Customer Relationship Management CRM and external relationships

Focus of CRM Importance for organisation to focus on needs, wants, preferences and values of customer Use of IT and Internet to cause major transformation in ways organisations interact with customers

Electronic Business: Scope B2C EC 企業價值 企業策略 KM SCM ERP CRM Supplier Customer BI B2B EC

Significance of CRM $23b in 2000 Estimates of $76b in 2005 Median annual investment ~ $1m, implementation over 4 years Large companies spend ~ $15m – $30m /year, and between $60m – $130m to full implementation (Gartner Group 2001) But, ~ 30% CRM projects never get finished 55% to 75% fail to deliver anticipated benefits 60% of managers view CRM as failures (Morphy 2001, Kiely 2001)

CRM and Its Relationship with EC Customer relationship management (CRM): A customer service approach that focuses on building long-term and sustainable customer relationships that add value both for the customer and the company

Who is the BOSS… ‘There is only one boss. The customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else.’ (Sam Walton, WalMart)

Notions about customers Every 5 yrs, av. US organisation lose 50% of customers Cutting these by 5% double profits (Morphy 2001) 5% in customer retention av. lifetime value of customer of between 35-95% (Reichheld 1996) Retaining more customers can have significant impact on organisational performance.

Twice the normal turnover Why CRM ? Twice the normal turnover Top 20% contributed to 150% profit, while the worst 40% results in 50% profit reduction 50% profit reduction Profit 1 2 3 4 5 6 7 8 9 10 Customer segments Source: Manhattan Consulting Group

Customer focus ‘Present a single face to the customer’ Customer focus win and retain loyal and profitable customers

Advantages of customer focus Accurate view of internal operations Service to customers Information Across product lines Across geographic locations Across subsidiaries, business units Across multiple channels Major challenge for most organisations – cross-functional, complex

Why are loyal customers more profitable? Potential customer Customer Loyal Former Costs Benefits

Why are loyal customers more profitable? Acquisition costs incurred once only Benefits accrue from Loyal customers referring other new customers Loyal customers tend to purchase more over time Loyal customers are less price sensitive Loyal customers incur fewer administrative costs over time Note also: damage from dissatisfied customers can escalate (Cash 1999)

Customer dissatisfaction escalates Dissatisfied customers Share bad experiences with others Loss of customer loyalty Dollars lost compound over time

Concept of demand chain Supplier Retailer Distributor Manufacturer Product / service flows Customer demand flows Consumer Supply chain perspective Demand chain

Customer Relationship Advertisement, Brand image Focal Company Customer Low visibility Channel Focal Company Customer Very low visibility Focal Company Salesmen Channel Customer No visibility

Changes in Relationship Focal Sales/ Channels Customer As is Focal Sales/ Channels Customer To Be

CRM and Its Relationship with EC (cont.) Classification of CRM programs Loyalty program Prospecting Save or win back Cross-sell/up-sell eCRM: Customer relationship management conducted electronically

CRM and Its Relationship with EC (cont.) Scope of CRM Foundation of service Customer-centered services Value-added services CRM

CRM and Its Relationship with EC (cont.) Extent of service Customer acquisition (prepurchase support) Customer support during purchase Customer fulfillment (purchase dispatch) Customer continuance support (postpurchase)

Components of CRM Customer and Product centric services Differential Marketing Mass marketing Focused marketing One-to-one marketing Customers are not born equal Sales Managment Marketing Management Customer Management Database Marketing Service Management

CRM and Its Relationship with EC (cont.) Benefits of CRM Provides: choices of products and services fast problem resolution and response easy and quick access to information Limitations of CRM Requires integration with a company’s other information systems which is costly Difficult to support mobile employees

CRM and Its Relationship with EC (cont.) CRM implementation issues Steps in building EC strategy focused on customer: focus on the end customer systems and business processes that are designed for ease of use and from the end customer’s point of view efforts to foster customer loyalty

CRM and Its Relationship with EC (cont.) Five factors required to implement a CRM program effectively: Customer-centric strategy Commitments from people Improved or redesigned processes Software technology Infrastructure

CRM and Its Relationship with EC (cont.) Justifying customer service and CRM programs Metrics: Standards of performance; may be quantitative or qualitative

CRM and Its Relationship with EC (cont.) Web-related metrics a company uses to determine the appropriate level of customer support: Response time Site availability Download time Timeliness Security and privacy On-time order fulfillment Return policy Navigability

CRM Applications and Tools: Delivering Customer Service in Cyberspace CRM applications improve upon traditional customer service by means of easier communications and speedier resolution of customer problems Customer service adds value to products and services It is an integral part of a successful business

CRM Applications and Tools (cont.) Classifications of CRM applications Customer-facing applications Customer-touching applications Customer-centric intelligence applications Online networking and other applications

Formation of CRM Front-end Communication CRM Back-end Analytical Core Operational CTI Net Banking B2C e-Commerce Data Mining OLAP EIS Customer Mgt Marketing Mgt Sales Mgt Service Mgt Database Data Mart Data Warehouse Demographic Data Transaction Data Extraction Transformation Loading Operational Database

CRM Applications and Tools (cont.) Customer-facing applications Customer interaction center (CIC): A comprehensive service entity in which EC vendors address customer service issues communicated through various contact channels Intelligent agents in customer service and call centers

Customer Management Know your customer Problems Customer relates to channel/salesmen, not company Lost of valuable customer data upon departure of sales personnel

Cases Online Traditional channel Membership One-to-one relationship Data collection and usage Closer tie to customer

CRM Applications and Tools (cont.) Autoresponders: Automated e-mail reply systems (text files returned via e-mail), which provide answers to commonly asked questions Sales force automation (SFA): Software that automates the tasks performed by sales people in the field, such as data collection and its transmission

CRM Applications and Tools (cont.) Customer-touching applications Personalized Web Pages E-Commerce Applications Campaign Management DM: Direct Mail For traditional market

CRM Applications and Tools (cont.) Web Self-Service Activities conducted by users on the Web to provide answers to their questions (e.g., tracking) or for product configuration Self-tracking Self-configuration and customization

CRM Applications and Tools (cont.) Customer-centric applications Data reports Data warehouse A single, server-based data repository that allows centralized analysis, security, and control over the data

CRM Applications and Tools (cont.) Data analysis and mining Analytic applications automate the processing and analysis of CRM data can be used to analyze the performance, efficiency, and effectiveness of an operation’s CRM applications Data mining involves sifting through an immense amount of data to discover previously unknown patterns

CRM Applications and Tools (cont.) Online networking and other applications Forums Chat rooms Usenet groups E-mail newsletters Discussion lists

CRM Applications and Tools (cont.) Mobile CRM the delivery of CRM applications to any user, whenever and wherever needed Voice communication people are more comfortable talking with a person, even a virtual one, than they are interacting with machines. The smile and the clear pronunciation of the agent’s voice increases shoppers’ confidence and trust

Business intelligence, data warehousing Internal and external data is gathered, stored and analysed to provide important information to support decision making of executives Provide better forecasts of end consumer demand, improved understanding of changing consumer preferences and wants, and so on

CRM Applications and Tools (cont.) Role of knowledge management and intelligent agents in CRM Automating inquiry routing and answering queries requires knowledge Generated from historical data and from human expertise and stored in knowledge bases for use whenever needed Intelligent agents support the mechanics of inquiry routing, autoresponders, and so on

Internet Marketing in B2B Organizational buyer behavior number of organizational buyers is much smaller than the number of individual buyers transaction volumes are far larger terms of negotiations and purchasing are more complex

Internet Marketing in B2B (cont.) Methods for B2B online marketing Targeting customers contact all of its targeted customers individually when they are part of a well-defined group affiliation service advertising Electronic wholesalers intermediary sells directly to businesses, but does so exclusively online

Internet Marketing in B2B (cont.) Affiliate programs Placing banners on another vendor’s Web site Content alliance program in which content is exchanged so that all can obtain some free content Infomediaries Online data mining services

One-to-One Marketing and Personalization in EC One-to-one marketing: Marketing that treats each customer in a unique way Personalization: The matching of services, products, and advertising content to individual consumers User profile: The requirements, preferences, behaviors, and demographic traits of a particular customer

One-to-One Marketing and Personalization in EC (cont.) Major strategies used to compile user profiles Solicit information directly from the user Observe what people are doing online Build from previous purchase patterns Perform marketing research

One-to-One Marketing and Personalization in EC (cont.) Cookie: A data file that is placed on a user’s hard drive by a Web server, frequently without disclosure or the user’s consent, that collects information about the user’s activities at a site

One-to-One Marketing and Personalization in EC (cont.) Collaborative filtering: A personalization method that uses customer data to predict, based on formulas derived from behavioral sciences, what other products or services a customer may enjoy; predictions can be extended to other customers with similar profiles

One-to-One Marketing and Personalization in EC (cont.) Variations of collaborative filtering: Rule-based filtering Content-based filtering Activity-based filtering Legal and ethical issues in collaborative filtering Invasion-of-privacy issues Permission-based personalization tools to request customer permission

One-to-One Marketing and Personalization in EC (cont.) Customer loyalty Customer loyalty: Degree to which a customer will stay with a specific vendor or brand Increased customer loyalty produces cost savings through: lower marketing costs lower transaction costs lower customer turnover expenses lower failure costs E-loyalty: Customer loyalty to an e-tailer

One-to-One Marketing and Personalization in EC (cont.) Trust in EC Trust: The psychological status of involved parties who are willing to pursue further interaction to achieve a planned goal Trust is influenced by many variables

One-to-One Marketing and Personalization in EC (cont.) How to increase EC trust between buyers and sellers trust is determined by: degree of initial success that each party experienced with EC and with each other well-defined roles and procedures for all parties involved realistic expectations as to outcomes from EC

One-to-One Marketing and Personalization in EC (cont.) Issues in personalization brand recognition security mechanisms help solidify trust disclose and update latest business status and practices to potential customers and to build transaction integrity into the system guarantee information and protection privacy through various communication channels