The paper tries to examine the concept of customer relationship management in building customer relationship .The paper throws light on the evolution of customer relationship through various phases.
The core of competition has changed over the period of time. The new empowered customer is very powerful today. The companies which realize this important change have started making changes in their business model. Their vision and mission statements are now more customers driven than before.Their values and strategies have also been changing and are largely customer driven today.
What has made this transition possible.. ?
This has been made possible by change in the business model. Today the focus has shifted from transaction to relationship. Customers are no longer seen as mere one time customers but as long term partners. Therefore, all companies are today looking for building long term relationship by providing quality services with innovations. It has also been realized that retaining customer is more profitable than acquiring customers; therefore, most companies are looking for building relationship with their customers.Customer Relationship Management is the key tool today in the hands of strategic planner sand manager. Customer Relationship Management is a comprehensive approach for creating, maintaining and expanding customer relationships.The concept of CRM is comprehensive as it touches all. CRM looks at creating, maintaining and expanding the entire customer cycle. CRM captures and analyzes data about the targeted customer–trying to understand their buying habits with a view to predicting their behavior .Cultivating the current customers is what CRM aims at building in the long run. “CRM is a strategy that focuses on the profitable development and management of customer relationships” (Love lock,Wirtz & Chatterjee 2010) . CRM involves five distinct processes like strategy development that involves defining the vision and mission statement from the perspective of the customers. Value creation is another process wherein a firm wants to create values within the ambit of stated business strategy. Multi channel integration is another area which CRM addresses with precision. A company communicates with all the Ps of Marketing mix like product ,price ,place , promotion ,physical evidence, people, process and productivity. CRM minimizes the challenges posed by the various interfaces by providing a unified customer interface. Information management –the biggest of all challenges tries to synchronize information garnered from all sources and provide them at all touch points by creating a dynamic data repository. CRM, therefore, should not be seen merely as a technology . It is an encompassing process to bolster and build profitable customer relationship. CRM finally through Performance Assessment tries to understand whether it has been able to create value for its various stakeholders or not.
“Firms’ relationships with their customers, like other social relationships, tend to evolve over time” (Zeithaml, Bitner Gremler & Pandit 2011) A customer goes through four distinct phases. First he is a stranger for a firm and then a relationship is forged and the customer who was a stranger initially becomes an acquaintance. Over a period of time this relationship develops and the customer becomes a friend and finally emerges as a partner. This continuum of relationship needs to be maintained very well. The product offering for a customer who is still a stranger has to be very different. It has to be attractive vis-à-vis the competitor- meaning thereby that the product offering cannot be below par.“Strangers are customers and suppliers in a pre-awareness and/or pretransaction period”.(Michael D. Johnson & Fred Selnes 2004).The customer is a stranger because she has not become a potential customer to a particular firm as yet even though he or she is not a stranger to other competing firms. In order to induce interest a stranger is asked to go for exploration or trail. Suppose a customer drives a car worth Rs. 7 lacs today may not have the purchasing ability at the moment to buy a car worth Rs. 12 lacs. For the company which is selling a 12 lac car in the Indian market, the customer mentioned above is a stranger. Yet the company is inducing trail or exploration for these types of customers even today. The reason is very simple. They want to make these strangers a prospective customer in days to come when the income level of the customers is likely to change in upward direction. The relationship goal here is to acquire the customer’s business in the long run. The sustainability of the competitive advantage is generally low as the company struggles to device ways to look attractive.
The next phase of relationship building is known as acquaintance. The customer is no longer stranger. He/She knows the company, its product offering or even the brand name. The number of trials & exploration has led to the familiarity with the product & the brand. The time is ripe to sustain and enhance this relationship. The product offering has to be standard, interlaced with more value. The source of competitive advantage is to create satisfaction. This satisfaction emanates from the various explorations and trials – customer has undergone in the past. The problem at the acquaintance level is that the product offerings remains almost the same with that of the competitor, therefore, it is sometime difficult to sustain this phase. The relationship time horizon is also short as the buyer has plenty of choices from other competitive firms.(Michael D. Johnson & Fred Selnes 2004). The loyalty is low here.
The primary relationship marketing goal is to satisfy the customers’ needs & wants. Most banks & insurance companies in India treat their customers merely as Acquaintances. They do not understand the importance of building relationship. They also tend to forget that satisfaction in today’s context is a passé. All competitive firms in the market are capable of satisfying needs & wants of their customers. If a firm wants to survive & sustain itself in the market, it needs to do things differently. It needs to forge relationships. It needs to look at a customer as a friend. When as a firm, you look at your customer as your friend; you take your relationship to a different level. You try to measure the customer expectations in the changing scenario. You also try to understand the various factors that fire the customer expectations. You try to create favorable customer experiences that shape the customer expectation (PwC’s Health Research Institute).
The product offering at the friend phase changes. As you better understand the customer expectation, you come out with differentiated product that directly addresses the customer’s requirement. You start providing satisfaction but you also try to win the trust of your customer. A customer becomes a friend when a trust has developed between the buyer and the seller. The customer will continue buying as long as she trusts the offerings and relationship of the firm it is dealing with. As stated earlier, mere satisfaction doesn’t work. In order to make a customer a friend- a firm needs to deliver its service interwoven with satisfaction & trust. The focus of selling also changes. As the firm is armed with specific knowledge of customer needs and wants, it tries to present its offering in a manner that better serves the above stated needs of the customers. The acquisition as also the conversion costs at the Friendship level is not as low as it was at the Acquaintance level. The costs get increased as ‘the differentiation positioning’ in the overall offering starts costing the firm dearly. The firm has to create different kind of distribution channels in order to retain friends. The chances of maintaining sustainability of competitive advantage in this phase is higher than the acquaintance stage. But due to its stated ‘differentiation positioning’ –it is difficult to sustain the competitive advantage. The concept of differentiation is as ephemeral in nature as the concept of customer delight and both are highly dynamic in nature and keep changing very fast. It becomes difficult for a firm to keep differentiating its offerings vis-a-vis the competitors by tweaking in the changes to a meaningful differentiated positioning. The time horizon of relationship is generally medium. ‘Trust’ the differentiated positioning that a firm takes to convert acquaintances into friends takes a longer period to develop. This bond of trust is very difficult for competitors to imitate.
However this time horizon can get extended if the firm keeps evolving with the needs and requirements of its customers and continue to differentiate its offerings as a firm. As a firm, you look for retaining the customer. Finally, all good companies today are looking for making their customers as partners. Partnership is the culmination of customer relationship. As a firm, you come out with customized product offerings suited to the specific requirement of your valued customers. Most banks in India today are not only selling banking products but have also started selling various other financial products including insurance and mutual funds to better serve the whole horizon of financial needs of their customers -thus becoming partners at every level in the financial journey of their customers. Most banks through Internet banking are trying to change their committed customers as partners. State Bank of India has taken the partnership role to a new height through its Freedom mobile banking advertisement – “Aab Huan Na Aapka Bank Aapke Jeb Me”. The State Bank Of India’s famous slogan “ With you all the way ,Pure banking nothing else, The nation’s bank on us” is a strong statement of fact and not a mere slogan. At a time when most banks were struggling with its ATMs in the wake of demonetization, State Bank of India clearly exhibited why the whole nation bank on it. A health insurance company offers tailor-made customized product for its corporate clients keeping in mind the specific requirements of its clientele. The source of competitive advantage at the partnership phase also changes from satisfaction plus trust to satisfaction plus trust plus commitment. A firm today is committed to serve its customer in the form of information sharing as and when required and even at times serving the idiosyncratic financial requirements of their customers. The key to commitment depends on how well a firm is able to organize and use information about individual customers –thereby enabling itself to deliver highly personalized and customized offering. Most health insurance underwriters are today keen to know the various factor that affect the health behavior of its customers. They are trying to create a database that enable them to better serve the changing needs of their customers. The incorporation of telemedicine, retail or mobile healthcare facility in healthcare delivery mechanism is the result of commitment on the part of health insurance companies to bolster their long term relationships with their valued customers. The time horizon of this relationship is usually long because it takes time to build this relationship. A Life insurance company takes premium over a long period of time. But the commitment it gives –clearly displays its commitment .It commits itself to serve you over a long period of time and in the event of a casualty –it helps you in rehabilitating your family. The famous slogan of Life Insurance Corporation Of India –‘Zindagi ke saath bhi, zindagi ke baad bhi; is the manifestation of LIC of India’s long term commitment.
The sustainability of competitive advantage is normally very high: But it depends on many things- in particular how valuable the customer is to the firm in terms of revenue generated from him and her. It is difficult to deliver customized service consistently. The customized services also come with a cost. The competitive advantage can be maintained if all important services across customer and supplier of services are synchronized properly.
The relationship goal in partnership phase is to retain the customer of course but also to enhance this relationship to a logical conclusion. Customers often like to stay in a relationship when they find that the company they deal with dish out products and services as per their changing needs and wants. They also look to deal with a company that continues to offer array of products or services in the course of their entire life span. Therefore, for a firm it makes business sense in retaining profitable customers and building a long term relationship with them.
– Dr. Abhijeet K. Chattoraj, Associate Professor, Amity University, Mumbai