CRM CH 2

CHAPTER
2
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CRM As An Integral
Business Strategy &
Relationship Oriented
Organisation
Subtopics:-
2.1 Introduction
2.2 The Nature of the CRM Strategy
2.3 The Context of the CRM Strategy
2.4 The Results of a Successful CRM Strategy
2.1 Introduction
Most companies expect CRM to add stability through increased customer retention and
long term profitability. This is done through increased efficiencies in sales, marketing &
product development.
12 | P a g e C h a p t e r 2 : C R M As A n I n t e g r a l B u s i n e s s S t r a t e g y & R e l a t i o n s h i p
O r i e n t e d O r g a n i s a t i o n
2.2 The Nature of the CRM Strategy
Companies expect to achieve high sales-conversion rates, high customer retention and
high profitability per customer by providing:
The right product or service
To the right customer
At the right price and time
Through the right channel
To satisfy the customer’s need or desire
Three Main Approaches
OPERATIONAL
EXCELLENCE
PRODUCT CUSTOMER
LEADERSHIP INTIMACY
2.2.1 Operational Excellence Approach
• Company with operational excellence focuses on price, quality and ease of

purchase
• This business model focuses on achieving cost leadership. That is the reason why a
company that implements this strategy did not spend on one-to-one relationships
with customers
• Example: McDonald’s offers its customers a guaranteed low price and problem free
service.
Key Strategies in Operational Excellence
• Products are purchased at low prices and in large volumes

• The information systems follow the flow of goods closely and remove inefficiencies
• Activities within the value chain are closely aligned with one another
• Production is standardized and automated if possible
• The staff maintains high level of productivity with a centralized management
2.2.2 Product Leadership
• This strategy implements innovation and renewal with aim to become the product
leader in the market
• The objectives are to provide customers with the newest and best product, push limits
and discover the unknown
• Success achieved by product leaders is dependent upon the success they are able
to realize in the market
• A company that implements this approach dares to take risk and willing to bear high
cost for R&D
The Key Strategies in Product Leadership
• Important key strategy for this approach is to recognize the good ideas and to
expand upon these ideas so that truly new products may be developed
• Managing a new portfolio of new ideas – can counterbalance the failure of certain
innovations
• Avoid every type of bureaucracy and guide talented worker who should be treated
as the asset of the company
2.2.3 Customer Intimacy
• This strategy is when companies build and focus on the development of relationship
with customers.
• Intimacy with customers involves understanding their needs and a commitment to
meeting those needs
• A great deal of attention is given to customers’ desire
• The company is built up based on the knowledge of the individual customers or
customer’s company and their preferences
• Decision making authority in the company is delegated to those who are closest to
the customer
Strategies in Customer Intimacy Model
• Appreciate lifetime value of a customer, not only profit or loss of transactions

• Products and services are continually adapted to customers’ wishes, without
charging excessively high prices
• Company positions itself as a partner for its customers
• Identify customers’ problems and offer total solutions or assist customers to perform
better in their own business
2.3 The Context of The CRM Strategy
• A successful CRM strategy depends on several factors in internal and external

factors
• The applicability of a strategy and its degree of success is determined by the
context
2.3.1 Internal
• An organization must first meet certain preconditions.

• The situation must be avoided in which a company ultimately chooses to implement
a CRM strategy based on negative considerations
• CRM not only involves the marketing or the IT function within the organization
• The company’s success will be dependent on the development of relationships with
the right customers
• The CRM system will have to be able to be fully developed for the purpose of
achieving this goal
2.3.2 External
A CRM strategy must also be in tune with the market and the broader external
environment:
• The intended customers will have to appreciate a

relationship with the supplier alone to have an
interest in a long term bond with the customer
Customers • The personality of the customer or the culture of the
purchasing company will have to be taken into
consideration
• The success of a CRM strategy also depends on

the competition encountered in the market
• A supplier that operates in a market in which it
has a monopoly will have to expend less effort to
Competition increase customer loyalty than it would if it were
active in a market in which it is up against heavy
competition
• Companies that employ intermediaries to serve

their customers need to find the opportunity within a
CRM strategy to strengthen their ties with customers
Distribution • A CRM system, and usually also a CRM strategy,
can offer a solution in this situation
2.4 The Results of a Successful CRM Strategy
CULTURE
Relationship Oriented STRUTURE
MISSION culture, organising around
Long term competitive Interest, customers,organisational
advantage forms, The role of CRM in
Coroporate culture the organisation
COMMUNICATION &
PEOPLE INFORMATION SYSTEM
Increase in customer Improvement in financial Repeat purchase
lifetime value result , Higher amount of Increase in profitability
Sales per person
INTEGRATION
Protect supplier for any action
taken by competition

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CHAPTER

The right product or service

To the right customer

At the right price and time

Through the right channel

To satisfy the customer’s need or desire

Three Main Approaches

2.2.1 Operational Excellence Approach

• Company with operational excellence focuses on price, quality and ease of

• Products are purchased at low prices and in large volumes

2.2.2 Product Leadership

2.2.3 Customer Intimacy

• Appreciate lifetime value of a customer, not only profit or loss of transactions

2.3 The Context of The CRM Strategy

• A successful CRM strategy depends on several factors in internal and external

• An organization must first meet certain preconditions.

• The intended customers will have to appreciate a

• The success of a CRM strategy also depends on

• Companies that employ intermediaries to serve

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