Week#1; Introduction & Concepts

8/8/2019 Week#1; Introduction & Concepts

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Chapter 1.1 N.Karami, CRM-Autumn 2010

Customer Relationship managementCustomer Relationship management

Introduction & ConceptsIntroduction & Concepts


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Introduction &Introduction &

ConceptsConcepts

Introduction &Introduction &

ConceptsConcepts

Chapter 1: Making Sense of CRM


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CRM is a business strategy that aims to understand,

anticipate and manage the needs of an organisations

current and potential customers. CRM is a shift from traditional marketing as it focuses

on the retention of customers in addition to the

acquisition of new customers.

The expression Customer Relationship Management(CRM) is becoming standard terminology, replacing

what is widely perceived to be a misleadingly narrow

term, relationship marketing (RM).

Why CRM?Why CRM?


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1. CRM is database marketing CRM is much wider in scope

2. CRM is a marketing process

CRM is also about company culture, new product developmentpartnerships with other companies etc.

3. CRM is an IT issue IT is the enabler but CRM is much more than just IT

4. CRM is about loyalty schemes

Loyalty schemes may play a role in CRM systems - generatingcustomer data and serving as an exit barrier

5. CRM can be implemented by any company Good quality customer data is required for analytical and

operational CRM


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Strategy, Process, Software, Philosophy, Project???

a) CRM is about Strategy

CRM is about creating a competitive advantage by being the best at

understanding, communicating, delivering and developing existingcustomer relationships, in addition to creating and keeping new

customers (Strategic CRM)

b) CRM the customer thread

Whether the customers are current / potential / selected CRM is aboutacquiring, retaining, partnering, personalizing relationships with them.

CRM helps businesses use technology and human resources to gain

insight into the behavior of customers and the value of these

customers.


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CRM is concerned with the creation,

development and enhancement ofindividualised customer relationships with

carefully targeted customers and customer

groups resulting in maximizing their total

customer life-time value.


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` The focus [of CRM] is on creating value forthe customer and the company over thelonger term.

` When customers value the customerservice that they receive from suppliers,they are less likely to look to alternativesuppliers for their needs.

` CRM enables organisations to gaincompetitive advantage over competitorsthat supply similar products or services.

The Purpose ofThe Purpose of CRMCRM


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Focuses, automates and improves customer-facing and

customer-supporting business processes.

Marketing automation: applies technology to marketing

processes - segmentation, multi-channel communication,event-based marketing.

Sale-force automation: applies technology to selling

activities.

Service automation: allows companies to manage theirservice operation whether delivered through call centre,

contact centre, web or face-to-face.


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

An essential part of many CRM implementations.

leading companies to decide that selling approaches should differbetween customer group.

Customer perspective - delivers better, more timely,

personalized customized solutions.Company perspective - enables cross-selling and up-selling

programs, and more effective customer retention andacquisition.


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Focuses upon the development of a customer-centric business culture. This culture is dedicated towinning and keeping customers by creating anddelivering value better than competitors.

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


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Product-oriented business: best quality, performance, designor features.

Production-oriented business: low-price products.Consequently, these business strive to keep operating costs low, and

develop low-cost routes to market.

Sale-oriented business: invest in advertising, selling, publicrelations (PR) and sales promotion.

A customerormarket-oriented business: put the customer

first.It collects, disseminates and uses customer and competitiveinformation to develop better value propositions for customers.


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>1990 >1996 >2002

Customer Service Support

Integrated customer facing Strategic CRM

ERP Integration

Customer analytics

Complete Web integrationScope:

Service function

Goals:

Improve service operations

Increase sales efficiency

Marketing function

Service function

Sales function

Reduce cost of interaction

Increase customer retention

Improve customer experience

CompetitiveAdvantage

Sales force Automation

1st generation 2nd generation 3rd generation

Call Center Management

Front-end ( marketing, sales, service)

Campaign Management

Sales function

Entire organization

Cost reduction & Revenue growth


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` A relationship consists of episodes between dyadic parties

over time

` Episodes are time-bound and nameable

` Each episode is made up of a series of interactions

` Business relationships are made up of task and social

episodes

` Relations involve trustand commitment


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` Calculus-Based Trust. This is present in early stages of the relationship and

related to economic calculations. The outcomes of creatingand sustaining the new relationship are weighed against

those of dissolving it` Knowledge-Based Trust.

This relies on the individual parties interactive history andknowledge of each other, allowing each to makepredictions about the other

` Identification-Based Trust. This happens when mutual understanding is such that

each can act as substitute for the other in interpersonalinteraction. This is found in the later stages of relationshipdevelopment.


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`Commitment exists when an exchange partner believes that an ongoing relationship with another is

so important as to warrant maximum effort to maintaining it; that is, the

committed party believes the relationship is worth working on to ensure

that it endures indefinitely

`Relational consequences of commitment Commitment arises from trust, shared values, and the belief that partners

will be difficult to replace.

Commitment motivates partners to co-operate in order to preserverelationship investments.

Commitment means partners pass over short-term alternatives in favour

of more stable, long-term benefits associated with current partners.


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` Suspect - could the customer fit the target market profile?

` Prospect - customer fits the profile and is beingapproached for the first time

` First-time customer- customer makes first purchase` Repeat customer- customer makes additional purchases

` Majority customer- customer selects your company assupplier of choice

` Loyal customer- customer is resistant to switchingsuppliers; strong positive attitude to your company

` Advocate - customer generates additional referral dollars


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`The total present day value of a customer is the

sum of all past net margins compounded to todays value, and

all future net margins discounted to todays value

`The potential value of a customer is all future net margins discounted to todays value


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615-644 Week 10 CRMSystems 21

` Companies generate better results when

they manage their customer base in order to

identify, satisfy and retain their mostprofitable customers

Marketing costs are reduced

Suppliers understand customer requirements better -

and sell more products and services


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Customer

Satisfaction

Customer

Loyalty

Business

Performance

Understand customer requirements Meet customer expectations Deliver customer value

Behavioral loyaltyAttitudinal loyalty

Revenue growth Share of customer Customer tenure


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` Banks and telecommunications companies Enhanced retention and cross-sell

` Auto manufacturers

More profitable relationships with distributors Better understanding of end-users

` FMCG manufacturers Better understanding of cost-to-serve and retail account

profitability

` Retailers Enhanced basket value


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` CRM projects are expensive, complex and take

several years to complete

`CRM projects are risky - the CRM failure rate isestimated at 65% (it may escalate to 80%) -

Gartner Research

` Customer satisfaction with CRM is very low

indeed


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` Companies that implement CRM

` Customers of companies that implement CRM

`Partners of companies that implement CRM

` Vendors of CRM software, for example Siebel,

PeopleSoft, Pivotal, Oracle, SalesLogix and

Salesforce.com

` vendors of CRM hardware and infrastructure

` consultancies offering strategy, business, CRM

application and technical consulting


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CRM is a collective term for processes and

strategies regarding individualized

relationships between enterprises and

customers, prospects, and business partnersfor marketing, sales and service with the goal

of winning new customers, extending existing

customer relationships across the entire

customer life cycle, and improvingcompetitiveness and business success by

optimizing the profitability of individualized

customer relationships.

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