CUSTOMER RELATIONSHIP MARKETING AND ITS RELEVANCE IN THE DYNAMIC ENVIRONMENT

By: V S RANGARAJAN Posted on: 2008-02-27 ** Print Article ** ** Copy Article ** ** Email Article ** - Category Feed

Article Summary: Customer Relationship Marketing is an activity of identifying the target customers ( profitable, reliable, long standing, etc ) within the existing customer list and orienting all the marketing efforts of the company on them ultimately to retain them with the company as a Loyal / Regular customers and grow.

CUSTOMER RELATIONSHIP MARKETING AND ITS RELEVANCE IN THE DYNAMIC ENVIRONMENT



CONTENTS


A) INTRODUCTION

B) IMPACT OF CUSTOMER RELATIONSHIP MARKETING ( CRM )

C) THE PROCESS OF IMPLEMENTING CUSTOMER RELATIONSHIP MANAGEMENT ( CRM )

D) SUGGESTED STRATEGIES FOR CUSTOMER RELATIONSHIP MARKETING BASED ON FACTORS CONSIDERED

E) CONCLUSION



A) INTRODUCTION

Customer Relationship Marketing is an activity of identifying the target customers ( profitable, reliable, long standing, etc ) within the existing customer list and orienting all the marketing efforts of the company on them ultimately to retain them with the company as a Loyal / Regular customers and grow. In other words, segmenting the customers of the company from the selected target segment of the company, to evolve appropriate strategy to satisfy their needs and thus make profit This way the marketing efforts of the company are focused wastages minimised.

Company gives equal or even more importance for retention of existing customers as it gives towards converting the non users of the product into users of the product and non users of the brand into users of the company’s brand.

Companies have started believing in putting its efforts in retaining the selected existing Regular, Profitable, Loyal Customers than getting New Customers. This can be explained in the following manner It is like, in a tank if the rate of out flow is more than rate of in flow, at any particular time the tank is empty. On the other hand if the outflow is minimized or reduced to negligible rate compared to the rate of inflow the tank is near full, all the efforts taken in lifting the water to the tank is not wasted

Hence Companies have started believing that the marketing cost involved in retaining the Customer to achieve a particular quantum of sale is very much less compared to the cost involved in getting the same through new customers

Companies started believing that the real growth in the market could be achieved not only by increasing the size of the market but also by retaining the existing customers with them.

This is more relevant and easy to practice when the company is in Services sector / Product sector catering to Business to Business marketing. But now a days even in Business to Consumer marketing also this is being practiced by the companies to a larger extent

B) IMPACT OF CUSTOMER RELATIONSHIP MARKETING ( CRM )

The impact of failure of practice of CRM in any company is very serious which will affect the company in its financial performance over a long run

Hence any company should practice CRM to remain profitable and viable

The process of converting the Consumers into Customers and also retaining the Customers as long standing regular Customers by the companies is achieved through Customer Relationship Marketing

The Consumers are the people who consumes the product and the Customers are the people who consumes that particular brand of the Product of the company.

The Consumer become aware of a product, tries it, accepts it, prefers it, become loyal to it, develops obsession towards it. The efforts are taken by the industry as a whole in Product building ( example - Tamilnadu Milk Federation )

The Customer becomes aware of the brand, tries the brand, accepts the brand, prefers the brand, become loyal to the brand, develops obsession towards the brand. The efforts are taken by the company in brand building ( example - Aavin brand milk )

The Customer could be further classified into 1) Customer and 2) Regular Customer / Loyal Customer. Once the Consumer reached the stage of Preferring the Brand he could be considered as a Customer and the company has succeeded in converting a Consumer into a Customer. Further when that Customer has reached the stage of Loyal / Regular Customer and the company has succeeded in converting a Customer into a Regular / Loyal Customer

Companies have started realizing that it is wise for the companies to retain the existing Regular Customers and Converting Prospective Customers into Regular Customers than hunting for New Customers

Effect of loosing Prospective Customer

Consumer / Prospective Customer becomes Customer only after he reaches the final stage or at least the previous stage of the final stage as mentioned

There is every chance of loosing the Consumer before he is converted into Customer which could be seen from the following

1) Consumer comes to know about the Brand Tries it and stop buying next time ( not accepting the Brand )
2) Consumer comes to know about the Brand Tries it, Accepts it and considers that Brand as one of the other Brands available in the Market ( no Unique Selling Proposition available in the Brand )
3) Consumer comes to know about the Brand, Tries it, Accepts it and Prefers it over the other Brand but due to various reasons not able to become loyal to the Brand or become Customer of the Company’s Brand. ( non availability of the Brand in the Market )

Till this stage the Consumer could be classified as Prospective Customer. The loss to the company ( in terms of Effort, Time and Money ) depends on the stage in which it looses its Prospective Customer. Later the stage in which it looses the Prospective Customer more is the loss to the company and vice versa

Effect of loosing Loyal Customer

There is every chance of loosing the Customer by the company before he is converted into Regular / Loyal Customer which could be seen from the following

1) Customer who is likely to become Loyal Customer suddenly Switches Brand - technology change / sudden remarkable product development of competitors

2) The Regular Customer suddenly stops buying ( fail to exist in the area / in the world )

Till this stage the Customer could be classified as Prospective Loyal Customer. The loss to the company ( in terms of Time, Effort and Money ) depends on the stage in which it looses its Prospective Loyal Customer. Later the stage in which it looses the Prospective Loyal Customer more is the loss to the company and vice versa

C) THE PROCESS OF IMPLEMENTING CUSTOMER RELATIONSHIP MANAGEMENT ( CRM )

The following are the steps involved in implementing CRM

1) Getting new Customer from Consumers in the Market
2) Converting him to prospective Customer
3) Converting him to Regular / Loyal Customer and retaining him at the same level


1) Getting new Customer from Consumers in the Market

To identify the overall factors determining the Scope of Marketing the Product two level operations are carried out

a) Macro Level operations

b) Micro Level operations


a) Macro Level Operations

1) Scanning the Environment

2) Market Research

3) Segmenting the Market

4) Identifying the Target Market Segment

5) Resources Planning

b) Micro Level operations

1)identify the potential customers ( people with need and capacity to buy ) among the
potential customers identify the prospective customers ( people with inclination to
buy )

2) using the promotional methods create interest / motivate / facilitate the buyer to
take decision

4) obtain the order and execute the same



2) Converting him to prospective Customer


1) Collection of Data Through Data Mining Process( Customer wise data like quantity of purchase, quality of the product demanded, profitability, consumption pattern, season of purchase, types of product purchased, frequency of purchase, etc).

2) Analysis of Data to segment Most important customer, important customer, less important customer ( based on the Profitability, turn over, reliability, dependability, consistency, etc of the Customers )

3) Arriving at a differentiated Marketing Strategy with appropriate Promotional methods to make sure that the Consumer makes repeat buy

4) Implementation of strategy arrived

5) Monitoring of the implemented strategy to find defects and to make
Rectification

3)Converting him to Regular / Loyal Customer and retaining him at the same level

1) Encouraging personnel of the company to establish relationship at the personal level with the Customers

2) Initiate business proposals for Partnering, Strategic alliance, Joint Ventures, etc to establish Win Win situation for both Company and the Customers

3) Offering investment options for the Customers in the company


D) SUGGESTED STRATEGIES FOR CUSTOMER RELATIONSHIP MARKETING BASED ON FACTORS CONSIDERED

The Strategies that could be used for implementing CRM varies with many factors and company has to choose appropriate strategy based accordingly

Some of the factors which are to be considered are given below

TYPE OF INDUSTRY ( PRODUCT SECTOR / SERVICES SECTOR )

TYPE OF MARKET ( GOVERNMENT / INSTITUTIONAL / CONSUMER /
INDUSTRY / EXPORT )
TYPE OF CUSTOMER ( NEED BASED / EMOTIONAL BASED )

TYPE OF PRODUCT ( CONSUMER GOODS / INDUSTRIAL GOODS )

TYPE OF SERVICE ( SERVICE TO THE CONSUMER MARKET / SERVICE TO THE INDUSTRIAL MARKET )

TYPE OF MARKET STRUCTURE ( MONOPOLY,OLIOPOLY,MONOPOLESTIC,
PURE COMPETITION )

TYPE OF COMPETITION THAT THE COMPANY IS FACING ( BRAND, INDUSTRY, SUBSTITUTE , SAME BUYING POWER OF BUYER )

TYPE OF CONSUMPTION PATTERN OF THE CUSTOMERS / CONSUMERS

TYPE OF SELLING REQUIRED ( CREATIVE SELLING, ROUTINE SELLING, PROFESSIONAL SELLING BASED ON THE TYPE OF BUY )


TYPE OF INDUSTRY

Services sector

If the company has to adopt concept selling of selling the Services of the company to its customers it has to adopt a different strategy of selling compared to selling Products. The strategy that it has to adopt to retain the customers will be like making available the operator / service provider according to the taste of the customer, making the ambience of the spot place very attractive etc.

Product industry

On the other if the company is marketing goods it can adopt the strategy of taking back the goods returned by the customer without any hesitation, efficient after sales service, etc

TYPE OF MARKET

Government Market

If the company wants to sell and retain the customers of Government organizations is has to adopt to the strategy of maintaining all the required licenses in order, participate in all the Government tenders and quote the competitive price, maintaining good rapport with the decision makers, efficient public relationship management, etc.

Institutional Market

If the company wants to sell and retain the customers of institutions / companies who purchase goods for their people to consume it has to adopt to the strategy of consistent quality, lowest price, regular supply, etc
Industrial Market

If the company wants to sell and retain the customers of Industrial Market / industrial units who purchase the product as raw material / other materials, components, accessories, etc for converting into some other product or for attaching onto some other
Product

When the companies cater to its sister companies requirement / Captive consumption

If the company wants to cater to the requirements of products of inter departmental requirements / sister companies as captive consumption it can adopt the strategy of holding joint meetings, providing suggestions / consultancy services to solve the problems and taking suggestions in the positive manner to the benefit of both the parties

When the companies cater to the Original Equipment Manufacturers ( OEM ) Market

If the company wants to sell and retain the customers catering OEM market, to one or few of the customers, should function like an extended arm of the parent company. It has to take care that it gets involved and participate on every strategic move of the OEM company. The company should always aim in winning the confidence of the Parent company in terms of its technical , financial, managerial capabilities. The parent company should have the opinion that the company is reliable, dependable, trust worthy, the transactions are transparent, maintains open and effective communication.

To support their product the company can adopt ISO Certification, certificates obtained by the Quality testing and certification laboratories, regular customer grievance meet to sort out quality problems and supply shortage problems, etc. The company can also keep sending the comparative statement of its products with its competitors highlighting the advantages of the purchasing the company’s product against its competitors. The testimonials given by the reputed manufacturers on the company’s product and its benefits could also be submitted

When the companies cater to the Replacement Market

If the company wants to sell and retain the customers catering to Replacement Market it can adopt to improved technology components, standardization of parts / components, more margin for the middlemen, etc


When the companies
Consumer Market

When the companies market their product through direct selling

If the company wants to sell and retain the customers of end user market segment / consumer market segment it can adopt the strategy of product development, attractive promotional methods, adding value to the product, etc. This is by increasing the Brand Loyalty of the company’s product

When the companies market their product through indirect selling

If the company wants to sell and retain the customers of Resellers market segment it can adopt the strategy of providing more trade discounts ( purchase value discounts on slab system basis, free gifts, regular meeting to solve the problems of the middlemen, etc. Here each and every activity aims at ‘WIN WIN SITUATION’ ‘PARTNERING CONCEPT ‘ ‘GROWING TOGETHER’ strategies.

Export Market

If the company wants to sell and retain the customers of Importers it can adopt the strategy of frequent visits to their countries with business plans, understanding their requirements, to keep upgrading the technology of the production facilities according to their changing requirements, by avoiding rejects in the goods exported, timely delivery etc. The company should take allnesse

TYPE OF CUSTOMER ( NEED BASED / EMOTIONAL BASED )


If the company wants to sell and retain customers who buys product for emotional benefits the company can keep adding features which will boost the emotional feelings of the customers and keep advertising boosting the image of the owners of the product

TYPE OF PRODUCT ( CONSUMER GOODS / INDUSTRIAL GOODS )


Industrial goods are classified as Raw materials and other materials, Installations, Fabricating materials, Ancillaries, Operating supplies

Example

The installations once bought by the customer will go repurchase after a long interval. But the company needs to have good relationship with him to generate positive’ Word of Mouth’ about the company which will help to get more new customers

Consumer goods are classified as convenience goods, shopping goods, speciality goods and un sought goods

Example


Companies to retain loyalty can adopt the strategy of Exchange offer ( buying the old product and selling the new )

TYPE OF SERVICE ( SERVICE TO THE CONSUMER MARKET / SERVICE TO THE INDUSTRIAL MARKET )

Service to the Consumer Market

Service to the consumer market is Hospital, Education, etc. To retain customers the company can adopt strategies like sending birthday greetings, get together parties, etc

Service to the Industrial Market

Service to the industrial market is Industrial consultancy, providing Industrial loans, etc. To retain customers the company can adopt strategies like sending attractive proposals for expansion, interest concessions, etc

TYPE OF MARKET STRUCTURE (MONOPOLY,OLIOPOLY,MONOPOLESTIC,
PURE COMPETITION )

The magnitude of the CRM very much depends on the Market Structure in which the company is existing

For the company which is existing in Monopoly market structure the CRM required is very much less compared to the company which exists in Pure competition or Monopolistic competition

The strategy which could be adopted in Monopoly market structure will be like making phone calls, act after getting complaints, etc whereas in Monopolistic competition the company has to motivate the retailers, end users to keep purchasing the companies product

TYPE OF COMPETITION THAT THE COMPANY IS FACING ( BRAND, INDUSTRY, SUBSTITUTE , SAME BUYING POWER OF BUYER )

When the company is facing substitute competition the strategy that it can adopt will be like providing advertisements on using the product, the environmental aspects, etc

Example

Jute packing material against plastic packing material in terms of environment protection


TYPE OF CONSUMPTION PATTERN OF THE CUSTOMERS / CONSUMERS

The company can adopt different promotional methods to differentiate between bulk buyers and small quantity buyers. For bulk users / high value purchase in a month more discount could be offered compared to small vale of purchase.

TYPE OF SELLING REQUIRED ( CREATIVE SELLING, ROUTINE SELLING, PROFESSIONAL SELLING BASED ON THE TYPE OF BUY )

For new buy customers the company has to adopt different strategy compared to customers who are buying repeatedly. For certain products repeat purchase may not come.

Example

The Textile machinery company can find new applications for the products thereby increasing the demand of the Textile machines on continuous basis suggesting expansion programs with the existing customers


E) CONCLUSION

Companies without CRM cannot survive and grow. CRM need to be implemented in a systematic and planned manner to avail benefits .As discussed the strategy of CRM very much depends on many factors and the company has to select the appropriate strategy

Article Source: http://www.upublish.info

About the Author:
V S RANGARAJAN
educational qualification B TECH, MBA, M PHIL, ( PH D) INDUSTRIAL CONSULTANCY 18 YEARS INDUSTRY 3 YEARS TEACHING 5 YEARS

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