MODULE 1

INTRODUCTION IN CRM

Definition
Customer relationship management (CRM) 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 and drive sales growth. CRM systems
compile customer data across different channels, or points of contact,
between the customer and the company, which could include the
company's website, telephone, live chat, direct mail, marketing materials
and social networks. CRM systems can also give customer-facing staff
members detailed information on customers' personal information,
purchase history, buying preferences and concerns.
Scope

The scope of CRM includes a wide range of activities, from managing

customer contact information to developing personalized marketing
campaigns. In order to be effective, CRM must be tailored to the specific
needs of each business. As such, the scope of CRM can vary greatly
from one company to the next.

However, there are certain core elements that are essential for all
successful CRM initiatives. These include the ability to capture and store
customer data, the ability to track and analyze customer interactions,
and the ability to automate customer-facing processes.

By understanding the scope of CRM, businesses can be better equipped

to develop strategies that will improve their relationship with customers
and help them grow their businesses.

History and Evolution of CRM

Customer relationship management was once simply a way to record
transactions, but it is now much more complex and integrates all
departments of a business to ensure the customer is satisfied.

Before the introduction of computers and the internet, businesses relied

heavily on paper to record interactions and transactions with customers.
As computers became more readily available to businesses and
customers, customer relationship management transitioned to a digital
experience.

Over the last 20 years, it has become important for businesses to adopt
CRM strategies and tools to foster relationships with customers. CRM
systems today focus on uniting sales, marketing and customer service
departments with the goal of improving customer relationships and
increasing sales.

A CRM is an important component of a customer experience (CX)

strategy, which focuses on fostering the customer relationship
throughout their journey with a business -- beginning when customers
are sales prospects and continuing through to post-sales and customer
retention.

CX strategy requires a complete view of customer data so that the

business can understand the customer, create a customer vision,
develop a relationship with the customer and capture customer
feedback. A CRM system in conjunction with a CDP can help to provide
a complete view of the customer. By knowing and understanding the
customer, the business can better create a personalized customer
experience.

Objectives

1) Improve business efficiency

CRM platforms can help you eliminate day-to-day redundancies when it

comes to customer relationships. Your CRM platform collects and
organizes customer data that allows you to easily determine which stage
of the purchasing process each customer is in, as well as other key
information such as demographics, interests, etc. With this information,
you can create and send targeted marketing material out in batches to
customers based on this data.

2) Improve customer satisfaction

Happy customers become loyal customers that also contribute to free

word-of-mouth advertising. A quality CRM allows you to make customer
satisfaction a primary goal through areas such as increased direct
engagement, social networking engagement, automated surveys, and
much more.

3) Expand customer base

Lead generation is a critical component of every successful business. A

CRM platform allows you to track, manage, and improve the quality of
your leads. In addition, a good CRM can help identify actions that are
converting those leads into potential clients, allowing your business to
fast-track your sales process and increase your customer base.

4) Enhance sales and support teams

A quality CRM not only benefits your bottom line, but it helps to support
nurture lead and client relationships. For example, you know that lead
follow-up in a timely manner is essential to convert. With CRM lead
tracking, you can assign tasks and your team can record leads and
progress for each opportunity through the sales pipeline. Every member
has full visibility to closely monitor all new leads to ensure no follow-up is
missed.

5) Build long-term relationships

Using a CRM platform gives you and your team the ability to identify,
prioritize, and implement activities that have the most significant impact
on your customer relationships for the long term. Your CRM can help
you track and implement actions such as customer referrals and loyalty
programs.

Benefits
#1. Streamline your sales process

Before CRMs came into the picture, most business’ sales process was
managed by themselves on Excel sheets, email and a variety of other
static tools.

While it’s fine to use it for a small number of leads, as the volume grows,
it becomes harder to manage your leads and customers.

But with a CRM, you can track your lead’s journey down the sales funnel
from the point of entry to the point of conversion and even after.

A CRM helps you to make sure that there are no leaks in your sales
funnel. All the leads that come into your system from any kind of lead
source are accounted for.

#2. Manage your leads more efficiently

Most CRMs come with a lead management tool as well, which helps you
to keep a check on your lead volume no matter how much it may be. As
said before, instead of struggling to remember where and how your
leads are coming in, a CRM gives you the option to easily manage and
control these leads.

Instead of sifting through thousands of leads manually to find that one

lead you need to contact, a CRM helps you to find the quality leads in
your system easily.

You can also figure out what interaction each lead is having with your
company as well as which lead stage they belong to. Some CRMs even
allow you to predict the closure of a particular lead.
#3. Prioritize who you call

When you have thousands of leads in your system, you might lose track
of who to call first. This is because you don’t have enough data about
these leads to know which one is of higher value. As a result, sales
people spend their precious time calling every lead that comes their way.
But leads that actually can provide business are sometimes missed out.
Chances are that they have already bought your competitor’s products
or have lost interest in making a purchase.
A CRM helps you prioritize your leads so that this does not happen. This
could be through setting them a lead score or by grouping them in a list
or by tracking their activities. This way you can group your leads into
buckets and interact with them accordingly.

You can then communicate with each stage accordingly. Follow up with
hot leads immediately to close the sale. Offer warm leads incentives
such as discounts or coupons to buy from you. You can nurture cold
leads through emails or other promotional content over a period of time
to make them sales ready.

#4. Make your customer interactions more personalized

No matter how good a sales person you are, it would be difficult to

gauge what exactly your leads want. They might be reluctant in sharing
their buying intent with you most of the time. Unless you are a magician,
you would not be able to read their minds. A CRM, however, will help
you to become exactly that!

Most CRMs come with a sales tracking or lead tracking feature. This will
help you to know which pages on your website are being visited and how
much time is being spent on it. If you sell products online, then you can
find out which category is being visited the most. You can also track
what conversations they have with your team.

This way, you will be able to gauge the amount of interest that the lead
has in buying from you as well as which product/service interests them
the most. This is a sure shot way to cinch awesome deals.

#5. Save more time by automating routine tasks

The bane of a salesperson is the little tasks that take up most of their
time. Imagine the amount of leads that come in on a daily basis. Now, if
you have to manually check them and update their status and owner,
then half yoru productive day is gone. CRM systems of today come with
features that allow you to set rules and tasks and other features to help
you to automate these routine tasks and concentrate on what you do
best: selling!
The nuances such as filling out order forms, reminder emails and more
are taken care of without you having to do much work.

#6. Make your teams more transparent

For any organization or team to work efficiently and without any internal
conflicts, it is necessary for the system to be transparent. Working
together, sales teams may get demoralized if they think they are being
treated unfairly or if they feel other are being favored more. CRMs help
solve this problem as well. You can use them to communicate internally
as well.

One of the major points of dispute would be the assignment of leads. By

automating the entire process, your team would be rest assured that the
process has been impartial. This is important in keeping up their morale.

This way they will also know clearly who has achieved the most sales
and why their work is being appreciated. By avoiding such clashes, you
would have a happier team more ready to work with each other. This
translates to more sales and more business.

#7. Get detailed analytics on your sales process

If you are unable to account for your actions, what is the point of all your
efforts? An Excel sheet gives you access to only limited data and
insights. But, a CRM comes with powerful analytics features to get deep
insights into the effects of your sales activities.

You can find out the best lead sources, the geography, and demography
that most of you leads or customers belong to. You can also find out the
results of the email campaigns and drip campaigns that you run.
Additionally, they also help you find out which customers are giving you
the maximum revenue. You can also gauge the performance of
individual sales people. These data can help the management make
powerful business decisions, and help sales teams set more realistic
targets.

CRM Myths
Myth 1: CRM is only for large enterprises, and only the sales team will use it.

CRM can be a game-changer for any business with customers, whether that
business is small, medium-sized, or large.

Sales teams can always use CRM to reduce response times, accelerate deal
closures and expand cross-selling and upselling. However, today’s CRM
systems offer broader and more far-reaching benefits, from enhancing
communication and collaboration across departments to improving product
development and forecasting.

Myth 2: CRM solutions aren’t customizable.

Some businesses operate under the assumption that no CRM system can match
their personalized customer processes. These businesses do not want to conform
to a generic, cookie-cutter CRM system—and the good news is, they shouldn’t
have to.

CRM solutions are customizable, and it is essential for any CRM

implementation to involve working with the selected vendor to develop any
necessary process realignment. After all, the goal is to offer even better
customer service than before, and that is precisely what a well-implemented
system will do.

Myth 3: CRM implementation is too difficult and overly time-consuming.

Businesses are accustomed to operating and managing their customers in a

certain way. That means they are reluctant to adopt new practices. Sales teams,
in particular, often get locked in place with a reliance on conventional tools like
Excel, Outlook, or even paper notepads and Post-its.

At times, motivating employees to adopt a CRM solution can be an exercise in

change management, which is why it is critical to listen to users’ needs and
priorities early in the process (during vendor selection, if possible), provide the
proper training, and rack up early, convincing wins.
Myth 4: CRM introduces security risks.

It is reasonable and prudent to be cautious about how customer data is collected,

maintained, and shared within the business.

Thankfully, today’s CRM solutions typically have excellent security features

designed to keep customer information safe from external attacks like
ransomware and distributed denial of service (DDoS). However—and perhaps
even more importantly—it is also critical for businesses to take steps that will
protect customer data from internal threats.

Myth 5: A CRM solution is too expensive.

This may be the most popular CRM myth of all, and it stems from the
assumption that a CRM solution will be costly to purchase, implement, and
maintain. Whenever “cost” is calculated, however, it is essential to factor in the
overall value of a CRM solution and its true ROI.

CRM Technology

CRM technology is an effective software which helps in managing the

customer database in order to nurture and sustain long term
relationships. This will end up in productivity and maximize the revenue
of the firm in an outstanding way. The basic infrastructure behind the
CRM technology is the customer database. Customer database contains
a whole lot of information about the customer and prospects. CRM
software is a sophisticated business solution that grows your business in
an impeccable manner.

Different types of CRM technologies

There are three types of CRM technologies.

1.Operational CRM

The operational CRM focuses mainly on the customer facing teams such
as sales and support. Operational CRM solves each and every problem in
the enterprise customer relationship. Operational CRM helps the
organization to find the right information and track the interactions in
order to solve the issues. Operational CRM has the following
automations : sales force automation, Marketing automation and
Services automation.

Sales force Automation: Sales force automation is a technology which

helps in managing the sales activities. It takes care of the complete sales
cycle and fixes the sales issues effectively.

Marketing Automation: Marketing automation involves the marketing

activities such as segmenting the market, sending campaigns, having a
count on leads, event based marketing, personalized messages and
promotions. All the marketing tasks can be automated in order to reduce
the repetitive workload and maximize the benefits.

Service Automation:

Service automation helps in resolving the cases and issues regarding the
brand’s offering. You can have interactive chatbots that can solve the
problems by itself without human intervention. Service automation is
helpful for the customer service and support team, which helps in
retaining the customers and builds loyalty among them.

2.Analytical CRM

Analytical CRM is a CRM software that helps in managing, storing,

modifying, processing the customer information. It contains all the
internal business data such as sales data, marketing data and finance
data. This CRM provides deeper insights with the analytics and reports.
Analytical CRM provides timely solutions to the customer problems. It
gives deeper insights for sales and helps in customer acquisition and
retention.

3.Collaborative CRM
Collaborative CRM is combining the resources which helps in identifying,
developing, retaining and maintaining the customers. It paves way for
smooth communication among the business partners and stakeholders.
It helps in collaboration among the teams in order to enhance the
workflow capabilities.
Technology Components of CRM

CRM Software

CRM software's main purpose is to make interactions more efficient and

productive. Automated procedures within a CRM module include
sending sales team marketing materials based on a customer's
selection of a product or service. Programs also assess a customer's
needs to reduce the time it takes to fulfill a request.

CRM Cloud Solutions

Cloud-based systems provide real-time data to sales agents at the

office and in the field as long as a computer, smartphone, laptop or
tablet connects to the internet. Such systems boast heightened
accessibility to customer information and eliminate the sometimes-
complicated installation process involved with other CRM products or
software.

CRM Human Management and Artificial Intelligence

All of the computer software in the world to help with CRM means
nothing without proper management and decision-making from humans.
Plus, the best programs organize data in a way that humans can
interpret readily and use to their advantage. For successful CRM,
companies must learn to discern useful information and superfluous
data and must weed out any duplicate and incomplete records that may
give employees inaccurate information about customers.

AI is expected to strengthen CRM activities by speeding up sales

cycles, optimizing pricing and distribution logistics, lowering costs of
support calls, increasing resolution rates, and preventing loss through
fraud detection.
CRM AS A STRATEGIC MARKETING TOOL

Marketing is one of the new discoveries in business management. Of late,

marketing has come to occupy significant position in the overall strategic
studies. Various challenges are emerging in marketing as well as new
approaches are being made in its study to view its different aspects of the
many things it has been recently realized that customer is the most
important elements in marketing and its sustenance and retention is far
more important than any other marketing functions.CRM is one of the
core area in marketing.

The major areas of CRM focus on:

• Generation and servicing more loyal customers.

• Expansion of customer base

• Reduction of advertising costs

• Increase in profitable customers

• Ease in introduction of new products

• Personal Information Gathering and Processing, Self-Service.

• CRM is the marketing management practice of identifying, attracting

and retaining the most valuable customer to sustain profitable growth

• CRM is the process of making and keeping customers and maximizing

their profitability, behaviors and satisfaction.

• Today customer demand open equal access, real time specialized

information, convenient access, portability, process and logistics
transparency, pricing transparency, global pricing, ability to set prices,
choices of distribution channels and control over their information.
 • First time customer can become a repeat customer, thereafter a client,
then an advocate and finally one‘s partner in progress.

Loyal customers always create a profit and also reduced operating cost,
increased purchases and give plenty of referrals.

• The realistic observation on customers that it costs ten times more to

sell to new customers than to sell to an existing one.

• Existing customer deliver most of the revenues.

• It‘sveryimportant part of CRM is to identify the Most Valuable

Customers (MVC) for the success of the business.

• A small net upward migration of customers (5-10%) can deliver a

dramatic improvement in business performance.

• Marketing and sales are charged with influencing customer behavior.

• Customer success always equal to business success.

CRM SIGNIFICANCE TO STAKEHOLDERS

• Four principal stake holders play a major role in the entire process of
customer relationship management.

1. Customers

2. Employees

3. Suppliers

4. Partners

CRM SIGNIFICANCE
 • Perpetual stream of revenue

• Positive referral creation

• Provides premium

• Helps customer retention

• Lowers cost of sale

• Helps understanding consumer behavior

• Provides opportunity to cross-sell and up-sell

• Reduces marketing time

• Channel cost rationalization

• Enables business process re-engineering.

The seven C’s of Stakeholder Management

• Concern
• Communicate
• Contribute
• Connect
• Compound
• Co-Create
• Complete

CRM Issues and Problems

CRM Problems

1. Low user adoption

Around 65 percent of CRM projects fail due to low user adoption

There are some simple solutions for combatting low user adoption
issues. The first step is getting users involved in the CRM process
sooner. Ask them what they currently struggle with in their workflows.
Then determine what could be automated or simplified for them. Get
them involved with the design, so they’ll be a part of user-experience
testing processes. Hearing and implementing their suggestions will go a
long way toward user adoption.

2. Nowhere to grow

Your CRM should ebb and flow with your business. Too often, managers
choose their CRM based on what fits their needs for today, but they
don’t think about tomorrow and beyond.

When selecting the CRM that will work for you, plan for evolution. Even if
you just need some basic functionalities right now, consider next steps.
Is there a higher tier you can move to as your business evolves? How
does it integrate with other platforms you might be using? You should
consider both of these questions before signing the dotted line.

3. Scope creep

Scope creep can happen if you don’t have a plan and stick to it. If you do
decide you want to add in some additional functionalities once you dive
into a system, then plan phases. Phase 1 is the initial work you set out to
do. Once you complete that phase, you can move on to Phases 2,3,4
etc.

4. Wrong vendor

You think you’ve found the right solution and the partner you want to
work with. You sign your paperwork, and they stop taking your calls. It’s
frustrating.

Take the time to get to know your vendor. Ask them their expertise in
your industry, your use case, and your estimated timelines. Choose the
partner that’s the best fit for you.
5. Lack of support

Sometimes, a CRM project coordinator can feel overwhelmed.

Implementing a CRM system isn’t a small undertaking. If you don’t have
the executive team buy-in, it can be challenging to get your users
onboard, too.

6. Bad data

Your CRM is only as successful as the data you have in your system.
User adoption is important here, but so is keeping your data updated.

When you first migrate your CRM, you’ll want to find the most updated
data source and migrate it into your new CRM. Then develop methods to
collect and clean your data moving forward.

7. Siloed departments

Do you have transparency in your company? How much knowledge

does each department have about what the others are doing? Having a
centralized location for information can break down the silos in your
business and better align your departments.

Create processes to show what everyone’s role is inside the CRM (such
as updating phone numbers and email addresses).

8. One-time thing

You implement your CRM system. You’re done, right? Wrong. You want
to assess how your CRM is working, create new phases of functionalities
as needed, and provide ongoing training for users. Too often, companies
have training at the beginning of implementation. Then it falls to the
wayside.

9. Not centralized

The CRM needs to be THE center of your business. If everyone still

gravitates toward using email and spreadsheets as their “go to,” it won’t
work.
10. Perspective

Your CRM aims to build customer relationships and create a better

customer experience. Take a look at the customer perspective, not just
your own.

CRM ISSUES

Cost

One of the major barriers to CRM success is the budget, or lack thereof. CRM
themselves can be very expensive, and the implementation costs can add up
quickly. Some companies try to save money by skimping on implementation
support, which can backfire on them and make it difficult to get the CRM up
and running. Downtime to complete training and get up to speed on the new
system also eats into company profits.

Solution: In order to make the most of your CRM, your company will need to
invest the necessary money to fund the implementation upfront, with the
knowledge that it will pay off in the long run as the CRM improves sales over
time.

Time

Choosing and implementing a CRM takes time. Your teams need to research,
test, onboard, deploy, and train, which can result in downtime for the business
and for employees. Sometimes companies try to save on this “lost” time by
rushing through these steps or even skipping them entirely, which often results
in a CRM failure.

SOLUTION: Switching CRMs can’t be done both quickly and successfully, so

companies need to set their expectations accordingly and embrace the process.

Data quality

Following the “garbage in, garbage out” principle, if you put poor data into a
CRM, then the output will be poor quality, too. This poor or incomplete data
can come from many different sources, including a faulty import from the
previous CRM or incomplete data entry by sales reps.
SOLUTION: To prevent this from happening, your company will need to
carefully import existing CRM data in order to ensure data integrity. Teams
should also incentivize the CRM users to input new data into the system
correctly to maintain the overall quality of the data pool.

Communication

If your employees have been kept in the dark about the CRM transition —
either intentionally or unintentionally — that can lead to a lack of adoption and
training and result in a CRM failure. Conflicting information about the
migration can also confuse employees and make it difficult to determine what is
true and what is false, further hindering their use of the CRM.

SOLUTION: Appoint a committee comprised of a representative from each

department affected as part of the adoption process. You hired your staff
because you trust their judgment, so taking it into account could save you a lot
of headaches.

Technology

Both the technology itself as well as your IT staff can contribute to a CRM
failure. Your IT staff might not have the skills and knowledge necessary to
successfully implement the new CRM or to maintain it. The CRM itself might
also lack necessary integrations with the rest of your company software stack
and may not offer the ability to build custom connections with an open API.

SOLUTION: Even if it does have the right integrations, if they are set up
incorrectly the CRM will fail anyways. If you’re not confident in your IT staff’s
capabilities, you might need to hire outside professionals to assist with the CRM
deployment process.

Ecrm

Definition

eCRM refers to Electronic Customer Relationship Management. It is a step

ahead of CRM and it is the adaption of CRM in a E-Commerce environment
and through internet. Here every communication occurs through internet like
from obtaining customer support to online purchase, customer relationship
management to customer feedback/suggestion collection everything. In
Electronic Customer Relationship Management the nature of relationship is
complex and dynamic.

CRM Framework

Six Es ine CRM

1. Electronic channels
New electronic channels such as the web and personalised e-
messaging have become the medium for fast, interactive and
economic communication, challenging companies to keep pace
with this increased velocity. E CRM thrives on these electronic
channels.
2. Enterprise
Through ecrm a company gains the means to touch and a shape a
customer’s experience through sales, services and corner offices
whose occupants needs to understand and assess customer
behaviour.
3. Empowerment
E CRM strategies must be structured to accommodate customers
who now have the power to decide whem and how to
communicate with the company .
 4. Economics
An ecrm strategy ideally should concentrate on customer
economics, which drives smart asset- allocation decisions,
directing efforts at individuals likely to provide the greatest return
on customer communication initiatives.
5. Evaluation
Understanding customer economics relies on a company’s ability
to attribute customer behaviours to market programs, evaluate
customer interactions along various customer touch point channel ,
and compare anticipated ROI against actual returns through
customer analytic reporting.
6. External information
The ecrm solution should be able to gain leverage information from
such sources as third party information networks and web page
profiler application.

E CRM Features

ECRM has the following features:

 Customer management: Grant access to all customer information,

containing the request status and other similar information
 Account management: Provide access to customer data and history,
supporting the sales team to function in an effective way
 Administrative management: A centralized database that manages
and shares customer information
 Case management: Notify inquiries, priority cases, and unresolved
issues to the management department
 Back-end integration: Integrate with other systems such as billing,
inventory, and logistics through websites and call centers
 Reporting and analysis: Create reports on customer behavior and
business criteria

Difference between CRM and ECRM :

S.No. CRM E-CRM

CRM stands for E-CRM stands for Electronic

01. Customer Relationship Customer Relationship
Management. Management.

CRM applies traditional E-CRM applies electronic/digital

02. tools and standards to tools and standards to perform its
perform its operation. operation.

Along with telephone, in E-CRM

In CRM customer
customer contact is initiated
contact is initiated
03. through the internet, email,
through retail store,
wireless, mobile and PDA
telephone or fax.
technologies.

in CRM Customer
Customer service can be provided
04. service is time and space
at any time from any location.
constraint.

In Customer
In Electronic Customer
Relationship
05. Relationship Management wide
Management wide area
area coverage possible.
coverage is not possible.

In CRM quick response

In E-CRM quick response may or
06. is possible through
may not happen poor response
telephonic call.

In CRM system is
designed around In E-CRM system is designed
07.
products and job around customer needs.
function.

08. Customer Relationship In eCRM optional response limits

Management is more its effectiveness.
 effective.

It may or may not It provides attractive options as it

09. provide so attractive uses audio visual features,
options. animations etc.

In CRM web based

In Electronic Customer
applications needs PC
Relationship Management no such
clients and also which
10. requirement, internet is the
needs to be downloaded
backbone and the browser is the
separately in various
customers portal to e-CRM.
platforms.

In CRM the nature of

In eCRM the nature of relationship
11. relationship is simple
is complex and dynamic.
and static.

CRM implementation is
longer and management In E-CRM reduced time and cost.
is costly as the system is System implementation and
12.
situated at various expansion can be managed on one
locations and on several location and on one server.
servers.

Customization of
information is possible Customization of information for
13.
but requires little each person is very easy.
changes in system.

Innovation is optional in
14. Innovation is necessary in E-CRM.
CRM.

15. In CRM the data is In eCRM the data is not so secured

secured as there is no as there is involvement of internet
involvement of internet but security can be provided with
 and no additional cost is
firewalls etc and additional cost is
incurred for data
incurred for data security.
security.

information from such sources as third party information networks and web
page profilern.
estion-1: Discuss the six E’s of eCRM.
Answer: The SIX “E’s” OF E-CRM
The “e” in E-CRM not only stands for electronic but also can be perceived to
have many
other connotations. Though the core of E-CRM remains to be cross channel
integration
and optimization. The six “e” in E-CRM can be used to frame alternative
definitions of
E-CRM based upon the channels which E-CRM utilizes, the issues which it
impacts and
other factors, the six “E’s” of E-CRM are briefly explained as followed:
1. Electronic channels: New electronic channels such as the web and
personalized e-
messaging have become the medium for fast, interactive and economic
communication,
challenging companies to keep pace with this increased velocity. E-CRM
thrives on these
electronic channels.
2. Enterprise: Through E-CRM a company gains the means to touch and a
shape a
customer’s experience through sales, services and corner offices whose
occupants need to
understand and assess customer behavior.
3. Empowerment: E-CRM strategies must be structured to accommodate
consumers
who now have the power to decide when and how to communicate with the
company.
Through, which channel, at what frequency? An E-CRM solution must be
structured to
deliver timely pertinent, valuable information that a customer accepts in
exchange of
his/her attention.
4. Economics: An E-CRM strategy ideally should concentrate on customer
economics,
which drive smart asset-allocation decisions, directing efforts at individuals
likely to
provide the greatest return on customer communication initiatives.
5. Evaluation: Understanding customer economics relies on a
company’s ability to
attribute customer behavior to market programs, evaluate customer
interactions along
various customer touch point channel, and.

6. External information: The E-CRM solution should be able to gain

leverage
information from such sCRM ARCHITECTUREe CRM Features

CHAPTER 2
MANAGING CUSTOMER RELATION

CUSTOMER PORTFOLIO MANAGEMENT’

 A customer portfolio consists of all the details you need to

maintain a relationship with your customer. Through this,
you are able to know your customer well and engage with
them effectively. Customer portfolio management is done
through tools like ERP, CRM, or customer success software
that collects and stores all the customer data at one
central location.
 The details associated with customer portfolio may
include:
 Company’s name

 Point of contacts and associates

 Industry and domain

 Products or services being used

 Ticket size, average revenue and billing information

 Type of relationship

 Potential upsells or cross-sells opportunitie

 Importance of Customer Portfolio Management

 Once you get all the details of the customer through their
portfolio, you can use it for different purposes which are:

Effective engagement

 Imagine engaging with a client of whom you don’t have

the complete information and you go clueless on some
obvious point in the meeting, it would taint your
reputation drastically. Instead of looking for the
information all over the place, you can refer to the
customer portfolio before meeting them and know
everything you need to hold a meaningful conversation
with them. Once you have a clear picture of who the main
contacts are, what industry they belong to, what potential
for business expansion do they hold, your engagement
would be as effective as it can get.

Prioritization of customer

 You can not serve everything to everyone. You need to

prioritize your customers for the amount of time and the
level of service you can provide to them. To decide who
goes first and who stands last, you need to refer to
their portfolio and prioritize them accordingly.
 Creating headspace

 Based on the portfolio , you can also know which are the
customers that are not adding any value to your business.
You can discard them straight away which would allow
you to create more headspace for serving valuable clients.

Here are some key aspects of customer portfolio

management:

 Customer Segmentation: Companies segment their customers

into different groups based on various criteria such as
demographics, purchasing behavior, and profitability. This
segmentation helps in understanding the diverse needs and
preferences of different customer segments.
 Customer Value Analysis: By analyzing the value that each
customer brings to the company, organizations can prioritize
their efforts and allocate resources effectively. Customers can
be evaluated based on factors like revenue generation, profit
margins, potential for growth, and their overall impact on the
company's bottom line.
 Customer Acquisition and Retention: Customer portfolio
management involves strategies for acquiring new customers
and retaining existing ones. It focuses on identifying potential
customers who align with the company's target market and
 designing effective marketing and sales initiatives. Retention
strategies aim to enhance customer satisfaction, reduce churn,
and foster long-term loyalty.
 Relationship Management: Building strong and personalized
relationships with customers is crucial for successful portfolio
management. This involves understanding customer
preferences, providing personalized experiences, and ensuring
effective communication and support throughout the customer
lifecycle.
 Cross-Selling and Upselling: Customer portfolio management
aims to identify opportunities for cross-selling and upselling to
existing customers. By understanding their needs and
preferences, companies can offer additional products or
services that complement their existing purchases, thereby
increasing revenue and customer lifetime value.
 Performance Monitoring and Analysis: Regular monitoring and
analysis of customer portfolio performance is essential. Key
metrics such as customer satisfaction, customer lifetime value,
churn rate, and repeat purchase rate are tracked to evaluate
the effectiveness of strategies and identify areas for
improvement.
 Overall, effective customer portfolio management helps
companies optimize their customer base, enhance customer
satisfaction and loyalty, and drive revenue growth by focusing
 on the most valuable and profitable customers while improving
overall customer experience.

Customer lifecycle

 the customer lifecycle refers to the process of understanding

and optimizing the various stages that a customer goes through
in their relationship with a company. It involves developing
strategies and implementing tactics to attract, engage, retain,
and maximize the value of customers. The customer lifecycle
typically consists of the following stages:
 Awareness: At this stage, potential customers become aware of
a company and its products or services. Marketing and
advertising efforts are aimed at generating brand awareness
and attracting the attention of the target audience.
 Acquisition: Once customers are aware of the company, the
focus shifts to acquiring them as customers. This involves
capturing leads, nurturing them, and converting them into
paying customers. Effective lead generation, lead nurturing
campaigns, and sales processes play a crucial role in customer
acquisition.
 Onboarding: After the acquisition, the onboarding stage is
crucial for setting the foundation of a positive customer
experience. It involves welcoming customers, providing
necessary guidance, and helping them get started with the
 product or service. Onboarding activities aim to familiarize
customers with the company's offerings, ensure a smooth
transition, and address any initial questions or concerns.
 Engagement: Customer engagement focuses on creating
ongoing interactions and building relationships with customers.
This stage involves delivering value, providing excellent
customer service, and maintaining regular communication.
Companies use various channels such as email marketing, social
media, loyalty programs, and personalized experiences to keep
customers engaged and satisfied.
 Retention: Customer retention is about keeping customers
happy, satisfied, and loyal over the long term. This stage
involves continuously delivering value, addressing customer
needs, and proactively resolving any issues or concerns.
Retention strategies can include personalized offers, loyalty
programs, customer support, and regular check-ins to ensure
customer satisfaction.
 Growth and Advocacy: Satisfied and loyal customers can
become brand advocates and contribute to business growth.
This stage involves nurturing and leveraging these advocates to
drive referrals, positive reviews
 customer feedback initiatives, and by delivering exceptional
experiences that customers are compelled to share.
 Winback: Sometimes, customers may churn or become
inactive. The winback stage focuses on re-engaging these
customers and bringing them back into the customer lifecycle.
Winback strategies can include targeted promotions,
personalized offers, and addressing any concerns or issues that
led to their departure.

 Throughout the customer lifecycle, data analysis and customer

feedback play a crucial role in understanding customer
behavior, preferences, and pain points. This information helps
in personalizing the customer experience, refining marketing
strategies, and improving overall customer satisfaction and
loyalty.

 By effectively managing the customer lifecycle, companies can

maximize customer lifetime value, foster loyalty, and generate
sustainable business growth.

Customer Lifetime Value (CLV)

 It is a metric that estimates the total value a customer brings to a

business over the entire duration of their relationship. It is a key
measure used to evaluate the long-term profitability and
financial impact of acquiring and retaining customers. CLV
helps companies make informed decisions about resource
 allocation, marketing strategies, and customer relationship
management.

 Calculating CLV involves considering factors such as the

customer's purchasing behavior, average order value, frequency
of purchases, retention rate, and the duration of the customer
relationship. The formula for calculating CLV can vary
depending on the specific business model and industry. Here's a
simplified version of the formula:

 CLV = (Average Purchase Value) x (Number of Purchases per

Year) x (Average Customer Lifespan)

 Let's break down the components of the formula:

 Average Purchase Value: This refers to the average amount of

money a customer spends on each transaction or purchase. It is
calculated by dividing the total revenue generated from a
customer by the total number of purchases made.

 Number of Purchases per Year: This represents the average

frequency or rate at which a customer makes purchases within a
given time period, typically a year. It is determined by dividing
the total number of purchases by the customer's lifespan.

 Average Customer Lifespan: This is the average length of time a

customer remains active or engaged with a company before
churning or discontinuing their relationship. It can be calculated
 by measuring the time between the customer's first purchase and
their last purchase or by using retention rate data.

 By multiplying these three factors together, CLV provides an

estimate of the total revenue that can be attributed to a customer
throughout their lifetime. This metric is valuable for decision-
making processes such as customer segmentation, determining
marketing budgets, and identifying high-value customers.

 Understanding CLV enables businesses to focus their efforts on

acquiring and retaining customers who have higher long-term
value, rather than solely focusing on short-term transactions. By
optimizing CLV

 companies can improve their profitability, tailor their marketing

strategies, and allocate resources effectively to enhance the
overall customer experience and satisfaction.
The customer interaction cycle

o It refers to the sequence of interactions or touchpoints

that a customer goes through when interacting with a
company. It outlines the various stages of customer
engagement and provides a framework for understanding
and managing customer interactions. The customer
interaction cycle typically consists of the following stages:
 Awareness: The cycle begins when a customer becomes aware
of a company or its products and services. This stage often
involves marketing efforts such as advertisements, content
marketing, social media, or word-of-mouth recommendations
that introduce the company to potential customers.
 Research and Consideration: Once aware, customers may
engage in research and evaluation activities to gather more
information about the company, its offerings, and its
competitors. They may visit the company's website, read
customer reviews, compare prices, or seek recommendations
from friends or online communities.

 Purchase: The next stage occurs when the customer decides to

make a purchase. This could involve visiting a physical store,
placing an order online, or subscribing to a service. The
purchase stage is critical, and companies aim to provide a
smooth and convenient buying experience to ensure customer
satisfaction.

 Product or Service Experience: After the purchase, customers

begin using the product or service and have firsthand
experiences with it. This stage includes the initial usage,
onboarding, and any post-purchase support or assistance
provided by the company. It is important to deliver a positive
 experience to meet customer expectations and address any
potential issues or questions.

 Engagement and Support: Throughout the customer's usage of

the product or service, they may require ongoing support or
assistance. This stage involves customer service interactions,
troubleshooting, account management, and any
communication channels that allow customers to engage with
the company for inquiries, feedback, or problem resolution.

 Loyalty and Advocacy: Positive experiences and exceptional

customer service can lead to customer loyalty and advocacy.
Satisfied customers may become repeat buyers and loyal
supporters of the company. They may recommend the
company to others, write positive reviews, or engage in social
media advocacy, contributing to the company's reputation and
customer acquisition efforts.

 Repurchase or Renewal: In certain industries with recurring

revenue models, customers are encouraged to repurchase or
renew their subscriptions or contracts. This stage involves
targeted communication and offers to retain the customer and
ensure continued business.

 By understanding the customer interaction cycle, companies can

optimize each stage to enhance customer satisfaction, loyalty,
 and advocacy. It enables businesses to identify pain points,
deliver exceptional experiences, and develop strategies to
engage customers effectively throughout their journey.

 Customer Interaction Management (CIM)

 It refers to the strategies, processes, and technologies used by

businesses to manage and optimize customer interactions
across various channels and touchpoints. It involves effectively
handling customer inquiries, providing personalized
experiences, and building positive relationships to enhance
customer satisfaction and loyalty. Here are some key aspects of
customer interaction management:
 Multi-channel Communication: CIM involves managing
customer interactions across multiple channels, including
phone, email, live chat, social media, and in-person
interactions. It aims to provide a consistent and seamless
experience regardless of the channel chosen by the customer.
 Customer Relationship Management (CRM): Utilizing a CRM
system is essential for effective customer interaction
management. CRM platforms centralize customer data,
allowing businesses to have a comprehensive view of each
customer and their interaction history. This enables
personalized communication and enables businesses to better
understand and meet customer needs.
 Customer Service and Support: CIM focuses on delivering
exceptional customer service and support. It involves promptly
addressing customer inquiries, resolving issues, and providing
guidance throughout the customer journey. Timely and
effective support plays a vital role in enhancing customer
satisfaction and loyalty.

 Personalization and Customization: CIM emphasizes tailoring

interactions to meet the specific needs and preferences of
individual customers. By leveraging customer data and insights,
businesses can personalize their communication, offers, and
recommendations, creating a more personalized and relevant
customer experience.

 Proactive Engagement: CIM includes proactive customer

engagement initiatives. This can involve reaching out to
customers with relevant information, updates, or offers based
on their past interactions and preferences. Proactive
engagement helps businesses stay connected with customers
and strengthens the customer relationship.

 Feedback and Continuous Improvement: CIM involves

gathering and utilizing customer feedback to improve
interactions and overall customer experience. Collecting
feedback through surveys, reviews, and customer satisfaction
 metrics helps businesses identify areas for improvement and
make necessary adjustments.

 Analytics and Performance Monitoring: CIM leverages data

analytics and performance monitoring to measure the
effectiveness of customer interactions. Key metrics such as
response times, customer satisfaction scores,

 conversion rates are tracked to assess performance and

identify areas where enhancements can be made.
 By effectively managing customer interactions, businesses can
foster customer loyalty, drive repeat business, and gain a
competitive edge. CIM aims to create positive experiences at
every touchpoint, nurturing long-term relationships with
customers and maximizing their lifetime value.

Customer profiling,

 It is also known as customer segmentation or customer persona

development, is the process of categorizing customers into
distinct groups based on common characteristics, behaviors, and
preferences. It helps businesses understand their customers
 better, tailor their marketing strategies, and provide personalized
experiences.

 Here are some key steps involved in customer profiling:

 Data collection: Gather relevant data about your customers
from various sources, including demographics (age, gender,
location), psychographics (values, interests, lifestyle), purchase
history, online behavior, and interactions with your brand.

 Segmentation criteria: Determine the criteria on which you will

divide your customer base. This could be based on
demographics, interests, buying patterns, customer lifetime
value, or any other relevant factors that align with your
business goals.

 Segmentation analysis: Analyze the collected data and identify

patterns, similarities, and differences among your customers.
Group them into segments or personas based on the
segmentation criteria you defined earlier.

 Persona creation: Develop detailed profiles for each customer

segment or persona. Include information such as
demographics, motivations, goals, challenges, preferred
communication channels, and buying preferences. Use both
quantitative and qualitative data to create a well-rounded
understanding of each persona.
 Validation and refinement: Continuously validate and refine
your customer profiles as you gather more data and insights.
Regularly review and update your segmentation based on
changing market trends, customer behavior, and new
information.

 Application: Utilize customer profiling in various aspects of your

business. Tailor your marketing messages, product
development, pricing strategies, customer service, and
communication channels to align with the needs and
preferences of each customer segment or persona.

 Benefits of customer profiling include:

 Personalized marketing: By understanding your customers'
preferences and motivations, you can create targeted
marketing campaigns that resonate with specific segments,
resulting in higher engagement and conversion rates.

 Enhanced customer experience: Customer profiling enables you

to provide personalized experiences, customized product
recommendations, and tailored customer service, improving
overall satisfaction and loyalty.

 Efficient resource allocation: By focusing your efforts and

resources on high-value customer segments, you can optimize
 marketing spend, streamline operations, and maximize return
on investment.

 New product development: Customer profiles can inform

product development and innovation, helping you identify
unmet needs, preferences, and opportunities in different
customer segments.

 Remember that customer profiling is an ongoing process. As

customer preferences and market dynamics change, regularly
revisit and update your customer profiles to ensure their
relevance and accuracy.

Customer centricity in CRM (Customer Relationship

Management)

o It refers to an approach that prioritizes the customer at the

core of all CRM activities and strategies. It focuses on
understanding and fulfilling customer needs, delivering
exceptional customer experiences, and building strong,
long-term relationships.

 Here are key elements of customer centricity in CRM:

 Customer understanding: It starts with gaining a deep
understanding of your customers, their preferences, behaviors,
and needs. Collect data from various touchpoints, including
 interactions, transactions, surveys, and feedback, to build
comprehensive customer profiles.

 Personalization: Utilize the customer data to personalize

interactions and communications with individual customers.
Tailor marketing messages, offers, and product
recommendations based on their preferences, purchase
history, and demographic information.

 Seamless omnichannel experience: Enable customers to

interact with your brand across multiple channels, such as
online, mobile, social media, and physical stores. Ensure a
consistent and seamless experience, allowing customers to
switch between channels without losing context or facing
hurdles.

 Proactive customer service: Anticipate customer needs and

address their concerns proactively. Provide efficient and timely
customer support through various channels, including phone,
email, live chat, and self-service portals. Use customer data to
personalize support and resolve issues quickly.

 Customer journey mapping: Understand the customer journey

from initial contact to post-purchase activities. Identify
touchpoints, pain points, and opportunities to enhance the
 customer experience at each stage. Optimize processes and
remove obstacles to create a smooth and satisfying journey.

 Continuous feedback and improvement: Encourage and gather

customer feedback regularly to understand their satisfaction
levels and identify areas for improvement. Act on feedback
promptly to address issues, refine products or services, and
enhance the overall customer experience.

 Empowered employees: Equip your employees with the

necessary tools, training, and authority to deliver exceptional
customer service. Foster a customer-centric culture where
employees understand the importance of customer satisfaction
and are empowered to go the extra mile to meet customer
needs.

 Long-term relationship building: Focus on building and

nurturing long-term relationships with customers. Leverage
CRM systems to track customer interactions, preferences, and
purchase history. Use this data to engage customers with
targeted marketing campaigns, loyalty programs, and
personalized offers.

 Benefits of customer centricity in CRM include:

 Increased customer satisfaction and loyalty, leading to repeat
business and positive word-of-mouth.
 Improved customer retention and reduced churn rates.

 Higher customer lifetime value through cross-selling and

upselling opportunities.

 Better understanding of customer needs, enabling innovation

and product development.

 Enhanced brand reputation as a customer-focused

organization.

 By adopting a customer-centric approach in CRM, businesses

can foster stronger relationships with customers, drive growth,
and gain a competitive edge in today's market.

 Customer touchpoints

 Customer touchpoints are the various interactions and points of

contact that customers have with a company throughout their
customer journey. These touchpoints can occur through different
channels and can significantly impact the overall customer
experience and perception of a brand. Here are some common
customer touchpoints:
 Website: The company's website is often the first point of
contact for customers. It includes elements such as landing
pages, product pages, blogs, and contact forms.
 Social media: Interactions on platforms like Facebook, Twitter,
LinkedIn, Instagram, and others provide opportunities for
customers to engage with a brand, ask questions, share
experiences, and provide feedback.

 Physical stores or offices: For businesses with brick-and-mortar

locations, in-person interactions at stores or offices play a
crucial role. This includes the layout, ambiance, customer
service, and overall experience.

 Phone calls: Customers may contact a company via phone to

inquire about products or services, seek support, or make
purchases. Customer service representatives and sales agents
interact directly with customers during these calls.

 Email: Email communication includes various touchpoints such

as welcome emails, order confirmations, shipping notifications,
promotional newsletters, and customer support
correspondence.

 Live chat: Many companies offer live chat support on their

websites or mobile apps. It allows customers to get immediate
assistance and answers to their questions while browsing or
making a purchase.
 Mobile apps: If a company has a mobile app, interactions
through the app, including account management, purchases,
notifications, and support, serve as important touchpoints.

 Advertising and marketing campaigns: Touchpoints can also

occur through advertising channels, such as online ads, TV
commercials, billboards, and print media. These touchpoints
contribute to brand awareness and influence customer
perceptions.

 Product or service usage: The actual experience of using a

company's product or service is a significant touchpoint. This
includes the product's performance, usability, reliability, and
customer support during usage.

 Post-purchase support: After-sales touchpoints, such as

returns, exchanges, and customer support for troubleshooting
or inquiries, are essential for customer satisfaction and loyalty.

 Understanding and managing customer touchpoints is crucial for

businesses to provide consistent and positive experiences at
every stage of the customer journey. By identifying and
optimizing these touchpoints, companies can enhance customer
satisfaction, build stronger relationships, and differentiate
themselves in the competitive marketplace.

Loyalty management
 It refers to the strategies, programs, and initiatives implemented
by businesses to cultivate customer loyalty and encourage repeat
purchases. It involves understanding customer needs,
preferences, and motivations, and then developing and
executing tactics to engage and retain customers over the long
term. Here are some key aspects of loyalty management:
 Customer segmentation: Divide your customer base into
segments based on various factors such as demographics,
behavior, purchase history, and loyalty levels. This
segmentation helps tailor loyalty strategies to specific customer
groups.

 Loyalty programs: Implement loyalty programs that incentivize

customers to engage with your brand repeatedly. These
programs typically offer rewards, discounts, exclusive offers,
points, or other benefits based on customer purchases or
interactions. Loyalty programs can be tiered to provide
additional incentives for higher-value customers.

 Personalization: Leverage customer data to personalize the

customer experience. Tailor offers, recommendations, and
communications based on individual customer preferences and
purchase history. Personalization helps deepen the emotional
connection with customers and enhances their loyalty.
 Exceptional customer service: Provide exceptional customer
service at all touchpoints. Promptly address customer inquiries,
concerns, and issues. Going above and beyond to meet
customer needs helps build loyalty and positive word-of-
mouth.

 Communication and engagement: Regularly communicate with

customers to keep them engaged and informed. Use various
channels such as email, social media, and mobile apps to share
relevant updates, exclusive offers, and personalized messages.
Engage customers through interactive content, surveys, and
feedback mechanisms to foster a sense of involvement and
loyalty.

 Relationship building: Focus on building strong relationships

with customers. This involves understanding their preferences,
anticipating their needs, and showing genuine care and
appreciation. Engage in two-way conversations, actively listen
to customer feedback, and take action to address their
concerns and suggestions.

 Experiential marketing: Create memorable and positive

experiences for customers. Provide unique experiences, events,
or special access that are exclusive to loyal customers. This can
include VIP events, early access to new products or features, or
 personalized surprises that demonstrate appreciation for their
loyalty.

 Data analysis and measurement: Continuously analyze

customer data, loyalty program metrics, and customer
feedback to assess the effectiveness of your loyalty
management efforts. Identify trends, patterns, and areas for
improvement. Use data-driven insights to refine and optimize
loyalty strategies.

 Employee engagement: Engage and train employees to deliver

exceptional customer experiences and reinforce loyalty
initiatives. Employees who are knowledgeable, passionate, and
customer-centric can contribute significantly to customer
loyalty and satisfaction.

 Continuous improvement: Loyalty management is an ongoing

process. Regularly assess and refine your loyalty strategies
based on changing customer needs, market dynamics, and
competitive landscape. Stay updated with emerging trends and
technologies to adapt your approach accordingly.

 Effective loyalty management can lead to increased customer

retention, higher customer lifetime value, positive brand
perception, and advocacy. By fostering loyal customers,
 businesses can gain a competitive advantage and drive
sustainable growth in the long run.

 The loyalty ladder

 It is also known as the customer loyalty ladder or the customer

loyalty hierarchy, is a conceptual framework that illustrates the
progression of customer loyalty and engagement with a brand. It
represents the various stages that customers typically go through
as they develop a deeper relationship with a company. The
loyalty ladder helps businesses understand and manage
customer loyalty by providing a framework for customer
segmentation and targeted marketing strategies. Here are the
typical stages of the loyalty ladder:
 Prospect: At the bottom of the loyalty ladder are prospects who
have yet to engage with the brand. These individuals are aware
of the brand but have not made any purchase or interacted
with the company's products or services.

 First-time customer: This stage represents customers who have

made their initial purchase or engaged with the brand for the
first time. They may have been attracted by marketing efforts,
recommendations, or curiosity about the brand.

 Repeat customer: Repeat customers have made multiple

purchases or engaged with the brand on multiple occasions.
 They have shown a level of satisfaction and trust in the brand,
leading to ongoing transactions.

 Loyal customer: Loyal customers are those who consistently

choose the brand over competitors and exhibit a strong
preference. They have a higher level of engagement, are more
likely to recommend the brand, and have developed a sense of
loyalty and emotional connection.

 Advocate: Advocates are highly loyal customers who actively

promote and recommend the brand to others. They have a
deep belief in the brand's value proposition, have experienced
significant benefits, and willingly share their positive
experiences.

 Brand evangelist: At the top of the loyalty ladder are brand

evangelists. These customers are not only advocates but also
actively champion the brand's values, mission, and purpose.
They may voluntarily participate in user-generated content,
social media campaigns, or community-building efforts to
spread the brand's message.

 It is important to note that not all customers progress through

each stage of the loyalty ladder. Some customers may remain at
lower stages, while others may skip certain stages based on their
individual behaviors and experiences. Additionally, customer
 loyalty is not always linear, and customers can move up or down
the ladder based on their ongoing interactions and experiences
with the brand.

 By understanding the loyalty ladder, businesses can develop

targeted strategies to move customers up the ladder, nurture
their loyalty, and provide tailored experiences and incentives at
each stage. This helps strengthen customer relationships,
increase customer retention, and foster brand advocacy.

 Regenerate response

 There are several types of customer loyalty that can be observed

in customer relationships with a brand. These types of loyalty
can vary in terms of the depth, commitment, and emotional
connection customers have with the brand. Here are some
common types of customer loyalty:

Types of customer loyalty

 Behavioral loyalty: Behavioral loyalty refers to customers who

exhibit repeat purchases and consistent engagement with the
brand. These customers continue to choose the brand out of
habit, convenience, or satisfaction with the product or service.
Behavioral loyalty is often driven by convenience, price, or
functional benefits.
 Attitudinal loyalty: Attitudinal loyalty reflects customers'
positive attitudes, beliefs, and emotional connection to the
brand. These customers have a strong preference for the brand
and exhibit loyalty based on their emotional connection, trust,
and perceived brand value. Attitudinal loyalty is often driven by
factors such as brand reputation, brand image, and alignment
with personal values.

 Cognitive loyalty: Cognitive loyalty is based on customers'

rational evaluations and considerations of the brand's
attributes, features, and benefits. These customers show
loyalty because they believe the brand offers superior quality,
value, or performance compared to competitors. Cognitive
loyalty is driven by customers' cognitive assessments and
rational decision-making processes.

 Affective loyalty: Affective loyalty is rooted in customers'

emotional attachment and positive feelings towards the brand.
These customers feel a sense of belonging, happiness, or joy
associated with the brand and develop a deep emotional
connection. Affective loyalty often arises from experiences,
brand storytelling, customer service, and emotional resonance
with the brand's values or purpose.
 Social loyalty: Social loyalty occurs when customers exhibit
loyalty to a brand due to social influences, group affiliations, or
social interactions. Customers may show loyalty because of
peer recommendations, social norms, or a desire to fit in with a
particular community or group of individuals who favor the
brand.

 Sense of purpose loyalty: Sense of purpose loyalty emerges

when customers feel a strong alignment with a brand's mission,
values, or social responsibility efforts. These customers support
the brand because they believe in its larger purpose beyond the
products or services it offers. Sense of purpose loyalty is driven
by customers' desire to contribute to a cause or make a
positive impact through their association with the brand.

 It's important to note that customers can exhibit multiple types

of loyalty simultaneously, and their loyalty may evolve or
change over time based on their experiences and interactions
with the brand. Understanding the different types of customer
loyalty can help businesses tailor their loyalty strategies,
communication, and experiences to meet customers' specific
needs and motivations.

 Loyalty programs
 Loyalty programs are structured initiatives implemented by
businesses to reward and incentivize customers for their repeat
purchases, engagement, and loyalty to the brand. These
programs aim to strengthen customer relationships, increase
customer retention, and drive incremental sales. Here are some
common types of loyalty programs:
 Points-based programs: This is one of the most popular types of
loyalty programs. Customers earn points for every qualifying
purchase, and these points can be accumulated and redeemed
for rewards, discounts, free products, or exclusive experiences.
The more customers engage with the brand, the more points
they earn and the greater the rewards they can redeem.

 Tiered programs: Tiered loyalty programs have multiple levels

or tiers based on customer activity or spending. Customers
start at a basic tier and can progress to higher tiers by reaching
certain milestones or spending thresholds. Each tier offers
increasing benefits, such as exclusive offers, enhanced rewards,
priority service, or personalized experiences, to incentivize
customers to move up the loyalty ladder.

 Paid programs: Some brands offer premium or subscription-

based loyalty programs where customers pay a membership
fee in exchange for exclusive benefits and perks. These benefits
can include free shipping, early access to sales or new products,
 dedicated customer service, or members-only events. Paid
programs can create a sense of exclusivity and provide
additional value to loyal customers.

 Cashback programs: Cashback programs offer customers a

percentage or fixed amount of cash back on their purchases.
Customers receive these cashback rewards either as direct cash
refunds or as credits that can be applied towards future
purchases. Cashback programs provide a tangible incentive for
customers to continue making purchases with the brand.

 Coalition programs: Coalition loyalty programs involve multiple

brands partnering together to offer a shared loyalty program.
Customers earn and redeem rewards across different
participating brands within the coalition. This type of program
allows customers to accumulate points faster and provides a
wider range of reward options.

 Gamified programs: Gamified loyalty programs incorporate

elements of gamification to engage and incentivize customers.
Customers earn points, badges, or unlock achievements
through various interactions or challenges, encouraging repeat
purchases and engagement. Gamified programs add an
element of fun and competition, making the loyalty experience
more engaging and interactive.
 Experiential programs: Experiential loyalty programs focus on
providing customers with unique, memorable experiences as
rewards. These experiences can include VIP events, access to
exclusive concerts or shows, behind-the-scenes tours, or
personalized experiences with brand ambassadors. Experiential
programs create emotional connections with customers and
foster a sense of loyalty beyond transactional benefits.

 When designing loyalty programs, it is essential to consider

factors such as the target audience, brand positioning,
competitive landscape, and overall business objectives.
Effective loyalty programs should align with customers'
preferences and motivations, provide tangible value, and
continuously adapt and evolve based on customer feedback and
changing market dynamics.
 Lack of value or relevance: If the rewards and benefits offered
by a loyalty program are not perceived as valuable or relevant
by customers, they are less likely to engage with the program.
The rewards should align with customers' preferences, needs,
and desires to motivate them to participate and stay loyal.

 Complexity and barriers: Loyalty programs that are overly

complex or difficult to understand and participate in can
discourage customer engagement. Complicated earning rules,
convoluted redemption processes, or excessive restrictions can
 create barriers and make it challenging for customers to reap
the benefits of the program.

 Lack of differentiation: If a loyalty program fails to differentiate

itself from competitors or does not offer unique and compelling
benefits, customers may not see a reason to choose and stay
loyal to that particular brand. Lack of differentiation can lead to
customer apathy and disinterest in the program.

 Inadequate communication: Effective communication is crucial

for the success of a loyalty program. If customers are not
adequately informed or reminded about the program, its
benefits, and how to participate, they may be unaware of its
existence or forget to engage. Insufficient communication can
result in low program awareness and limited customer
participation.

 Poor customer experience: A loyalty program cannot

compensate for a poor overall customer experience. If
customers have negative experiences with the brand's
products, services, or customer support, the loyalty program
alone may not be sufficient to retain their loyalty. Customers
expect a consistent and positive experience at all touchpoints,
and a subpar experience can undermine the effectiveness of
the loyalty program.
 Lack of personalization: Customers appreciate personalized
experiences and rewards. If a loyalty program fails to offer
personalized recommendations, offers, or rewards based on
individual customer preferences and behaviors, it may not
resonate with customers or make them feel valued and
appreciated.

 Ineffective program management: Poor program management

can contribute to the failure of a loyalty program. Inconsistent
program execution, inadequate tracking and measurement,
difficulty in redeeming rewards, or delays in customer service
responses can erode customer trust and satisfaction, leading to
program abandonment.

 Changing customer expectations: Customer expectations and

preferences evolve over time. If a loyalty program does not
adapt and evolve with changing customer needs and market
trends, it may become outdated and less effective in capturing
customer loyalty.

 To mitigate the risk of failure, businesses should thoroughly

research, plan, and continuously evaluate and optimize their
loyalty programs. Regularly soliciting customer feedback,
monitoring program performance, and making necessary
adjustments based on insights can help enhance the program's
effectiveness and increase customer engagement and loyalty.
 LOYALTY LADDER

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