Customer Relationship Management Unit-1 IMBA Osmania University

CUSTOMER
RELATIONSHIP
MANAGEMENT
UNIT - 1
PRESENTED BY
K.BALASRI PRASAD
B.Sc(KU), M.B.A(OU), NET(UGC), (Ph.D)(MGU)

Unit – I: EVOLUTION OF CUSTOMER
RELATIONSHIP
CRM-Definition, emergence of CRM
practice, factors responsible for CRM
growth, CRM Process, framework of
CRM, Benefits of CRM, Types of
CRM, Scope of CRM, Customer
Profitability, Future Trends in CRM,
CRM and Cost-Benefit Analysis, CRM
and Relationship Marketing

CRM-Definition
Customer relationship management (CRM) is a
process in which a business or other organization
administers its interactions with customers,
typically using data analysis to study large
amounts of information.
CRM systems compile data from a range of
different communication channels, including a
company's website, telephone, email, live chat,
marketing materials and more recently, social
media.
CRM allow businesses to learn more about
their target audiences and how to best cater for
their needs, thus retaining customers and

A CRM lets you store customer and prospect
contact information, identify sales opportunities,
record service issues, and
manage marketing campaigns, all in one central
location — and make information about every
customer interaction available to anyone at your
company who might need it.
Customer relationship management is the
combination of practices, strategies and
technologies that companies use to manage and
analyze customer interactions and data
throughout the customer lifecycle.
The goal is to improve customer service
relationships and assist in customer retention

Emergence of CRM practice
 Developing customer relationships has historical antecedents
going back into the pre-industrial era.
 Much of it was due to direct interaction between producers of
agricultural products and their consumers.
 Similarly, artisans often developed customized products for
each customer.
 Such direct interaction led to relational bonding between the
producer and the consumer.
 It was only after the advent of mass production in the
industrial era and the advent of middlemen that interaction
between producers and consumers became less frequent
leading to transaction oriented marketing.
 In other words, the production and consumption functions
became separated leading to the marketing functions being
performed by middlemen, and middlemen, in general, are

Several factors have contributed to the rapid
development and evolution of CRM.
These include the growing de- intermediation
process in many industries due to the advent of
sophisticated computer and telecommunication
technologies that allow producers to directly
interact with end-customers.
For example, in many industries such
as the airline, banking, insurance, computer
software, or household appliances industries
and even consumables, the de-intermediation
process is fast changing the nature of marketing
and consequently making relationship marketing
more popular.

 Since services are typically produced and delivered at the
same institution, it minimizes the role of middlemen.
 Between the service provider and the service user an
emotional bond also develops creating the need for
maintaining and enhancing the relationship.
 Another force driving the adoption of CRM has been t
he total quality movement.
 When companies embraced the Total Quality Management
(TQM) philosophy to improve quality and reduce costs, it
became necessary to involve suppliers and customers in
implementing the program at all levels of the value chain.
 This created the need for closer working relationships with
customers, suppliers, and other members of the marketing
infrastructure.
 Thus, several companies, such as Motorola, IBM, General
Motors, Xerox, Ford, and Toyota, formed partnering

 In the current era of hyper-competition, marketers are
forced to be more concerned with customer retention and
loyalty.
 Retaining customers perhaps offers a more sustainable
competitive advantage than acquiring new ones.
 What marketers are realizing is that it costs less to retain
customers than to compete for new ones.
 There is greater opportunity for cross-selling and up-selling
to a customer who is loyal and committed to the firm and
its offerings.
 Customer expectations have been changing rapidly over
the last two decades.
 Consumers are less willing to make compromises or trade-
offs in product and service quality.
 In a world of ever changing customer expectations,
building cooperative and collaborative relationships with

Factors responsible for CRM
growth
The factors are:
1. Top Management Commitment and
Support
2. Define and Communicate CRM Strategy
3. Culture Change
4. Inter-Departmental Integration
5. Skillful Staff
6. Key Information on Customers
7. Manage IT Structure
8. Customer Involvement.

Factor – 1: Top Management Commitment and Support
 Top management involvement in the CRM implementation plan
has been identified in almost all success factors studies as a
crucial factor.
 Considering the scope of CRM implementation as an
enterprise-wide strategy requires a full support by the top level
of the organizational structure.
 The role of board level is essential in backing the CRM
implementation process and securing required amount of
financing for putting CRM projects into action.
Factor - 2: Define and Communicate CRM Strategy
 A clear definition of the CRM strategy and alignment of this
strategy to the company’s strategy would facilitate the
transition of changing work structure and environment toward
customer-centric approach.
 The absence of a clear CRM strategy or the lack of developing
such a plan could cause the failure of CRM implementation.

Factor - 3: Culture Change
 In order for CRM to succeed in realizing its objectives,
organization should develop a culture where all staff are
encouraged to share and learn from new work structure
and information that is based on customers.
 Expected resistance of new ways of conducting work tasks
within the organization’s culture should be addressed and
minimized.
Factor - 4: Inter-Departmental Integration
 From s strategic perspective CRM implementation has an
organization-wide influence.
 Different functions and departments of the organization should
be integrated and connected with a structure that support the
flow of information.
 Although all aspects of the organization should be integrated, a
special consideration should be devoted to functions that
have direct interaction with customers such marketing,

Factor - 5: Skillful Staff
Employees play a key role in the success of CRM
projects.
Issues of the nature of learning new work systems,
training programs, change resistance, willingness
to share information, and motivating staff should be
taken to consideration.
Factor - 6: Key Information on Customers
Acquiring and analyzing the right quantity and
quality of information on customers helps to meet
customer’s needs.
The right information is the base for designing
customized products and services.

Factor - 7: Manage IT Structure
 Considering CRM as only a technological solution is a vital
misconception that resulted in increasing failure of CRM
projects.
 Nevertheless, IT is an enabler for acquiring and managing
valuable data on customers.
 Technological aspects such as data warehouse capabilities
and software configuration in addition to the influence of the
internet are crucial for CRM successful implementation
Factor - 8: Customer Involvement
 Direct and indirect Involvement of customers in CRM
designing is a tool for strengthening practical CRM.
 Such an involvement helps the organization to analyze the
customer relationship life cycle and consequently find the
areas of problems that can be managed by CRM.
 Furthermore, customers’ acceptance and interaction with
CRM systems could be enhanced by involving those

CRM Process
To understand the steps of the CRM process, you have
to understand the customer lifecycle.
All the plans and activities that you have in mind to better
your business, a CRM process would help you execute
those.
The CRM process is a strategy for keeping every
customer interaction personalized and meaningful that
consists of five main steps.
There are five key stages in the CRM cycle:
A. Reaching a potential customer
B. Customer acquisition
C.Conversion
D.Customer retention

 The five steps of the CRM process are a collaborative effort
between marketing, sales, and support departments.
A. Generate brand awareness
The first step to acquiring new customers is to introduce them to
your business. The marketing team typically takes on this task
through a number of measures:
1. Learning about your target audience: Marketers will conduct
research to identify their audience’s target demographics, interests,
preferred channels of communication, what messaging they
respond most to, and what they care about.
2. Segmenting your target audience: Audience profiles are
created to segment a brand’s target audience into similar groups
based on similar interests or demographics. This helps marketers
identify which types of people are most likely to become customers
and whom their campaigns should target.
3. Creating marketing campaigns that speak to those target
demographics: Marketing automation can be used to identify what

B. Acquire leads
 Introducing your brand to a potential customer is just the
beginning of the CRM process.
 You have to encourage them to learn more about your
business and engage with it.
 Depending on how your company is structured, this lead
acquisition step could be a marketing or sales team
responsibility — or both.
 Your marketing team, for example, might encourage website
visitors to share their email with a newsletter signup CTA or a
social media giveaway.
 Sales, on the other hand, could use their CRM system to set
up live chat on your site.
 With this feature, your team can proactively reach out to
potential customers who land on your website.
 With customer data, you can personalize your outreach with

C. Convert leads into customers
You’ve successfully engaged with your leads, and
they’re interested. Now it’s time to turn those
leads into customers.
To do so, sales persons must be skilled at
identifying how interested leads are and,
specifically, whether they’re interested enough to
make a purchase.
The historical data from past successful sales
can be used to identify lead-qualification criteria.
If leads do seem likely to make a purchase, sales
people must then be able to nurture them further
and build their trust enough to convert and follow

D. Provide superior customer
service
You’ve successfully converted your lead into a customer.
But the CRM process doesn’t end when a customer
converts. In order to grow as a company, you need to
retain customers.
Customer service is the biggest factor that determines a
consumer’s loyalty to a brand. Conversely, poor
customer service can cost you customers and negatively
impact your reputation. Support teams must be able to
deliver superior support whenever, wherever, and
however their customers expect it.
Forty-nine percent of customers say being able to
resolve their issue quickly is the most important aspect of
a good customer service experience. Support agents can

E. Drive upsells
 When we think of a returning customer, we imagine a
shopper continually coming back to the same business to buy
the products they know and love. But there is another key
way existing customers provide value — by upgrading to
more expensive products.
 Personalized recommendations via email are a great place to
start. Organize customers into smart lists based on similar
purchase histories.
 Create custom email templates that send relevant product
releases to entire lists of customers at once. This way, you
can be sure the promotional deals or releases you send are
reaching the people most likely to buy them.
 If the business is service-based, find upsell opportunities
through check-in calls, regularly reach out to repeat
customers to ask how they’re doing and whether there is any

Benefits of CRM
 A CRM system can benefit your business by helping you
centralize, optimize and streamline your
communications with customers, and become better in
these 6 areas.
1. Better knowledge of customers
All information stored on each contact in one place
makes CRM a super powerful communication tool.
CRM system gives your sales, marketing and customer
service teams a competitive advantage.
Not only do they know a contact’s full name, email
address, telephone number, postal address, website and
social media accounts, but also such critical business
facts as a contact’s position in the company, his/her
relations to other contacts in your database, the

2. Better segmentation
You can do it by segmenting contacts (customers
and prospects) into target audiences.
CRM allows you to break down data by
categories and criteria, making it easy to
create focused lists.
Segmented lists allow you to run
specific customer marketing campaigns and
analyze your sales process and lead pool.
3. Better customer retention
 CRM is also a great tool for keeping your existing
customers happy.
 CRM can also prompt you to reach out to those customers
who have not been contacted in while, and perhaps feel

Keeping an existing customer is 6 or 7 times cheaper
that getting a new one.
To sustain your customers’ interest, a CRM system can
also help you coordinate your marketing activities.
4. Better anticipation of needs
It’s easier to cross-sell or upsell a customer when
you’ve been tracking their buying habits.
CRM system help salespeople sell more and sell
faster.
The access to interaction history makes it easy to offer
timely customer service.

5. Better and speedier communication
Making your customers wait by quickly replying to their
requests is a sign of professionalism.
90% of companies do not use auto-responders to
acknowledge they have received a customer service
email.
A CRM system can also help you draft SMS and
emails and schedule their dispatch weeks or months in
advance.
6. Better protection of data privacy
A CRM system can help you obtain and document
your contacts’ permission to store and use their
personal details (consents), send automatic
notifications to all new contacts informing that you

Strategic CRM
Strategic CRM is focused upon the development of a
customer-centric business culture which is dedicated
to winning and keeping customers by creating and
delivering value better than competitors.
Philip Kotler identifies three other major business
orientations: product, production, and selling.
Product-oriented businesses believe that customers
choose products with the best quality, performance,
design or features.
Production-oriented businesses believe that customers
choose low price products.
Sales-oriented businesses make the assumption that if
they invest enough in advertising, selling, public
relations (PR) and sales promotion, customers will

Operational CRM
Operational CRM automates and improves
customer-facing and customer supporting
business processes.
CRM software applications enable the marketing,
selling and service functions to be automated and
integrated.
Marketing automation:
Campaign management modules allow marketers to
use customer-related data in order to develop, execute
and evaluate targeted communications and offers.
In multichannel environments, campaign management
is particularly challenging.
Event-based campaigns can be initiated by customer

Sales-force automation:
 Widely adopted in business-to-business environments.
 SFA applies technology to the management of a company’s
selling activities. The selling process can be categorized
into a number of stages, such as
lead generation
lead qualification
needs identification
development of specifications
proposal generation
proposal presentation
handling objections and closing the sale.
 SFA software can be configured so that it is modeled on the
selling process of any industry or organization.
 Sales-force automation software enables companies
automatically to assign leads and track opportunities as

 Opportunity management software contains lead
management and sales forecasting applications.
 Lead management applications enable companies to
qualify leads and assign them to the appropriate
salesperson.
 Contact management lets companies manage their
communications programme with customers.
Service automation
 CRM software enables companies to handle and
coordinate their service related inbound and outbound
communications across all channels.
 Enables companies to become more efficient and effective
by reducing service costs, improving service quality,
lifting productivity and increasing customer
satisfaction.
 Call routing software can be used to direct inbound calls to

Analytical CRM
 Analytical CRM is concerned with capturing, storing, extracting,
integrating, processing, interpreting, distributing, using and
reporting customer-related data to enhance both customer and
company value.
 Analytical CRM builds on the foundation of customer-related
information.
 Customer-related data may be found in enterprise-wide
repositories:
 Sales data (purchase history),
Financial data (payment history, credit score),
Marketing data (campaign response, loyalty scheme data) and
service data.
 Analytical CRM can lead companies to decide that selling
approaches should differ between customer groups.
 From the customer’s point of view, analytical CRM can deliver
timely, customized, solutions to the customer’s problems,

Collaborative CRM
Describes the strategic and tactical alignment of
normally separate enterprises in the supply chain for
the more profitable identification, attraction, retention
and development of customers.
For example,
manufacturers of consumer goods and retailers can
align their people, processes and technologies to
serve shoppers more efficiently and effectively.
They employ practices such as co-marketing, category
management, collaborative forecasting, joint new
product development and joint market research.
Collaborative CRM enables separate organizations to
align their efforts to service customers more effectively.

Scope of CRM
CRM, or customer relationship management, is
concerned with the development and maintenance
of mutually beneficial relationships with strategically
significant partners.
Its focus is the creation of long-term value, and not
just short-term profits, for the company and all it works
with.
Four main constituencies of a focal organization’s
network are Suppliers, Owners/Investors, Partners and
Employees.
Mnemonics of SCOPE:
S - Suppliers,
C - the focal firm’s customers who are at the hub of

The direction of the arrowhead in the outer wheel is
meant to indicate that they are all aligned to the common
goal of helping the focal firm create and deliver value for,
and from, their chosen customers.
The Suppliers
Suppliers provide input, such as raw materials,
technologies, components, investment, human
resources and expertise, to the company’s value chain.
Enhanced performance can result from improved
communication and coordination with this set of
suppliers.
Purchasing costs can be reduced due to elimination of
the need to constantly seek cheaper sources.
With fewer vendors, increased cooperation between the
remaining parties in the form of management information

Toyota’s Supplier’s network

The Customer
The customer is of key importance because
only relationships with customers generate
revenues for a company.
 Establishing a good long-term relationship with
customers can take the form of the provision of
benefits such as special prices and preferential
treatment.
Doing so can bring about drastic increases in
value due to frequent sales from satisfied
customers, positive word of mouth, a reduced
need for product sampling and advertising, and
increased possibility of cross-selling or

The Owners
Companies may remain private for the duration of their
lifespan, remaining the property of single proprietors or
many owners.
Other companies may start out that way, but at certain
points may elect to go public and sell shares in order
to spread liability or raise funds for future expansion.
Whichever category a company may fall under, it is
paramount for its management to establish productive
relationships with its owners and create value for them
in the form of enduring company and stock value in the
long run.
A poor long-term relationship can result in investors
selling out and in drops in stock value, or in changes of

Other Partners
Establishing a partnering relationship with
another company, such as a strategic alliance or
joint venture, is done through sharing
complementary strengths such as technological
expertise, market reach, supplier networks,
customer data and customer bases.
Partnering with another firm can thus support
the creation and delivery of value through
increasing efficiency, sharing product
development, marketing and distribution costs,
and sharing key resources.

The Employees
Employees are central to CRM practitioners.
Many businessmen claim that their employees
or “internal customers” are their most important
constituency.
Should employees be satisfied and happy with
their jobs, they will be more apt to provide
noteworthy service to the company’s external
customers.
In short, employee satisfaction drives customer
satisfaction.
A positive climate for service is less rule-driven,
more customer-orientated, and more supportive

Customer Profitability
Customer Profitability Analysis is a
managerial accounting method that
allows businesses to determine the
overall profit a customer generates.
A profitable customer is someone who
generates a revenue stream greater
than the cost of their acquisition,
selling, and serving.
CPA allows companies to evaluate their
customers and know how beneficial it is

Customer Profitability Formula
 To calculate CPA, you need the annual profit per customer,
and the total duration a customer stays with your business.
 Annual profit = (Total revenue generated by the customer in
a year) – (Total expenses incurred to serve the customer in
a year)
 The total revenue can be generated by the following sources
that you need to include:
 Recurring revenue
Upgrades to the higher plans
Cross-buying of relevant products
 Expenses can be incurred from the following sources which also
you need to consider:
 Cost of customer service
Maintaining a customer service team
Loyalty perks

How to do Customer profitability analysis
 The key is to segment the customer base, determine
revenues, attribute costs and also have an activity-
based costing approach.
Segmenting customers
 The base for a profitability analysis is customer
segmentation.
 This will differ across industries and companies.
 It can be demographic based on customer age, income,
area, etc.
 It can also be psychographic that is based on customer
needs, behaviours, values, interests, and attitude.
Revenue Attribution
 Once segmentation is done, you need to calculate
revenue for each segment.

Cost attribution
Calculate the annual cost per segment.
This will be customer costs, service costs, product
costs, sales, marketing, and distribution costs.
These costs are usually hidden and need to be
added to determine the cost attribute.
Analysis – Profit, Less profitable, unprofitable
Profitable customer segmenting also requires analysis
of segments.
Classifying those segments that have better
revenues over costs is necessary.
It must include calculating profitability over the
lifetime of customers.

Develop strategies to maximize profits based on focus
on specific segments
 The next step is to create strategies that increase revenues,
create long term relationships, and enhance customer
retention and loyalty programs.
 Strategies can include elimination of least profitable aspects,
re-engineering customer groups into profitable ones by
increasing revenue and decreasing costs.
Review the Impact
 Any new strategy or practice needs to be implemented and
worked up accordingly.
 This needs to be reviewed after appropriate periods of time to
understand impact on customers.
Wrapping Up
 Companies most often do not have the right resources to
accurately calculate the CPA.
 The activity-based costing, and hence customer profitability

Future Trends in CRM
Integrating Data from Multiple Channels
 The CRM solution provides on moving social media data to
more secure communication channel.
 Integrating unstructured data coming from multiple channels
such as Email and mobile smart phones.
Handling Big Data
 As the data is penetrating from multiple channels with high
volume, velocity, and variety, the CRM solution providers are
exploring how this big data can be managed well to be able
to use effectively.
Shifting to Cloud-based CRM
 The businesses are preferring cloud-based CRM software to
overcome the problems with on premise CRM software, in
which every new feature development requires an
expensive upgrade.

Social CRM
 The customers are into the practice of reading reviews,
recommendations, and judging the product or service
before deciding to purchase.
 The businesses are keen to employ social CRM tools in
their CRM software as the social media can bring an
insight of customer preferences and behavior.
The Mobile CRM is Expected to be Powerful
 Today’s CRM solution providers are investing a handsome
amount to bring more rigor in the mobile platforms of CRM
applications.
Using CRM data effectively
 The historical and current data of the customers is so
huge that the CRM users spend more time in entering the
same in the system than using it effectively for beneficial
purpose.

CRM Software Systems with Wearables
 It is the next big revolution in the development of CRM
software systems.
 Wearable are the devices worn by the consumers to track
their health and fitness information.
 If CRM applications are integrated with wearable computing
devices, then the businesses can get benefited by having
real time information of customers and access to their
account data.
 The businesses can then engage with their customers
effectively and discover opportunities of selling and
enhancing customer relationships.
Creating Best Customer Experiences
 The customers remember business products and services
by associating with best and worst experiences.
 The businesses using CRM are placing the activities related
to making their customers feel good in their list of top

CRM to XRM
XRM is evolved CRM.
There is little limitation in the word CRM which depicts
Customer Relationship Management.
XRM is eXtreme Relationship Management, or Any
(replace X with any value) Relationship Management.
The scope of XRM is different and larger than the
scope of CRM.
For example, a business is managing contracts,
grievances, policies, building assets, parking
violations, property taxes, etc. The list is near to
endless. This all management is catered by XRM, a
business can manage the relationship of anything
within itself.

CRM and Cost-Benefit Analysis
 In order to establish a business case for pre-project
planning, and post-project success measurement, we
must assess implementation costs, benefits, and risk.
1.Implementation Costs:
Basically, implementation costs should include CRM
software licensing and maintenance or support
contracts; EDI, database, operating system and other
software licensing and maintenance or support
contracts; hardware purchases and maintenance or
support contracts including servers, storage and
network upgrades (as required); software integration
and customization, including design, development, test
and ongoing maintenance; implementation labor;
ongoing administration and support labor; planning

2. Tangible and Intangible Benefits:
 Benefits typically include increases in staff productivity,
cost avoidance, increased revenue and margin, and
reduced inventory through the elimination of errors.
Benefits could be divided into tangible and intangible
benefits.
i) Tangible Net Benefits: A clear and precise cost-benefit
analysis which tallies all of the planned project costs
quantifies each of the tangible benefits and calculates key
financial performance metrics such as ROI, NPV, and
payback period.
ii) Intangible Benefits: A total of the expected intangible
benefits should include key performance indicators (KPI)
that will be used to measure success or shortfalls of CRM
project. These are a handful of areas of improvement that
should be considered.
3) Risk Assessment: Risk Assessment is also essential for

CRM and Relationship Marketing
 Relationship Marketing is being spoken of as one key
Business Philosophies of the progressive Organizations
who are Customer Oriented or Customer Centric.
 Companies have realized that to be successful on the long
term path of successful business, they need to be closer
to the market, get under he skin of the Customer, anticipate
customer needs and engineer products and services to
satisfy the customer and engage their loyalty.
 As competition is increasing, product innovation is
definitely one of the key important elements that the
Organizations need to depend upon to steer themselves
ahead in the market.
 Along with the technical leadership the companies
necessarily need to know how to reach out to the
Customer.

One of the outcomes of the evolution of Relationship
Marketing has been the birth of CRM solutions.
Besides CRM we have also seen the birth of new
departments and disciplines in Organizations namely
Customer Service Department as well as Key
Account Management.
Relationship Management forms part of the vision
and business ethics that the Company envisages to
imbibe as its core value system.
When an Organization chooses to build its business
blocks around Relationship Management, the
Organization is connecting its Profit Making goal
with Customer Relationship to build a synergy by
which all the divisions as well as the functions of the
Organization look at their function and business

 CRM on the other hand can best be described as an enabler of
RM in any Organization.
 CRM involves process including software and hardware
components that automates and helps manage customer
engagement.
 While RM works at a strategy level, CRM helps implement
the Strategy.
 Relationship marketing has been defined more popularly with
a focus on individual or one-to-one relationship with
customers, integrating database knowledge with long term
customer retention and growth strategy.
 The core of CRM and relationship marketing is the focus of co-
operative and collaborative relationships between the firm
and its customers and for other marketing factors.
 It must, however, be noted that CRM programs now visualize a
wider spectrum of efforts other than data-based one-to-one
relationship with customers, which characterizes relationship

 Relationship marketing is emerging as the core
marketing activity for businesses operating in fiercely
competitive environments.
 The practice of relationship marketing also has the
potential to improve marketing productivity through
improved marketing efficiencies and effectiveness.

Important Questions
1. Define CRM. Discuss the factors
responsible for CRM growth?
2. Explain CRM Process and Elucidate on
benefits of CRM?
3. Discuss different Types of CRM? Explain
the Future Trends in CRM?
4. Discuss the Cost-Benefit Analysis of
CRM?

Customer Relationship Management Unit-1 IMBA Osmania University

Customer Relationship Management Unit-1 IMBA Osmania University

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