Chapter 1Chapter 1

customer relationship managementcustomer relationship management

By the of this chapter, you will be aware of:By the of this chapter, you will be aware of:

1.1. Four major perspectives on CRM: strategic, operational, Four major perspectives on CRM: strategic, operational, analytical and collaborativeanalytical and collaborative

2.2. Several common misunderstandings about CRMSeveral common misunderstandings about CRM3.3. A definition of CRMA definition of CRM4.4. The six constituencies having an interest in CRMThe six constituencies having an interest in CRM5.5. How important CRM issues vary across industriesHow important CRM issues vary across industries6.6. Five generic models of CRMFive generic models of CRM

2

IntroductionIntroduction

The expression customer relationship management (CRM) has The expression customer relationship management (CRM) has only been in use since the early 1990s.only been in use since the early 1990s.

Information technology (IT) companies have tended to use Information technology (IT) companies have tended to use the term CRM to describe the software applications that automate the term CRM to describe the software applications that automate the marketing, selling and service function of businesses. the marketing, selling and service function of businesses.

3

Strategic CRMStrategic CRM

Strategic CRM is focused upon the development Strategic CRM is focused upon the development of a customer-centric business culture. This culture is of a customer-centric business culture. This culture is dedicated to winning and keeping customers by dedicated to winning and keeping customers by creating and delivering value better than competitors.creating and delivering value better than competitors.

Many business claim to be customer-centric, Many business claim to be customer-centric, customer-led, customer-focused or customer oriented, customer-led, customer-focused or customer oriented, but few are.but few are.

4

Strategic CRMStrategic CRM

Customer-centricity competes with other business logics. Customer-centricity competes with other business logics. Philip Kotler identifies three other major business orientation:Philip Kotler identifies three other major business orientation:

Product-orientedProduct-oriented business believe that customer choose business believe that customer choose products with the best quality, performance, design or features.products with the best quality, performance, design or features.

Production-oriented Production-oriented business believe that customer choose low-business believe that customer choose low-price products. Consequently, these business strive to keep price products. Consequently, these business strive to keep operating costs low, and develop low-cost routes to market.operating costs low, and develop low-cost routes to market.

5

Strategic CRMStrategic CRM

Sale-orientedSale-oriented business make the assumption that if they invest business make the assumption that if they invest enough in advertising, selling, public relations (PR) and sales enough in advertising, selling, public relations (PR) and sales promotion, customers will be persuaded to buy.promotion, customers will be persuaded to buy.

A customer A customer oror market-oriented market-oriented company shares a set of beliefs company shares a set of beliefs about putting the customer first. It collects, disseminates and about putting the customer first. It collects, disseminates and uses customer and competitive information to develop better uses customer and competitive information to develop better value propositions for customers.value propositions for customers.

6

Operational CRMOperational CRM

Operational CRM automaters and improves customer-facing and Operational CRM automaters and improves customer-facing and customer-supporting business processes. CRM software customer-supporting business processes. CRM software applications enable the marketing, selling and service functions applications enable the marketing, selling and service functions to be automated and integrated.to be automated and integrated.

Marketing automationMarketing automationMarketing automation (MA) applies technology to marketing Marketing automation (MA) applies technology to marketing processes.processes.

7

Operational CRMOperational CRM

Sale-force automationSale-force automationSale-force automation (SFA) was the original form of operational Sale-force automation (SFA) was the original form of operational CRM. SFA system are now widely adopted in business-to-CRM. SFA system are now widely adopted in business-to-business environments and are seen as a competitive imperative business environments and are seen as a competitive imperative that offers competitive parity.that offers competitive parity.

Sale-force automation software enables companies Sale-force automation software enables companies

automatically to assign leads and track opportunities as they automatically to assign leads and track opportunities as they progress through the sales and pipeline towards closure.progress through the sales and pipeline towards closure.

8

Operational CRMOperational CRM

Service automationService automationService automation allows companies to manage their service Service automation allows companies to manage their service operation whether delivered through call centre, contact centre, operation whether delivered through call centre, contact centre, web or face-to-face. CRM software enables companies to web or face-to-face. CRM software enables companies to handle and coordinate their service-related inbound and handle and coordinate their service-related inbound and outbound communications across all channels. outbound communications across all channels.

Service automation differs significantly depending on the Service automation differs significantly depending on the product being serviced. product being serviced.

9

Analytical CRMAnalytical CRM

Analytical CRM is concerned with capturing, storing, extracting, Analytical CRM is concerned with capturing, storing, extracting, integrating, processing, interpreting, distributing, using and integrating, processing, interpreting, distributing, using and reporting customer-related data to enhance both customer and reporting customer-related data to enhance both customer and company value.company value.

Analytical CRM is has become an essential part of many CRM Analytical CRM is has become an essential part of many CRM implementations.implementations.

Analytical CRM can lead companies to decide that selling Analytical CRM can lead companies to decide that selling approaches should differ between customer group.approaches should differ between customer group.

10

Analytical CRMAnalytical CRM

Analytical CRM can lead companies to decide that selling Analytical CRM can lead companies to decide that selling approaches should differ between customer group.approaches should differ between customer group.

From the customer’s point of view , analytical CRM can From the customer’s point of view , analytical CRM can deliver timely, customized, solutions to the customer’s problem, deliver timely, customized, solutions to the customer’s problem, thereby enhancing customer satisfaction.thereby enhancing customer satisfaction.

From the company’s point of view, analytical CRM offers the From the company’s point of view, analytical CRM offers the prospect of more effective customer retention and customer prospect of more effective customer retention and customer acquisition programmes.acquisition programmes.

11

Collaborative CRMCollaborative CRM

Collaborative CRM is the term used to describe the strategic and Collaborative CRM is the term used to describe the strategic and tactical alignment of normally separate enterprises in supply tactical alignment of normally separate enterprises in supply Chain for the more profitable identification, attraction, retention Chain for the more profitable identification, attraction, retention and development of customers. and development of customers.

Some CRM technology vendors have developed partner Some CRM technology vendors have developed partner relationship management (PRM) applications that enable relationship management (PRM) applications that enable companies to manage complex partner or channel ecosystem companies to manage complex partner or channel ecosystem and reduce the costs of partner or channel management. PRM and reduce the costs of partner or channel management. PRM applications are often used to manage partner promotions.applications are often used to manage partner promotions.

12

Misunderstandings about CRMMisunderstandings about CRM

Misunderstanding 1: CRM is database marketingMisunderstanding 1: CRM is database marketing

Misunderstanding 2: CRM is marketing processMisunderstanding 2: CRM is marketing process

Misunderstanding 3: CRM is an IT issueMisunderstanding 3: CRM is an IT issue

Misunderstanding 4: CRM is about loyalty schemesMisunderstanding 4: CRM is about loyalty schemes

Misunderstanding 5: CRM can be implemented by any companyMisunderstanding 5: CRM can be implemented by any company

13

Defining CRMDefining CRM

CRM is the core business strategy that integrates CRM is the core business strategy that integrates Integrates internal processes and function, and Integrates internal processes and function, and

external external network, to create and deliver value to targeted network, to create and deliver value to targeted customers at a profit. It is grounded on high quality customers at a profit. It is grounded on high quality customer-related data and enabled by information customer-related data and enabled by information technology. technology.

14

CRM constituenciesCRM constituencies

There are several important constituencies having an There are several important constituencies having an interest in CRM:interest in CRM:1.1. CompaniesCompanies implementing CRM :many companies have implementing CRM :many companies have

implemented CRM.implemented CRM.

2.2. Customers and partners of those companiesCustomers and partners of those companies

3.3. Vendors of CRM software: Vendors of CRM software: such as Oracle, SAP, SAS, KANA, such as Oracle, SAP, SAS, KANA, Microsoft and StayinFront.Microsoft and StayinFront.

15

CRM constituenciesCRM constituencies

4.4. CRM application service providers (ASPs):CRM application service providers (ASPs):

5.5. Vendors of CRM hardware and infrastructure:Vendors of CRM hardware and infrastructure:

6.6. Management consultants:Management consultants:

16

Commercial contexts of CRM Commercial contexts of CRM

BanksBanks

Automobile manufacturersAutomobile manufacturers

High-tech companiesHigh-tech companies

Consumer goods manufacturersConsumer goods manufacturers

17

The not-for-profit contextThe not-for-profit context

Most of this chapter has been concerned with CRM in Most of this chapter has been concerned with CRM in the for-profit context. CRM can also be found in the the for-profit context. CRM can also be found in the not-for-profit context. not-for-profit context.

Universities have deployed CRM to manage their Universities have deployed CRM to manage their student and alumni relationships. For example, student and alumni relationships. For example, students who enjoy their experiences at a graduate students who enjoy their experiences at a graduate school of business may return there for executive school of business may return there for executive education.education.

18

Models of CRMModels of CRM

A number of comprehensive CRM models have been developed. A number of comprehensive CRM models have been developed. We introduce five of them here.We introduce five of them here.

1. The IDIC model 1. The IDIC model The IDIC model suggests that companies should take four actions The IDIC model suggests that companies should take four actions in order to build closer one-to-one relationships with customers:in order to build closer one-to-one relationships with customers: identifyidentify differentiatedifferentiate interactinteract customizecustomize

19

Models of CRMModels of CRM2. The QCi model 2. The QCi model

20

Models of CRMModels of CRM3. The CRM value chain3. The CRM value chain

21

Models of CRMModels of CRM4. Payne’s five-process model4. Payne’s five-process model

22

Models of CRMModels of CRM5. The Gartner competency model5. The Gartner competency model

23