Customer Relationship Management- Redefined with Customer as the Focal Point

1. Session – 1 “CRM Redefined”
Focus : C u s t o m e r

2.  This is a Series of CRM Presentations evolving the concept
towards the IT Framework.
2

3.  Ever Changing Business World (30 Min)
• Case Study – General Motors
• Case Study- HCL Technologies Ltd
 Marketing – Customer Perspective (15 Min)
• Give and Take in Marketing
• 4P’s Marketing – Revisited
 Customer (15 Min)
• Who is a Customer
• Customer Interaction Stages
• Case Study HP ‘Think Pad’ – Design for the Target Customer
 Break – 30 Min
3
Today’s Session [1.5 Hrs]

4.  Customer Value Management (CVM) ( 20 Min)
• Evolution of CVM
• What is CVM and its relevance
• Case Study- Turnaround of AT&T through CVM strategy in
1990’s
 Customer – Life Time Value (C-LTV) & Wallet Share (C-WS)
(30 Min)
• C-LTV in Details
• C-WS defined
• Class Activity : Case Study on Scorpio [30-45 Min]
 Break (10-15 Min)
 Re-Cab (15 Min)
 Reference Books – 1 Min
4
Today’s Session [2.0 Hrs]

5. The Ever Changing Business
World…
5

6. So what is new – In the world we live and the evolved economy
6
Digitalization and
connectivity –
-everything is digital
and networked
Disintermediation and re-
intermediation
- old channels are
disappearing & new ones
getting defined

7. Industry convergence – businesses are redefining
7
1. Kodak – chemical company to digital imaging
2. Shiseido – cosmetic company to dermatology
3. Dabur – Ayurveda medicines to Herbal – medicines, oral care, personal care
4. Apple – Converges multiplatform media into Telecommunication
Any other Examples?

8. Customerization – The New Paradigm
8
1990 Old Indicia – The
People Car
2010 Vista – Luxury
Hatchback
Customer’s had no choice of Indian made Sedan… and the need was
basic- a Utility vehicle with good mileage and low running cost - The
Customer base was large and the product was made custom to
satisfy the need of ‘Many’ from the ‘Richey Rich to the ‘Middle Class
–First Time Users!!’
Indicia lost more than 50% of its market in 2 decades and Tata Motorsd slipped
to 5 position in passenger car segment from No. 2 spot
Tata Motor ran a long program to understand specific need of the
key customer base, differentiation with competition and new
market position…. To Introduce The High End People’s Car
Companies interact with customers intimately
& personally – combination of operational
customization & marketing customization is
called customerization

9. Case Study on General Motors
 Forces of Change
• External Forces: Toyota has emerged as the biggest competitor
even at its highest market base- USA
• Internal forces: Cost of employee 74 $-Hr @ 80% Utilization as
compared to Toyota which is 44 $-Hr @ 95% Utilization
• Due to union agreement GM was not in position to lower staff
cost
 GM had less choice but to implement organization changes
to achieve optimization in structural cost, change cost with
help of process change and cultural change
9
Organizational Impact & Changes – The boiling Internal world

10.  Reengineering: From focusing to reorganizing (Parts Consolidation)
 Outsourcing: Buying goods and services from outside (Global Sourcing
Optimization)
 E-Commerce: Making all Products& Services available on the Internet (Improve
reach to customer and dealers)
 Benchmarking: Studying “world class performance” and adopting “best
practices” – Production of right and fuel efficient vehicles
 Alliances: Forming networks of partner firms – Vehicle design and Plant design
outsourced
 Partner-suppliers: Using fewer and more reliable suppliers who work closely in a
“partnership” relationship with the company- Seamless SCM, JIT in place
 Market-centered: Organizing by market segment. –Introduce country specific
brands
 Global and local: Both global and local – “Glocal”
 Decentralized: encouraging more initiative and “intrepreneurship” at the local
level.
10
GM – What can be the possible organizational changes?

11. 11
GM – What can be the possible organizational changes?

12. Case Study: HCL as case of growth with robust relationship fundamentals
 HCL in 2000 was a 0.5 B$ IT Services and Infra organization. It was a
home grown pioneer of IT systems in India but could not match up with
the growth of its peers like TCS, WIPRO and Infosys who blossomed
much later… HCL was aiming a high growth sustainable strategy by
2004
 HCL grew from 0.5 B$ and equity of ~ 60Rs to 7B$ global Organsation in
7 years and currently it is trading at 1500 Rs at the BSE. It is now the
fourth largest IT provider in India…
 Let us understand how marketing focused changed the game
12
Business & Marketing Changes… “Where no one has gone before”

13.  Customer relationship marketing: Building long-term profitable customer relationships – Focus
from New Account to profitable existing accounts
 Customer lifetime value: Making profits by managing life-time sales- Providing Enterprise level
vision aligned sales programs and become partner to business, Product to Services
 Customer share: Focus on building customer share – BOOP – A pioneer model by HCL
 Target marketing: Serving well-defined target markets- Early Birds in South East and Australia
Markets, First in Cloud Partnering, First in three layer consolidation
 Customization: Individualizing and customizing messages and offerings – Vertical based offering
 Customer database: Building a rich database of information about individual customer’s
purchases, preferences and demographics and profitability- Blue Sheet by BAIN revolutionized
the mapping from Customer to Partners in Business, Introduction of Sales Force integrated with
SAP
 Integrated marketing communications: Blending several tools to deliver a consistent brand
image to customers at every brand contact- HCL brought out the most eye catching marketing
advertisements and made one of the best high drama International sale meets
 Channels as partners: Treating intermediaries as partners- Platinum Partners with SAP, Oracle
and MS by acquisition of Axon
 Every employee a marketer: Every employee must be customer-focused- Employee First
Customer Second
 Model-based decision making: Basing decisions on models and facts on how the marketplace
works- Organizational level ROI based project budget allocation based on Smart Analytical based
tools
13
HCL Technologies – How the Marketing changed business

14. The HCL Eye Catchers – Marketing Communication at its BEST
14

15. 15

16. Marketing
16

17. Give and Get of Marketing…
17
Money
Time
Energy
Commitment
Referrals
Past Experience
Expectations
Knowledge
Product
Price
Value
Convenience
Selection
Service
Warranty
Brand
The Customer
Gives – The
Company Gets
The Company
Gives and
Customer
Gets
Let us Analyze Flipkart

18. 1. “The purpose of a company is ‘to create a customer…The only
profit center is the customer.’”
2. “A business has two—and only two—basic functions:
marketing and innovation. Marketing and innovation produce
results: all the rest are costs.”
3. “The aim of marketing is to make selling unnecessary.”
4. “While great devices are invented in the Laboratory, great
products are invented in the Marketing department.”
5. “Marketing is too important to be left to the marketing
department.”
18
Great Words on Marketing

19.  Marketing today is applied to virtually all aspects of a
company’s operation that has the potential to influence
customer satisfaction
 Whenever things of value are being exchanged, marketing
principles apply: consider exactly what is being exchanged
(it’s “give” and “get”)
 The ultimate goal is customer satisfaction, which leads to
long-term profitability and success
 Marketing principles apply in all organizations
19
So, Its all about Customer Satisfaction

20. The Marketing Mix
20

21.  The conventional view of the marketing mix consisted of
four components (4 Ps): Product, Price, Place/ distribution
and Promotion.
 Generally acknowledged that this is too narrow today; now
includes service, processes, Productivity [technology],
People [employees], Physical Evidence [Servicescape]
 Marketers today are focused on virtually all aspects of the
firm’s operations that have the potential to affect the
relationship with customers.
21
The Marketing Mix
Play Video

22. C U S T O M E R
22

23. Who is a Customer ??
23
Anyone who is in the market looking at a product / service
for attention, acquisition, use or consumption that satisfies
a want or a need
CUSTOMER IS . . . . .

24.  CUSTOMER is someone who buys the product from you
 CUSTOMER has needs, wants, demands and desires
 Understanding these needs is starting point of the entire marketing
 These needs, wants …… arise within a framework or an ecosystem
 Understanding both the needs and the ecosystem is the starting point
of a long term relationship
• CONSUMER is one who actually uses the product. Also the customer’s
customer
24
Customer & Consumer

25. 25
On A Lighter Note – Good Quotes

26. Stages of Customer Interaction
26

27. Case Study – Product Design
based on Customer Need
27

28. Summary sheet of customer
investigation
Investigation
project
Awareness
Perception
Lenovo Sony
Speed 5 4 3
Weight 5 3 5
Capacity 5 4 3
(5 levels scale)
1=don’t attention
5=special focus
 Improve the Lenovo ThinkPad laptop according
to Customer needs .
28

29. The indexes
customers care
Technique index
(attractive quality )
(attractive quality )
The congruent relationship between the indexes customers care and
technique index
Speed
Weight
Capacity
Frequency
Memory
Material
Size
Thickness
Hard disk
29

30. House of Quality
30

31. 3. CASE STUDY
31

32. Customer Requirements
Customer
requirements
Index level
Customer satisfaction
Speed
Weight
Capacity
Step 1

33. Planning Matrix
Customer
Requirem-
ents
Import-
ance
Comparative
analysis
Improvement goal
Key Customer needs
rank
Enterprise Else
Improve-
ment goal
Standard
increased
rate
Commodity
characteris-
tic point
Absolute
weight
Weigh
t﹪
Speed 5 4 3 5 1.25 ◎ 9.375 31.9
Weight 5 3 5 5 1.67 ◎ 12.525 42.6
Capacity 5 4 3 5 1.25 ○ 7.5 25.5
Total 29.4 100
Step 2

34. Technical Requirements
Technical
requirements
Technical index
Frequency Memory Material Size Thickness
Hard
disk
Step 3
34

35. Relationship Matrix
Frequency memory Material Size Thickness
Hard
disk
Speed ⊙ ○
Weight ⊙ ○ ○
Capacity ⊙
Technical
requirements
Customer
requirements
Step 4
35

36. Correlation Matrix
Technical
requirements
Frequency Memory Material Size Thickness
Hard
disk
Frequency
Memory
Material
Size
*
Thickness
*
Hard disk
Step 5
36

37. Setting
Technique
analysis
Desired
value
Quality
character
design
Oppone-
ntCompara
tive
analysis
Importance（%）
124513
+---=+
14.316.016.023.911.917.9
Targets
25.5○1.255345⊙Capacity
42.6○1.675535○○⊙Weight
31.9◎1.255345⊙⊙Speed
Commodity
characteri-
stic point
Standard
increased
rate
Improv-
ement
goal
ElseEnterp-
rise
Weight
﹪
Improvement goalComparative
analysis
Import
-ance
Planning Matrix
Hard
disk
ThicknessSizeMaterialInternal
memory
Frequency
*
Technical
requirements
Customer
requirements
House of Quality
37

38. Technical
requirements
Frequency Memory Material Size Thickness
Hard
disk
Targ-
ets
Importance（%） 17.9 11.9 23.9 16.0 16.0 14.3
Compara
tive
analysis
Opponent + = - - - +
Technique
analysis 3 1 5 4 2 1
Quality
character
design
Desired
value
Setting

39. Technical
requirements
Frequency Memory Material Size Thickness
Hard
disk
Targ-
ets
Importance（%） 17.9 11.9 23.9 16.0 16.0 14.3
Compar-
ative
analysis
Opponent + = - - - +
Technique
analysis 3 1 5 4 2 1
Quality
character
design
Desired
value
Setting
Frequency
× ×× √√ √
MemoryMaterial Hard diskThicknessSize
The cost of frequency's advancement is
relatively high.
It keeps at the same level as our rivals' and it
will not make notable difference to laptop's
performance.
Have additional value in the patent technology
Hard to improve in a limited time.
Thickness and size has great influence on
weight.
The expense on disk research is low and will
boost customer's satisfaction.

40. CONCLUSION
Improving goals:
——A thinner and smaller laptop equipped with a
bigger capacity.
40

41. Customer Value Management
With a Case Study
41

42. CVM - The Concept
42
 “What do we buy ?
 Value (Benefits)
 Value/ Benefit = Use + Esteem function
of a product (service)

43. Price, Cost, Profit vs. Value
43
Required Desired
(Value) Increasing
Benefits- Functions- Performance
Price,
Cost,
Profit
Price
Cost
Zero Value Costs
Marginal Price
Realization
Profit

44. The Market Leadership
44
Supplier offering highest Value to Price ratio
should attain Market Leadership.
(V/P >= 1)
Supplier having superior Value to Cost ratio
should attain Financial Leadership
(V/C <= 1)

45. Making Quality a Strategic Weapon
45
Effectiveness
Time
Stage 1
Conformance Quality (Before 80’s):
Deming, Juran, Crosby era
Focus - Process Control, Reduce Scrap, SQC,
Conformance to Requirements
Product with Zero Defects may not necessarily make
customers happy ?

46. Making Quality a Strategic Weapon
46
Effectiveness
Time
Stage2
Customer satisfaction (late 1980s):
Focus : Get close to customer, Understand their
needs, Be customer driven e.g. Xerox
Did not answer why we win/ loose customers ?
Often non customers not included
Failed to measure performance relative to
competition.
Conformance
Quality

47. Making Quality a Strategic Weapon
47
Effectiveness
Conformance
Qlty.
Customer
satisfaction
T Q M
Time
Stage2
Stage 3
Stage 1
Mkt. perceived quality & value relative to competition (1990s)
Entire market included
How our products compare with competition

48.  What are the key buying factors that customers value when
they choose among our business and our toughest
competition ?
 How do customers rate our performance vs. competition on
each of the buying factors ?
 What is the percentage importance of each of these
components of customer value ?
48
Unanswered Questions ?

49. Making Quality a Strategic Weapon
49
Effectiveness
Conformance
Qlty.
Customer
satisfaction
Mkt-perceived Qlty & value
relative to competitors
C V M
T Q M
Time Stage 4
Quality key to CVM (Post 1990)
Use changes in market place as a strategy to drive business and
create most value for customers
Build on TQM principles

50. Making Quality a Strategic Weapon
50
Effectiveness
Conformance
Qlty.
Customer
satisfaction
Mkt-perceived Qlty & value
relative to competitors
Quality key to
CVM
Customer Value Management
Total Quality Management
Time
Stage2
Stage 3
Stage 4
Stage 1

51. Perceived Quality
51
Quality means little in business unless –
Customers perceive your quality as superior to
your competition’s.
Knowing how to achieve “ this “ kind of quality is
all that matters.

52.  30 world Quality experts assembled in US in 1987 for
Baldrige Quality Award criterion meeting
 Main focus – Manufacturing Quality/ Process Control
 Many “ thought “ customers opinions cannot be measured
& is subjective
 Curt Reimann wanted Quality to be defined & measured
from customer perspective
 Contribution of Sidney Schoeffler & Bradley Gale
52
“Birth” & Development of CVM

53.  How to identify attributes that are important to customers ?
 How to understand the importance customers give to those
attributes ?
 How to analyze performance relative to competitors on
each attribute ?
 How to use CVM as a Strategy to drive the business ?
53
What is CVM ?

54. 54
Customer Value Defined
Sub-attributes
Sub-attributes
Product
Quality
Customer
Service
Marketing
Sales
Order Fulfillment
Overall
Quality
Relative Price
Competitiveness
Overall Value
Satisfaction

55.  Value = Benefit / Cost
 Benefit = Functional Benefit + Emotional Benefit
 Cost = Monetary cost + Time cost + Energy cost + Psychic
cost
55
Customer Value

56. 56
Customer Delivered Value

57.  Successful monopoly business spilt in early 1980s
 Pioneer in Customer Satisfaction measurement
 Excellent plus Good scores 90 % in Equipment, Installation, Repair,
Billing, Training, Marketing etc.
 Mgt. target to maximize excellent plus good scores.
 Data used for recognition & rewards program
Shortcomings :
 Did not explain declining market share even with hi scores
 No correlation between satisfaction scores & Mkt share
 Focused on internal competition rather than external
 “ Useless” info to understand competitive position
57
AT & T Story

58. 1987
 Customers “ willing to shop around” increased dramatically
from 10 % to 40 % for Excellent to Good category.
 Company did nothing to convert “ good “ into
“ excellent”
 Low scores in What Worth Paid For (WWPF) question even
though overall scores of 95+.
58
AT & T Story
Ray Kordupleski & West Vogel Study Findings

59.  Realized “ Quality was a relative thing “
( What ultimately matters is not the % of satisfied customers
but the extent to which customers are more satisfied with
our product than by the competition - Market Perceived
Quality)
 Relationship between Customer Value scores (WWPF) and
Market Share.
 Changes in WWPF scores predicted changes in market
share.
59
AT & T Story - Startling Discoveries

60. Customer Value is a Leading Indicator of Market Share
AT & T market share
WWPF
-
1987 1988 1989
Adapted from speech given by Raymond E. Kordupleski at the American Marketing
Association’s Customer Satisfaction Congress, 1991.
60

61. 1990-91 Bob Allen (CEO) used CV as strategy :
 Top leadership made to commit to customer value
 CV data used in reviews & planning processes
 Incorporated in AT & T Chairman Quality Award
 Executive compensation revised to include CV indices
 Identified processes which drive relative performance on
each attribute.
 Benchmarking studies to improve processes
 Cascaded to employees by teaching & their role in
improving CV.
1992 - AT & T gains significant market share
61
AT & T - Shift to CV Management

62.  Greet and approach: AT&T store employees now greet customers within ten
feet and ten seconds of entering the door
 Build value: An employee will ask the customer specific questions to
understand the purpose of their visit
 Offer solutions: This step is key. As per CVM AT&T is not in the business of
selling products. They are in the business of selling solutions. Customers
don’t walk through the door to buy a phone, they come to buy need
 Gain agreement: Employees must make sure they have helped the customer
walk out with the solutions they were looking for. They are even taught to
educate the customer about solutions/benefits they were not aware even
existed
 Walk out working: This is the educational step. If a customer walked in
wanting a phone to text her kids, the employee will show the customer how
to take a photo and send it as an SMS. Employees will even set up a
customers’ email in the store.
 Thank and depart: An AT&T employee will thank a customer and walk them
toward the door. Why? Because that’s how you would treat a guest in your
home.
62
AT&T Store- CVM Attributes
https://cvmas07.cvmsolutions.com/sbc/

63.  Customer perceived value (CPV) is the difference between the
prospective customer’s evaluation of all the benefits and all the costs of
an offering and the perceived alternatives.
 Satisfaction is a person’s feelings of pleasure or disappointment
resulting from comparing a product’s perceived performance (or
outcome) in relation to his or her expectations.
 If the performance falls short of expectations, the customer is
dissatisfied.
 If the performance matches the expectations, the customer is satisfied.
 If the performance exceeds expectations, the customer is highly
satisfied or delighted.
63
Customer Perceived Value & Satisfaction

64.  Successful marketing involves meeting or exceeding
customer expectations
 Marketing is very much about adding value through a
broadly-defined value proposition
 Value may be created by marketers in many different ways:
value is not only about price
64
…and Creating Value
Creating Customer Value Video

65. Traditional Vs. Modern Way of
Looking at Customers
65

66. Market Orientation, Customer Satisfaction & Profitability
66
Three Key Forces Driving Firm Profitability-Attractiveness
The size, growth potential, and competitive intensity of
a market.
Competitive Advantage
The strength of a business’s differential advantage
over their competitors.
Market Orientation
The degree to which a firm is market focused.

67. Customer Life Time Value
&
Wallet Share
67

68. Customer Lifetime Value
68
Customer lifetime value (CLV) – present value of the stream of future profits
expected over the customer’s lifetime purchases minus the expected costs of
attracting, selling and servicing that customer.

69. 69
Customer Lifetime Value

70. 70
Customer Lifetime Value – Banking as a Classic Case

71. Simple and Complex Calculation of C-LCV
71
73$
Show Complex C-LCV

72.  Share of Wallet is the percentage ("share") of a customer's
expenses ("of wallet") for a product that goes to the firm
selling the product
 Defined as the % share of customer’s expenditure that an
organization is able to target on buying / owning / using a
product or a service in a given period of time and may
include complementary / ancillary products and
consumables if any.
72
Customer Wallet-Share
Video: Customer Wallet Share Research - Indonesia

73. CUSTOMERS ARE MORE PROFITABLE OVER TIME
73
Customer
acquisition cost
Profit from price premium
Profit from referrals
Profit from
reduced operating costs
Profit from
increased purchases
Base profit
Years7654321
Profit
Source: Bain & Co.

74. Customer LTV & Wallet Share
Exercise- Scorpio
74

75. Assignment
 Calculate the Customer Life Time Value and Wallet Share for different
cost components for a customer buying a M&M Scorpio and using it for
7 years.
Parameter In Rupees
Ex – Showroom Cost 743000.00
Insurance per year [constant for 7 years] 28500.00
Registration 55000.00
On Road Price 826500.00
Down Payment – 10% 75000.00
Loan amount - 90% 668000.00
EMI per month for 48 months 18200.00
Accessories 50000.00
75

76. Other Information
 First year – 4 free services
 2nd year onwards – 4 services per year at 2000.00 per service
 Average vehicle run per month = 1000 kms per month
 Fuel Efficiency – 12 kms per litre
 Diesel Cost = Rs. 65.00 per litre
 Year 5 – change of tyres at Rs. 25000.00 for 5 tyres
 Repair cost –
• Year 1 = Rs.0.00;
• Year 2 = Rs. 5000.00
• Year 3 = Rs. 8000.00
• Year 4 = Rs. 10000.00
• Year 5 = Rs.12500.00
• Year 6 = Rs.15000.00
• Year 7 = Rs. 15000.00
• In Repair cost above, labour is 30% and spare parts is 70%
76

77. LCV- Result
77
Component Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total
EMI per Year 218400 218400 218400 218400 0 0 0 873,600
Principal 668,000
Down Payment 75000 0 0 0 0 0 0 75,000
Registration 55000 0 0 0 0 0 0 55,000
Interest 205,600
Accessories 50000 0 0 0 0 0 0 50,000
Services 0 8000 8000 8000 8000 8000 8000 48,000
Insurance 28500 28500 28500 28500 28500 28500 28500 199,500
Repairs 0 5000 8000 10000 12500 15000 15000 65,500
- Labour on Repairs 0 1500 2400 3000 3750 4500 4500
- Spare Parts for Repairs 0 3500 5600 7000 8750 10500 10500
Tyres 0 0 0 0 25000 0 0 25,000
Fuel 65000 65000 65000 65000 65000 65000 65000 455,000
Total 491,900 316,900 319,900 321,900 131,000 108,500 108,500 1,846,600

78. % Expenditure by Scorpio Customer
78

79. 1. World is ever changing and so is the Customer expectation
• Organization need to change their CRM strategy constantly
2. Organization use scientific methods of CVM, C-LTV, C-WS etc. to design
their overall CRM strategy
• Marketing Strategy are always based on Overall valuation of the
customer and the market
• Strategy of CRM needs to be long term while being flexible to
accommodate dynamic changes
3. Market and Customer data forms basis of CRM Strategy
• Data Mining has become key to today's decision making
• CRM helps to gather and analyze relevant data to support and
formulate the marketing plan
79
A Final Re-Cab

80. Books
80
 Customer Relationship Management – A Strategic
Perspective – By G. Shainesh & Jagdish Sheth, MacMillan
India Limited
 CRM at the Speed of Light – Essential Customer Strategies
for the 21st Century – By Paul Greenberg, Tata McGraw Hill
 Few Free CRM eBooks
• Sage CRM: A Practical guide to social CRM for SMB
• Sugar CRM: THE POWER OF CRM FOR THE INDIVIDUAL
• Salesforce: The Only CRM guide you will ever need

81. Q?
gyanibong@outlook.com
81