Ch. 10 Customer Relationship Management (CRM) Rev: Apr., 2015 Euiho (David) Suh, Ph.D. POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: http://posmit.postech.ac.kr) Dept. of Industrial & Management Engineering POSTECH

Evolution of Marketing Marketing Age Techniques Technology The Dark Ages Artistry and Alchemy Cross-talk , Mass-talk The Renaissance Craftsmanship Focus groups, interviews The Industrial Revolution Mass Marketing Files/Computer mailing lists The Information Age Database Marketing Databases/Segmentation This figuere says that rather than a revolution, these changes can be seen as evolving over time. The Age of Optimization Customer Relationship Management Data Warehousing, Data Mining, Analysis Tools (OLAP)

Managing the customers What is CRM? (1/2) Managing the customers Customer relationship management (CRM) is a system for managing a company’s interactions with current and future customers. It often involves using technology to organize, automate, and synchronize sales, marketing, customer service, and technical support.[1]

What is CRM? (2/2)

Source: The Loyalty Effect (Harvard Business School Press) Why CRM? It is easier to retain a customer than to gain a new customer It is 6-7 times more expensive to gain a new customer than retain an existing customer (Harvard Business Review) It is far more expensive to win back a customer after they left than it is to keep them satisfied in the first place. It is far easier to sell a new product to an existing customer than it is to a new customer Customers become more precarious A 5% increase in customer retention can increase profits 60-100% proved customer retention Source: The Loyalty Effect (Harvard Business School Press) By Frederick Reichhek

Database Marketing A form of direct marketing using databases of customers or potential customers to generate personalized communications in order to promote a product or service for marketing purposes. The method of communication can be any addressable medium, as in direct marketing. Distinction between direct and database marketing: Attention level paid to the analysis of data. Database marketing emphasizes the use of statistical techniques to develop models of customer behavior, which are then used to select customers for communications. As a consequence, database marketers also tend to be heavy users of data warehouses, because having a greater amount of data about customers increases the likelihood that a more accurate model can be built. Two Types of Marketing databases, 1) Consumer Databases: primarily geared towards companies that sell to consumers, often abbreviated as [business-to-consumer] (B2C) or BtoC. 2) Business Databases: Much more advanced in the information that they can provide. This is mainly because business databases aren't restricted by the same privacy laws as consumer databases.

Relationship Marketing Explanation of CRM Origin of CRM Create a Database DBM  DW  OLAP  Call Center  Service Center  CRM Analysis Various Types of CRM Customer Selection Direct e-mails Call Center Mass customization or developing products that fit individual customer’s needs Operational CRM Customer Targeting Relationship Marketing Key Point to Succeed Main concept of CRM: managing valuable customer in a long-term view  Company should focuses on value of customer, instead of short-term profit Privacy Issues Metrics CRM Framework

Identify and target the best customers Benefits of CRM Benefits of CRM Identify and target the best customers Real-time customization and personalization of products and services Track when and how a customer contacts the company Provide a consistent customer experience Provide superior service and support across all customer contact points

Three Phases of CRM

Entire CRM Framework Operational CRM Analytical CRM Collaborative CRM The automation of horizontally integrated business processes, including customer touch-points, channels, and front-back office integration Analytical CRM The analysis of data created by the Operational CRM Collaborative CRM Application of collaborative services including e-mail, personalized publishing, e-communities, and similar vehicles designed to facilitate interactions between customers and organizations Touchpoint: where you have the opportunity to interact and “touch” your customers or they touch your company, are called “touchpoints”

Business Rules and Metadata Management CRM Architecture Business Rules and Metadata Management Workflow Management Marketing Data mart Campaign management Analytics Data Mart Reporting Data Data Mining/ Analytics Ad Hoc Query and Reporting Direct Mail Contact Management Call Centers Sales Force Customer Service Centers Internet E-Mail Other History Transaction Customer Profile and Account Data Warehouse External data ETL Tools Data Source Marketing Data Source Decision Support Applications Communication Channels In this architechture, you can see a number of customer touch points and delivery channels that produce and consume information. This information needs to be integrated and analyzed in order to obtain a complete and accurate picture of the customers – their preferences, needs, complaints, and attributes that can make them life-long members of the organizational “network” of products and services. As a result, all major components of the data warehouseing environment are being deployed to perform a number of critical functions related to the integration and analysis. Among these components are not just data warehouses and data marts, but also data mining, reporting, OLAP engines, and the metadata management repository. ETL : Extract Transform Load Data mart : An implementation of the data warehouse, where its data scope is somewhat limited compared to the enterprise-wide data warehouse. A data mart may contain lightly summarized departmental data and can be customized to suit the needs of a particluar department that owns the data. In a large enterprise, data markts tend to be a way to build a data warehouse in a sequential, phased approach. A collection of data marts composes an enterprise-wide data warehouse; conversel, a data warehouse may be construed as a collection of subset data marts. More on data marts can be found in Part II of this book (pp.27)

Application Clusters in CRM

Contact and Account Management CRM helps sales, marketing, and service professionals capture and track relevant data about Every past and planned contact with prospects and customers Other customer business & life-cycle events Data are captured through touch points Telephone, fax, e-mail, Websites Retail stores, kiosks, personal contact

Sales A CRM system provides sales reps with the tools and data resources they need to Support and manage sales activities Optimize cross- and up-selling Up-selling & Cross-selling CRM also provides the means to check on a customer’s account status and history before scheduling sales calls

Marketing and Fulfillment CRM systems help with direct marketing campaigns by automating tasks Qualifying leads for targeted marketing Scheduling and tracking mailings Capturing and managing responses Analyzing the business value of a campaign Fulfilling responses & requests

Customer Service and Support CRM helps customer service managers create, assign and manage customers’ requests for service Call center software Help desk software Web-based self-service

Retention and Loyalty Programs (1/2) The odds of selling to an existing customer are 50%; a new one 15% 70% of complaining customers will do business with the company again if it quickly fixes a problem It costs 6 times more to sell to a new customer An unhappy customer will tell 8-10 others Boosting customer retention 5% can boost profits 85%

Retention and Loyalty Programs (2/2) Enhancing and optimizing customer retention and loyalty is a primary objective of CRM Identify, reward, and market to the most loyal and profitable customers Evaluate targeted marketing and relationship programs

Domestic CRM Market Transition (license) Limitation of CRM CRM Failure Domestic CRM Market Transition (license) unit: billion won 75% of CRM projects that do not deliver measurable ROI will have failed because of poor business executive decision-making ½ of the companies got worse performance tasks, ¼ of companies which implement CRM system didn’t get improvement of tasks 20% damaged customer relationships CAGR:13.5% Source: Gartner Group, Insight Technology Group report CRM Failure Reasons Source :http://www.krgweb.com Sin One : Failing to Plan Sin Two : Failing To Establish Outcomes Sin Three : Excluding the Human Factor Sin Four : Automating Flawed Processes Sin Five : Ignoring Constraints Sin Six : Disregarding Politics Sin Seven : Choosing the Wrong Vendor  CRM Market is getting bigger but, companies should pay too much cost and time to implement CRM. Also, the CRM system does not guarantee higher performance Source: interview of Gartner Research’s Beth Eisenfeld with CRMDaily

Microsoft Dynamics CRM Market Leaders Vendor 2013 Revenue 2013 Share (%) 2012 Revenue 2012 Share (%) 2008 Revenue 2008 Share (%) 2007 Revenue 2007 Share (%) 2006 Revenue 2006 Share (%) Salesforce.com CRM 3,292 16.1 2,525.6 14.0 965 10.6 676.5 8.3 451.7 6.9 SAP AG 2,622 12.8 2,327.1 12.9 2,055 22.5 2,050.8 25.3 1,681.7 25.6 Oracle 2,097 10.2 2,015.2 11.1 1,475 1,319.8 16.3 1,016.8 15.5 Microsoft Dynamics CRM 1,392 6.8 1,135.3 6.3 581 6.4 332.1 4.1 176.1 2.7 Others 11,076 54.1 10,086.8 55.7 3,620 39.6 3,289.1 40.6 2,881.6 43.8 Total 20,476 100 18,090 9,147 7,674 6,214

Trends Cloud Computing Issue Social Media Customer /SNS Customer VRM (Vendor Relationship Management) ERM(Extended Relationship Management) Customer Transparency Sales Effectiveness