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Unit: 5

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What is a relationship Composed of a series of interactive episodes between two

parties over time.

Content of each interactive episode is a range ofcommunicative behaviours including speech, actions andbody language

Essential to have emotional content resulting into a bond

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Transactional ex Value added ex Collaborative ex

Automated

purchasing

Shift from

Acquiring to

RetainingIntegration of

Supplier with

Buyer

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Trans Ex Coll Ex

Availability of alternatives

Supply mkt dynamism

Imp of purchase

Complexity of Purchase

Info exchange

Operational linkages

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CRM is a core business strategy that integratesinternal processes and functions and externalnetworks, to create and deliver value to targeted

customers.

CRM is a systematic approach for servingcustomers so as to ensure that customer retention

and profitability in marketing are achieved.

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anages customer interaction and customerservice

Helps focus on profit and avoid mis-alignmentb/w revenue and profit

Gathers in-depth customer info, tracks customerbehaviour and applies the knowledge to all

marketing efforts.

Serves as a sustainable competitive advantage

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Why retaining customers are profitable1. Cost of acquisition at the beginning of the relationship.

Longer the relationship lower the amortised cost.

2. Account maintenance costs decline as a % of total costs

3. Long term customers tend to be less inclined to switch;less price sensitive

4. Likely to purchase ancillary products

5. Creates entry barrier to competition

6. Less expensive to service

7. Increased customer retention and loyalty makes theemployees job easier and satisfying.

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Do not sell to them; help them to buy instead ut the customers interest above your own Form trust teams Also build trust amongemployees

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Transactional Customers

Less loyalty and commitment

Cost of switching is low

Focus on price and service

Collaborative Customers Lasting commitment

Operational linkages & info sharing mechanisms Service offerings as per customers needs

Cost of switching is high

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ABC systemprovides a clear picture of thegross margins & cost to serve componentsthat yield individual CP.

Steps to calculate CP using ABC system Identify activities that vary across customers

sales, Mktg, service, Production

For each activity, identify the cost driver

CP -- revenue from Customer minus the costassociated with serving it

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Method to allocate and measure indirect costs

called

Time driven ABC Has 2 components: Identify cost per hr of each group of resources performing

work( R & D, Prodn, Services, etc )

Identify unit times spent on these resources by specific

activities for products, services and customers

Ex: Customer services has a cost of Rs. 5000 per hr and aparticular transaction has taken 30 min, a cost of Rs.2500 is thecost of transaction for that customer.

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Rank the profitability from most to leastand to plot the accumulated profit in agraph.

X axis list of customers

Y axis -, the accumulated profit Distribution of profits follows the 80 20 rule.

Firm makes profit from one / two groups ofcustomers and loses money from other groups ofcustomers.

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Passive

Product is crucial

Good supplier match

Costly to serve but

buyers pay

Price sensitive

Few special demands

Aggressive

Leverage buying power

Low price

Customized features

Net margin Vs. Cost to serve

High

Net

Margin

Low High

Cost to serve

Profit

Loss

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Some people always throw stones in your

path. It depends on you what you

make with them; a wall or bridge.Remember, you are the architect of your life.