66  Customer Relationship Marketing

66.1 Concept

Relationship Marketing (RM) was coined by Leonard L. Berry (Texas A&M) in Emerging Perspectives on Services Marketing (1983). It is the process of attracting, maintaining and enhancing customer relationships. Customer Relationship Management (CRM) is the technology-supported implementation of relationship marketing, popularised in the late 1990s.

TipWorking definitions
  • Berry (1983): “Attracting, maintaining and enhancing customer relationships.”
  • Christopher, Payne & Ballantyne (1991): “Marketing concerned with double focus — getting and keeping customers.”
  • Grönroos (1997): “To identify, establish, maintain, enhance and terminate relationships with customers and other stakeholders so that the objectives of all parties are met.”
  • Peppers-Rogers (1993): “One-to-one marketing — treating different customers differently.”
  • Gartner: “CRM is a business strategy that maximises profitability, revenue and customer satisfaction by organising around customer segments.”

66.2 Transactional vs Relationship Marketing

TipTransactional vs Relationship Marketing
Dimension Transactional Relationship
Focus Single sale Long-term relationship
Time horizon Short-term Long-term
Orientation Product features Customer benefits
Quality Production-focused Customer-focused
Customer service Little High emphasis
Customer commitment Low High
Customer contact Moderate Frequent

66.3 IDIC Framework — Peppers-Rogers

TipDon Peppers & Martha Rogers — IDIC
  • Identify — your most valuable customers.
  • Differentiate — by needs and value.
  • Interact — engage personally.
  • Customise — tailor offerings.

66.4 CRM Components

TipThree CRM components
  • Operational CRM — sales, marketing, service automation (Salesforce, HubSpot, Zoho).
  • Analytical CRM — analyse customer data (data mining, segmentation, CLV models).
  • Collaborative CRM — partner integration (channels, customers, suppliers).

66.5 Customer Lifecycle and CRM

TipCustomer lifecycle stages
  • Awareness.
  • Acquisition.
  • Onboarding.
  • Engagement and Growth.
  • Retention.
  • Win-back / Churn management.

66.6 Customer Loyalty

TipLoyalty classifications
  • Hardcore loyals — always one brand.
  • Split loyals — 2-3 brands.
  • Shifting loyals — from one to another.
  • Switchers — no loyalty.
  • Dick & Basu (1994) loyalty matrix — Attitude × Behaviour:
    • True loyalty (high attitude, high behaviour).
    • Latent loyalty (high attitude, low behaviour).
    • Spurious loyalty (low attitude, high behaviour).
    • No loyalty (low both).

66.7 Loyalty Programmes

TipLoyalty programme types
  • Points-based — Air Miles, Tata Neu, Reliance One.
  • Tiered — Marriott Bonvoy, Tata Passport tiers.
  • Cashback — Cred, Amazon Pay.
  • Coalition — Payback, Tata Neu, Star Alliance.
  • Subscription — Amazon Prime, Flipkart Plus.
  • Gamified — Duolingo streaks.

66.8 Customer Lifetime Value (CLV) — Recap

Topic 57 — PV of future profits across relationship.

\[\text{CLV} = \sum_{t=0}^n \frac{(p_t - c_t) \cdot r^t}{(1+i)^t}\]

66.9 NPS — Net Promoter Score

Fred Reichheld (Bain, HBR 2003) — “The One Number You Need to Grow” — promoters minus detractors on a 0-10 recommendation scale.

66.10 Customer Equity

Blattberg-Getz-Thomas (2001) — total CLV across all customers. Three drivers:

TipDrivers of customer equity (Rust-Lemon-Zeithaml)
  • Value equity — perceptions of objective quality, price, convenience.
  • Brand equity — subjective brand perceptions.
  • Relationship / Retention equity — bonds beyond brand and value.

66.11 Wallet Share vs Market Share

  • Market share — % of category buyers.
  • Wallet share / Share of customer — % of a customer’s spend in category (Peppers-Rogers focus).

Modern CRM emphasises wallet-share growth through cross-sell, up-sell, customer development.

66.12 CRM Implementation Process

TipCRM implementation steps
  1. Develop CRM strategy — segments, value propositions.
  2. Process redesign — customer-facing processes.
  3. Technology selection — Salesforce, Oracle, Microsoft Dynamics, Zoho, HubSpot.
  4. Data integration — single customer view.
  5. Change management — culture and training.
  6. Performance measurement — CLV, NPS, retention, churn.

66.13 Reasons for CRM Failure

TipCommon CRM-implementation failures
  • Lack of clear strategy.
  • IT-led instead of business-led.
  • Poor data quality.
  • Insufficient training.
  • Cultural resistance.
  • Over-customisation of software.
  • Lack of executive sponsorship.
  • Customer privacy concerns.

Gartner / KPMG estimates: 60-70 % of CRM projects fail to meet objectives.

66.15 Practice Questions

Q 01BerryMedium

The term "Relationship Marketing" was coined in 1983 by:

  • ALeonard Berry
  • BPeppers-Rogers
  • CGrönroos
  • DReichheld
View solution
Correct Option: A
Leonard L. Berry (1983).
Q 02IDICMedium

IDIC framework is by:

  • APeppers & Rogers
  • BBerry
  • CReichheld
  • DGrönroos
View solution
Correct Option: A
Identify · Differentiate · Interact · Customise.
Q 03NPSMedium

NPS was popularised in 2003 by:

  • AFred Reichheld
  • BKotler
  • CPeppers
  • DPZB
View solution
Correct Option: A
Fred Reichheld at Bain.
Q 04CRM typesMedium

Which is NOT a CRM type?

  • AOperational
  • BAnalytical
  • CCollaborative
  • DTransactional
View solution
Correct Option: D
Operational · Analytical · Collaborative.
Q 05Dick-BasuHard

Dick-Basu loyalty matrix uses two axes:

  • AAttitude × Behaviour
  • BPrice × Quality
  • CFrequency × Recency
  • DRFM
View solution
Correct Option: A
Attitudinal vs Behavioural loyalty.
Q 06CLVEasy

CLV is:

  • ACustomer acquisition cost
  • BPV of future profits across the relationship
  • CCustomer age
  • DCustomer's first purchase value
View solution
Correct Option: B
Sum of discounted future profits.
Q 07Customer EquityHard

Rust-Lemon-Zeithaml's customer equity has 3 drivers; which is NOT one?

  • AValue equity
  • BBrand equity
  • CRelationship equity
  • DProfit equity
View solution
Correct Option: D
Value · Brand · Relationship/Retention equity.
Q 08Failure rateMedium

CRM-project failure rate per industry estimates is approximately:

  • A10-20 %
  • B30-40 %
  • C60-70 %
  • D90 %
View solution
Correct Option: C
Gartner/KPMG — ~60-70 %.
Q 09SalesforceEasy

Salesforce, HubSpot and Zoho are primarily:

  • AOperational CRM platforms
  • BERP systems
  • CAnalytics tools
  • DLogistics platforms
View solution
Correct Option: A
Operational CRM — sales, marketing, service automation.
Q 10Loyalty typesMedium

Customers who buy two-three brands are:

  • AHardcore loyals
  • BSplit loyals
  • CSwitchers
  • DShifting loyals
View solution
Correct Option: B
Split loyal among two-three brands.
Q 11Wallet shareMedium

"Share of customer" or "wallet share" focuses on:

  • A% of a customer's spend in a category
  • BMarket share
  • CDiscount level
  • DInventory share
View solution
Correct Option: A
Peppers-Rogers focus.
Q 12DPDPHard

India's Digital Personal Data Protection Act was enacted in:

  • A2019
  • B2021
  • C2023
  • D2024
View solution
Correct Option: C
DPDP Act 2023.
Q 13RFMHard

RFM in CRM analytics stands for:

  • ARecency · Frequency · Monetary
  • BRetention · Frequency · Margin
  • CRecency · Forecast · Margin
  • DRevenue · Frequency · Margin
View solution
Correct Option: A
RFM segmentation in direct marketing.
Q 14CoalitionMedium

Payback and Tata Neu are examples of:

  • APoints loyalty
  • BCoalition loyalty
  • CSubscription
  • DCashback
View solution
Correct Option: B
Multi-brand coalition.
Q 15MatchHard

Match:

(i) Relationship Marketing (a) Reichheld
(ii) IDIC (b) Berry
(iii) NPS (c) Dick & Basu
(iv) Loyalty Matrix (d) Peppers-Rogers
  • A(i)-(b), (ii)-(d), (iii)-(a), (iv)-(c)
  • B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
  • C(i)-(c), (ii)-(a), (iii)-(b), (iv)-(d)
  • D(i)-(d), (ii)-(c), (iii)-(b), (iv)-(a)
View solution
Correct Option: A
RM — Berry; IDIC — Peppers-Rogers; NPS — Reichheld; Loyalty Matrix — Dick & Basu.

66.15.1 Advanced Format Questions

AR 1Assertion-ReasonHard

A: CRM aims at lifetime customer value.
R: CRM uses analytical, operational and collaborative components.

  • ABoth true; R explains A
  • BBoth true; R does not explain A
  • CA true, R false
  • DA false, R true
View solution
Correct Option: B
S 1Statement-basedMedium

CRM components: (i) Operational. (ii) Analytical. (iii) Collaborative. (iv) Strategic.

  • AAll four
  • B(i) and (ii) only
  • C(iii) and (iv) only
  • D(iii) only
View solution
Correct Option: A
S 2Statement-basedHard

Loyalty programmes: (i) Point-based. (ii) Tier-based. (iii) Cashback. (iv) Coalition.

  • AAll four
  • B(i) and (ii) only
  • C(iii) and (iv) only
  • D(i) only
View solution
Correct Option: A

66.16 Quick Recall

ImportantQuick recall
  • Relationship Marketing — Berry (1983); CRM = tech implementation.
  • Transactional vs Relationship — short vs long-term.
  • IDIC — Peppers-Rogers: Identify · Differentiate · Interact · Customise.
  • 3 CRM types: Operational · Analytical · Collaborative.
  • Lifecycle: Awareness → Acquisition → Onboarding → Engagement → Retention → Win-back.
  • Loyalty (Kotler): Hardcore · Split · Shifting · Switchers.
  • Dick-Basu (1994) loyalty matrix: True · Latent · Spurious · No loyalty.
  • Loyalty programmes: Points · Tiered · Cashback · Coalition (Payback, Tata Neu) · Subscription (Amazon Prime) · Gamified.
  • CLV (Topic 57) · NPS — Reichheld 2003.
  • Customer Equity — Rust-Lemon-Zeithaml: Value · Brand · Retention equity.
  • Wallet share / Share of customer > Market share focus.
  • CRM platforms: Salesforce · HubSpot · Zoho · Microsoft Dynamics · Oracle.
  • CRM failure rate 60-70 %.
  • India regulation: DPDP Act 2023 · GDPR for EU.
  • Modern trends: AI CRM · Social CRM · Mobile · Predictive · CDP · VOC · Omnichannel · Privacy-first · Conversational AI · CX management · Community-led growth.