McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved

Chapter 11Chapter 11

Building a Customer-Centric Building a Customer-Centric Organization – Customer Organization – Customer Relationship ManagementRelationship Management

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Learning Outcomes

11.1 Compare operational and analytical customer relationship management

11.2 Identify the primary forces driving the explosive growth of customer relationship

management

11.3 Define the relationship between decision making and analytical customer relationship management

11.4 Summarize the best practices for implementing a successful customer relationship

management system

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Customer Relationship Management (CRM)

• CRM enables an organization to:– Provide better customer service– Make call centers more efficient– Cross sell products more effectively– Help sales staff close deals faster– Simplify marketing and sales processes– Discover new customers– Increase customer revenues

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Recency, Frequency, and Monetary Value

• Organizations can find their most valuable customers through “RFM” - Recency, Frequency, and Monetary value– How recently a customer purchased items

(Recency)– How frequently a customer purchased items

(Frequency)– How much a customer spends on each

purchase (Monetary Value)

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The Evolution of CRM

• CRM reporting technology – help organizations identify their customers across other applications

• CRM analysis technologies – help organization segment their customers into categories such as best and worst customers

• CRM predicting technologies – help organizations make predictions regarding customer behavior such as which customers are at risk of leaving

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The Evolution of CRM

• Three phases in the evolution of CRM include reporting, analyzing, and predicting

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The Evolution of CRM

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The Ugly Side of CRM

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Customer Relationship Management’s Explosive Growth

CRM Business Drivers

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Customer Relationship Management’s Explosive Growth

Forecasts for CRM Spending (in billions)

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Using Analytical CRM to Enhance Decisions

• Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers

• Analytical CRM – supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers

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Using Analytical CRM to Enhance Decisions

• Operational CRM and analytical CRM

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Customer Relationship Management Success Factors

• CRM success factors include:1. Clearly communicate the CRM strategy

2. Define information needs and flows

3. Build an integrated view of the customer

4. Implement in iterations

5. Scalability for organizational growth

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OPENING CASE STUDY QUESTIONS

Second Life

1.Why is it important for any company to use CRM strategies to manage customer information?

2.How are CRM strategies in Second Life different from CRM strategies in the real world?

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OPENING CASE STUDY QUESTIONS

Second Life3. If the virtual world is the first point of

contact between a company and its customers, how might that transform the entire shopping experience?

4. How could companies use Second Life to connect with customers that would be difficult or too expensive in the real world?

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CHAPTER ELEVEN CASEThe Ritz-Carlton-Specializing in Customers

• Ritz-Carlton is the only service company to have won the prestigious Malcolm Baldrige National Quality Award twice—in 1992 and 1999

• Companies worldwide strive to be “the Ritz-Carlton” of their industries

• In 2000, the company launched the Ritz-Carlton Leadership Center, where anyone can study the brand’s cult of customer service for $2,000

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Chapter Eleven Case Questions

1. What are the two different types of CRM and how has the Ritz-Carlton used them to become a world-class customer-service business?

2. Determine which of Ritz-Carlton’s six steps of customer service is the most important for its business

3. Rank Ritz-Carlton’s six steps of customer service in order of greatest to least importance in a CRM strategy for an online book-selling business such as Amazon.com

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Chapter Eleven Case Questions

4. Describe three ways Ritz-Carlton can extend its customer reach by performing CRM functions over the Internet

5. The sixth step states to eschew technology— “We will not replace human service with machines.” Do you agree that customer service and satisfaction would decrease at Ritz-Carlton if it used technology such as automatic check-in kiosks? Why or why not? Do you think that Ritz-Carlton might find itself at a competitive disadvantage to hotels that are embracing technology to become more efficient and effective? Why or why not?