Customer Relationship Management

The use of customer relationship management (CRM) as a strategic approach has become increasingly popular in recent decades, and that trend shows no signs of changing. It is critical for businesses to understand how strategic and customer-centric CRM can support their efforts to achieve their corporative objectives. Thus, this first chapter offers a detailed overview of the key terms and introduces important constructs that readers will need to recognize and understand if they hope to gain full comprehension of this topic. After defining strategic CRM in its current state and putting it in context with respect to the changing fields of consumers, the marketplace and the marketing function, this chapter outlines the benefits of strategic management of customer value. Finally, it details insights into the past, current, and future developments that have marked and continue to influence strategic CRM.

In light of the digital transformation relationship marketing as the heart of strategic CRM has gained substantial traction as markets get increasingly competitive and customers get increasingly demanding. In order to stay relevant, companies must create value for the customers while at the same time extracting enough value from them. Strategically implemented CRM is a key component to meet this challenge by balancing Customer Perceived Value and Company Value. Using a customer-value based approach to CRM, profits for the company as well as the satisfaction of their customers can be increased in the long run. Subsequently, the underlying processes are illustrated using the Satisfaction-Loyalty-Profit Chain (SPC). We explain why delivering value to the customers in the end translates to value for the firm. Moreover, we describe the different dimensions of value that a company can derive from customers and we consider various links within the SPC. Finally, using empirical studies this chapter shows that these links are not always linear and symmetric, and vary across industries and customer segments.

This chapter examines the strategic aspects of CRM in detail while also providing deeper insights into the distinct requirements and key success factors for developing and implementing efficient, effective customer management strategies. Section 3.1 introduces the four main components of a CRM strategy: customer-management orientation, integration and alignment of organizational processes, information capture and alignment of technology, and CRM strategy implementation. The following section explores the main steps for developing a CRM strategy, before the chapter concludes with an investigation of ways to manage relationships with key stakeholders, including suppliers, employees, and investors.

Implementing the CRM Strategy involves putting together a sequential order of operations that comprises of the following components: (1) the various elements of a CRM System such as the company to customer touch points that cover sales, marketing, and service functions, (2) ascertaining the ROI of the planned CRM initiative by considering the costs and implementation timeframe, and (3) the project and data requirements for the deployment of the CRM project. To explain the process of CRM implementation, this chapter reviews a case study involving British financial service company Capital One. This case highlights the factors that impact the implementation of CRM in an organization.

As a precursor to understanding and applying customer management concepts, it is necessary to define measures or metrics of marketing activities and their outcomes. This chapter reviews traditional marketing metrics and introduces various primary customer-based metrics for acquisition and customer activity measurement, before it explains some popular customer-based metrics. Some of the primary customer-based metrics introduced in this chapter form the inputs to derive customer value—the key metric that drives decision making in the age of data-based marketing.

Customer value management rests on the idea of allocating resources differently according to the characteristics of different customers. The basis of this differential resource allocation is the economic value of the respective customer to the firm. Thus, before one can start to manage customers, one must have developed a thorough understanding of how to compute the value contribution each customer makes to a firm. Various economic concepts and procedures have been developed that help us to achieve this. Chapter 5 proceeds to conceptualize strategic metrics of customer value and introduces popular customer selection strategies and techniques to evaluate these strategies.

This chapter describes the importance and benefits of data mining and gives a detailed overview of the underlying process. The data mining procedure breaks down into five subsections: defining the business objectives, getting the raw data, identifying relevant variables, gaining customer insight, and acting. The discussion of these steps will help the reader understand the overall process of data mining. Furthermore, the process steps are illustrated with the case study of Credite Est (name disguised), a French mid-tier bank. Finally, the case study, “Yapi Kredi—Predictive Model–Based cross-sell Campaign,” shows a comprehensive application of data mining.

This chapter discusses the various uses of databases as a successful tool for understanding customers. Using relevant industry examples, this chapter explains customer databases by categorizing the types of databases, illustrating the benefits of marketing databases, and highlighting the uses of marketing databases. The chapter shows the different levels and methods of categorizing the databases by their respective main business function, information content, active or passive approach, or structure. Further, the benefits of implementing each category of database that allow marketers to analyze and customers, classify them into different groups, and subsequently implement specialized marketing programs for each group, are illustrated. Finally, the uses of these databases that firms can deploy, including identifying profitable customers, improving communication to individual customers, and positively influencing various aspects of business operations are highlighted.

Although CRM has the potential to provide firms the ability to optimize their marketing budgets and increase revenues, a subpar implementation stage can cost the firm millions of dollars, cause operational inefficiencies, or even drive away customers. In order to avoid these adverse results, firms should recognize and understand the various CRM implementation strategies that are best fitted to their needs. This chapter shows three strategies associated with CRM implementations as being: (1) developing in-house software, (2) purchasing licensed software from a third party vendor, and (3) outsourcing to a managed service provider. As well as identifying them, the chapter investigates the various degrees and methods of customization that exist within each strategy while weighing the costs and benefits of each one. Finally, the chapter describes the implementation of these strategies as two options: (a) Stage wise implementation, and (b) Enterprise-wise implementation, each of which has its own unique advantages and disadvantages. By showing the distinct CRM strategies and the possible methods of implementation, the chapter shows that with careful consideration, a successful implementation of a CRM system can be achieved.

Loyalty programs (LPs) are critical CRM tools used to identify, reward, and successfully retain profitable customers. This chapter gives a deeper introduction into the strategic use of this tool by presenting several industry examples. In two parts, it deals with the design and the effectiveness of LPs. Initially, this chapter details the objectives and design of various loyalty programs, along with several LP failures that highlight the elements and determinants of a successful program. By reviewing several of these LP characteristics, this chapter offers a systematic investigation of the outcomes and determinants of LP success, as well as guidelines for designing optimal programs. The key dimensions of LP design, including reward and sponsorship, also are explained in detail and illustrated with relevant case studies. Then in the second part of the chapter, the discussion of the effectiveness of loyalty programs introduces four key drivers of effectiveness and details their influence schematically. Empirical evidence about the performance of LPs across various industry segments also illustrates the success factors, leading into explanations of how firms can create competitive advantages by operating effective loyalty programs and focusing on value alignment. Finally, a seven-point checklist sums up the most important prerequisites for successful design and implementation of loyalty programs.

This chapter defines campaign management as a series of interconnected promotional efforts, usually undertaken within a defined timeframe, designed to capture customer’s interest, and thereby achieve precise marketing goals. Marketing campaigns can be used by firms to identify prospective customers, acquire customers, and retain and reward existing customers. The four phases that are required for a successful campaign management process are: (1) campaign planning and development, (2) campaign execution, (3) analysis and control, and (4) campaign feedback. The chapter describes the various objectives that should be set forth within each phase and the methods by which a firm should strive to accomplish these goals. Further, the chapter provides the various channels through which firms can maximize customer interaction, including phone, direct mail, the Web, wireless devices, email, direct sales, and partner network. Through various examples and case studies, the chapter also highlights how creating successful relationships with customers is contingent upon the firm’s ability to use the right method of contact with the right customer at the right time.

This chapter deals with the aspect of CRM strategy implementation in relation to the management of different distribution channels through which companies interact with their customers. Current multichannel-issues that firms are facing nowadays are presented and insights into the management of the respective challenges are provided. In Sect. 12.2, the role of channels in creating and maintaining customer relationships is introduced including a discussion of emerging trends with regard to traditional and electronic channels. Furthermore, related chances and challenges for the implementation and maintenance of CRM are highlighted. The main part of this chapter captures attributes of the design of multichannel offers as well as giving instructions on how to do so successfully. Finally, worthwhile insights into the management of both multichannel systems and shoppers are given.

CRM is not only an important tool in markets directed toward end consumers but also plays a major role in the B2B context. This chapter serves to highlight the internal and external perspectives of Sales Force Management (SFM), an important construct of CRM strategy implementation in a setting where both parties involved are companies or institutions. With the main objectives being the building and maintenance of stronger buyer-seller relationships as well as managing the value of these relationships, SFM builds the central aspect of this chapter. The first part deals with the internal perspective and introduces Sales Force Automation (SFA) as a means to manage buyer-seller relationships both effectively and efficiently before introducing Key Account Management (KAM) as important link between buyer and seller which helps to allocate the right activities to the right customers. Instructions and suggestions on how to realize SFA benefits and successfully implementing a KAM program are also given. The external perspective of SFM is highlighted in the third part of this chapter where the ongoing shift from products to services or hybrid offerings at the core of B2B activities is discussed and guidelines for the execution of a successful shift are presented.

Companies are increasingly collecting and using data on their current and potential customers to improve their CRM, sales, and service effectiveness. At the same time, they are faced with a growing reluctance of customers to disclose their personal information or to allow tracking of their behaviors because of privacy concerns. This chapter discusses the concept of customer privacy concerns and the respective implications for successful CRM practices. After introducing trends and underlying drivers of customer privacy concerns, this chapter sheds more light on the different governmental regulations concerning privacy in a cross-country comparison. Sections 14.4, 14.5, and 14.6 continue with presenting the underlying psychological processes and respective customer responses which are summarized in a comprehensive conceptual framework. At the end of this chapter, implications for a responsible privacy handling related to CRM are drawn.

Within a short period of time, social media has risen to a multi-faceted, two-way marketing and service channel. Its handling bears novel opportunities, but also large risks. Consumers and firms act and interact on social media platforms in various ways: from exchanging thoughts and recommendations about products and services, seeking help or stating complaints, up to taking part in challenges and co-creation activities. The spectrum of what social media means for CRM extends well beyond simple advertising. Yet, these advancements are still rather young, often prompting firms to act on instinct rather than a solid foundation of truths about social media management. We shed light on different topics in the realm of CRM on social media, each of which presents unique challenges for management: word-of-mouth (WOM) and its impact on brands, return on social media campaigns, brand sales in the entertainment industry, and social couponing. Each paragraph discusses the factors that determine success and failure in social media management, and gives recommendations for marketers.

This chapter defines the concept of Customer Lifetime Value (CLV) and provides an approach to compute CLV. In simple terms, CLV refers to the net present value of future cash flows from a customer. Using a numerical example, this chapter provides the approach and formula to compute CLV. It also discusses the various drivers that can maximize CLV for both B2B and B2C firms. Further, the chapter discusses some of the proven strategies to maximize customer profitability. First, the chapter discusses the relationship between customer lifetime with the firm and the resulting profitability. Based on this relationship, this chapter discusses a model that can be used to measure the lifetime values of customers when they share a noncontractual relationship with the firm (i.e., a relationship in which customers are not bound by contracts). Second, a model for incorporating customers’ projected profitability into lifetime duration computation is discussed. This model builds on the idea and approach discussed in the first model. Finally, a model for identifying the true value of a lost customer is also discussed.

This chapter attempts to answer the following questions: (1) What should be the total budget for acquisition and retention? (2) How much should be spent on customer acquisition and customer retention? and (3) How should these expenditures be allocated between contact channels? The links between acquisition, retention, and profitability, as well as, balancing acquisition and retention resources are discussed in reference to maximizing customer profitability. In addition to measuring customer profitability and optimal resource allocation, the chapter also highlights the importance of accurately valuing a customer by defining customer brand value and customer referral value. Also discussed are the linking of customer referral value and customer lifetime value, as well as customer brand value and customer lifetime value, and the managerial implications thereof.

This chapter discusses the current and future states of CRM. As it stands, there are three current CRM perspectives: (1) Strategic CRM, has as an objective to mold the interactions between a firm and its customers in order to maximize CLV for the firm. (2) Analytical CRM, which is designed to help firms migrate from relying entirely on traditional marketing metrics to customer-based value metrics. (3) Operational CRM, is gaining significant traction among firm due to changes with respect to (a) consumers, (b) marketplaces, (c) technology, and (d) marketing functions. This chapter also discusses three key areas in which CRM will be expanding in the near future: (1) Social CRM (2) Global CRM and (3) Database CRM.