Strategy And Organization

Strategy and Organization PRESENTED BYBALRAM JAY KUMAR NAHATA ARVIND JOSHI APARNA PAL

Topics Covered ■

History of CRM

■

Dynamics of Customer Supplier Relationships

■

Nature and context of CRM strategy

■

The relationship oriented organization

History

Objective of marketing activity Long standing and clear tendency To focus on SALE

Consequences Feelings of salesman and buyers during PURCHASE and USE process

Emotions

Better synchronization of emotions Precondition for customer & supplier Development of long term relationship

After the sale is over

Relation seldom ends Relation intensifies after sales Helps buyer’s choice next time

Examples Financial services Consulting General contracting Capital goods

Marriage Sales Consummates courtship Marriage begins

Good marriage Depends on how seller manages the relationship Quality of marriage determines whether it will continue, be troubled or end in divorce

Transactional Mktg

Focuses on salesmen Not on marketing

Objective of transactional marketing Make customers happy This happiness to translate into future repeat purchases

Marketing as exchange process Between buyer and seller

Formed subsequent conceptualization of

relationship marketing Various exchanges are involved

Relationship

Feelings that two people have for each

other Mutual attraction and respect Consideration Dependency

These aspects will appear only if certain

conditions are met again

Conditions

Interactions between two parties Activities of one influences others &vice-versa

Certain degree of continuity Interactions from past influence present and future interactions

Actual events Interactions dependent on occurrence

Primary vs Secondary reln’

Primary ( Love relationship between a man

and a woman ) Basic long term inter-personal relations Emotional bonding Comprise roles, behaviors, situations Not limited by strict route governing contract People involved generally know one another well One person cannot be automatically replaced

Primary vs Secondary reln’

Secondary ( between a customer & a

supplier ) Short term interpersonal relation Limited degree of social interaction Fairly clear of etiquette Reasonably well defined social rules Deep emotional involvement rarely occurs People can be easily replaced in general

Example

Neighborhood grocer Delivers bead every morning

Cashier Reliance Fresh

Interactions

Pyramid of relationships

Degree of reln’ depends on 1. Cooperation or competition 2. Equal or unequal distribution of power 3. Dependence or independence 4. A task or social-emotional orientation 5. A formal or informal form of contract

1. Cooperation or competition

Competition Customer plays a number of suppliers against one another Chooses one with the best offer

Cooperation Both work to achieve best results

2. Distribution of power

Unequal distribution of power Knowledge and skill oriented services Customer fate depends on expertise of service provider

Supermarket chain Responsible for 30% turnover of a brand

3. Dependence or independence

Inversely proportional to balance of power Powerful party is independent The other is dependent

4. Task or emotional orientation

Task orientation Supermarket

Social – emotional orientation Neighbor grocer

5. Formal or informal contract

Difference in contract Lawyer Hairdresser

Negative considerations

Some relations are continued Lack of options

Microsoft

Interactions and reciprocity Reciprocity is critical to relationships Giving Receiving Giving again

Calculated return ( Receiving creates

obligation to give something ) A positive gift is returned by a +ve gift A negative one with a negative one

Reciprocity Reciprocity assumes Moral norm exists to give back something A precise return is not desirable – equilibrium needs to be created in long run Occurs in all cultures – is Universal It makes interaction possible

Goal of Reciprocity Survival of group Better oneself in economic sense

Objects of exchange

Personal Value of resource is dependent on person providing it Love, Status, Information

Tangible Goods Products, Services, Money

Objects of exchange 26

High Love

Services

Status Personal Information

Products Money

Low Low

Tangibility

High 05/25/09

Commitment

Definition Enduring desire to maintain a valued relationship Exchange of resources influence the level of commitment

Types 1. Personal 2. Moral 3. Structural

1. Personal Commitment

Demonstrated by will that someone

displays in continuing a relationship Example Satisfied customer at a car dealership will continue relation with that company

2. Moral Commitment

People feel a sense of obligation

Example Buy bread from neighborhood grocer who is facing a tough time today Even though it may be cheaper in supermarket

3. Structural Commitment

Perception ‘There is no escape from it’

Example Investment in operating system New OS may require new software, training & transition period

Characteristics of 3 forms

Trust

Definition Willingness to rely on an exchange partner in whom one has confidence

Foundations Honesty Overcome insecurity & doubt

Dynamics of Customer Supplier Relationships

Dynamics

Trust & commitment cannot be forced Short

Growth of relationship

Capacity for empathy Ability to see the world through someone else’s eye, moment to moment

Necessity Both parties must supply open and honest info Dare to expose themselves ( self-disclosure ) Have a positive attitude

5 phases of relationship

1. Awareness of each other 2. Exploration or sounding out 3. Growth phase 4. Commitment or saturation 5. Decline

Product Life cycle

Maturity Growth

Decline

Introduction

Time 37

Relationship Life cycle Saturation

Growth

Decline

Purchases

Exploration

Time

Commitment 

Commitment = f ( satisfaction, attractiveness, switching cost )

3

Phase 1. Awareness

Both parties become aware Both parties position themselves Take actions designed to demonstrate appeal to the other party

Phase 2. Exploration

Begins with attraction Both think they aspire to the same goals Perceived personality ( He / she is honest ) Supplier’s products are good and customer has a great deal to spend

Characteristics Interactions Negotiations ( willingness ) Reciprocity

Phase 3. Growth

Interactions continue Both continue to attract Negotiations continue Norms / expectations become specified

Characteristics More risks are taken Activities performed to test relationships Mutual dependency increases

Phase 4. Saturation

Relations reach maximum levels Commitment, dependence, trust, respect Many resources are exchanged Problems discussed fairly & openly

Characteristics Social and non-social environment also contributes

Phase 5. Decline

Directedness & focus on others Indicate continuity of relationship is an issue Differences in expectations

Characteristics Differing needs for freedom / renewal External influences make their effects felt

Analysis

Challenge

Marketer needs to look into dynamic of

relationship For long term profitable relation Anticipate critical moments early Influence relationship in most efficient manner

Effort to prevent customer from ending

relationship

Airline story

Endeavour to delight customers AI

:

Just flying

Jet

:

Joy of flying

Kingfisher

:

Enjoy flying

Airline story

Airline story

Airline story

Airline story

Airline story

Nature and context of CRM strategy

Nature of CRM Strategy

Successful companies have three ‘Value

disciplines’ 1. Operational excellence 2. Product leadership 3. Customer intimacy

1. Operational excellence

Companies practice combination of Guaranteed low price Good quality Ease of purchase Problem free service

Examples McDonald’s, Dell, EasyJet Ford, Wal-Mart

Business model

Achieving cost leadership Products purchased at low price & large volumes

Efficiency Info system follows flow of goods closely and remove inefficiencies Staff maintains high level of efficiencies Efficiency is rewarded and waste despised

2. Product leadership

Companies practice Innovation Amaze customers & push limits

Examples Mercedes Nike, Swatch, Apple, Sony

Business model

Innovations Recognize good ideas & expand to develop products Inspirational vision of new product is indispensible

Efficiency Develop portfolio of new ideas Minimize the risk and counterbalance failure Quick decisions necessary

3. Customer intimacy

Companies practice Building relations with customers Individual wishes of customers count Lifetime value of customer recognized

Examples Private banks Hotel Hyatt

Business model

Ability to supply Products and services Reliable time tested solution

Efficiency Thorough knowledge of customer Planners rewarded for keeping and satisfying them

Inference

Value discipline that fits best in CRM

strategy Customer intimacy It is difficult to excel in all areas

Critical Even a company seeking operational excellence Will have to maintain minimum level of innovation and attention to customers

Strategic perspective

Offensive strategy Conquest of Market Share Acquisition of new customers

Defensive strategy Maintaining and defending one’s position Barriers to keep competition at bay

Strategic perspective

Context of CRM Strategy

Applicability of a strategy Determined by context

Necessary to understand Capability of organization to implement Current market context Relevance to external environment

Internal

CRM should not be based on –ve

considerations Problem with quality of product Their positioning and logistics Competition breathing down the neck

Current situation Supermarkets Airlines Car manufacturers

Internal

+ve arguments at the heart necessary Clarity on what company hopes to achieve Business model needs to be established Reason for existence should be the customer

Heroes People who work closely with the customers They must be allowed freedom and authority

External

CRM should be in tune with market and

environment 1. Customers 2. Competition 3. Distribution

1. Customer Customer attitude Customers appreciate relationship with supplier Insufficient for supplier alone to have interest

Necessity Customers should accept differentiated marketing approach

2. Competition Type of competition Monopoly – less effort Heavy competition – High effort

Necessity Customers should accept differentiated marketing approach

2. Competition Non Competitive Zone

Mobile Airlines Hospitals

Loyalty

PC Automobile Highly Competitive Zone Satisfaction

2. Competition Non Competitive Zone

Airtel Kingfisher

Apollo Loyalty

Dell

Santro Highly Competitive Zone Satisfaction

3. Distribution

Employment of intermediaries Need right CRM strategy to strengthen ties with customers There can be alienation between customer and supplier