MGT 3604 CUSTOMER RELATIONSHIP

MANAGEMENT

CHAPTER 1
INTRODUCTION

1
MODULE OBJECTIVES

 To develop & enhance students’ understanding

on the dimensions of successful CRM strategy
and opportunities.

Last Updated:October 3, 2022 © LMS SEGi education group 2

MODULE GUIDELINE
• WARNING!!

• Academic Dishonesty
• As stated in the faculty Handbook, cheating, including plagiarism,
will not be tolerated. All written work, including paper summaries,
must be your own work. If you wish to quote a source, you must do
so explicitly, and with proper attribution. Any "double dipping" that
does not meet the requirements set out above will be treated as a
violation of the academic honesty policy for the class, and dealt
with accordingly.

• The minimum penalty for a violation of the academic honesty

policy is a zero on the assignment. Other penalties may include a
letter grade reduction, failing the class, or, in extreme or repeated
cases, dismissal from the program/college
LEARNING OBJECTIVE

 To discuss on the evolution of marketing

 To discuss on the relationship marketing
 To provide the students for some understanding on CRM.
 To understand the meaning of services.
 To introduce the 4 differences between services and goods:
intangibility, heterogeneity, simultaneous production &
consumption and perishability.
 To highlight the 3 additional elements of services marketing
mix: people, physical evidence and process.
LEARNING OUTCOMES

 On completion of this topic, students will be able

to understand the evolution of marketing and the
important of relationship marketing

 On completion of this topic, students must be

able to define CRM and justify the importance of
CRM as business strategy.

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WHAT IS MARKETING

‘The aim of Marketing is

to know & understand the
customer so well the
product or service fits
him & sells itself’

Peter F. Drucker (1909-2005)

WHAT IS MARKETING

• Marketing specialists are responsible for the

following activities:
• Identifying customer needs
• Designing products that meet those needs
• Communicating info about the goods & services to
prospective buyers
• Pricing that reflect the costs, competition &
customers’ ability to buy
• Providing the necessary service & follow up to ensure
customer satisfaction after purchase.
WHAT IS MARKETING

• Marketing - An organizational
function and a set of
processes for:
• Creating, communicating,
& delivering value to
customers
• Managing customer relationships in ways that
benefit the organization and its stakeholders
EVOLUTION OF MARKETING
EVOLUTION OF MARKETING

PRODUCTION ERA (before 1925)

• Characterized by a production orientation
— a business philosophy stressing
efficiency in producing a quality product
• Attitude toward marketing is “a good
product will sell itself”
• Characteristic of a shortage economy and
intense consumer demand
• Business success often was defined solely
in term of production success
EVOLUTION OF MARKETING

“they (customers) can

have any color they want,
as long as it’s black.”

Henry Ford
EVOLUTION OF MARKETING

SALES ERA (early 1950s)

• Characterized by a sales orientation — a business
philosophy assuming that consumers will resist
purchasing nonessential goods and services
• Attitude toward marketing is that creative
advertising and personal selling are required to
overcome consumer resistance and convince them
to buy
• Marketing departments began to emerge from the
shadows of production and engineering. Chief
marketing officer in many firms held the title of sales
manager during this era
EVOLUTION OF MARKETING

“ the thing that we see that

really tell us the most about
the consumer’s financial
solution is displaced
merchandise. Shoppers fill
their baskets, then what they
do is take that merchandise
out as they pick other
things. When the economy
gets tougher, we have to go
through that store more
frequently.
Lee Scott (Former CEO, Walmart)
EVOLUTION OF MARKETING

MARKETING ERA (after 1950s)

• Emergence of the marketing concept
• Attitude towards marketing changed from
production orientation to consumer
orientation as society changed from a
seller’s market (one in which there were
more buyers for fewer goods and services)
to a buyer’s market (one in which there
were more goods and services than people
willing to buy them)
EVOLUTION OF MARKETING

“Real innovation in
technology involves a
leap ahead,
anticipating needs that
no one really knew
they had & then
delivering capabilities
that redefine product
categories.”
Steve Jobs
EVOLUTION OF MARKETING

RELATIONSHIP ERA
• Represents a major shift from the traditional
concept of marketing as a simple exchange
between buyer and seller
• Relationship marketing involves developing long-
term, value-added relationships over time with
customers and suppliers
• Strategic alliances and partnerships with vendors
and retailers play a major role in relationship
marketing
• Prevailing attitude is that long-term relationships
with customers and partners will benefit everyone
RELATIONSHIP MARKETING

• The lifetime value of a customer consists of the

revenues and intangible benefits that a
customer brings to an organization over an
average lifetime minus the investment the firm
has made to attract and keep the customer
• Relationship marketing gives a company the
opportunity to move customers from new
customers to regular purchasers, then to loyal
supporters of the firm and its goods and
services, and finally to advocates who not only
buy its products but recommend them to others
RELATIONSHIP MARKETING
RELATIONSHIP MARKETING

Using interactive marketing to build relationship

• Effective relationship marketing often relies
heavily on information technologies such as
computer databases that record customers’
tastes, price preferences, and lifestyles
• The stage is set for mobile marketing —
marketing messages transmitted via
wireless technology
RELATIONSHIP MARKETING
• Interactive marketing refers to buyer–seller
communications in which the customer controls the
amount and type of information received from a
marketer
• Social marketing is the use of online social media
as a communications channel for marketing
messages
• Interactive marketing allows marketers and
consumers to customize their communication
• Buzz marketing uses customers to create a “buzz”
about a company’s products – word of mouth
messages that bridge the gap between company &
its products
“Services are going to move in this
decade to being the front
edge of the industry.”
Louis V. Gerstner,
former CEO

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What Are Services?

Services are deeds, processes and

performances that are essentially not a
physical product, is generally consumed at
the time it is produced and provides added
value in forms that are intangible

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Characteristics of Services

Intangibility Heterogeneity

SERVICES

Simultaneous
Perishability
production &
consumption

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(1) Intangibility

What it means?
• Performances/actions can’t be
seen, felt, tasted, touched.
• Ie: health care services

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(1) Intangibility

Challenges
• Can’t be inventoried

• Can’t be easily patented

• Can’t be readily displayed or

communicated
• Pricing is difficult

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(2) Heterogeneity

What it means?
• No two services will be precisely alike.

• Service employees performance vary from

day to day/hour to hour.

• No two customers are alike (demand &

experience)

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(2) Heterogeneity

Challenges
• Inconsistent service quality

• Inconsistent with what was originally

planned and promoted

• Third party service provider

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(3) Simultaneous Production & Consumption
What it means?
• Goods: produced sold & consumed
• Services: sold produced & consumed
• Customer is present when service is being

produced.
• Customer can take part in the production

process.
• Interaction between customers

• Service providers play an important part in the

service experience (Week 7)

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(3) Simultaneous Production &
Consumption
Challenges
• Mass production is difficult

• Quality of service and satisfaction is ‘real

time’
• Customer is involved and observes

• Decentralization

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(4) Perishability

What it means?
• Goods can be inventoried/stored,
sold on another day and returned if
customer is not satisfied.
• Services can’t be saved, stored, resold,

returned.

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(4) Perishability

Challenges
• Difficult to synchronize supply and

demand with service.

• Services can’t be returned or resold.

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Services Marketing Mix

(1) Product
(2) Price
(3) Promotion
(4) Place
(5) People Extended
Marketing Mix
(6) Physical Evidence
(7) Process

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(1) Services Marketing Mix: People

All human factors who play a part in service

delivery and thus influence the buyer’s
perceptions: employees, customers &
other customers in the environment

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(1) Services Marketing Mix: People
(1) Employees
- Dressing, attitude, behaviour, knowledge
(2) Customers
- Consulting services: providing
timely/accurate information, implementing
recommendations
- Health care services: complying with
health regimes
- Influence other customers

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(2) Services Marketing Mix: Physical
Evidence

The environment in which the service is

delivered and where the firm and customer
interact and any tangible components that
facilitate performance or communication of
the service.

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(3) Services Marketing Mix: Process

The actual procedures, mechanisms and

flow of activities by which the service is
delivered – the service delivery and
operating system.

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INTRODUNCTION TO CRM
INTRODUNCTION TO CRM
• In late 1990s, CRM growth tremendously thanks
to the deployment of ICT.
• Organization become accessible to large group
of customers – people who companies would get
to know individually & whose individual needs
could be served.
• Permanent relationships could be developed
• Customers would become loyal to organization
INTRODUNCTION TO CRM
• The realization of an infrastructure enable
customer & supplier to communicate with one
another, freed from constraints of place & time.
• Increase customer knowledge thro database
management.
• Formulating & implementing marketing strategy that
aimed at the development of long-lasting
relationships with customer.
• A customer-oriented organization have to be
created which incorporates the appropriate culture,
structure & procedures.
CRM DEFINITION

‘a process that addresses all aspects of

identifying customers, creating
customer knowledge, building
customer relationships, and shaping
their perceptions of the organisation and
its products’
CRM as a BUSINESS STRATEGY

• CRM is more than a functional strategy – affects the

organization as whole
• CRM strategy will provide directions to each dept or
employee that maintain contact with customers
• In relationship marketing era – corporate strategy
whose objective is the development of long-term,
mutually profitable customer-supplier relationship
• CRM’s goal is so-called customer intimacy –
development of relationship requires both parties get to
know one another, help, trust & make commitment to
one another for long term

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ELEMENTS OF CRM

• The realization of CRM

strategy depend of the
ability to create the
infrastructure which
make it possible for
customer & supplier to
recognize one another &
able to interact in real-
time

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ELEMENTS OF CRM

Relationship
strategy

Business Customer
Communication
strategy knowledge

Individual
value
proposition
ELEMENTS OF CRM

Customer Knowledge
• Knowledge of individual customer is essential

to develop a long-term relationship & to supply

customization.
• Customer & prospects must be identifiable

• Customer profile must also be known.

• Databases have to be filled with correct &

current data which can be transformed into

individual customer info.

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ELEMENTS OF CRM
• Economic consideration
& manageability factors.
• The aim is to develop
long-term relationship
that are mutually
profitable
• The info must result in
companies being able to
help customers on time
& in more targeted
manner
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ELEMENTS OF CRM

Relationship Strategy
• Individual customer info must be used to

develop a long-lasting customer-supplier

relationship.
• Organization with relationship strategy have

longer term horizon, ‘tell’ & ‘listen’ more than

‘sell’ – have broader & deeper interest in the
right customers.
• Their interest in individual customer does not

end at the moment the transaction is completed

Last Updated:October 3, 2022 © LMS SEGi education group 46
REFERENCES

• Buttle, Francis. (2009). Customer

Relationship Management, 2nd ed. Elsevier
Publishing
• Peelen, Ed. (2012). Customer Relationship
Management, 2nd ed. Pearson Prentice Hall:
Harlow
• Harris, E.K. (2007). Customer Service: A
Practical Approach. Pearson Prentice Hall:
Harlow.

Last Updated:October 3, 2022 © LMS SEGi education group 47