Chapter 11 Building a Customer-Centric Organization – Customer Relationship Management 11-1

Learning Outcomes Compare operational and analytical customer relationship management Identify the primary forces driving the explosive growth of customer relationship management Define the relationship between decision making and analytical customer relationship management

Customer Relationship Management (CRM)- overview Customer Relationship Management Systems (CRM) Manages all of the ways used by firms to deal with existing and potential new customers CRM is both a Business and Technology discipline CRM Uses information system to integrate entire business processes of a firm’s interaction with its customers. Provides end-to-end customer care ( from order receipt through delivery and after sale service and support) Provides a unified view of customer across the company Consolidates customer data from multiple sources (retail stores, phone, e-mail, the Web) and provides analytical tools for answering questions

CRM : Customer Relationship Management Systems 4

Customer Relationship Management (CRM) CRM enables an organization to: Provide better customer service Make call centers more efficient Help sales staff close deals faster Simplify marketing and sales processes Discover new customers Increase customer revenues As the business world increasingly shifts from product-focus to customer-focus, most organizations recognize that treating existing customers well is the best source of profitable and sustainable revenue growth

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) Once a company knows this information, it can begin to strategize marketing campaigns, sales promotions, and other ways to increase business For example: If Ms. Smith buys only at the height of the season, then the company should send her a special offer during the “off-season”

The Evolution of CRM There are 3 phases in the CRM evolution: 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 Reporting Help organizations identify their customers across applications Analyzing Help organizations segment their customers into categories such as best and worst customers Predicting Help organizations make predictions regarding customer behavior such as which customers are at risk of leaving

The Evolution of CRM Three phases in the evolution of CRM include reporting, analyzing, and predicting Reporting Help organizations identify their customers across applications Analyzing Help organizations segment their customers into categories such as best and worst customers Predicting Help organizations make predictions regarding customer behavior such as which customers are at risk of leaving

The Evolution of CRM

Good CRM systems By consolidating customer data, one should be able to answer questions such as What’s the value of particular customers over their lifetime? Who are the most loyal customers? ( costs 6 times more to sell to a new customer than an existing one) Who are firm’s most profitable customers? (80%-90% of the firm’s profit are generated by 10%-20% of its customers) What do these profitable customers buy? Firms can then use the answers to these questions to acquire new customers.

CRM Demo- SAP SAP CRM Enabling Customer-Loyalty Management SAP.com is the major producer of CRM systems 11

Customer Relationship Management’s Explosive Growth CRM Business Drivers Brother International experienced skyrocketing growth in its sales of multifunction printers Along with skyrocketing sales growth came a tremendous increase in customer service calls When Brother failed to answer the phone fast enough, product returns started to increase Brother purchased, designed, developed, and deployed SAP’s CRM solution The 1.8 million calls dropped to 1.57 million – reducing call center staff from 180 agents to 160 agents The CRM system has also reduced call duration by an average of one minute, saving the company $600,000 per year

Customer Relationship Management’s Explosive Growth Can you think of an industry or company that would not benefit from a CRM system? Every business can benefit from CRM! Business 2.0 magazine recently rated the top 50 important people for 2006 The number 1 person was “You, The Consumer”, due to the information age, personalization, and the growing importance of the consumer

Operational vs. 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

Operational CRM Customer-facing applications, such as sales force automation, call center and customer service support, and marketing automation Examples: Campaign management, e-marketing, telemarketing, tele-selling, e-selling, field sales

Analytical CRM Applications that analyze customer data generated by operational CRM applications to provide information for improving business performance Examples: Develop customer profiles; analyze customer or product profitability; identify trends in sales length cycle;

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 collect insights into customer behavior These systems quickly aggregate, analyze, and disseminate customer information throughout an organization Analytical CRM has the ability to provide an organization with information about their customers that was previously impossible to locate, and the resulting payback can be tremendous. 17

Using Analytical CRM to Enhance Decisions A data warehouse is a repository of an organization's electronically stored data. Data warehouses are designed to facilitate reporting and analysis

Summary Business Value of Customer Relationship Management Systems Increased customer satisfaction More effective marketing and reduced direct marketing costs Lower costs for customer acquisition Increased revenue from identifying most profitable customers and segments for marketing Reduced churn rate (Number of customers who stop using or purchasing products or services from a company) 19

More CRM Demos Microsoft CRM Demo (Fun) (video- 3 min.) CRM Demo (video – 3 min.) Microsoft CRM - What can it do for you? (video - 3 min.)