Module – 8

Consumer Behaviour
Dr Virupaksha Goud

Topics to be covered :
Customer Relationship Management : Meaning & Significance of CRM, Types of CRM (Operational,
Collaborative, Analytical), Strategies for building Relationship Marketing, e-CRM, Meaning, Importance
of e-CRM, Difference between CRM & e-CRM.
Online Decision Making : Meaning & Process / Stages.

Meaning & Significance of CRM

• CRM “is a business strategy that aims to understand, anticipate and manage the needs of an
organisation’s current and potential customers”
• It is a “comprehensive approach which provides seamless integration of every area of business
that touches the customer- namely marketing, sales, customer services and field support
through the integration of people, process and technology” .
Goal of the CRM macro process is to generate customer demand and facilitate transmission and
tracking of orders. Key processes under CRM are as follows :
• Marketing – Involve decisions regarding which customers to target, how to target customers,
what products to offer, how to price products and how to manage the actual campaigns
targeting customers.
• Sell – The sell process includes providing the sales force the information it needs to make a sale
and then execute the actual sale.
• Order management – Important for the customer to track his order and for the enterprise to
plan and execute order fulfillment.
• Call/service center – Helps customers place orders, suggests products, solves problems, and
provides information on order status.
• E.g. Of CRM software – Siebel, Salesforce.com, SAP and Oracle, loyalty cards, cookies etc.
• Amazon, uses “cookies” to provide a personalised service for its customers. Amazon requires
customers to register with the service when they purchase items. When registered customers
log in to Amazon at a later time, they are ‘greeted’ with a welcome message which uses their
name (for e.g. “Hello John”). In addition, their previous purchases are highlighted and a list of
similar items that the customer may wish to purchase are also highlighted.
• The supermarket chain, Tescos, offers loyalty cards to its customers. When customers use the
loyalty cards during pay transactions for goods, details of the purchases are stored in a database
which enables Tescos to keep track of all the purchases that their customers make. At regular
intervals, Tescos sends its customers money saving coupons by post for the products that the
customers have bought in the past. The aim of this is to encourage customers to continually
return to Tescos to do their shopping.

Purpose of CRM
• The focus [of CRM] is on creating value for the customer and the company over the longer term.
• When customers value the customer service that they receive from suppliers, they are less likely
to look to alternative suppliers for their needs.
• CRM enables organisations to gain ‘competitive advantage’ over competitors that supply similar
products or services

Benefits of CRM
 • Reduced costs, because the right things are being done (i.e. effective and efficient operation)
• Increased customer satisfaction, because they are getting exactly what they want (i.e. meeting
and exceeding expectations)
• Ensuring that the focus of the organisation is external
• Growth in numbers of customers
• Maximisation of opportunities (e.g. increased services, referrals, etc.)
• Increased access to a source of market and competitor information
• Highlighting poor operational processes
• Long term profitability and sustainability
CRM Strategies
• Customer Acquisition : Gain the greatest number of new “Best” customers as early in their
“lifespan” as possible.
• Customer Retention :Retain and expand your business and relationships with your customers
through up-selling, cross-selling and servicing.
• Customer Loyalty : Offer programs to ensure that your customers happily buy what you offer
only from you.
• Customer Evangelism : Enable loyal customers to become a volunteer sales force.
• Cost Reduction :Reduce costs related to marketing, sales, customer service and support.
• Improve Productivity

Types of CRM
Nowadays, three major types of customer relationship management systems, namely operational CRM,
analytical CRM and collaborative CRM are being used in many organizations.
Operational CRM
It provides support to front-office business processes that involve direct interaction with customers
through any communication channel, such as phone, fax, e-mail, etc. The details of every interaction
with customers, including their requirements, preferences, topics of discussion etc., are stored in the
customers’ contact history and can be retrieved by the organization’s staff whenever required.
Thus, it presents a unified view of customers across the organization and across all communication
channels. Examples of operational CRM applications are sales force automation (SFA), customer service
and support (CSS), enterprise marketing automation (EMA),etc.
Analytical CRM
It enables to analyze customer data generated by operational CRM applications, understand the
customers’ behavior, and derive their true value to the organization. This helps to approach the
customers with pertinent information and proposals that satisfy their needs. The analytical customer
relationship management applications use analytical marketing tools like data mining to extract
meaningful information like the buying patterns of the customers, target market, profitable and
unprofitable customers, etc., that help to improve performance of the business.
Collaborative CRM
It allows easier collaboration with customers, suppliers, and business partners and, thus, enhances sales
and customer services across all the marketing channels. The major goal of collaborative customer
relationship management applications is to improve the quality of services provided to the customers,
thereby increasing the customers loyalty. Examples of collaborative CRM applications are partner
relationship management (PRM), customer self-service and feedback, etc.

Strategies for building Relationship Marketing

Successful businesses don't just communicate with prospects and customers for special sales. Today,
making your company indispensable is a vital key to marketing success. It's a terrific way to add value,
enhance your brand and position against your competition.

1. Communicate frequently. For best results, it's important to communicate frequently and vary the
types of messages you send. Instead of a constant barrage of promotions, sprinkle in helpful newsletters
or softer-sell messages. The exact frequency you choose will depend on your industry and even
seasonality, but for many types of businesses, it's possible to combine e-mail, direct mail, phone contact
and face-to-face communication to keep prospects moving through your sales cycle without burning out
on your message.

2. Offer customer rewards. Customer loyalty or reward programs work well for many types of
businesses, from retail to cruise and travel. The most effective programs offer graduated rewards, so the
more customers spend, the more they earn.

3. Hold special events. The company-sponsored golf outing is back. With the renewed interest in
retaining and up-selling current customers, company-sponsored special events are returning to the
forefront. Any event that allows you and your staff to interact with your best customers is a good bet,
whether it's a springtime golf outing, a summertime pool party or an early fall barbecue.

4. Build two-way communication. When it comes to customer relations, "listening" can be every bit as
important as "telling." Use every tool and opportunity to create interaction, including asking for
feedback through your Web site and e-newsletters, sending customer surveys (online or offline) and
providing online message boards or blogs.

5. Enhance your customer service. One of the best ways to add value and stand out from the
competition is to have superior customer service. Customers often make choices between parity
products and services based on the perceived "customer experience." This is what they can expect to
receive in the way of support from your company after a sale is closed.

6. Launch multicultural programs. It may be time to add a multilingual component to your marketing
program. For example, you might offer a Spanish-language translation of your Web site or use ethnic
print and broadcast media to reach niche markets.

7. Visit the trenches. For many entrepreneurs, particularly those selling products and services to other
businesses, it's important to go beyond standard sales calls and off-the-shelf marketing tools in order to
build relationships with top customers or clients. There's no better way to really understand the
challenges your customers face and the ways you can help meet them than to occasionally get out in the
trenches.

e- CRM
The eCRM or electronic customer relationship management encompasses all the CRM functions with
the use of the net environment i.e., intranet, extranet and internet. Electronic CRM concerns all forms of
managing relationships with customers making use of information technology (IT). eCRM is enterprises
using IT to integrate internal organization resources and external "marketing" strategies to understand
and fulfill their customers needs. Comparing with traditional CRM, the integrated information for eCRM
intraorganizational collaboration can be more efficient to communicate with customers.

Importance
As the Internet is becoming more and more important in business life, many companies consider it as an
opportunity to reduce customer-service costs, tighten customer relationships and most important, further
personalize marketing messages and enable mass customization. ECRM is being adopted by companies
because it increases customer loyalty and customer retention by improving customer satisfaction, one of
the objectives of eCRM. E-loyalty results in long-term profits for online retailers because they incur less
costs of recruiting new customers, plus they have an increase in customer retention. [10] Together with the
creation of sales force automation (SFA), where electronic methods were used to gather data and
analyze customer information, the trend of the upcoming Internet can be seen as the foundation of what
we know as eCRM today.

As we implement eCRM process, there are three steps life cycle:[11]

1. Data collection: About customers preference information for actively (answer knowledge) and
passively (surfing record) ways via website, email, questionnaire.
2. Data aggregation: Filter and analysis for firm’s specific needs to fulfill their customers.
3. Customer interaction: According to customer’s need, company provide the proper feedback to
them.
eCRM can be defined as activities to manage customer relationships by using the Internet, web browsers
or other electronic touch points. The challenge hereby is to offer communication and information on the
right topic, in the right amount, and at the right time that fits the customer’s specific needs.

Difference between CRM & e-CRM

Major differences between CRM and eCRM:

Customer contacts

 CRM – Contact with customer made through the retail store, phone, and fax.
 eCRM – All of the traditional methods are used in addition to Internet, email, wireless, and PDA
technologies.
System interface

 CRM – Implements the use of ERP systems, emphasis is on the back-end.

 eCRM – Geared more toward front end, which interacts with the back-end through use of ERP
systems, data warehouses, and data marts.
System overhead (client computers)

 CRM – The client must download various applications to view the web-enabled applications. They
would have to be rewritten for different platform.
 eCRM – Does not have these requirements because the client uses the browser.
Customization and personalization of information

 CRM – Views differ based on the audience, and personalized views are not available. Individual
personalization requires program changes.
 eCRM – Personalized individual views based on purchase history and preferences. Individual has
ability to customize view.
System focus

 CRM – System (created for internal use) designed based on job function and products. Web
applications designed for a single department or business unit.
 eCRM – System (created for external use) designed based on customer needs. Web application
designed for enterprise-wide use.
System maintenance and modification

 CRM – More time involved in implementation and maintenance is more expensive because the
system exists at different locations and on various servers.
 eCRM – Reduction in time and cost. Implementation and maintenance can take place at one location
and on one server.
Online Decision Making Process

Problem Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Post-purchase Decision CRM

A unique characteristic of online shopping environments is that they allow vendors to create
retail interfaces with highly interactive features. One desirable form of interactivity from a
consumer perspective is the implementation of sophisticated tools to assist shoppers in their
purchase decisions by customizing the electronic shopping environment to their individual
preferences. The availability of such tools, which we refer to as interactive decision aids for
consumers, may lead to a transformation of the way in which shoppers search for product
information and make purchase decisions.

While making purchase decisions, consumers are often unable to evaluate all available
alternatives in great depth and, thus, tend to use two-stage processes to reach their decisions. At
the first stage, consumers typically screen a large set of available products and identify a subset
of the most promising alternatives. Subsequently, they evaluate the latter in more depth, perform
relative comparisons across products on important attributes, and make a purchase decision.
Given the different tasks to be performed in such a two-stage process, interactive tools that
provide support to consumers in the following respects are particularly valuable: (1) the initial
screening of available products to determine which ones are worth considering further, and (2)
the in-depth comparison of selected products before making the actual purchase decision.

The first interactive tool, a recommendation agent (RA), allows consumers to more efficiently
screen the (potentially very large) set of alternatives available in an online shopping
environment. Based on self-explicated information about a consumer's own utility function
(attribute importance weights and minimum acceptable attribute levels), the RA generates a
personalized list of recommended alternatives. For example, While doing Online shopping for
Dresses, Filtering by Size, Price Range, Sales offers, New Collection or Fresh Arrivals help
customers in shortlisting the items. The second decision aid, a comparison matrix (CM), is
designed to help consumers make in-depth comparisons among selected alternatives. The CM
allows consumers to organize attribute information about multiple products in an alternatives ×
attributes matrix and to have alternatives sorted by any attribute.