1. Customer Relationship Management (CRM)
Rev: Feb, 2012
Euiho (David) Suh, Ph.D.
POSTECH Strategic Management of Information and Technology Laboratory
(POSMIT:
Dept. of Industrial & Management Engineering POSTECH

2. Contents ※ Discussion Questions 1 Introductions of CRM 2 Case Study 1)
Fundamental Introductions of CRM 2)
CRM Architecture 3)
Application Cluster in CRM 4)
Strategy of CRM 5)
Executions of CRM 6)
Limitation and Future of CRM 2
Case Study

3. Discussion Questions Define CRM by your own words
What benefits do you think are there of CRM? Give your own opinion
How does CRM help sales and marketing?
Develop your own strategy for retaining existing customers

4. Evolution of Marketing
1. Introductions of CRM
1) Fundamental Introductions of CRM
Evolution of Marketing
Marketing Age
Techniques
Technology
The Dark Ages
Artistry and Alchemy
None
The Renaissance
Craftsmanship
Focus groups, interviews
The Industrial Revolution
Mass Marketing
Computers store mailing lists
The Information Age
Database Marketing
Flat File MCIFs
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)

5. 1. Introductions of CRM
1) Fundamental Introductions of CRM
What is CRM? (1/3)
Managing the full range of the customer relationship involves two related objectives
(1) Providing customer-facing employees with a single, complete view of every customer, at every touch point, across all channels
(2) Providing the customer with a single, complete view of the company and its extended channels
CRM uses IT to create a cross functional enterprise system that integrates and automates customer-serving processes

6. Definitions by various authors
1. Introductions of CRM
1) Fundamental Introductions of CRM
Definitions by various authors
Couldwell ,1998
CRM is a combination of business process and technology that seeks to understand a company’s customers from the perspective of who they are, what they do, and what they’re like
Kutner & Cripps, 1997
CRM is founded on four relationship-based tenets:
Customers should be managed as important assets
Customer profitability varies; not all customers are equally desirable
Customers vary in their needs, preferences, buying behavior and price sensitivity
By understanding customer drivers and customer profitability, companies can tailor their offerings to maximize the overall value of their customer portfolio
Merlin Stone et al., 1996
Relationship marketing
The use of a wide range of marketing, sales, communication, service and customer care approaches to:
Identify a company’s named individual customers
Create a relationship between the company and its customers that stretches over many transactions
Manage that relationships to the benefit of the customers and the company

7. Characteristics of CRM
1. Introductions of CRM
1) Fundamental Introductions of CRM
Characteristics of CRM
Key Characteristics of CRM (Lynette Ryals & Simon Knox, 2001)
A customer relationship perspective aimed at the long-term retention of selected customers
Gathering and integrating information on customers
Use of dedicated software to analyze this information (often in real time)
Segmentation by expected customer lifetime value
Micro-segmentation of markets according to customers’ needs and wants
Customer value creation through process management (Hammer & Champy, 1993; Hamel & Prahalad,1994)
Customer value delivery through service tailored to micro-segments, facilitated by detailed, integrated customer profiles
A shift in emphasis from managing product portfolios to managing portfolios of customers, necessitating changes to working practices and sometimes to organizational structure

8. Source: The Loyalty Effect (Harvard Business School Press)
1. Introductions of CRM
1) Fundamental Introductions of CRM
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 % proved customer retention
Source: The Loyalty Effect (Harvard Business School Press)
By Frederick Reichhek

9. Relationship Marketing
1. Introductions of CRM
1) Fundamental Introductions of CRM
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 s
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

10. Identify and target the best customers
1. Introductions of CRM
1) Fundamental Introductions of CRM
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

11. Three Phases of CRM 1. Introductions of CRM
1) Fundamental Introductions of CRM
Three Phases of CRM

12. Entire CRM Framework Operational CRM Analytical CRM Collaborative CRM
1. Introductions of CRM
1) Fundamental Introductions of CRM
Entire CRM Framework
Operational 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 , 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”

13. Business Rules and Metadata Management
1. Introductions of CRM
2) CRM Architecture
CRM Architecture (1/2)
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
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)

14. Web applications are the capstone
1. Introductions of CRM
2) CRM Architecture
CRM Architecture (2/2)
Web applications are the capstone
Data mining is the architectural blueprint
Customer profitability is the cornerstone
Data warehousing is the foundation
The customer touch points are the bedrock
CRM system
that can execute closed loop marketing to display continuous improvement over time

15. Application Clusters in CRM
1. Introductions of CRM
3) Application Cluster in CRM
Application Clusters in CRM

16. Contact and Account Management
1. Introductions of CRM
3) Application Cluster 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, , Websites
Retail stores, kiosks, personal contact

17. 1. Introductions of CRM
3) Application Cluster in CRM
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

18. Marketing and Fulfillment
1. Introductions of CRM
3) Application Cluster in CRM
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

19. Customer Service and Support
1. Introductions of CRM
3) Application Cluster in CRM
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

20. Retention and Loyalty Programs (1/2)
1. Introductions of CRM
3) Application Cluster in CRM
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%

21. Retention and Loyalty Programs (2/2)
1. Introductions of CRM
3) Application Cluster in CRM
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

22. Best-Practice CRM Principles Customer-Related Business Processes
1. Introductions of CRM
4) Strategy of CRM
Develop a CRM Strategy
Customer Life Cycle Management (CLCM) as a Three-Domain Business System
Best-Practice CRM Principles
Derive customer patterns by
applying “ETFS” as a lens to drive
sales, service, marketing and
commerce chain process
Anchor offer, channel, and business processes around customer patterns
Technology-enable customer relationship with CRM eco -system
Engage
Service
Customer Life Cycle
Fulfill
Transact
Cust.
Pattern
CRM Technology
“Ecosystem”
Collaborative
Analytical
Operational
Customer-Related Business Processes
Channels & “POIs”
Sales
Mktg.
Service
“Offer”
CRM is not an IT project — it is an iterative and continual transformation of people, process and technology

23. CRM Implementation Point
1. Introductions of CRM
4) Strategy of CRM
CRM Implementation Point

24. Managing Campaigns Campaign management systems
1. Introductions of CRM
5) Executions of CRM
Managing Campaigns
Campaign management systems
To help marketing professionals manage and execute campaigns
To require as complete a view of the customer as possible
To manage interactions between the company and the customer
Required functions in campaign management systems
Marketing insights from data mining about what new promotions to create
Accommodation of many new touch points besides direct mail
Focus on profitability
Optimization of the sequence of promotion delivery
Tools for constructing experiments that allow the marketing professional to test out the effectiveness of new promotions and new segmentation techniques
Accommodation by the system of predictive modeling
The transition from just defining and deploying a direct mail campaign to supporting all customer touch points
Customer profitability across all touch points
Campaign management systems : the forerunners of CRM systems
MCIF : Marketing Customer Information Files. As the name implies, they were a lot more like files than databases, but they did serve the same functions as what would later be called a data warehouse.

25. Closed Loop Marketing “Close the Loop”
1. Introductions of CRM
5) Executions of CRM
Closed Loop Marketing
“Close the Loop”
CRM systems can also execute “close the loop” and measure the results of the campaigns
Once marketing’s effectiveness can be measured, it can be improved the next time around
Three basic steps of closed loop marketing
Measure
Measure the results of the marketing effort, based on customer profitability
Use Web-based tools to access the customer data warehouse and perform enterprise-level ROI analysis
Predict
Use data mining technology to predict consumer behavior and learn from past experiments
Use the results of the data mining system to focus and refine future campaign
Act
Use campaign management systems to be sure that the campaigns are executed in an understandable and measurable customer data warehouse or data mart

26. Domestic CRM Market Transition (license)
1. Introductions of CRM
6) Limitation and Future of CRM
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 :
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

27. Future CRM
1. Introductions of CRM
6) Limitation and Future of CRM
[Improvement in reception of customer]
[Business structure innovation]
customer
customer
customer
customer
customer
customer
customer
customer
customer
customer
Future CRM
purchase
develop -ment
manu
-facture
delivery
sales
marketing
service
purchase
develop -ment
manu
-facture
delivery
sales
marketing
service
enterprise infrastructure
enterprise infrastructure
enterprise
customer
enterprise
customer
CRM
Future CRM
Step of introducing Future CRM
investigation
set up strategy
design
implementation
/ introduction
settlement
Consulting through investigation and innovation of cultural features is important

28. 1. Introductions of CRM
6) Limitation and Future of CRM
Next Generation CRM
Continuously expanding in functionality and in scope across the enterprise
Sales Force Automation (SFA)
Enterprise Resource Planning (ERP)
The force opposing the fusing of information and technology
Internal difficulties in getting various customer information form different customer touch points
External difficulties in keeping customer privacy
They will begin to merge with the other main customer touchpoints that are already being automated through sales force automation and through enterprise resource planning. This is an inevitable trend.

29. Case Study

30. References
Euiho Suh, “CRM (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)
Euiho Suh, “CRM II (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)
O’Brien & Marakas, “Introduction to Information Systems – Fifteenth Edition”, McGraw – Hill, Chapter 7, pp. 265~271
Euiho Suh, “Customer Relationship Management (CRM) in Financial Services”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)