 In the last session, we were discussing about the leadership strategies in the market place. We discussed that the leadership strategy has to be an evolving strategy in consonance with the product like cycle, the market life cycle, the life cycle, the life cycle position of the business in which you are in. We also discussed that while in the initial phase of the market, we can or rather we must focus our strategy on product leadership. At a later stage, the most lucrative stage in the business cycle, we have to graduate to operational excellence and then to customer intimacy. In fact, in most businesses today these two later strategies that means operational excellence and customer intimacy because of the general acceleration in the market, in the compression of life cycle today in most products and services, these two later strategies that is operational excellence that as you would recall the product leadership gives way to operational excellence because after the initial phase soon a dominant design standards emerge and as a result the distinctiveness the unique selling proposition must come from enhanced value proposition which means decreasing cost improving operational efficiency to retain your margin under price pressure that happens due to new competitors coming in. But that due to this increased velocity in the market place cannot only be efficiency based strategy to be effective that operational excellence must derive its inputs from customer intimacy. The operational excellence that means where we must improve, where we must distinguish ourselves must come from the guidance of the customer. So, market leadership today therefore depends a lot on what we call relationship marketing. More popularly also often called CRM which can be expanded sometimes as customer relationship management, customer relationship marketing, some people call it continuous relationship marketing and so on and so forth. But customer is at the center the relationship is at the center of this kind of strategy formulation often people believe or kind of are misled that you can become a CRM focused company by buying some software. But that is an absurd proposition it is just like you cannot become a poet unless poetry is inside you just by buying a new computer or a new fountain pen or whatever. So, the tools can help you, but until unless you have a total systemic approach you cannot be a relationship marketing based leader just by buying some hardware and software. There is an increasing need of software, but that software is not necessarily computer software that software is in terms of intangibles develop through the people in your organization and that is what we want to discuss today. So, in definition wise relationship marketing means long term relation creation and approach towards repeat purchase easing facilitating repeat buying it is based on transaction mentality that means just one time buy and sell mentality to a long term relationship mentality. A better way to think about it is to think that this is a journey a continuously escalating approach that makes your first buyer a repeat buyer could be a repeat buyer through friends and relatives could be a repeat buyer for other offerings adjacent offerings that you may have, but most importantly the relationship marketing must aim at co-opting the customer within your marketing strategy. So, that the customer becomes your advocate this customer advocacy achieving that status which can only happen if the customer is delighted if the customer feels that you offer superior value. If the customer is convinced that you are reliable if the customer is assured that your response will be of the first order your response will be in time your response will solve the problem that has come up. So, if the customer advocacy is based on these beliefs in the mind in the perception of the customer then you have an unassailable position one of the best competitive positions that you can create because the word of mouth the so called viral marketing are essential tools today in the high velocity marketplace. Now, to do this you do need to know the customer you can use communication and information technology tools to collect information at every touch point with the customer out of every transaction with the customer. You can create a database that continuously is updated it is a dynamic database, but using the database just to calculate the customer life cycle value or to facilitate the profit chain that we have discussed before is not enough unless you can move more and more of your customers to the best customer category which happens by enhancing the life time value which means by enhancing the repeat buying or co-opting that customer to cause more sales to happen unless you are able to make that happen then just bear gathering of information is not enough this is a very important point that means feedback is important, but real action effective action on that feedback to close gaps which we will discuss a little bit more what are those gaps what are the criteria for understanding we will just now discuss. So, that action out of the feedback can completes the loop you know some of you who are aware of the control system you know that the close loop system based on feedback based on corrective action always offers a superior result as opposed to open loop systems. So, that and this means in the marketing sense that it is not focus on pre sales only not focus on the act of getting the next order, but it has a very important component in terms of the post sales continued relationship and enhancing the post sales experience of the customer ensuring that that sale that you have achieved in reality enhances customers experience or customers life position. We can discuss it in terms of very impressive success achieved by some of the Korean manufacturers of consumer durables in the Indian market place. They followed some simple approaches the people who came to install their refrigerators or washing machines were not just you know people who were used to lifting heavy load, but they gave them good training good attire ability to present themselves as experts who not only install the product at the customers premise efficiently, but help the customer to use the equipment more efficiently and on top of that they actually created a program of contacting the customer one week later one month later three months later to ensure that that refrigerator that washing machine that microwave was performing at its top level this created a tremendous relationship brand loyalty once you have sold the refrigerator you were able to convince that same customer to prefer your washing machine or your microwave or your dishwasher and so on and so forth. So, this is an interesting example from the Indian market place that you can study there are a lot of material available on the success of LG or Samsung in the Indian market place and you can read that how they executed this relationship enhancing strategy. This chart kind of presents to you a sort of maturity model and it is in the form of a stepped pyramid because not everybody who is at the level one can actually migrate to the level four, but it is not too narrow to demonstrate that this climb this enhancement of your customer sensitivity is not rocket signs it can be achieved through mindful execution. So, in the level one which is the level where most companies are particularly in India where our customers are in the level one service orientation our customer satisfaction orientation needs a lot of improvement because we are still kind of in many companies focused on this us and them type of mentality that there are customers out there our job is to somehow convince them to buy our products and that is it. So, customers are important for our revenue increase, but what we in most companies often fail to investigate in depth and act upon it that what do we mean to the customer in the long term. So, the level two is a company which has awareness about the company about the customer the front line employees the sales people your distributor sales people your service people your service agents they know about what the customers are saying about your product about its functioning about they have a much better knowledge, but that knowledge does not get shared across the various parts of the company. So, the company does not actively solicit feedback does not create the conversation with the customer and nor does it actually does much with the feedback that they receive from their front line. So, what we say that there is no perceptual integration between the company and its customers and today if you are at level one or level two most probably you will fail even if you come up with a brilliant product you cannot achieve leadership the leadership must start. So, it is you have to cannot spend the time to go through level one and level two feeling that some day we will arrive at level three today right when you hit the market you have to be running at this level that customers managers employees are all on the same page employees and managers spend considerable time talking about the customer centricity and not only talking they actively seek feedback through surveys focus groups customer visits and other techniques but the distinction between level three and level four is in action is in implementation that means not only collect feedback not only get inputs, but act upon it action. This action orientation where you can co-opt the customer this customer co-option is a very important concept increasingly being developed by the service dominant logic community as opposed to goods logic dominant community of marketing. In fact, you can find a lot of material on the website of sdlogic.com you can see a lot of research that are happening in different types of markets particularly in service market with respect to customer co-option customer co-creation. So, here actually the customer embraces the company embraces the customer centricity in its culture customers are often made part of the managerial decisions they become your active guides and advisers and the focus is on building relationship not only with the best customers, but also with the next customers the peripheral customers that we talked about in the last session the could be customers as well as today's customers and actively solicit customer participation in new product development, new service development and so on. Another way of looking at it instead of going into all those diagrams and steps and pyramids is to simply answer the W and H questions the why, what, when, how questions to develop your CRM system. So, before or even if you acquire hardware, software and talk about these things understand that the purpose of the feedback that you are trying to get the conversation that you want to have the customers must lead to solutions that save time that save direct and indirect costs. So, if you know that it is difficult for your customers to come to your premises because the transport system in the city. So, create some shuttle buses running from a convenient point to your store particularly if you are a big store create opportunities for better parking facility even these simple things can generate a lot of satisfaction can become building blocks of that relationship. If you actually there are stores today in India who were in the unorganized sectors the kind of local grocery stores they have practice certain kind of relationship because they knew the kind of monthly purchase that you would need and they have now taken steps forward some of them in competition with the organized sector in competition with the malls the hyper markets and so on super markets organized super markets coming up they have become responsive they have become proactive in contacting the customer that should we send such and such items that you procured last last month or you buy regularly we can package it and send it to you this kind of proactivity can be quite appreciated not by all but by some customers but by many customers some people may not like that kind of intrusion but you can always manage it that it is not intrusive but rather facilitating type of approach. So, saving time saving direct and indirect costs making customers life easier you know taking that step forward that before the customer needs to step towards you making buying more convenient that you take orders on the telephone and deliver or take orders to the web and deliver blend your offline and online marketing strategies and so on and so forth. If you are coming up with a new product if you are actually an entrepreneur growing your market share remember that every new purchase creates a kind of risk perception in the customers mind that will this work can I rely on this new supplier and so on. So, do everything to reduce the risk perception be there when the customer faces any difficulty with the usage of the new product. So, this customers make them feel better make their life easier these are important components of building a brand as a market leader in the growth market that we were discussing in the last session that to retain long term relationship to create a long term brand based on relationship we can look at as a this two by two matrix where we have differentiation on the x axis low differentiation versus high differentiation. We know that new or growing products product markets are focused on differentiation and to go from this position to this position that means you become highly relevant with high differentiation you have to create features that are both important to customers and highly differentiated from competitors and as we have been discussing that these features need not necessarily be only product features or functional features or functional attributes these can be created by building layers on your core product through service through different types of satisfaction levels. So, that is the key point here that companies in the growth market to build a long term brand equity based on relationship would like to be here where they remain highly relevant and with high differentiation, but that differentiation need not be only in terms of the core product features a lot of important differentiation can be built through service and through factors that delight the customer. These are some interesting statistics shared in the book that I have written with Professor Love Lock and Professor Jochen Witz on services marketing collected from many other research work in the western world. We are doing such studies in the Indian context I believe that these percentages of dissatisfied customers may be higher in Indian businesses at least some of our preliminary studies indicate that in the organized sector and the dissatisfied customers are very damaging just as satisfied customers can become extremely important asset because treating customers indifferently when they look away from you can actually make a huge impact on your revenue on your bottom line because replacing a lost customer is very expensive today. The biggest component of your marketing expense or when you calculate return on your marketing investment you will find that the most expensive proposition today is to get the new customer acquisition cost. On the other hand your investment in retention your investment in building a relation is a fraction of that cost. So, obviously that is a very good investment this relationship based marketing everything that you can do to climb that pyramid that we discussed us now is very good investment because it costs about nine times as much to attract a new customer as it does to sell to an existing one. In fact the customer acquisition cost has become so high in highly competitive industries like say mobile telephony service and so on that you need to retain that customer for at least two years to get any return from that customer. So, if you today sell a prepaid connection to a customer if you are not able to retain that customer through superior service for at least two years you really cannot make money and if you look at the dynamics the financial returns of many of the mobile service providers in today's market here you will realize this relationship you will realize that many of these companies are bleeding because of this nine times factor because they are not able to retain a good way to judge it may be look to look at the ratio of their post paid to prepaid customer base and link that ratio to the profitability of that particular company in any quarter which you are looking at or any financial year you are looking at. So, 80 percent of profitable sales today comes from customers who are repeat buyers and who help through their advocacy to inspire others to buy your products or services. So, fundamentally therefore, our aim for market leadership can only be realized through an increasing number of satisfied loyal repeat customers who are happy to be your marketing partner your advocate these are some simple steps action steps to achieve we will discuss a little bit more academic or more abstract concepts, but here this is very easy to understand it is at a managerial action level to create personal customized messages many companies are doing it they send cards on your birthday or on your anniversary, but this is just at the first level this is good, but not good enough unless you have responsive rapid handling of requests questions problems solving addressing complaints. And of course, that possibility can only be achieved by continuous employee development. So, there are people who say employees first because if you have satisfied capable expert employees then most likely you will have satisfied customers if your other systems and other strategies are in place, but you can have all strategies you can have all intents, but if you do not have capable people who are customer centric who loves serving customers then all those strategies all those systems all those software will not work. So, the focus therefore, will not only be on making a sale, but on this long term view which can come through frequent and visible demonstrations of commitment. Now, how do we achieve that it is by closing the gap between pre purchase pre purchase expectation when the customer approaches you the customer has certain expectation with from your product your service from your total approach to relationship and then there is a post purchase perception it is this we have discussed this point before. So, that is this pre purchase expectation versus your post purchase perception expectation versus perception it is this gap the gap between expectation. So, if your post purchase perception exceeds the initial expectation then the customer is satisfied if that difference is higher then the customer may be delighted and there is good research that has been done in different ways that these gap between the expectation and perception we can measure by these five criteria namely tangibles that relate to the equipment the facilities the people that the customer interfaces with reliability responsiveness assurance and empathy what is responsiveness what is reliability what is empathy simple to understand if you read reliability as doing what you say you will do responsiveness is the promptness the speed the effectiveness the efficiency in helping the customer empathy is the way you do it the soft issues delivered by your front line delivered by your back office delivered by your call center and above all the customers believe that you will solve the problem when called upon. So, gap analysis and closing the gap based on these five factors which we often actually say it is a tier with double R is at the core of building long term relationship. Another way of closing gaps seeking feedbacks and acting upon them to delight the customers are to answer simple questions with respect to convenience this is particularly true for retail marketing because as somebody had said that the core strategy to succeed in the retail market must be based on three issues and those three issues are convenience convenience and convenience. So, that is mean that means that single focus on all types of convenience can be a powerful tool for retail marketing success and it is in many ways a success mantra for most businesses not only retail today is to answer the questions like is your business conveniently located are your business hours convenient do you make it easy for customers to place order to deliver the goods and so on do you make it easy for the customers to buy on credit or using credit card and so on are other instruments. So, today it is not only e-businesses which are open 24 by 7 there are many physical stores which are open 24 7 there are banks who provide you the touch point the service through physical locations through ATMs through telephone banking through internet banking anytime anywhere service there are retailers who are now open 7 days almost all days may be excluding 1 or 2 top holidays there are retailers who can actually cater to customer segments and like call center employees and they have the busiest time late night early morning. So, convenience looking at the customer your STP segmentation targeting positioning strategy convenience is a very powerful tool to cause satisfaction to and create a strong foundation for relationship. The response that we were discussing in the tier factors that those five factors where we do gap analysis again can be found through answers to simple questions like the speed at which you have the ability to introduce new products improvements the speed at which you can respond to market demand and deliver the ordering process improvement. So, these are all related to speed efficiency. So, efficiency and effectiveness must go hand in hand not either or but and you need both you can have excellent attitude excellent empathy, but if your response time is sluggish then that may not be enough in your health care service you can have excellent tangible facilities, but if you if the customer is not assured that the treatment will be good the outcome will be good then you will fail. So, you have to manage superior performance on all those five factors of course, depending on the type of business some factors have a higher weightage. So, for example, the health care that we were discussing all factors are important tangible empathy, but the reliability and assurance factors have a higher weightage there because the treatment that you get must be must assure you your wellness your recovery and the service must be reliable that it is not by hit and trial and error, but it is consistently most people get good treatment. So, in health care therefore, those factors have a higher weightage. So, similarly you can look at any product or service and understand that which gaps are more important than others and accordingly decide your strategy. So, to come to conclusion focus on this integrated concept of health care. What we call SSR sense share and respond continuously sense customer inputs proactively seek out customer feedback. So, sense and seek is the first test, but obviously this means that you have to have good deployment of communication technology information technology that will help you to sense and seek that will help you to analyze your point of sale data that will help you to analyze your service call data that will help you to analyze your call centers record but just by sensing and seeking you cannot achieve satisfaction unless you have actually responded and resolved to create the relation. So, between these two stages is what is share? Share means across all functional silos inside your organization this dynamic data that is coming in at every moment should be presented should be shared with different emphasis. So, the service department's feedback data about functional problems in the product need to be analyzed formatted and presented in different ways to the finance department. So that they do not bother the customer with the warranty payment or the last payment if the customer is continuing to have trouble with the equipment that you have delivered or some there are some functional issues with respect to installation. It must be presented in a different format to manufacturing so that they know that these are issues that are causing installation problems or usage problems. It must be presented in a different way to the design people it must be presented in a different way to top management where we can we need to create dashboard level aggregation and filter out and abstract out that what are the top management action points but that sharing is what actually links the sensing and seeking out of information or gathering of information getting the feedback signal and the resolution the response towards the resolution and this sharing is not the function of only technology. The sharing obviously as you can easily see is also a lot of attitudinal cultural and company practice issues, beliefs, values nurtured within the organization to make it a continuous habit. So, use technology to eliminate customer irritation inconvenience but remember that until and unless the technology leads to final resolution high speed response integration of efficiency and efficiency your investment in that technology will not be amortized will not you will not get the return. So, many times when we apply technology for customer relationship because the CRM has become synonymous with software hardware IT ICT. So, we are often motivated that how can we reduce transaction cost, how can we persuade more customers to go to our ATM rather than come to our branch in a bank, how we can take the customers to telephone interaction rather than physical interaction to reduce transactional cost. But we know from research today that your focus first must be on reducing customers cost not your cost, you must focus on that that is the efficiency issue what you are in your own operation. You have to continuously reduce the cost because that is the foundation for operational excellence. But as I said right in the beginning of today's session that your operational excellence must be driven by your customer intimacy inputs. So, your efficiency strategy must be driven by your effectiveness in the eyes of the customer perceptual feedbacks from the customer. So, your gap closing strategy on those tangible empathy assurance reliability response factors must drive your transactional cost reduction efficiency improvement in the operation. So, that kind of is a part of discussion on relationship marketing with respect to a growth market and with respect to the strategy to be followed by market leaders. We will again discuss some of these factors and the variants of your strategies in this respect. In the coming session when we discuss the marketing strategies for a maturing market or in a declining market. We will see that whether you are at the initial stage of the market whether you are an entrepreneur or you are a market leader in a matured market the importance of relationship is always there and perhaps in some ways if this is the product life cycle or business life cycle the importance of relationship is a continuous demand on the business. It is something that must be enhanced continuously because it is only through that strategy. When customer becomes your co-creator you will be able to convert the so called S curve to an E curve. That means you have this ability to cause a new business to happen every time you are coming to a decline or facing a maturity. So, creating this portfolio this matching of maturing segments with emerging segments creation new business. Creating new businesses out of your existing businesses by leveraging the inputs from your customers by co-opting them to co-create new value streams will be what we would take up in the next session. Thanks.