Customer Relationship Management

CRM: A comprehensive business strategy and technological framework designed to identify, acquire, retain, and develop profitable long-term customer relationships across all touchpoints.

Concept: The present value of all net future profits expected to be generated by a customer over their entire relationship with the company.

Distinction:

• Customer Satisfaction: Meeting customer expectations (Performance = Expectations).
• Customer Delight: Exceeding customer expectations unexpectedly, creating emotional loyalty (Performance > Expectations).

The 5 Rungs: Prospect $\to$ Purchaser $\to$ Client $\to$ Supporter $\to$ Advocate (Partner).

It measures customer loyalty and willingness to recommend the brand to others.

Concept: An approach that integrates customer data across different enterprise departments (sales, marketing, billing, customer support) to provide a unified 360-degree customer view.

Concept: A specialized, departmental subset of a centralized customer data warehouse focused on a specific business function (e.g. credit card customer data).

Concept: The phenomenon where a customer becomes more loyal after a business satisfactorily resolves a service failure than if no failure had occurred at all.

Challenge: Resistance of employees to adopt new CRM software and lack of clean, unified customer database records across branch networks.

1. Operational CRM: Front-office automation including Sales Force Automation (SFA), marketing campaign automation, and customer call centers. 2. Analytical CRM: Back-office analysis using data mining, OLAP, and predictive modeling to identify customer purchasing patterns and churn risks. 3. Collaborative CRM: Sharing customer insights across suppliers, distributors, and internal departments to deliver consistent service.

Retention Strategies:

1. Loyalty Reward Programs: Tiered rewards, points, and exclusive discounts for repeat purchases.
2. Personalized Communication: Customized birthday greetings, relevant recommendations based on purchase history.
3. Proactive Customer Support: Resolving grievances before the customer complains.
4. Switching Cost Barriers: High convenience, bundled ecosystems that make switching inconvenient.
5. Customer Communities: Creating brand user clubs and VIP forums.

1. Customer Acquisition: Lead generation, targeted digital campaigns, introductory offers to win first-time buyers. 2. Customer Retention: Consistent quality, responsive service, loyalty programs to prevent brand switching. 3. Customer Development (Expansion): Cross-selling related products and up-selling higher-value services to maximize share of wallet.

Role of Technologies:

• Data Warehouse: Centralized repository storing unified historical transaction data from all customer touchpoints.
• Data Mining: Extracting hidden actionable patterns (market basket analysis, churn prediction, high-value customer profiling, response modeling for promotional campaigns).

1. CSAT (Customer Satisfaction Score): Asks customers to rate satisfaction on a 1–5 scale: $\text{CSAT} = \frac{\text{Number of Satisfied Customers (4 \& 5)}}{\text{Total Respondents}} \times 100$. 2. NPS (Net Promoter Score): Based on ‘How likely are you to recommend us?’ Promoters (9–10), Passives (7–8), Detractors (0–6). $\text{NPS} = \% \text{ Promoters} - \% \text{ Detractors}$.

Nepalese Context:

• Commercial Banks: Dedicated relationship managers for HNW clients, priority banking lounges, 24/7 contact centers, mobile banking push notifications, loyalty rewards.
• Telecoms (NTC, Ncell): Personalized data pack recommendations via USSD/app, self-service chatbots, automated recharge reminders, tiered privilege clubs.

Step 1: Calculate Annual Customer Profit ($M$):

Step 2: Calculate Expected Customer Lifespan:

Step 3: Calculate CLV using Discounted Valuation Formula:

Where $M = \text{Rs. } 4,800$, $r = 0.80$ (retention rate), $i = 0.10$ (discount rate).

Conclusion: The net present value of expected future profits from this customer relationship is Rs. 12,800.

1. Implementation Framework:

• Strategic Phase: Setting clear business objectives (increase retention by 15%), customer-centric cultural alignment.
• Process Design Phase: Mapping end-to-end customer journeys and eliminating friction points.
• Technology Selection Phase: Selecting suitable CRM software (Salesforce, Microsoft Dynamics, open-source).
• Data Migration & Integration: Cleaning legacy customer records, integrating with ERP and accounting software.
• Change Management & Training: Training frontline staff and aligning incentives.

2. Reasons for CRM Failures:

• Viewing CRM merely as a software purchase rather than an enterprise business strategy.
• Poor data quality and fragmented customer records across departments.
• User adoption resistance by sales staff who view CRM as surveillance.
• Lack of senior executive sponsorship and unrealistic timelines.

1. Customer Delight Concept: Delivering unexpected positive surprises that touch customer emotions (e.g. free room upgrade, personal note, remembering preferences).

2. Designing Service Standards:

• Setting measurable service benchmarks (maximum 3 rings for telephone response, 24-hour turnaround for email queries).
• Empowering frontline staff with discretionary budgets to solve customer issues on the spot without manager approval.

3. Effective Service Recovery System:

• Listen with Empathy: Acknowledge customer frustration without becoming defensive.
• Apologize Sincerely: Accept organizational responsibility.
• Offer Fair Restitution: Provide refund, replacement, or value-added voucher.
• Resolve Rapidly: The faster the resolution, the higher the customer loyalty retention.