CHAPTER 10- CUSTOMER RELATIONSHIP MANAGEMENT Principles of Supply Chain Management: A Balanced Approach Prepared by Daniel A. Glaser-Segura, PhD

© 2005 Thomson Business and Professional Publishing Learning Objectives You should be able to: Discuss the strategic importance of Customer Relationship Management (CRM). Describe the components of a CRM initiative. Discuss the implementation procedures used for CRM programs. Describe how information is used to create customer satisfaction and greater profits for the firm. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

© 2005 Thomson Business and Professional Publishing Chapter Ten Outline Defining Customer Relationship Management (CRM) CRM’s Role in Supply Chain Mgmt Key Tools & Components of CRM Segmenting Customers Predicting Customer Behaviors Customer Profitability Determination Personalizing Customer Communications Automated Sales Force Tools Customer Service Capabilities Designing and Implementing a Successful CRM Program Some CRM Application Providers Future Trends in CRM Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

© 2005 Thomson Business and Professional Publishing Introduction “Finding a new customer costs five times as much as keeping an old customer” Customer relationship management (CRM) is associated with automated transaction and communication applications. Increased automated interactions will lead more organizations to find they must continue to identify and develop new value for customer relationships Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Defining Customer Relationship Management Customer Relationship Management (CRM) is defined as:. Building and maintaining profitable long-term customer relationships. Successful CRM programs require cultural change in many organizations, leading to strategies that are focused on cultivating long-term relationships with customers, aided by the software capabilities. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

CRM’s Role in Supply Chain Management The firm seeks position as a value-enhancing supplier to its customers. Firms must create methods for finding and developing good suppliers Firms must create methods for becoming and staying good suppliers themselves. It may be necessary for a firm to certify its intermediate customers as to their ability to adequately represent their firm’s products. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Key Tools & Components of CRM Segmenting Customers- Grouping customers in a variety of ways to create more specialized communications about their products. Target marketing efforts- e-mail or direct mail saves labor and postage, reduces chances of being a nuisance. Relationship marketing or permission marketing- customers select the type and time of communication. Requires software and customer participation Cross-Selling- Additional products are sold as the result of an initial purchase (e.g., e-mails from Amazon.com describing other books bought by people). Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Key Tools & Components of CRM- Cont. Predicting Customer Behaviors- Behaviors can be predicted and firms forecast likelihood of customers’ purchases. Customer Defection Analysis- methods to retain customers. Churn reduction- reducing customer defections. Personalizing Customer Communications- understanding customers, their behaviors, and their preferences allows firms to customize communications aimed at specific groups of customers. Clickstream, how a customer navigates a Web site can help tailor a Web site’s images, ads, or discounts. Event-Based Marketing- Offering individual promotions tied to specific events to offer the right products & services to customers at the right time. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Key Tools & Components of CRM- Cont. Automated Sales Force Tools- Used for documenting field activities, communications with the home office, & retrieving sales history. Sales Activity Management- Tool offering sales reps a guided sequence of sales activities Sales Territory Management- Sales managers obtain information of each sales rep’s activities (e.g., total sales per sales rep.) Lead Management- Sales reps can follow prescribed tactics when dealing with prospects to aid closing the deal. Knowledge Management- Enables quick decision making, better customer service, and a better-equipped and happy sales staff. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Key Tools & Components of CRM- Cont. Customer Service Capabilities What does customer service actually mean? Seven Rs Rule” having the right product, in the right quantity, in the right condition, at the right place, at the right time, for the right customer, at the right costs. Performance measures are often designed around satisfying the seven Rs. These kinds of services can come at a cost. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Key Tools & Components of CRM- Cont. Customer service elements can be classified as: Pre-transaction elements- Precede the sale (e.g., customer service policies, the mission statement, organizational structure, & system flexibility). Transaction elements- Occur during the sale & include the order lead time, the order processing capabilities & the distribution system accuracy. Posttransaction elements- Occur after the sale & include warranty repair capabilities, complaint resolution, product returns, and operating information. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Key Tools & Components of CRM- Cont. Call Centers Call center systems can now categorize all calls, determine average resolution time, and forecast future and improve the overall productivity of the staff, increasing customer satisfaction levels. Informational Scripting Scripts to successfully guide service representatives through many types of customer problems. They do not allow for much “out-of-the-box” thinking. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Key Tools & Components of CRM- Cont. Web Site Self-Service- Web sites act as support mechanisms for call centers. Customers can access their account information and operating hours, contact information, etc. Field Service Management- Customers can communicate directly with product specialists using wireless devices and the right diagnosis can be made quickly. Measuring Customer Satisfaction- Customers are frequently given opportunities to provide feedback about a product, service, or organization. Customer Privacy Capabilities- Two important issues are ability to assure privacy and ability to minimize customer harassment. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Designing & Implementing a Successful CRM Program What will CRM solve? This question must involve employees from all functions. Step 1. Creating the CRM Plan- should include: Objectives of the CRM program CRM’s fit with corporate strategy New applications to be purchased or developed Integration or replacement of existing methods or legacy systems Personnel Requirements- personnel, training, policies, Upgrades, and maintenance and the costs and time frame for implementation. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Designing & Implementing a Successful CRM Program- Cont. Step 2- Involve CRM users from the Outset- To get acceptance of the CRM initiative, employees should understand how it affects their jobs. Create a project team with members from all affected organizational areas. Test with a pilot application Step 3- Select the Right Application and Provider- Find an appropriate application and determine the extent of customization (adaptation). Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Designing & Implementing a Successful CRM Program- Cont. Step 4- Integrate Existing CRM Applications- CRM is a collection of various applications implemented over time. Customer contact mechanisms need to be coordinated so that every CRM application user in the firm knows about all of the activity associated with each customer. Centralized database or data warehouse containing all customer information. Step 5- Establish Performance Measures- Measuring performance allows the firm to: Determine if objectives have been met Compare actual to planned = variance Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Designing & Implementing a Successful CRM Program- Cont. Step 6- Providing CRM Training for All Users- Provide and require training for all of the initial users and then provide training on an ongoing basis as applications are added. Training can also help convince key users like sales, call center, and marketing personnel of the benefits and uses of CRM applications. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

Some CRM Application Providers Oracle Interaction Center- integrates with service, sales, contracts, and marketing applications. Oracle Sales- processes across all sales and customer interaction channels. Oracle Marketing -provides automation and tools for the entire marketing process. Siebel Systems Call Center- improve agent productivity by providing critical customer information. Siebel Sales- the means to focus on the right deals at the right time. Siebel Marketing- optimizes targeting and improves response rates with robust segmentation capabilities. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing

© 2005 Thomson Business and Professional Publishing Future Trends in CRM New Privacy Regulations- Rules and laws regarding invasion of privacy are springing up. Solution: develop a privacy policy and post it on their Web site. Application Service Providers (ASPs)- Fifty 50 percent of all CRM programs are now designed and maintained for clients by ASPs. Adapting CRM for global uses is increasing-New Markets out side of traditional industrialized countries require adaptation to local needs, language, and culture Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing