BACHELORS OF BUSINESS ADMINISTRATION

SEMESTER 5

CUSTOMER RELATIONSHIP MANAGEMENT

MODULE 1

MS. SNEHAL KAPOOR

12/06/2024
What is CRM (customer relationship management)?
CRM (customer relationship management) is the combination of practices, strategies and technologies that
companies use to manage and analyze customer interactions and data throughout the customer lifecycle. The goal
is to improve customer service relationships and assist with customer retention and drive sales growth.
CRM systems compile customer data across different channels and points of contact between the customer and the
company. These can include the company's website, telephone, live chat, direct mail, marketing materials and
social networks. CRM systems can also give customer-facing staff detailed data on customers' personal information,
purchase history, buying preferences and concerns.

Why CRM benefits businesses

The benefits of CRM systems apply to all types of organizations, ranging from small businesses to large
corporations. They include the following:
• Enhanced customer service. Having customer information, such as past purchases and interaction history, easily
accessible helps customer support representatives provide better and faster customer service.
• Trend spotting. Collection of and access to customer data let businesses identify trends and insights about their
customers through reporting and visualization features.
• Automation. CRM systems can automate menial, but necessary, sales pipeline and customer support tasks.
Components of CRM

At the most basic level, CRM software consolidates customer information and documents it into a single CRM database. This lets business users more easily access and manage that information.

Over time, additional functions have been added to CRM systems to make them more useful. Some of these functions include recording various customer interactions over email, phone, social media
and other channels. Automation capabilities have been added to many CRM systems, automating various workflow automation processes, such as tasks, calendars and alerts. Other CRM features
enable managers to track performance and productivity based on information logged within the system.

Common components and capabilities of CRM systems include the following:

• Marketing automation. CRM tools with marketing automation capabilities automate repetitive tasks to enhance marketing efforts at different touch-points in the lifecycle for lead generation. For
example, as sales prospects come into the system, it might automatically send email marketing content with the goal of turning a sales lead into a full-fledged customer.
• Sales force automation. These tools track customer interactions and automate certain business functions of the sales cycle. Sales force automation tools target sales functions where it's
necessary to follow leads, obtain new customers and build customer loyalty.
• Contact centre automation. Designed to reduce tedious aspects of a contact center agent's job, contact center automation includes prerecorded audio that assists in customer problem-solving
and information dissemination. Various software tools that integrate with the agent's desktop tools can handle customer requests to cut down the length of calls and streamline customer service
processes. Automated contact center tools, such as chatbots, can improve customer user experiences.
• Geolocation technology, or location-based services. Some CRM systems include technology that creates geographic marketing campaigns based on customers' physical locations, sometimes
integrating with popular location-based Global Positioning System (GPS) apps. Geolocation technology is also used as a networking or contact management tool to find sales prospects based on a
location.
• Workflow automation. CRM systems help companies optimize business processes by streamlining mundane workloads, enabling employees to focus on high-level and creative tasks that help
them close deals.
• Lead management. Sales leads can be tracked through a CRM platform, enabling sales teams to input, track and analyze data for leads in one place.
• Human resources (HR) management. CRM systems help track employee information, such as contact information, performance reviews and benefits within a company. This enables the HR
department to more effectively manage the internal workforce.
• Analytics. CRM analytics examines user data to create targeted marketing campaigns that can increase customer satisfaction rates.
• Artificial intelligence (AI). AI technologies have been built into CRM platforms to automate repetitive tasks, identify customer-buying patterns and predict future customer behaviours.
• Project management. Some CRM systems include features to help users track client project details, such as objectives, strategic alignment, processes, risk management and progress.
• Integration with other software. Many systems integrate with other software, such as call centre and enterprise resource planning systems.
CRM tools specifically for social media platforms help companies foster customer relationships and monitor customer sentiments around
their brands.
Types of CRM technology
The four main vendors of CRM systems are Microsoft, Oracle, Salesforce and SAP. These four tend to be the best systems for large companies; other providers are popular
among small to midsize businesses. The types of CRM technology offered are as follows.
Cloud-based CRM
• CRM that uses cloud computing is also known as software as a service or on-demand CRM. Data is stored on an external, remote network that employees can access
anytime and anywhere there is an internet connection. Sometimes, a third-party service provider oversees system installation and maintenance. The cloud's quick
and easy deployment capabilities appeal to companies with limited technological expertise or resources.
• Data security is a primary concern for companies using cloud-based systems, as the company doesn't physically control the storage and maintenance of its data. If the
cloud provider goes out of business or is acquired by another company, an enterprise's data could be compromised or lost. Compatibility issues can also arise when
data is initially migrated from a company's internal system to the cloud.
• Companies might consider cloud CRM as a cost-effective option. Vendors typically charge the user on a subscription basis and offer the option of monthly or yearly
payments. However, cost might still be a concern because paying subscription fees for software can be more costly over time than investing in an on-premises model.
• Popular cloud-based CRM providers include HubSpot, Salesforce, Zendesk and Zoho.
On-premises CRM
• On-premises CRM puts the onus of administration, control, security and maintenance of the database and information on the company using the CRM software. With
this approach, the company purchases licenses upfront, instead of buying yearly subscriptions from a cloud CRM provider. The software resides on the company's
servers, and the user assumes the cost of any upgrades. It also usually requires a prolonged installation process to fully integrate a company's data. Companies with
complex CRM needs might benefit from an on-premises deployment.
• Many cloud-based providers, such as Aptean and Salesforce, also offer on-premises versions of their CRM software.
Open source CRM
• An Open Source CRM system makes source code available to the public, enabling companies to make alterations at no cost to the company using the system. Open
source CRM systems enable the addition and customisation of data links on social media channels, assisting companies looking to improve social CRM practices.
• Platforms such as Bitrix24, OroCRM, SugarCRM and SuiteCRM offer alternatives to the proprietary platforms from Salesforce, Microsoft and other vendors. Adoption
of any of these CRM deployment methods depends on a company's business needs, resources and goals, as each has different costs associated with it.
CRM examples in practice
Examples of CRM use vary by the type and purpose of the specific CRM system. Common ones include the following.
• Contact center
Traditionally, data intake practices for CRM systems have been the responsibility of salespeople and marketing departments, as well as contact center agents. Sales and marketing
teams procure leads and update the system with information throughout the customer lifecycle. Contact centers gather data and revise customer history records through service calls
and technical support interactions.
• Social CRM
Social media in CRM involves businesses engaging with customers directly through social media platforms, such as Facebook, Twitter and LinkedIn. Social media presents an open
forum for customers to share experiences with a brand, whether their airing grievances or promoting products.
To add value to customer engagement on social media, businesses use various social CRM tools that monitor social media conversations. These tools look for everything from specific
mentions of a brand to the frequency of keywords used to determine a company's target audiences and which platforms they use. Other tools are designed to analyze social media
feedback and address customer queries and issues.
Companies are interested in capturing customer sentiments, such as the likelihood they recommend products and overall customer satisfaction to develop marketing and service
strategies. Companies try to integrate social CRM data with other customer data obtained from sales and marketing departments to get a single view of the customer.
Another way in which social CRM adds value for companies and customers is through customer communities, where customers post reviews of products and engage with other
customers to troubleshoot issues and research products in real time. Customer communities provide low-level customer service for certain kinds of problems and reduce the number
of contact centre calls. These communities also provide new product ideas and feedback that companies can use in lieu of focus groups.
• Mobile CRM
CRM applications built for smartphones and tablets have become a must-have for sales representatives and marketing professionals who want to access customer information and
perform tasks when they aren't physically in their offices. Mobile CRM apps take advantage of features that are unique to mobile devices, such as GPS and voice
recognition capabilities, to give sales and marketing employees access to customer information from anywhere.
• Business-to-business practices
A CRM system in a business-to-business (B2B) environment helps monitor sales as they move through the sales funnel, enabling a business to address any issues that might come up
during the process. CRM strategies in the B2B market give sales reps more visibility into leads, increasing efficiency throughout the sales process.
CRM systems have moved far beyond traditional customer profiling functions.
CRM challenges
For all the advancements in CRM technology, without the proper management, a CRM system can become little
more than a glorified database in which customer information is stored. Data sets must be connected,
distributed and organised so that users can easily access the information they need.
Companies might struggle to achieve a single view of the customer if their data sets aren't connected and
organised in a single dashboard or interface. Challenges tracking the customer journey also arise when systems
contain duplicate customer data or outdated information. These problems can lead to a decline in customer
experience (CX) because of issues such as long wait times during phone calls and improper handling of
technical support cases.
CRM systems work best when companies clean their existing customer data to eliminate duplicate and
incomplete records before they supplement CRM data with external sources of information.

Will CRM be affected by AI?

CRM systems benefit from nascent trends and technologies in the AI space. Sales forecasting is one area that
will benefit. Predictive AI algorithms in a CRM system can analyze historical data about customers and
companies to predict future sales outcomes and future market trends to shape an organisation’s decision-
making.
AI also provides automation for routine and repetitive tasks, such as data entry and follow-up emails to
customers or potential customers. Advanced chatbots and sentiment analysis capabilities help synthesise
information from interactions to better identify customer needs and inform future interactions.
HubSpot and Salesforce are examples of enterprise-grade CRM providers that are integrating up-to-date AI
capabilities into their platforms. It remains to be seen how quickly smaller organisations and startups with CRM
offerings and significantly less resources will be able to integrate similar AI features. Still, these AI
enhancements will become more commonplace in the future.
CRM tools are required to manage customer data, but it also helps for businesses to have a strategy that
priorities CX. Learn some tips for building a valuable CX experience.
The Emergence of CRM Practice
As observed by Sheth and Parvatiyar (1995b), developing customer relationships has historical antecedents going back into the pre-
industrial era. Much of it was due to direct interaction between producers of agricultural products and their consumers. Similarly,
artisans often developed customized products for each customer. Such direct interaction led to relational bonding between the
producer and the consumer. It was only after the advent of mass production in the industrial era and the advent of middlemen that
interaction between producers and consumers became less frequent leading to transaction oriented marketing. In other words, the
production and consumption functions became separated leading to the marketing functions being performed by middlemen, and
middlemen, in general, are oriented towards economic aspects of buying since the largest cost is often the cost of the goods sold.

In recent years however, several factors have contributed to the rapid development and evolution of CRM. These include the
growing de- intermediation process in many industries due to the advent of sophisticated computer and telecommunication
technologies that allow producers to directly interact with end-customers. For example, in many industries such as the airline,
banking, insurance, computer software, or household appliances industries and even consumables, the de-intermediation process
is fast changing the nature of marketing and consequently making relationship marketing more popular. Databases and direct
marketing tools give these industries the means to individualize their marketing efforts. As a result, producers do not need the
functions formerly performed by middlemen. Even consumers are willing to undertake some of the responsibilities of direct ordering,
personal merchandising, and product use related services with little help from the producers. The recent success of on-line banking,
Charles Schwab and Merryll Lynch’s on-line investment programs, direct selling of books, automobiles, insurance, etc., on the
Internet all attest to the growing consumer interest in maintaining a direct relationship with marketers.

The de-intermediation process and consequent prevalence of CRM is also due to the growth of the service economy. Since
services are typically produced and delivered at the same institution, it minimizes the role of middlemen. Between the service
provider and the service user an emotional bond also develops creating the need for maintaining and enhancing the relationship. It
is therefore not difficult to see that CRM is important for scholars and practitioners of services marketing (Berry & Parsuraman,
1991; Bitner, 1995; Crosby & Stephens, 1987; Crosby, Evans, & Cowles, 1990; Gronroos, 1995).

Another force driving the adoption of CRM has been the total quality movement. When companies embraced the Total
Quality Management (TQM) philosophy to improve quality and reduce costs, it became necessary to involve suppliers and customers
in implementing the program at all levels of the value chain. This created the need for closer working relationships with customers,
suppliers, and other members of the marketing infrastructure. Thus, several companies, such as Motorola, IBM, General Motors,
Xerox, Ford, and Toyota, formed partnering relationships with suppliers and customers to practice TQM. Other programs such as
“just-in-time” (JIT) supply and “materials-resource planning” (MRP) have also made use of interdependent relationships between
suppliers and customers (Frazier, Spekman, & O’Neal, 1988).
With the advent of digital technology and complex products, the systems selling approach has become common. This approach has
emphasized the integration of parts, supplies, and the sale of services along with the individual capital equipment. Customers have
liked the idea of systems integration and sellers have been able to sell augmented products and services to customers. Then, the
popularity of system integration began to extend to consumer packaged goods as well as to services (Shapiro & Posner, 1979). At the
same time some companies started to insist upon new purchasing approaches, such as national contracts and master purchasing
agreements, forcing major vendors to develop key account management programs (Shapiro & Moriarty, 1980). These measures
created intimacy and cooperation in the buyer-seller relationship. Instead of purchasing a product or service, customers were more
interested in buying a relationship with a vendor. The key (or national) account management program designates account managers
and account teams that assess the customer’s needs and then husband the selling company’s resources for the customer’s benefit.
Such programs have led to the establishment of strategic partnering within the overall domain of customer relationship
management (Anderson & Narus, 1991; Shapiro 1988).
Similarly, in the current era of hyper-competition, marketers are forced to be more concerned with customer retention and loyalty
(Dick & Basu, 1994; Reichheld, 1996). As several studies have indicated, retaining customers perhaps offers a more sustainable
competitive advantage than acquiring new ones. What marketers are realizing is that it costs less to retain customers than to
compete for new ones (Rosenberg & Czepiel, 1984). On the supply side it pays more to develop closer relationships with a few
suppliers than to work with more vendors (Hayes, Wheelwright, & Clarke, 1988; Spekman, 1988). In addition, several marketers are
concerned with keeping customers for life rather than with only making a one-time sale (Cannie & Caplin, 1991). There is greater
opportunity for cross-selling and up-selling to a customer who is loyal and committed to the firm and its offerings. In a recent study,
Naidu, Parvatiyar, Sheth, and Westgate (1999) found that relational intensity increased in hospitals facing a higher degree of
competitive intensity.
Also, customer expectations have been changing rapidly over the last two decades. Fueled by new technology and the growing
availability of advanced product features and services, customer expectations are changing almost on a daily basis. Consumers are
less willing to make compromises or trade-offs in product and service quality. In a world of ever changing customer expectations,
building cooperative and collaborative relationships with customers seems to be the most prudent way to keep track of their changing
expectations and appropriately influencing them (Sheth & Sisodia, 1995).
Finally, many large internationally oriented companies are today trying to become global by integrating their worldwide operations.
To achieve this they are seeking cooperative and collaborative solutions for global operations from their vendors instead of merely
engaging in transactional activities with them. Such customers’ needs make it imperative for marketers interested in the business of
companies that are global to adopt CRM programs, particularly global account management programs (Yip & Madsen 1996). Global
account management (GAM) is conceptually similar to national account management programs except that they have to be global in
scope and thus more complex. Managing customer relationships around the world calls for external and internal partnering activities,
including partnering across a firm’s worldwide organization.
 Customer Profitability Analysis: Definition, Formula, Benefits

Customer Profitability Analysis Definition

CPA is a managerial accounting method that allows businesses to determine the overall profit a customer generates. A profitable customer is
someone who generates a revenue stream greater than the cost of their acquisition, selling, and serving. Companies calculate the CPA on a
customer level or for the entire customer group.
When companies are more focused on products, departments, and locations of their offices, they often tend to lose focus on the customers.
As a result, the companies have to sometimes bear the cost of maintaining unprofitable customers which is detrimental to their business.
CPA allows companies to evaluate their customers and know how beneficial it is for them to keep the customers. Based on this value they can
decide upon the cost of serving them or even to decide whether to continue or let them go.
It has been found in a study that the size of the customer is not directly proportional to their profitability. Sometimes even the large-sized
customers can turn out to be unprofitable ones for a business.
 Customer Profitability Formula
To calculate CPA, you need the annual profit per customer, and the total duration a customer stays with your business.

Annual profit = (Total revenue generated by the customer in a year) – (Total expenses incurred to serve the customer in a year)

The total revenue can be generated by the following sources that you need to include:
• Recurring revenue
• Upgrades to the higher plans
• Cross-buying relevant products
And, expenses can be incurred from the following sources which also you need to consider:
• Cost of customer service
• Maintaining a customer success team
• Loyalty perks
• Operational cost
Finally, when you have the annual profit, the customer profitability analysis calculation goes like this:
CPA = (Annual profit) x (no. of years customer stays with company)

CPA allows you to understand the business from a profitability viewpoint. Methods like activity-based costing help you assign a cost to
each activity associated with a product or service. Businesses can leverage customer account profitability analysis in the following
areas to benefit from this method.
 BENEFITS
• Trim out the cost factors: One of the most common exercises to analyse customers is customer segmentation. After segmentation, businesses
can segregate the group of customers that are costing more than others. It is still viable to do business with a low-profit generating group. But
on a deeper analysis, if you find a group of customers that are costing more than the revenue they are generating, then it is advisable to shut
your services to them. By letting them go, you are making your customer base more efficient in your growth engine.
• Marketing to the right segment: When the customer segmentation according to profit range has been identified, they can be used for further
operations. The attributes of the most profit-generating customer group must be recorded and used for further acquisition. Marketing teams
can design their campaigns based on those attributes to attract more such customers. Furthermore, based on their profitability range,
marketers can decide what deals and discounts they can offer to the prospects.
• Customised retention strategy: After finding the customer group with different profitability, companies can customise their retention
strategies for each group. For the customers with the highest profitability, companies can afford to give a service of the highest quality. That
means, they can spend more on serving those elite customers.What engagement model to choose from – high-touch or low-touch? How many
CSMs must be employed for a specific group of customers? Questions like these can be easily answered when you know the cost behind each
choice and the profit a customer group would generate. To retain high-value customers, through CPA, you get a clear margin of how much you
can spend on building their loyalty. Initiatives like customer loyalty programs can be easily designed based on the profit margin for a customer
segment.
• Enhancing operational efficiency:The main reason for a customer group to generate lower profits is not always the customer. There might be
few flaws in the internal operations of the company that is costing them more to serve the customers.According to a customer profitability
analysis example, let’s say the lower profit customer group is consuming a lot of resources to deal with the same issue in a product over and
over again. Instead of allocating resources to that recurring issue, it might be beneficial for the company to build a feature in the product itself
that resolves the issue. This would not only lower the operational cost but would also make your product better for future customers.
How to do Customer profitability analysis

To do a Customer profitability analysis, you need to follow a certain approach. The key is to segment the customer base, determine revenues, attribute costs and also
have an activity-based costing approach. Let us know all the steps in depth here.

• Segmenting customers :The base for a profitability analysis is customer segmentation. This will differ across industries and companies. It can be demographic-
based on customer age, income, area, etc. It can also be psychographic that is based on customer needs, behaviours, values, interests, and attitude.
• Revenue Attribution:Once segmentation is done, you need to calculate revenue for each segment. The annual revenue is a sum of all segments. Adjustments like
discounts, fees, service charges must be included and adjusted accordingly.
• Cost attribution: Calculate the annual cost per segment. This will be customer costs, service costs, product costs, sales, marketing, and distribution costs. These
costs are usually hidden and need to be added to determine the cost attribute.
• Analysis – Profit, Less profitable, unprofitable: Profitable customer segmenting also requires analysis of segments. Classifying those segments that have better
revenues over costs is necessary. It must include calculating profitability over the lifetime of customers.
• Develop strategies to maximise profits based on focus on specific segments
The next step is to create strategies that increase revenues, create long term relationships, and enhance customer retention and loyalty programs. Strategies can include
elimination of least profitable aspects, re-engineering customer groups into profitable ones by increasing revenue and decreasing costs.
• Review the Impact
Any new strategy or practice needs to be implemented and worked up accordingly. This needs to be reviewed after appropriate periods of time to understand impact on
customers.
• Mistakes made while performing customer profitability analysis
While performing customer profitability analysis, it is necessary to track some mistakes. If you know these mistakes in advance ,you can avoid making them. Customer
profitability analysis allows you to spot long-term customers, identify buyer habits, and improve targeting towards customers.To calculate customer profitability, you need to
track customer behaviour and activity. The market is, however, subject to changes and different resources. All this makes it necessary to reduce errors in calculating customer
profitability as much as possible.
• Assuming every product is the same
Customer profitability analysis requires you to assume every product is different. One mistake often made is not accounting for the difference in products. If you assume that
all products are equal, it leads to varied impacts. You must keep all differences in mind to measure the right impact. In multi-product enterprises, it is tougher to ascertain the
impact of a specific product. However, calculating customer profitability in the right manner drives improved customer retention.
• Not taking into account all the costs involved
Sometimes while calculating customer profitability, one might forget other costs involved. It is easy to forget all the costs involved in the business. If you don’t track these
costs, it will reduce the overall profitability. Costs in any company can include sales costs, marketing, transportation, handling, warehousing, and more. These costs might
sometimes be omitted from the equation.
• Calculating profitability in terms of the customer instead of product
Customer profitability analysis can go wrong if profits are calculated against the customer. For example- while calculating customer profitability analysis, one should not see
how much profit was generated from one customer. The process needs to be measured as profit generated from the product. The product must be the central focus of the
profitability structure. Profitability needs to calculate per product.
• Selecting the incorrect time frame
While conducting the customer profitability analysis, it is necessary to pick the right time frame. The time frame needs to be long to enhance results. This helps since you get
the right picture of the customer’s lifetime value. The time frame needs to cover the aspects of product usage. If you include a short time frame, you cannot be sure if the
customer underwent product adoption or not.
What should be done to improve customer profitability analysis

Customer profitability analysis helps determine which customers are in the profitable bracket. It helps
improve businesses to include customer satisfaction, value, and market share. Customer profitability helps
track potential trends so that businesses can be steered that way. You can also decide on better pricing
strategies for the business. Customer profitability analysis, if done right, allows matching customers with
better-performing customers to draw insights and offer targeted content.
Keeping track of the product performance, customer product-usage time length, product features, and all
costs- internal and external will help improve the customer profitability analysis.
THANK YOU