Customer Relationship Management CHAPTER 9 Customer Relationship Management

CHAPTER OUTLINE 9.1 Defining Customer Relationship Management 9.2 Operational Customer Relationship Management 9.3 Analytical Customer Relationship Management 9.4 Other Types of Customer Relationship Management Applications

LEARNING OBJECTIVES Define customer relationship management and discuss the objectives of CRM. Describe operational CRM and its major components. Describe analytical CRM. Discuss mobile CRM, on-demand CRM, and open-source CRM.

Chapter Opening Case

From Neighborhood Stores……. Personal

To Today….. Mobile population The Web Giant malls Impersonal

Customer Intimacy? You Your competition Your customer Your problem

The Need for CRM It costs six times more to sell to a new customer than to sell to an existing one. A typical dissatisfied customer will tell 8-10 people. By increasing the customer retention rate by 5%, profits could increase by 85%. Odds of selling to new customers = 15%, compared to the odds of selling to existing customers (50%) 70% of complaining customers will remain loyal if their problem is solved

9.1 Defining Customer Relationship Management Customer relationship management (CRM) is an organizational strategy that is customer-focused and customer-driven.

Tenets of CRM One-to-one relationship between a customer and a seller. “Treat different customers differently.” Keep profitable customers and maximize lifetime revenue from them.

Figure 9.1

Lifetime Customer Value The value of a customer to a company depends on three dimensions: the duration of the relationship, the number of relationships (e.g., the number of products from a company that a customer purchases), and the profitability of the relationship.

“Miracle on the Hudson” See IT’s About Business 9.1.

Customer Touch Points CUSTOMER Direct Web Computer Physical Store Smart Phone Customer Service Sales Representative CUSTOMER Service Center Field Service Technician Direct Mail Email

360-Degree View of Customers

Data Consolidation Accounting POM Finance HR Customer Marketing MIS

9.2 Operational CRM Two major components of operational CRM: Customer-facing applications Customer-touching applications Operational CRM is the component of CRM that supports the front-office business processes. That is, those processes that directly interact with customers; i.e., sales, marketing, and service.

Customer-Facing Applications Customer service and support Sales force automation Marketing Customer-facing applications are those applications where an organization’s sales, field service, and customer interaction center representatives actually interact with customers. Customer service and support refers to systems that automate requests, complaints, product returns, and requests for information. Sales force automation automatically records all the aspects in a sales transaction process. Campaign management applications help organizations plan campaigns so that the right messages are sent to the right people through the right channels. Campaign management

Configurators A configurator is an online product-building feature. If you click on the Nike logo above, you will go to Nike’s running shoe configurator.

Marketing Cross selling Up selling Bundling Cross selling is the practice of marketing additional, related products to customers based on their previous purchases. Up selling is a sales strategy in which the sales person will provide customers the opportunity to purchase higher-value related products or services as opposed to, or along with, the consumer’s initial product or service selection. Bundling is a form of cross selling in which a business sells a group of products or services together at a price that is lower than the combined individual prices of the products.

Customer-Touching Applications Search and comparison capabilities Technical and other information and services Customized products and services In customer-touching applications, customers interact directly with online technologies and applications rather than interact with a company representative. Loyalty programs

Fraud at Subway New card program Old stamp program See IT’s About Business 9.3. New card program Old stamp program

9.3 Analytical CRM Analytical CRM systems analyze customer behavior and perceptions in order to provide actionable business intelligence.

The Relationship Between Operational CRM and Analytical CRM Sales Marketing Customer Service and Support Campaign Management Customer-facing Applications Customer Data Warehouse Search and Comparison Customized Products Technical Information Personalized Web Pages FAQ E-mail / Auto Response Loyalty Programs Customer-touching Applications See Figure 9.3. Data Mining Decision Support Business Intelligence OLAP

9.4 Other Types of CRM On-demand CRM Mobile CRM: Pal Mickey at Disneyworld On-demand CRM is a CRM system that is hosted by an external vendor in the vendor’s data center. Mobile CRM is an interactive CRM system that enables an organization to conduct communications related to sales, marketing, and customer service activities through a mobile medium for the purpose of building and maintaining relationships with its customers. Open-source CRM is CRM software whose source code is available to developers and users. Open-source CRM

Chapter Closing Case Clicking on the Tesco and dunnhumby logos will take you to their respective Web sites.