one company to serve the needs of the other company as agreed upon implicitly and explicitly. Value The ability of a selling organisation to satisfy the needs of the customer at a comparatively lower cost or higher benefit than that offered by competitors and measured in monetary, temporal, functional and psychological terms.

Determinants of CRM In addition to trust and value, salespeople must: Understand customer needs and problems; Meet their commitments; Provide superior after sales support; Make sure that the customer is always told the truth (must be honest); and Have a passionate interest in establishing and retaining a longterm relationship (e.g., have long-term perspective).

Stages in the development of a Customer Relationship

The Pre-relationship Stage


The event that triggers a buyer to seek a new business partner.

The Early Stage


Experience is accumulated between the buyer and seller although a great degree of uncertainty and distance exists.

The Development Stage


Increased levels of transactions lead to a higher degree of commitment and the distance is reduced to a social exchange.

The Long-term Stage


Characterised by the companies mutual importance to each other.

The Final Stage


The interaction between the companies becomes institutionalized.

Stages in the Development of a Key-Account Relationship


High

Synergistic KAM Partnership

Degree of involvement

Mid-KAM Early-KAM

Low

Pre-KAM
Transactional Nature of customer relationship
(Millman and Wilson, 1995)

Collaborative

A Relationship Life Cycle Model


High cooperation Low competition

Prerelationship stage

Development stage

Maturity stage

Decline stage

Low cooperation High competition Time


(Wilkinson and Young, 1997)

Class Exercise

What should the focus and main activities of a global salesperson be in each stage of the relationship development process? Why? (Please justify your answer)

Functions of Customer Relationship Management Direct functions (are the basic requirements of a company that are necessary to survive in the competitive marketplace) Profit; Volume; and Safeguard Indirect functions (are the actions necessary to convince the customer to participate in various marketing activities). Innovation: Market; Scout: and Access.

Functions of Customer Relationship Management


Value Creation Process
Technology delivery process R&D Technology integration Efficiency, effectiveness learning

Management Decision Process Customer sensitivity Diversity Information Differentiated offering

Product delivery process Concept to launch Manufacturing process

Value-based Strategies Pricing Communication

Customer delivery process Supply chain Distribution Infomediation (distribution of information)

(Sharma et. al., 2001)

Chapter 15: Customer Relationship Management (CRM)

The role of salespeople as relationship builders and promoters

Salespeople by:
identifying potential customers and their needs; approaching key decision makers in the buying firm; negotiating and advancing dialogue and mutual trust; coordinating the cooperation between the customers and their company; encouraging the inter-organisational learning process; contributing to constructive resolution of existing conflicts; and leading the customer relationship development team are the individuals in any organisation who act both as relationship builders and as relationship promoters.

Models of Customer Relationship Management


The Evans and Luskin (1994) model for effective Relationship Marketing

Relationship marketing inputs Understanding customer expectations Building service partnerships Empowering employees Total quality management
Relationship marketing outcomes Customer Satisfaction Customer loyalty Quality products Increased profitability Assessment state Customer feedback Integration
(Evans and Luskin, 1994)

Models of Customer Relationship Management


The Brock and Barcklay (1999) model of selling partner relationship effectiveness

Independence

Mutual trust Cooperation

Selling partner relationship effectiveness

Relative influence

Managing Customer Relationships


The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer.

Initiating the relationship Engage in strategic prospecting and qualifying; Gather and study pre-call information; Identify buying influences; Plan the initial sales call; Demonstrate an understanding of the customers needs; Identify opportunities to build a relationship; and Illustrate the value of a relationship with the customer

Managing Customer Relationships


The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer.

Developing the relationship Select an appropriate offering; Customise the relationship; Link the solutions with the customers needs; Discuss customer concerns; Summarize the solution to confirm benefits; and Secure commitment.

Managing Customer Relationships


The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer.

Enhancing the relationship Assess customer satisfaction; Take action to ensure satisfaction;

Maintain open, two-way communication; and


Work to add value and enhance mutual opportunities.

Managing Customer Relationships Qualifying prospects for relationship building


High

Use a non customized approach


Opportunities for adding value

Build a strong and lasting relationship

Seek better opportunities elsewhere


Low Low

Focus on loyalty-building program


High

Potential profitability of customer

Relationship networks The ultimate outcome of a successful CRM strategy is the creation of a unique company asset known as a relationship network. A relationship network consists of the company and its major customers with whom the company has established long and enduring business relationships. The additional aspects of a global salespersons job are to: Manage customer value; Act as customer advocate; and Enhance customer loyalty and build a health and profitable network of relationships.

Summary CRM is a new business philosophy based on trust and value; The core function of CRM is the value creation process; Customer relationships develop over time; The role of global salespeople in the process is that of both relationship builders and relationship promoters; and The basic premise of CRM is to offer superior value to customers in an effort to turn prospects into customers, customers into loyal customers, and loyal customers into partners.