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… CRM in Consumer Markets

G. SHAINESH
Professor of Marketing
Indian Institute of Management Bangalore
shaineshg@iimb.ac.in
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… Coverage

• CRM programs
• CRM in B2C Markets
• Service Quality & Loyalty
• Service Failures and Recovery

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… CRM Programs
Customer Types
Business to Business
Mass Markets Distributors
Program Types
Program Types Markets

•Continuous Special Sourcing

Continuity •After-Marketing
•Loyalty Programs Replenishment Arrangements
Marketing •ECR Programs
•Cross-selling

•Key Account
One - to - One •Permission Customer Business
Marketing Development •Global Account
Marketing
•Personalization Programs

•Affinity •Logistics •Strategic Partnering

Partnering/
Partnering Partnering •Co-Design
Co-Marketing
•Co-Branding •Joint Marketing •Co-Development
Source : Sheth & Parvatiyar, 2001 3
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… Consumer Markets

• Services
• Goods
– Durables
– Automobiles
• Packaged Goods

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… Consumer Markets

Customer engagement - Siva Ganapathi http://bit.ly/2tEs8fc

Co-creation- Tanishq http://bit.ly/2srbSir
Meeting customer expectations- Dr. Rajashekar https://goo.gl/AZ8ivb
Tanishq way of life- Tanishq http://bit.ly/2shoQ3G
Customer centricity- Siva Ganapathi https://goo.gl/MogxFe
Customer centricity- Dr. Rajashekar https://goo.gl/2akLQH
CRM at Tanishq- Tanishq http://bit.ly/2rQbrfx
Learnings from hospitality - Tanishq http://bit.ly/2ryBPLA
CRM programs Tanishq http://bit.ly/2tnfUZ8
Aries Agro Intro- Dr. Rahul Mirchandani https://goo.gl/D9CBq2
Marketing Strategies- Dr. Rahul Mirchandani https://goo.gl/shJYwA
Addressing Customer Pain Points- Dr. Rahul Mirchandani https://goo.gl/FDz1zR
Managing Customization- Dr. Rahul Mirchandani https://goo.gl/EzFAVV
Loyalty programs in Agri business - Dr. Rahul Mirchandani http://bit.ly/2sKpG9M
Customer Profitability- Siva Ganapathi http://bit.ly/2sKysF4
Pidilite & diverse audience - Vivek Sharma https://goo.gl/1RorPa
Fevicol & stakeholders - Vivek Sharma https://goo.gl/kyAHDX

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… B2C Markets – General CRM Framework
1) Customer Oriented
Strategy

4) Marketing-Driven
CRM Implementation

2) Integration and 3) Information capture

alignment of and alignment of
organizational processes technology
and structures

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… Service Quality

Degree and direction of discrepancy between

expected and perceived service performance

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Five General Dimensions of Service
Quality

1. Reliability : Ability to perform the promised service

dependably and accurately.
2. Responsiveness : Willingness to help customers and provide
prompt service.
3. Assurance : Knowledge and courtesy of employees and their
ability to inspire trust and confidence.
4. Empathy : Caring, individualized attention the firm provides its
customers.
5. Tangibles : Appearance of Physical facilities, equipment,
personnel, and communication materials.

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Illustrative Computation of Difference Score

Statement to Assess Expectations

Strongly Agree Strongly Disagree

The physical facilities at 7 6 5 4 3 2 1

excellent _____ firms will be visually appealing

Statement to Assess Perceptions

Strongly Agree Strongly Disagree
XYZ’s physical facilities 7 6 5 4 3 2 1
are visually appealing
Difference Score = Perception Rating - Expectation Rating
= 4–6= -2
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… Relative Importance of Service Dimensions

Tangibles Responsiveness
11% 22%
Empathy
16%

Assurance Reliability
19% 32%

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… IMPACT OF QUALITY OF SERVICE ON
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CUSTOMERS’

• Loyalty to a company

• Propensity to switch to another company

• Willingness to pay a premium price

• Likelihood of complaining externally when problems arise

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FINANCIAL BENEFITS OF
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CUSTOMER LOYALTY

Net Present Value of

Profits from a Customer

Defection Rate 50% 40% 30% 20% 10% 5% 0%

Average Customer Life 2 Years 2.5 3.3 5 10 20

Source : Adapted from Reichheld and Sasser, “Zero Defections : Quality Comes to Services” Harvard Business Review, September - October 1990, pp.. 105-111

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Relationship between Service
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… Quality and Customer Satisfaction

Service
Quality

Product
Perceived Customer
Quality Value Satisfaction

Price Relatively Easy for

Competitors to Copy
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Relationship between Service Quality,
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… Customer Satisfaction and Loyalty

s s
n e

As
iv e
s

su
o n True

ra
s p

nc
e High Customer
R

e
Reliability Perceived Satisfac-
Value tion
Ta y
n gib a th
les m p
E

PQ True
Customer
P Loyalty

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… Components of Perceived Value

Value Perceived by Customers

Benefits Received Costs Incurred

Core Product / Monetary Costs

Service (Price)

Time & Effort Costs

Service Peripherals

Psychological Cost
Purchasing Efficiency

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Impact of Competition in the Association
… Between Customer Satisfaction and Loyalty
High

Increased
Customer

Competition
Loyalty

Low

Low High
Customer Satisfaction

Source : Jones & Sasser, “Why Satisfied Customers defect,” Harvard Business Review, Nov.-Dec. 1995, 88-99.

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Principal Reason for Customer Defection is
within the Company’s Control

Move Away 3%
"Other" Friendships 5%

Competition 9%

Product
Dissatisfaction
14%

Perceived Indifference 69%

Source: Blanchard Training and Development

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… Profit Impact of Marketing Strategy (PIMS)

•Perceived good service providers could charge an average

9-10% more for the same basic product or service
•They grow 2 times faster than their competitors
•Perceived service leaders improve their market share at an
average of 6% a year, whereas the perceived poor service
providers lost as much as 2% MS per year

Most loyal customers are likely to take the time to

complain. Others simply take their business elsewhere

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… Retention

• It costs 5-8 times more to obtain a new customer

than retain an existing one.

• 30% of the customer complaints are actually caused

by customers who misuse / mishandle the product
but the service personnel must never assume this is
the reason for dissatisfaction.

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The Profitable Art of Service
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… Recovery

The Road to Service Recovery

• Measure the costs
• Break the silence
• Anticipate needs for recovery
• Act Fast
• Train Employees
• Empower the frontline
• Close the loop

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… Nordstrom Employee Handbook

Welcome to Nordstrom !
We’re glad to have you with our company. Our No. 1 goal
is to provide outstanding customer service.
Set both your personal & professional goals high.
We have great confidence in your ability to achieve them.
Nordstrom Rules :
Rule # 1: Use your good judgement in all situations
There will be no additional rules.
Please feel free to ask your department manager, store
manager or division general manager any question at any
time.
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… Summary

• CRM programs
• CRM in B2C Markets
• Service Quality & Loyalty
• Service Failure & Recovery

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Thank You
More Questions?

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