Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control

STRATEGIC CUSTOMER RELATIONSHIP MANAGEMENT CHAPTER 4 STRATEGIC CUSTOMER RELATIONSHIP MANAGEMENT McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

PIVOTAL ROLE OF CUSTOMER RELATIONSHIP MANAGEMENT DEVELOPING A CRM STRATEGY CRM Levels CRM Strategy Development CRM Implementation VALUE CREATION PROCESS Customer Value Value Received by the Organization CRM and Value Chain Strategy CRM AND STRATEGIC MARKETING Implementation Performance Metrics Short-Term Versus Long-Term Value Competitive Differentiation

CUSTOMER RELATIONSHIP MANAGEMENT CRM is a cross-functional core business process concerned with achieving improved shareholder value through the development of effective relationships with key customers and customer segments. CRM Recognizes That Customers: Vary in their economic value to the company Differ in their expectations toward the firm

CUSTOMER LIFETIME VALUE 4-3 CUSTOMER LIFETIME VALUE Customer lifetime value (CLV) calculates past profit produced by the customer for the firm – the sum of all the margins of all the products purchased over time, less the cost of reaching that customer To this is added a forecast of margins on future purchases (under different assumptions for different customers), discounted back to their present value. This process provides an estimate of the profitability of a customer during the time span of the relationship. The CLV calculation is a powerful tool for focusing marketing and promotional efforts where they will be most productive.

PERSPECTIVES TOWARD CRM 4-4 PERSPECTIVES TOWARD CRM STRATEGIC- THE ENTIRE COMPANY REQUIRED MARKETING FUNCTIONS THE CUSTOMER

THE STEPS IN DEVELOPING A CRM STRATEGY 4-5 THE STEPS IN DEVELOPING A CRM STRATEGY Gain enterprise commitment Build a CRM project team Business needs analysis Define the CRM strategy Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & Sons, Inc.), 2006, 39.

DEFINE THE CRM STRATEGY 4-6 DEFINE THE CRM STRATEGY Value Proposition 1 5 Other Stakeholders 2 Business Case CRM STRATEGY 4 3 Enterprise Transformation Plan Customer Strategy Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006, 42.

IMPLEMENTATION DANGERS 4-7 IMPLEMENTATION DANGERS Implementing Without Developing a Customer Strategy Failing to Initiate Necessary Organizational Change Allowing Technology to Dominate the CRM Process Focusing on the Wrong Customers

VALUE CREATION PROCESS 4-8 VALUE CREATION PROCESS Value Received by the Customer Value Received by the Organization THE VALUE EXCHANGE Successful Value Exchange

4-9 METRICS FEATURE How General Electric Co. Measures Customers’ Experience Happy (And Not-So-Happy) Customers General Electric is a big user of the “Net Promoter” concept of customer satisfaction, popularized by Fred Reichheld of Bain & Co. Below, questions similar to those on which GE’s Capital Solutions unit asks customers to rate the unit’s performance on a 0 – 10 scale. How willing are you to recommend us to a friend or associate? How would you rate our ability to meet your needs? How would you rate our people? How would you rate our processes? What is your impression of our market reputation? How would you rate the cost of doing business with us? How would you rate the overall value of our product or service as being worth what you paid? Source: Kathryn Kranhold, “Client-Satisfaction Tool Takes Root,” The Wall Street Journal, July 10, 2006, B3.

CRM AND VALUE CHAIN STRATEGY 4-10 CRM AND VALUE CHAIN STRATEGY The Perfect Customer Experience “The perfect customer experience, which must be affordable for the company in the context of the segments in which it operates and its competition, is a relatively new concept. This concept is now being embraced in industry by companies such as TNT, Toyota’s Lexus, Oce, and Guinness Breweries, but it has yet to receive much attention in the academic literature. Therefore, multi-channel integration is a critical process in CRM because it represents the point of co-creation of customer value. However, a company’s ability to execute multi-channel integration successfully is heavily dependent on the organization’s ability to gather and deploy customer information, from all channels and to integrate it with other relevant information.” Adrian Payne and Pennie Frow, “A Strategic Framework for Customer Relationship Management,” Journal of Marketing (October 2005), 173.

CRM AND STRATEGIC MARKETING 4-11 CRM AND STRATEGIC MARKETING STRATEGIC MARKETING CRM From the perspective of strategic marketing, there are several reasons why CRM is important and why there should be extensive marketing involvement in decisions about CRM. Importantly, an organizational perspective is needed in guiding the CRM strategy.