Chapter 12 Extending the Organization to Customers

Chapter Outline 12.1 Defining Customer Relationship Management 12.2 Operational Customer Relationship Management Systems 12.3 Analytical Customer Relationship Management Systems 12.4 Other Types of Customer Relationship Management Systems

Learning Objectives 1.Identify the primary functions of both customer relationship management (CRM) and collaborative CRM. 2.Describe how businesses might utilize applications used in each of the two major components of operational CRM systems. 3.Discuss the benefits of analytical CRM to businesses. 4.Explain the advantages and disadvantages of mobile CRM systems, on-demand CRM systems, and open-source CRM systems.

Introduction Opening Case: induPlast Personal customer relationship became impersonal as people moved from farms to cities, consumers became mobile, stores achieved economies of scale through mass marketing efforts, and the Internet and the World Wide Web grew rapidly. Customer relationship management (CRM) returns to personal marketing, focusing on customer intimacy. © Dmitri Mihhailov/iStockphoto

12.1 Defining Customer Relationship Management Customer relationship management (CRM) An organizational strategy focusing on satisfying customers by assessing their needs for both products and services and by providing quality services Maximize the lifetime value of a customer Customer’s potential revenue stream over the years Minimize customer churn (losing customers) CRM systems Information systems designed to support an organization’s CRM strategy Two basic elements: 1.Identify customer touch points 2.Consolidate data about each customer

Figure 12.1 The Customer Relationship Management Process

Figure 12.2 Customer Touch Points Sources: Smartphone-Oleksiy Mark/Shutterstock; Service center-Media Bakery; Physical store-Media Bakery Organizations interact with customers in multiple different ways

Data Consolidation 360-degree view of a customer A complete data set on each customer consolidated from various functional areas Made available to every unit of the business through a data warehouse Collaborative CRM systems Provide effective and efficient interactive communication with the customer throughout the entire organization Enable customers to provide direct feedback to the organization

12.2 Operational Customer Relationship Management Systems Operational CRM systems support front-office business processes Front-office processes directly interact with customers Examples: Sales, marketing, service Two major components: 1.Customer-facing applications 2.Customer-touching applications

Customer-Facing Applications Applications that support direct interactions with customers Include Customer service and support Sales force automation Marketing Campaign management © Mustafa Almir Mahmoud/Age Fotostock America, Inc.

Customer Service and Support Automate service requests, complaints, product returns, and requests for information Customer interaction centers (CIC) Use multiple communication channels (Web, phone, fax, and face-to-face) following each customer’s communication preferences Outbound telesales Create a call list of sales prospects for the sales team Inbound teleservice Customers communicate directly with the CIC Call center A centralized office that manages customer requests by phone

Sales Force Automation (SFA) Automatically records all the components in a sales transaction Contact management system Tracks all customer contacts (purpose, follow-up, etc.) Sales lead tracking system Lists potential customers Sales forecasting system Uses mathematical technique for estimating future sales Product knowledge system A comprehensive source of information regarding products and services Configurator Allows customers to model the product to meet their needs

Marketing CRM supports various marketing activities Identify and target best customers Manage marketing campaigns Generate quality leads for the sales teams Provide data mining capabilities Develop purchasing profiles Cross-selling: Offer related products based on customers’ previous purchases Up-selling: Offer higher-value related products or services as opposed to or along with the consumer’s initial product or service selection Bundling: Selling a group of products together at a lower price than the combined individual product prices A form of cross-selling Source: © Amy Eira/PhotoEdit

Campaign Management Campaign management applications Help organizations plan campaigns so that the right messages are sent to the right people through the right channels Source: Kzenon/Shutterstock

Customer-Touching Applications Electronic CRM (e-CRM) applications Customers interact directly with technologies and applications rather than interact with a company representative Consists of Search and comparison capabilities Technical and other information and services Customized products and services Personalized Web pages FAQs and automated response Loyalty programs

12.3 Analytical Customer Relationship Management Systems Analyze customer behavior and perceptions in order to provide actionable business intelligence Technologies used Data warehouses Data mining Decision support systems Other business intelligence technologies Image Source Limited; J-C & D. PRATT/PhotoNonStop/Glow Images

12.4 Other Types of Customer Relationship Management Systems On-demand CRM systems Hosted by an external vendor Mobile CRM systems Support direct interactions with consumers through their own portable devices, such as smart phones Open-source CRM systems Make source code available to developers and users What are benefits and drawbacks of these systems?

Figure 12.4 The Relationship Between Operational CRM and Analytical CRM

What’s in IT for ME? Accounting Uses data from CRM for financial reporting controls and compliance regarding customers Finance Uses CRM to track marketing expenses, collecting appropriate costs for each marketing campaign Marketing Uses CRM for every marketing activity Production/Operations Management Manufactures products based on CRM sales forecasts Human Resources Management Tries to increase employee satisfaction and provides CRM training for employees MIS Provides data used in a 360-degree view of the customer and provides the technologies for the customer interaction center