McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Business Driven Information Systems 2e CHAPTER 9 CUSTOMER RELATIONSHIP MANAGEMENT AND BUSINESS INTELLIGENCE CHAPTER 9 CUSTOMER RELATIONSHIP MANAGEMENT AND BUSINESS INTELLIGENCE

9-2 Chapter Nine Overview SECTION 9.1 – CUSTOMER RELATIONSHIP MANAGEMENT –Customer Relationship Management Fundamentals –Using IT to Drive Operational CRM –Using IT to Drive Analytical CRM –CRM Trends: SRM, PRM, ERM –The Ugly Side of CRM – SECTION 9.2 – BUSINESS INTELLIGENCE –Business Intelligence –Operational, Tactical, and Strategic BI –Data Mining –Business Benefits of BI

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved SECTION 9.1 CUSTOMER RELATIONSHIP MANAGEMENT

9-4 LEARNING OUTCOMES 1.Compare operational and analytical customer relationship management 2.Explain the formula an organization can use to find its most valuable customers 3.Describe and differentiate the CRM technologies used by sales departments and customer service departments

9-5 LEARNING OUTCOMES 4.Describe and differentiate the CRM technologies used by marketing departments and sales departments 5.Compare customer relationship management, supplier relationship management, partner relationship management, and employee relationship management

9-6 CRM FUNDAMENTALS Customer relationship management (CRM) – involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

9-7 CRM FUNDAMENTALS CRM overview

9-8 CRM as a Business Strategy CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level CRM can enable an organization to: –Identify types of customers –Design individual customer marketing campaigns –Treat each customer as an individual –Understand customer buying behaviors

9-9 Business Benefits of CRM 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)

9-10 Evolution of 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

9-11 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

9-12 Evolution of CRM Three phases in the evolution of CRM include reporting, analyzing, and predicting

9-13 Evolution of CRM

9-14 Operational and Analytical CRM 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

9-15 Operational and Analytical CRM

9-16 USING IT TO DRIVE OPERATIONAL CRM

9-17 Marketing and Operational CRM Three marketing operational CRM technologies: 1.List generator – compiles customer information from a variety of sources and segment the information for different marketing campaigns 2.Campaign management system – guides users through marketing campaigns 3.Cross-selling and up-selling Cross-selling – selling additional products or services Up-selling – increasing the value of the sale

9-18 Sales and Operational CRM The sales department was the first to begin developing CRM systems with sales force automation – a system that automatically tracks all of the steps in the sales process

9-19 Sales and Operational CRM Sales and operational CRM technologies 1.Sales management CRM system – automates each phase of the sales process, helping individual sales representatives coordinate and organize all of their accounts 2.Contact management CRM system – maintains customer contact information and identifies prospective customers for future sales 3.Opportunity management CRM system – targets sales opportunities by finding new customers or companies for future sales

9-20 Sales and Operational CRM CRM Pointers for Gaining Prospective Customer 1.Get their attention 2.Value their time 3.Overdeliver 4.Contact frequently 5.Generate a trustworthy mailing list 6.Follow up

9-21 Customer Service and Operational CRM Three customer service operational CRM technologies: 1.Contact center (call center) 2.Web-based self-service system Click-to-talk 3.Call scripting system

9-22 Customer Service and Operational CRM Common features included in contact centers –Automatic call distribution –Interactive voice response –Predictive dialing

9-23 CRM Metrics Sales Metrics –Number of prospective customers –Number of new customers –Number of retained customers –Number of open leads –Number of sales calls –Amount of new revenue –Amount of recurring revenue –Number of proposals given

9-24 CRM Metrics Service Metrics –Cases closed same day –Number of cases handled by agent –Number of service calls –Average number of service requests by type –Average time to resolution –Average number of service calls per day

9-25 CRM Metrics Marketing Metrics –Number of marketing campaigns –New customer retention rates –Number responses by marketing campaign –Number of purchases by marketing campaign –Revenue generated by marketing campaign –Customer retention rate

9-26 USING IT TO DRIVE ANALYTICAL CRM Personalization – when a Web site knows enough about a persons likes and dislikes that it can fashion offers that are more likely to appeal to that person Analytical CRM relies heavily on data warehousing technologies and business intelligence to glean insights into customer behavior These systems quickly aggregate, analyze, and disseminate customer information throughout an organization

9-27 USING IT TO DRIVE ANALYTICAL CRM Analytical CRM information examples 1.Give customers more of what they want 2.Value their time 3.Overdeliver 4.Contact frequently 5.Generate a trustworthy mailing list 6.Follow up

9-28 CRM TRENDS: SRM, PRM, AND ERM Current trends include: –Supplier relationship management (SRM) –Partner relationship management (PRM) –Employee relationship management (ERM)

9-29 THE UGLY SIDE OF CRM Business 2.0 ranked “You” the customer as the number one person who mattered most

9-30 OPENING CASE QUESTIONS Customer First Awards 1.Summarize the evolution of CRM and provide an example of a reporting, analyzing, and predicting question Progressive might ask its customers 2.How could Progressive’s marketing department use CRM technology to improve its operations? 3.How could Mini’s sales department use CRM technology to improve its operations?

9-31 OPENING CASE QUESTIONS Customer First Awards 4.How could Progressive and Mini’s customer service departments use CRM technology to improve their operations? 5.Define analytical CRM and its importance to companies like Progressive and Mini

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved SECTION 9.2 BUSINESS INTELLIGENCE

9-33 LEARNING OUTCOMES 6.Explain the problem associated with business intelligence. Describe the solution to this business problem 7.Describe the three common forms of data-mining analysis? 8.Compare tactical, operational, and strategic BI

9-34 LEARNING OUTCOMES 9.Explain the organization-wide benefits of BI 10.Describe the four categories of BI business benefits

9-35 BUSINESS INTELLIGENCE Business intelligence (BI) – applications and technologies used to gather, provide access to, and analyze data and information to support decision-making efforts Parallels between the challenges in business and challenges of war –Collecting information –Discerning patterns and meaning in the information –Responding to the resultant information

9-36 The Problem: Data Rich, Information Poor Businesses face a data explosion as digital images, in-boxes, and broadband connections doubles by 2010 The amount of data generated is doubling every year Some believe it will soon double monthly

9-37 The Solution: Business Intelligence Improving the quality of business decisions has a direct impact on costs and revenue BI systems and tools results in creating an agile intelligent enterprise

9-38 The Solution: Business Intelligence BI enables business users to receive data for analysis that is: –Reliable –Consistent –Understandable –Easily manipulated

9-39 The Solution: Business Intelligence BI can answer tough customer questions

9-40 OPERATIONAL, TACTICAL, AND STRATEGIC BI Claudia Imhoff, president of Intelligent Solutions, divides the Spectrum of data mining analysis and business intelligence into three categories: –Operational –Tactical –Strategic

9-41 OPERATIONAL, TACTICAL, AND STRATEGIC BI

9-42 OPERATIONAL, TACTICAL, AND STRATEGIC BI

9-43 BI’s Operational Value Richard Hackathorn’s graph demonstrating the value of operational BI

9-44 BI’s Operational Value The key is to shorten the latencies so that the time frame for opportunistic influences on customers, suppliers, and others is faster, more interactive, and better positioned

9-45 DATA MINING Data mining – process of analyzing data to extract information Data-mining tools – use a variety of techniques to find patterns and relationships in large volumes of information –Classification –Estimation –Affinity grouping –Clustering

9-46 DATA MINING Common forms of data-mining analysis capabilities include: –Cluster analysis –Association detection –Statistical analysis

9-47 Cluster Analysis Cluster analysis – a technique used to divide an information set into mutually exclusive groups such that the members of each group are as close together as possible to one another and the different groups are as far apart as possible CRM systems depend on cluster analysis to segment customer information and identify behavioral traits

9-48 Association Detection Association detection – reveals the degree to which variables are related and the nature and frequency of these relationships in the information –Market basket analysis –INSERT FIGURE 9.17

9-49 Statistical Analysis Statistical analysis – performs such functions as information correlations, distributions, calculations, and variance analysis –Forecast – predictions made on the basis of time-series information –Time-series information – time-stamped information collected at a particular frequency

9-50 BUSINESS BENEFITS OF BI Benefits of BI include: –Single Point of Access to Information for All Users –BI across Organizational Departments –Up-to-the-Minute Information for Everyone

9-51 Four Primary Categories of BI Benefits Four main categories: –Quantifiable benefits –Indirectly quantifiable benefits –Unpredictable benefits –Intangible benefits

9-52 OPENING CASE QUESTIONS Customer First Awards 6.Explain the problems of gathering business intelligence form car accidents. How can BI solve this problem and help Progressive Insurance become more efficient and more effective? 7.Choose one of the three common forms of data-mining analysis and explain how Progressive Insurance can use it to gain BI

9-53 OPENING CASE QUESTIONS Customer First Awards 8.How can Mini use tactical, operational, and strategic BI 9.What types of ethical and security issues will companies face when using business intelligence?

9-54 CLOSING CASE ONE Calling All Canadians 1.What are the two different types of CRM and how can they be used to help an organization gain a competitive advantage? 2.Explain how a contact center (or call center) can help an organization achieve its CRM goals 3.Describe three ways an organization can perform CRM functions over the Internet

9-55 CLOSING CASE ONE Calling All Canadians 4.How will outsourcing contact centers (call centers) to Canada change as future CRM technologies replace current CRM technologies?

9-56 CLOSING CASE TWO Fighting Cancer with Information 1.How could the ACS’s marketing department use operational CRM to strengthen its relationships with its customers? 2.How could the ACS’s customer service department use operational CRM to strengthen its relationships with its customers? 3.Review all of the operational CRM technologies and determine which one would add the greatest value to ACS’s business

9-57 CLOSING CASE TWO Fighting Cancer with Information 4.Describe the benefits ACS could gain from using analytical CRM 5.Summarize SRM and describe how ACS could use it to increase efficiency in its business 6.How could BI and data mining help fight cancer?

9-58 CLOSING CASE THREE Intelligent Business 1.What is the problem of gathering business intelligence from a traditional company? How can BI solve this problem? 2.Choose one of the three common forms of data-mining analysis and explain how Travelocity could use it to gain BI 3.How will tactical, operational, and strategic BI be different when applied to personal Google? 4.How is IBM’s search and analysis software an example of BI?

9-59 CLOSING CASE THREE Intelligent Business 5.What does the term “pervasive business intelligence” mean? 6.How could any business benefit from technology such as Personal Google? 7.How could a company use BI to improve its supply chain? 8.Highlight any security and ethical issues associated with Biggle

9-60 BUSINESS DRIVEN BEST SELLERS The Anatomy of Buzz, by Emanuel Rosen

9-61 BUSINESS DRIVEN BEST SELLERS Loyalty Rules!, by Frederick F. Reichheld