Page 90 - DMGT510_SERVICES_MARKETING

Unit 5: Customer Relationship Management in Services

CRM involves managing this relationship so that it is profitable and mutually beneficial. Notes
Customer lifetime value (CLV) is a tool for measuring this relationship.

Management

CRM is not an activity only within a marketing department. Rather it involves continuous
corporate change in culture and processes. The customer information collected is transformed
into corporate knowledge that leads to activities that take advantage of the information and of
market opportunities. CRM requires a comprehensive change in the organization and its people.

5.3 Steps of CRM

CRM extends itself from customer acquisition to customer retention to customer delight. The
important steps are:
1. Identifying the Right Customer: The key here is right customer segmentation. Many
marketers have failed to realize that the old models and theories of segmentation have to
be changed dramatically. The segmentation criteria need to change from conventional
demographic/psychographic segmentation to need-based behavioural segmentation.
This will lead to the right definition of the right target customer. This paradigm shift in
segmentation criteria is needed because the conventional segmentation criteria are losing
their relevance with the evolution of the customer. Consumer behavioural variables are
more relevant and actionable and can help in the right targeting. Hence marketers can
develop sustainable business models and can differentiate themselves from others by
using high-level consumer behavioural variables.

2. Retaining the Right Customer: It is very important to measure customer profitability.
ROC (return on customers) should be calculated on at least three dimensions: frequency
of customer purchases, value per transaction and profitability.
Customers who are low on all three dimensions need least focus, whereas customers
scoring high on all the three need maximum focus. The customers lying between the two
extremes need to be carefully analyzed to decide the degree of focus required for each of
the segments.

Marketers need to lay down systems and processes (which can be very simple formats and
not necessarily require capital-intensive ERP systems) to keep track of these dimensions.
Identification and sizing of these clusters can help develop the right strategies for each
customer group.
3. Delighting the Customer: Many marketers lose bottom-line focus in their efforts to please
the customer and may inadvertently erode business profitability. Marketers need to
develop strong value propositions in terms of better products and better services so that
strategies are not only customer-centric but also lead to high profitability. Pleasing the
customers should not be at the cost of hurting the company’s bottom line.

LOVELY PROFESSIONAL UNIVERSITY 85