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Introduction to Customer Relationship Management (CRM) Semester Ganjil 2013/2014

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

Customer Relationship Marketing Continuous Relationship Marketing CRM Stands for? Customer Relationship Management OR Customer Relationship Marketing 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 Customers should be managed as important assets Not all customers are equally desirable Customers vary in their needs, preferences, and buying behavior By better understanding their customers, companies can tailor their offerings to maximize their overall value

The CRM Advantages

Why CRM Systems are Being Used ? Identifying prospects Acquiring customers Developing customers Cross-selling and up-selling Servicing Retaining Increasing loyalty Winning 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 skew Companies 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

Dominant characteristic Types of CRM Type of CRM Dominant characteristic Strategic a core customer-centric business strategy that aims at winning and keeping profitable customers Operational focuses on the automation of customer-facing processes such as selling, marketing and customer service Analytical focuses on the intelligent mining of customer-related data for strategic or tactical purposes Collaborative applies technology across organizational boundaries with a view to optimizing company, partner and customer value

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] Product-oriented businesses believe that customers choose products with the best quality, performance, design or features Production-oriented businesses believe that customers choose low-price products 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] 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 automation Market segmentation Campaign management Event-based (trigger) marketing Sales force automation Account management Lead management Opportunity management Pipeline management Contact management Quotation and proposal generation Product configuration Service automation Case (incident or issue) management Inbound communications management Queuing and routing Service 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 CRM is database marketing CRM is a marketing process CRM is an IT issue CRM is about loyalty schemes CRM can be implemented by any company

CRM Constituencies Companies implementing CRM Customers and partners of those companies Vendors of CRM software CRM application service providers (ASPs) Vendors of CRM hardware and infrastructure Management consultants

CRM Challenges Vary Across Context Banks Auto manufacturers High tech companies Consumer goods manufacturers 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

Payne’s 5-process Model of CRM

Gartner’s Competency Model of CRM

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