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Semester Ganjil 2013/2014

Introduction to Customer Relationship Management

(CRM)

Learning Objectives

Understand the basic concept of CRM Identify the four major perspectives on CRM Define several common misunderstandings

about CRM Understand five generic models of CRM Overview of history and development of CRM

Sales Cycle

(2) Estimate Sales Potential

(3) Manage Leads

(1) Identify Prospect

(4) Forecasting Sales

(5) Initiate and Maintain Customer Relationship

CRM Stands for?

Customer Relationship Management

OR

Customer Relationship Marketing

OR

Continuous Relationship Marketing

Selected definitions of CRM [1]

CRM is an information industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organized way

CRM is the process of managing all aspects of interaction a company has with its customers, including prospecting, sales, and service CRM applications attempt to provide insight into and

improve the company/customer relationship by combining all these views of customer interaction into one picture

Selected definitions of CRM [2]

CRM is an integrated approach to identifying, acquiring, and retaining customers By enabling organizations to manage and

coordinate customer interactions across multiple channels, departments, lines of business, and geographies, CRM helps organizations maximize the value of every customer interaction and drive superior corporate performance

 

Selected definitions of CRM [3]

CRM is an integrated information system that is used to plan, schedule and control the pre-sales and post-sales activities in an organization CRM embraces all aspects of dealing with prospects

and customers, including the call center, sales force, marketing, technical support and field service

The primary goal of CRM is to improve long-term growth and profitability through a better understanding of customer behaviour

CRM aims to provide more effective feedback and improved integration to better gauge the return on investment (ROI) in these areas

Selected definitions of CRM [4]

CRM is a business strategy that maximizes profitability, revenue and customer satisfaction by organizing around customer segments, fostering behaviour that satisfies customers, and implementing customer-centric processes

Core Definition of CRM

CRM is the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit It is grounded on high quality customer-

related data and enabled by information technology

CRM is Founded on Four Tenets

1. Customers should be managed as important assets

2. Not all customers are equally desirable3. Customers vary in their needs, preferences, and

buying behavior4. By better understanding their customers,

companies can tailor their offerings to maximize their overall value

The CRM Advantages

Increases Market Share

Increases Market Share

Quicker Cash Flow Quicker Cash Flow

BetterCustomer

Knowledge

BetterCustomer

Knowledge

Creates Up and Cross-Selling

Opportunities

Creates Up and Cross-Selling

Opportunities

Increased Product

Acceptance

Increased Product

Acceptance

Why CRM Systems are Being Used ?

Identifying prospectsAcquiring customersDeveloping customersCross-selling and up-sellingServicingRetainingIncreasing loyaltyWinning back defectors

CRM’s Benefits for Retail Banks (Example)

Increase in average products sold per customer over one year from 4.6 to 6.2

3-5 percent decrease in administrative costs 200 percent return on technology investment

through cost reduction over one year 96 percent reduction in average time for a CCC

agent to refer a customer to a branch loan office 83 percent decrease in average customer info

retrieval time 15 percent increase in product revenue in one year

Lowell Alcorn and Anton Wiryawan, Mortgage Banking (Feb 2004): 74-78

A Customer Focus Can Aid Retention

Annual Defection Rates

Newspaper subscriptions 66 percent Residential tree and lawn care 32 percent U.S. long distance telephone 30 percent Clothing catalogues 25 percent Internet service providers 22 percent

Griffen and Lowenstein 2001

Customer Retention and Profits

Increase retention 5 percent and improve profitability in net present value from 20-85 percent

It costs five to ten times more to obtain a new customer than it does to keep an existing one

Which Companies Benefit Most from CRM?

Companies serving large numbers of customers through complex and frequent interactions: Communications companies Retail banks Insurance companies Healthcare organizations Utilities

Companies with a steep skewCompanies in “lost for good” markets

Which Companies Benefit the Least from CRM Today?

Companies that engage in minimal interactions with each customer Auto dealers Government agencies

Companies with simple transaction Movie theater Retail stores

Type of CRM Dominant characteristic

Strategica core customer-centric business strategy that aims at winning and keeping profitable customers

Operationalfocuses on the automation of customer-facing processes such as selling, marketing and customer service

Analyticalfocuses on the intelligent mining of customer-related data for strategic or tactical purposes

Collaborativeapplies technology across organizational boundaries with a view to optimizing company, partner and customer value

Types of CRM

Strategic CRM

Focus upon the development of a customer-centric business culture that is dedicated to winning and keeping the customers

Customer-centricity competes with other business logics E.g. Philip Kotler identifies three other major

business orientations: product, production and selling

Customer Centricity & Other Business Logics [1]

1. Product-oriented businesses believe that customers choose products with the best quality, performance, design or features

2. Production-oriented businesses believe that customers choose low-price products

3. Sales-oriented businesses make the assumption that if they invest enough in advertising, selling, public relations (PR) and sales promotion, customers will be persuaded to buy

Customer Centricity & Other Business Logics [2]

4. A customer or market-oriented company shares a set of beliefs about putting the customer first

It collects, disseminates and uses customer and competitive information to develop better value propositions for customers

A customer-centric firm is a learning firm that constantly adapts to customer requirements and competitive conditions

Operational CRM

Marketing automationMarket segmentationCampaign managementEvent-based (trigger) marketing

Sales force automationAccount managementLead managementOpportunity managementPipeline managementContact managementQuotation and proposal generationProduct configuration

Service automation Case (incident or issue) managementInbound communications managementQueuing and routingService level management

Marketing Automation

Applies technology to marketing processes Market segmentation Campaign management

• Allow marketers to use customer-related data in order to develop, execute and evaluate targeted communications and offers

Event-based (trigger) marketing• Describe messaging and offer presentation to customers at

particular points in time• Event-based campaigns can be initiated by customer

behaviours or contextual conditions• Ex. A call to contact center is an example of a customer

Sales-force Automation

The original form of operational CRM Applies technology to the management of a company’s

selling activities Improve and standardize the selling process

Consist of: Account management Lead management: enable users to qualify leads and assign

them to the appropriate salesperson Opportunity management Pipeline management Contact management: manage their communications

programme with customers Quotation and proposal generation: allow the salesperson to

automate the production of prices and proposals for customers Product configuration: enable salespeople or the customer

themselves, automatically to design and price customized products, services or solutions to problems

Service Automation

Allow companies to manage their service operations, whether deliverd through call centre, contact centre, web or face-to-face

Consists of: Case (incident or issue) management Inbound communications management Queuing and routing Service level management

Sources of Customer-related Data for Analytical CRM

Internal sources● Sales data (purchase history), financial data (payment

history, credit score), marketing data (campaign response, loyalty scheme data) and service data.

External sources● Geo-demographic and life-style data from business

intelligence organisations, for example.

Beneficiaries of Analytical CRM

Customer● Analytical CRM can deliver timely,

customized, solutions to the customer’s problems, thereby enhancing customer satisfaction.

Company● Analytical CRM offers the prospect of more

powerful cross-selling and up-selling programs, and more effective customer retention and customer acquisition programs.

Misunderstandings about CRM

1. CRM is database marketing2. CRM is a marketing process3. CRM is an IT issue4. CRM is about loyalty schemes5. CRM can be implemented by any

company

CRM Constituencies

1. Companies implementing CRM2. Customers and partners of those companies3. Vendors of CRM software4. CRM application service providers (ASPs)5. Vendors of CRM hardware and infrastructure6. Management consultants

CRM Challenges Vary Across Context

1. Banks2. Auto manufacturers3. High tech companies4. Consumer goods manufacturers5. Not-for-profits

The IDIC Model of CRM

Identify who your customers are and build a deep understanding of them

Differentiate your customers to identify which customers have most value now and which offer most for the future.

Interact with customers to ensure that you understand customer expectations and their relationships with other suppliers or brands

Customize the offer and communications to ensure that the expectations of customers are met.

The QCi Model of CRM

The CRM Value Chain

The CRM Value Chain

CustomerPortfolioAnalysis

CustomerIntimacy

NetworkDevelopment (SCOPE)

ValuePropositionDevelopment

ManageTheCustomerLifecycle

Leadership and culture

Data and information technology

People

Processes

Primarystages

Supportingconditions

Payne’s 5-process Model of CRM

Gartner’s Competency Model of CRM

1. CRM Vision: Leadership, Social Worth, Value Proposition

2. CRM Strategy: Objectives, Segments, Effective Interaction

8. CRM Metrics: Cost to Serve, Satisfaction, Loyalty, Social Costs

7. CRM Technology: Applications, Architecture, Infrastructure

6. CRM Information: Data, Analysis, One View Across Channels

5. CRM Processes: Customer Life Cycle, Knowledge Management

Culture and StructureCustomer Understanding

People: Skills,CompetenciesIncentives and Compensation

Employee CommunicationsPartners and Suppliers

4. Organizational Collaboration3. Valued Customer Experience

Understand RequirementsMonitor Expectations Satisfaction vs.Competition Collaboration and Feedback

References

Francis Buttle, Customer Relationship Management: Concepts and Technologies, 2e, Elsevier Ltd., 2009

Baran, Galka and Strunk, Principles of Customer Relationship Management, South-Western, 2008