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Customer RelationshipManagement
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CHAPTER 1
Customer Relationship Management
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Definition of CRM
Customer Relationship Management (CRM) is a
comprehensive strategy and process of acquiring, retaining &partnering with selective customers to create superior value
for the company & the customer
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Understanding CRM
It is a process or methodology used to learn more aboutcustomers' needs and behaviors in order to develop
stronger relationships with them
It brings together information from all data sources within
an organization to give one holistic view of each customer in
real time
This allows customer facing employees in such areas as sales,
customer support, and marketing to make quick yet
informed decisions on everything from cross-selling and
upselling opportunities to target marketing strategies tocompetitive positioning tactics
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Understanding CRM
CRM can be viewed in 4 principal ways It is a contemporary response to the emerging climate of unprecedented
customer churn, waning brand loyalty & lower profitability
It is central to the task of making an organisation customer centric
It is the surest symbol of embracing IT in business
It is the most certain way to increase value to the customers &profitability to the practicing organisations
CRM is all about capturing pertinent data about prospective
& current customers in respect of their buying pattern,
shopping behaviour & usage habits of the products & services
& to use the information to commence a 2-way dialogue with
them
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Understanding CRM
There are three key elements to a successful CRM initiative People: The people throughout a company-from the CEO to each and
every customer service rep-need to buy in to and support CRM
Process: A company's business processes must be reengineered to bolster
its CRM initiative, often from the view of, How can this process better
serve the customer? Technology: Firms must select the right technology to drive these
improved processes, provide the best data to the employees, and be easy
enough to operate
If one of these three foundations is not sound, the entire CRM
structure will crumble
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Thus,CRM
Cost to acquire customersCost to sell
Cost to serve
Time to serve
Reduces:
Customer satisfaction
Return on relationships
Competitive advantage
Number of consumers
Retention rate
Revenue per customer
Enhances:
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Is CRM a new concept???
Pre-Industrial Era Practised since centuries by merchants & traders
Markets traditional & small & businesses built on trust
Customisation of product and all aspects of delivery & payment
possible
Personal rapport shared with customers in the form of social
interactions
Industrial Era
Mass production, mass communication & mass distribution to
achieve economies of scale
More focus on lowering costs & increasing operational
efficiency
Emergence of intermediaries resulting in many layers between
manufacturer & customer
NO!!!
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Is CRM a new concept???
Post- Industrial Era (Information Era) Rapid advances in technology
Helped firms know their customers, learn more about them &
build stronger bonds through frequent interactions
The above information helped them respond to their needs
through manufacturing, delivery & customer service
Intensive competition
In competitive markets, specially ones that were maturing and
witnessing slow/no growth), firms found it more profitable to
focus on existing customer
Shift from just selling products to understanding customer
needs/wants and then satisfying them
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Is CRM a new concept???
Post- Industrial Era (Information Era) Growing importance of service sector
In services, provider usually involved in production as well as
delivery directly. Eg: doctor, consultants
Customers directly involved in purchase & consumption of these
services
These direct contacts create opportunities for better
understanding of needs & constraints & emotional bonding
Adoption of TQM programmes
This required firms to work closely with their customers,
intermediaries & suppliers
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Benefits of CRM Lower cost of marketing
Occurs as the company specifies its target segment customers &
knows their needs better, thus spending less money on advertising
& promotions
Decreased cost for customers
As marketing expenses of a firm decreases, firms can offer thesame product at a bit low cost, thus benefiting customers
Increased sales revenue
Results from spending more time with customers which results
from spending less time chasing needed information Improved customer satisfaction
Results from customers finding the company more responsive &
better in touch with their specific needs
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Benefits of CRM Improved customer retention
As old customers will be fully satisfied, they will buy the same
companies products as they know their problems would be taken
care of ,well
Creates intelligent opportunities for cross-selling & up-selling
Opens up possibility of rapid introduction of new brands &products
Strong customer loyalty
CRM helps to build good relationship with customers, thereby
ensuring that they remain loyal with the company
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Why CRM???
The top four reasons for implementing CRM are: gaining customer confidence and loyalty
providing personalized service to customers
acquiring better knowledge of customers and their buying
habits
differentiating themselves from the competition
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CRM architecture
A holistic approach to CRM inevitably makes it essential to integrate the back office & the front office activities &
Provde information seamlessly across all tiers of the organisation
Hence, CRM architecture has 3 primary components
Operational
CRM
Customers
Collaborative
CRM
Analytical
CRM
Firm
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CRM architecture Operational CRM
Automation of horizontally integrated business processes involving front
end customer touch points ie: places where a customer makes direct
contact with the employees of the organisation
At the root of any CRM success or failure ,is a well-designed operational
CRM infrastructure.If an organisations front-line customer service, sales
and marketing employees are not efficient, its CRM initiative is bound tofail
Operational CRM is the source for customer-related information, which is
invaluable for an organisation as it can be processed by analytical CRM
tools to extract business value
A badly co-ordinated operational CRM initiative will capture incorrectdata, paint an untrue picture of the buyers needs, and provide insufficient
service and response levels. Operational CRM needs to be in sync with
business units to receive complete and updated information on which it can
act. It must also integrate the systems at various customer touch points
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CRM architecture
Analytical CRM Analysis of data created on the operational side of CRM for the
purpose of business performance management & improvement
Prediction of customer behaviour, identifying relevant customer
segments, identifying potential customers are some of the activities
that could be performed from knowledge arising from this CRM
Collaborative CRM
Consists of technologies to ensure enterprise/customer interaction
across all contact channels such as in-person, phone, electronic andwireless
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CRM process framework
Purpose
Programs
Partners
Formation
Management
&
GovernancePerformance
Evolution
There are 3 main components
Formation
Management & governance
Performance
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CRM process framework: Formation
Purpose What is the need /specific requirement from the CRM process?
Partners
Selection of partners is based on intuitive judgement of seniors in the
company or extensive research
Criteria varies according to company goals & policies
Programs
Three generic types of CRM programs applied on three different set
of customers
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CRM process framework: Formation
Programtype
Mass markets Distributors Business toBusiness markets
Continuity
marketing
1. After marketing
2. Loyalty
programs
3. Cross selling4. Up selling
1. Continuous
replenishment
1. Special
sourcing
arrangement
One to one
marketing
1. Permission
market
2. Personalisation
1. Customer
business
development
1. Key account
program
Partnering /Co-
marketing
1. Affinitypartnering
2. Co-branding
1. Logisticpartnering
2. Joint marketing
1. Strategicpartnering
2. Co-design3. Co-development
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CRM process framework: Formation
Continuity marketing - To retain customers & increase loyaltythrough long term special services
Continuity marketing aimed at Mass markets
After marketing : Reaching to customers, post sales, to know theirfeedback
Loyalty programs : Designed and implemented to refraincustomers from switching to competitors. Eg: Shoppers Stop
Cross selling : Getting back to customers to buy relatedproduct/services
Up selling : Selling an upgraded version of the basic product to thesame customer over a period of time
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CRM process framework: Formation
Continuity marketing aimed at Distributors Continuous replenishment:Delivering information of goods
sold , to the manufacturer through integrated computer networks &
communication protocols
Continuity marketing aimed at Business markets
Special sourcing arrangement: It can be single sourcing,multiple sourcing or just in time
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CRM process framework: Formation
One to one marketing - To satisfy each customers needuniquely
One to one marketing aimed at Mass markets
Permission marketing : Requesting permission from customersto talk about products/services
Personalistion: Addressing customer by his name or personalisinghis home page like rediff does
One to one marketing aimed at Distributors
Customer business development: Providing knowledge aboutcustomer type, buying behaviour, habits etc
One to one marketing aimed at Business markets
Global account managers: One to one marketing practised in abusiness to business environment
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CRM process framework: Formation
Partnering / Co-marketing Focuses on the capability of thebusiness to partner with the relevant customer
Partnering aimed at Mass markets
Affinity partnering: Two different businesses coming together toincrease their profit
Co-branding: Advertising not only own brand but also the brand ofthe component that goes inside the product
Partnering aimed at Distributors
Logistic partnering: Sharing the process of transportation
Joint marketing: Dividing the marketing expenses between themanufacturer & the retail outlet owner
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CRM process framework: Formation
Partnering aimed at Business units Strategic partnering/ Co-design/ Co-development : During
the development stage, sharing of strategic plans by the manufacturer
with his vendors or raw materials provider. Also includes people from
the vendors team at the design stage
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CRM process framework
Management & Governance Team structure
Role specification
Planning process
Process alignment
Monitoring process
Communication
Employee motivation
Employee training
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CRM process framework
Performance : Measured under three heads Strategic: How has the program helped in increasing the strategic
asset of the company is measured
Financial : How has the program helped in improving the financial
status of the company is measured
Marketing: Customer retention, satisfaction & loyalty is measured
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Measuring CRM
A good CRM strategy should be followed by measurablecriteria defined before the implementation
For eg: the success of CRM at a banks retail business unit depends
on the rate of revenue growth, yield per customer, rate of decrease in
customer complaints and rate of customer acquisitions etc..
Every business unit, from operational to the back office, mustcreate well-defined metrics for measuring performance a day
before CRM
Any improvement in performance over time (week, month or
quarter) can be quantified and considered the measurement ofsuccess of a CRM initiative
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CRM used by Indian firms
B
elow mentioned companies have all adopted technology smartly tocreate better customer care solution & systems
1. Customer care begins before the sale:
Lakme Lever
Unveiled a radically new customer service: interactive kiosks that allow
women to choose products that suit them
Branded as Lakme Beauty Zones, these kiosks first take a picture of the
customer's face. Then, as the customer chooses different shades of
eyeshades & lipsticks, these are superimposed on the image on the screen.
That way, she is able to decide whether the colour suits her before she
buys the product Lakme had found that for many products, particularly foundation creams,
the number of lapsed users who bought it once & then stopped buying,
were high
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CRM used by Indian firms For long time, Lakme organized Beauty Clubs, where experts
offered beauty tips. But over time, organising these gatherings
proved to be a logistic nightmare
Now, with these kiosks, Lakme hopes to reach out to more women
right at the point of sale
Godrej - GE Has set up a Customer Care Call Centers manned by executives who have
a complete description of all appliances sold by the company
The call centres across Mumbai, Chennai & Delhi receive close to 3000
pre-sale calls. Sometimes, customers ask for information to help them
decide which product model will suit them better
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CRM used by Indian firms
2.U
nderstanding buying patterns: Food World
Undertake bar coding of products to keep a track of stock keeping
Planning to implement a system to understand purchase patterns better
Apart from regular customer meets & formal research, it has invested in
data mining software in Chennai that would help understand productadjacencies ie: figuring out which products are typically bought together
This will, in turn, help formulate product placements, undertake cross
promotions or develop new pack sizes
3. Understanding the customer:
ICICI
All customer information will be centralized in ICICIs server farm at
Mahalaxmi in Mumbai & gather information real time
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CRM used by Indian firms
4. Rewarding customer loyalty: BPCL
Initiated a smart card programme, enlisting select petrol pumps, where
customer is assured of a minimum level of quality service
Pumps had to have the ability to upgrade their facilities, practice ood
house keeping & customer care & of course, provide the right quality &quantity of product
Customers were given points for transactions made on the card, which
later, could be redeemed through gifts
5. Making after sales service easier: Samsung Electronics
If a cusomer finds a defect in their product, they can simply log on to the
company website & key in their address & product serial no.
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CRM used by Indian firms Immediately, the name & contact no. of the nearest Samsung dealeras well
as the complaint no.
If the dealer does not have the part, then the software directs the customer
to the nearest dealer who has the part
There is a common thread running through all theseorganisations,Talking, listening & understanding
what the customer is all about!!
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Impact of globalisation on CRM
Market segmentation Advancement in communication technology & growth of internet
Product Life Cycle
Product availability in different country markets, creates difficulty to
manage product life cycle
Competitive environment
Different competitive environment in different countries lead o
inconsistent CRM
Cultural difference
Leads to differences in products and services sold across differentcountry markets leading to inconsistent CRM programs.
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Winning markets through effective CRM
There are 2 approaches to CRMTraditional approach Web enabled & Integration
approach
Customer contact:
a) Telephone b) mails
Customer database
Personal selling EPOS (Electronic Point Of Sale)
After sales service Automation of customer
service(SFA)
Complaint handling Call centre
Account management System integration
Customer care Customer lifetime value
Customer satisfaction
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Traditional approach to CRM
Customer contact
Established through different methods
Telephonic method : Cheap, but less effective
Mails: Low conversion rate in India because of poor computer literacy
Personal selling
Costly & time consuming
Each of the contact should reflect good things about the company to the
customer
After sales service
Customers can become advocates for the product/service only when theyare happy using it. This is possible if the after sales service provided is a
good functional one
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Traditional approach to CRM
Complaint handling Procedure for filing complaint & receiving attention should be easy,
simple & fast
Account management
Each interaction of a high potential customer is recorded so that the
company can manipulate his future interactions
Customer care & customer satisfaction
Are ongoing processes through which company creates chances to
interact with the customer & make each of these interactions, a happy one
for the customer
Eg: AMC is a method of customer contact
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Web enabled approach to CRM Customer database
A hardware which gets regular flow of information
Helps understand customers & accurately anticipates their behavioural
patterns
Also helps to plan, implement & monitor customer contact
All this is possible if the database is a robust one & good data miningtools are applied on customer data
EPOS
The electronic gadget at the check out counter of a retail outlet where the
billing happens is an example of EPOS
Helps calculate sales rate, stock levels, price & margin Since sale of products depend on demographic & socio economic lifestyle
of the customers, useful information about the products that the customer
wants, can be given by an EPOS
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Web enabled approach to CRM Sales force automation
One of the powerful software modules of a CRM package, usually used
by sales people
Helps in automating & optimising sales processes
Shortens sales cycle & increases sales productivity
Gives information on
Customer, company & hierarchy of people to be contacted over there
Characteristics of the important person in the customer company
Information about competitors & their product profile
After sales information
Call centres Systems used by companies to interact with customers to sell their
products & solve customer problems
Can be inbound or outbound
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Web enabled approach to CRMUse the following technology
Automatic call distribution: A programmable telephone systemused in incoming call centres which automatically answers, queues &
distributes calls to agents.Also plays delay announcements to callers,
provide real-time & historical reports on these activities
Predictive dialing: A feature of a phone system where outboundcalls from a user elected list are automatically initiated & answeredcalls are passed to available service agents. Is designed to minimise
the time between answered calls, thus enhancing agent productivity
Interactive Voice Response: A system with menu drivenchoices that specify which choices you can make by hitting numbers
on your telephone pad. Helps handle routine transactions without
involvement of live agents
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Web enabled approach to CRMUse the following technology
Computer Telephony Integration: A software that helpsapplication programs control the phone system. Helps increase employee
productivity, enhance customer service & reduce costs with the custom
functionality ofWindows, Unix orWeb applications.Data collected by ACD
or IVR systems can be passed to existing PC, Unix orWeb applications
through the phone software System integration
There should be seamless integration between the front office & back-
office applications
Customer lifetime value
Amount of money that a customer spends while doing business with a
company in his entire lifetime. This will also include the money spent by
his referrals in doing business with the company
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Problems with CRM Exorbitant Costs
Huge investment needed to maintain a customer database. Money
required for computer hardware, software, personnel etc
Inadequate Focus on Objectives
When starting off on a CRM strategy the objectives are clearly
established and followed Midway during the CRM implementation, when hard times hit, the
organization loses sight of its goals and ultimately steers away from it
Insufficient Resources
Sometimes in phased implementation of CRM, if conditions worsen
within the company or without, organizations start lessening their budgetsfor the current phase
When funds are less, budgets get strained & the necessary costs required
for CRM success are not employed. As a result CRM starts failing
midway
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Problems with CRM Inappropriate Metrics
The old adage You cant manage what you cant measure is true for CRM also
Failure to choose the right method of measurement and implementation is one of
the chief reasons why CRM fails
Business Needs Most Important
One of the chief mistakes companies make is letting the technology drive
their CRM functionality
Instead they need to analyze their business problems first and then find the
appropriate CRM solution for it
Slow Returns
Another failure of CRM is its inability to provide quick returns oninvestment
Waiting for years to see their investments show results, tests patience and
leads to both employees and management slackening their efforts in the
implementation
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Problems with CRM
No Customer Focus
Employees need to be motivated to be absolutely customer centric. This
involves tremendous effort on the part of the company
CRM problems arise because of employee reluctance to be more customer
focused
The result is a highly expensive customer strategy being adopted by thecompany in an effort to retain customers, with reluctant, unfocussed
employees implementing it
Most CRM problems can be mitigated, resolved and ultimately
obliterated. What is highly required is the ability to focus on the business
needs, choose a CRM package that works towards it, employ the right
resources and assume the right metrics. Adopting these measures would
go a long way in alleviating CRM problems.
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CHAPTER 2
Technological tools for CRM
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Data Mining Is the discovery and presentation of non trivial, novel, interesting
and ultimately potential useful information from a very large
customer database or data ware house
Information received above helps solve critical business
problems. For eg: to increase market share, to improve internal
productivity or to gain competitive advantage An inter-disciplinary field that takes its inputs from diverse but
related disciplines
Is usually done on data collected while undertaking day-to-day
transactions of a company. Such data usually has less bias than
data that has been specifically collected for the purpose of analysis Aims to facilitate the involvement of the end user in the
discovery process without the need for trained experts either for
running the various techniques or for interpreting the results
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Applications ofData Mining
Covers a wide range of applications in commercial as
well as non-commercial fields
Commercial applications
Customer profitability
Customer retention
Customer segmentation
Channel optimisation
Targeted marketing
Fraud prevention
Market basket analysis
Demand forecasting
Price optimisation
Non - commercial
applications
Oil exploration & research Medical research
Crime investigations
Astronomy & cosmology
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Applications ofData Mining
Non - commercial
applications
Oil exploration & research
Medical research
Crime investigations
Astronomy & cosmology
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Tools/Techniques ofData Mining
Cluster detection Decision trees
Memory based reasoning
Link analysis
Rule induction
Neutral networks
Genetic algorithms
Sequential pattern discovery
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How to perform data mining
Step 1: Define business objectives Step 2: Prepare data
Data selection
Preprocessing of data
Data transformation Step 3: Perform data mining
Step 4: Evaluate results
Step 5: Present discoveries
Step 6: Ensure usage for discoveries
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Data Mining in banks & insurance cos A large customer base coupled with detailed demographic
information
Cross-selling & Up-selling of products can be taken up due to
cost advantage in selling to an existing customer
However, for this, a lot of investment needs to be done in
communicating about the offers to customer A better idea would be identify those customers who would respond
favourably to those offers
The favourable prospects are identified by segmenting the
database (using classification algorithms)
Data mining provides the intelligence & knowledge needed to
understand customers & their behaviour from past interactions
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E-CRM
E-CRM can be defined as activities to manage customerrelationships by using the Internet, web browsers or other
electronic touch points
E-CRM provides companies with a means to conduct interactive,
personalized & relevant communications with customers across
both electronic & traditional channels
It utilizes a complete view of the customer to make decisions
about messaging, offers & channel delivery
It synchronises communications across disjointed customer-
facing systems Thus, E-CRM is the management of customer interactions at all
levels, channels, and media
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Basic Requirements of E-CRM
Electronic channels Web & personalised e-messaging
Enterprise
Construction & maintenance of a data warehouse that
provides a consolidated, detailed view of individual customer
behaviour & communication history
Empowerment
Deliver timely, pertinent & valuable information to the
customer
Economics
Asset allocation to be directed at individuals likely to provide
the greatest return on customer communication initiatives
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Basic Requirements of E-CRM
Evaluation Customer interactions across various customer touch points need
to be evaluated & anticipated ROI should be compared against
actual returns through customer analytic reporting
External information
Gathered from sources like web page profile applications & third
party information networks
An E-CRM solution must have applications that synchronise
customer communications across channels & do so in
real-time
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Need of E-CRM
CRM offerings remain channel centric rather than customercentric
Customer facing systems create new islands of non-integrated
information
One of the reasons eCRM is so popular nowadays is that digital
channels can create unique and positive experiences - not just
transactions - for customers
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E-CRM architecture
Following is a set of technical E-CRM capabilities &applications that collectively comprise a full E-CRM solution
Customer Analytic Software:
Integrates with customer communications software to help
companies transform customer findings into ROI producing
initiatives
Data Mining Software:
Integrates with campaign management software to keep pace with
multiple campaigns running daily or weekly
Campaign Management Software
Tests various offers against control groups, captures promotion
history for each customer & prospect & produces output for any
online/offline customer touch point
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E-CRM architecture
B
usiness Simulation: Used in conjunction with Campaign Management software,
optimizes offer, messaging & channel delivery prior to campaign
execution & compares planned costs & ROI projections with
actual results
Real Time Decision Engine: Contains business intelligence to determine & communicate the
most appropriate message offer & channel delivery in real time &
support 2-way dialogue with the customer
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E-CRM framework
Identify
opportunity
Optimize
strategy
Present
communication
Evaluate
result
START
Customer
warehouse Deliverrecommendation in
batch
2-way dialogue &
channel
synchronisation
Plan
communication
strategy
Points of sale
SFA
Call center
Direct mail
Web
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E-CRM framework
: set of e-marketing & offline marketingfunctions that utilise a single view of the customer contained
in the single data warehouse
a sample of customer channels, containing
both electronic applications as well as traditional direct mail
one-way batch outputs to the channels
bi-directional customer communications in
real time & synchronization of communications across
channels
Left hand cycle
Right hand cycle:
One-way arrow:
Two-way arrow:
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Benefits of E-CRM Service level improvements - Using an integrated database to deliver
consistent and improved customer responses
Revenue growth - Decreasing costs by focusing on retaining
customers and using interactive service tools to sell additional
products
Productivity - Consistent sales and service procedures to createefficient work processes
Customer satisfaction - Automatic customer tracking and detection
will ensure enquiries are met and issues are managed. This will
improve the customer's overall experience in dealing with the
organisation Automation - eCRM software helps automate campaigns including:
Telemarketing
Telesales
Direct mail
Lead tracking and response
Opportunity management
Quotes and order configuration
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Benefits of E-CRM Captures and Reuses past experiences
Ensures Knowledge Management- A strategy to organize and use
available information, experience and expertise
Focus on customers across organization
Lower cost of service as servicing a customer online costs less
Help to capitalize on most profitable customers Helps increase marketing capabilities through gathering enhanced
demographic data
Many forms of advertising are not as effective as they need to be.
CRM enables a company to target their audience more precisely and
gain customer retention, all at a lesser cost
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How does E-CRM work? In today's world, customers interact with an organisation via multiple
communication channels-theWorldWideWeb, call centres, fieldsalespeople, dealers and partner networks. Many organisations also have
multiple lines of business that interact with the same customers
eCRM systems enable customers to do business with the organisation the
way the customer wants - any time, via any channel, in any language or
currency-and to make customers feel that they are dealing with a single,unified organisation that recognises them every step of the way
The eCRM system does this by creating a central repository for customer
records and providing a portal on each employee's computer system allowing
access to customer information by any member of the organisation at any
time
Through this system, eCRM gives you the ability to know more about
customers, products and performance results using real time information
across your business
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CHAPTER 3
Implementing CRM
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Steps to implement CRM
Need analysis Project planning
Implementation
Testing & quality assurance
Deployment & training To implement CRM successfully, you'll have to
reorganize your customer and change yourorganizational mindset. There are three importantcriteria
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Steps to implement CRM
To implement CRM successfully, an organisation needs toreorganize customers and also change their mindset
There are three important criteria
Good design interface: It has to be easier for a customer to give a
company its information and for the company to capture that
information Good memory: The company has to remember what the customer told
them so that they dont need to ask the customer same question again
Ability to integrate the information
These three criteria apply both on and off the Web
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Measuring the effectiveness ofRelship Marketing
Research findings by Mr. A Lindgreen to measureeffectiveness of relationship marketing are as
follows:
The loyalty accounting matrix
The relationship quality customer retention theory ofcreating shareholder value
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Measuring the effectiveness ofRelship Marketing
The loyalty accounting matrix
Yellow
customer
Yellow
customer
Green
customer
Red
customer
Relative attraction
Satisfa
ctionwiththe
company
L H
H
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The loyalty accounting matrix
Green customers More attracted to the company thancompeting business.. These customers need to be always kept
satisfied & given special attention
Yellow customers Score high on one parameter..hence
greater scope to convert them into green customers by
adopting an appropriate strategy
Red customers More price sensitive; will move their
business to suppliers of lower priced products..hence not very
profitable to be concentrated on, by the company
Thus, if the customers are properly chosen & administered with
relationship marketing, good results can be achieved
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The Relationship Quality model
Trust in credibility
Trust in benevolence
Affective commitment
Affective conflict
Satisfaction
Social bonding
Relshipquality
Customerretention
Customer revenue
Customer`s cost
Share of customer
Employee satisfaction
Share of future
Shareholder value
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The Relationship Quality model
Relationship quality is made of 6 key constructs
Credibility
Benevolence
Commitment
Healthy conflict
Satisfaction
Social bonding
Relationship quality can be increased by bringing about an increase
in the above mentioned factors. To achieve this, the businesses
must meet its business customers more often, both formally &informally
An increase/improvement in relationship quality will lead to
increase in customer retention, thereby generating revenue for the
business
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The Past, Present & Future of CRM
The Past:
1960: Era of massmarketing, standardised
products were produced in
large quantities in huge
manufacturing set ups
Products sold to allcustomers who wanted it &
were willing to pay for it
There was no segmentation
or customisation
1970: Introduction ofsegmentation, direct mail
campaigns & early
telemarketing
1980: Era of nichemarketing
Small group of customers
were offered customised
service & products & they
were ready to pay apremium for it
1990: Emergence ofrelationship marketing
Explosion of telemarketing& call centres , all set up to
develop relationships with
customers
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The Past, Present & Future of CRM
The Present: Now, organisations are moving through several stages of CRM as shown
in the table below:
Stage State Culture
Satisfaction
based
Re-active 1. Meet customer needs
2. Respond to complaints3. Minimal evaluation of customer
service levels
Performance
based
Pro-active 1. Evaluate customer perception
2. Identify customer retention factors
Commitment
based
Very pro-active 1. Evaluate multiple customer needs
2. Continuous inbound/outbound
flow & feedback
3. Continuous improvement
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The Past, Present & Future of CRM
The Present:
As seen from the table, a company can be just into CRM
(satisfaction based), deep into CRM (performance based) or
very much deep into CRM( commitment based)
Depending on the companys commitment to keep itscustomers happy, it could be in reactive mode, proactive mode
or very proactive mode
In reactive mode, the company reacts to customer needs as it
arises. In the other 2 states, the business tries to provide the
services to the customers before they ask for it
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The Past, Present & Future of CRM
The Future:
Customers will play a significant role in managing
relationships
Service models will continue to change
The web will create globalisation Loyalty programs will be the necessity in order to retain
customers
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Customer loyalty models
Relationship Continuous model
Rational & emotional 2 major connects to make consumers accept a
product/service
Rational connect executed through communication of potential value
of products/services like functional value, quantitative benefits etc
Emotional connect made through perceived value of products/servicewhich would help marketers enjoy brand equity
This model primarily focuses on enhancing customer relationships
through continuous value offering
Customer Need model
Helps marketers identify the level of consumer needs & design &deploy appropriate strategies to capture their mind & money share
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Customer loyalty models
Customer Involvement model
Degree of customer involvement would enable marketers to decide on
the products/services & the appropriate communication to reach them
Higher the customer involvement - higher the degree of brand loyalty
& affinity towards the product & services
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Campaign Management
To inform customers about various products & ultimately sell
them, marketing managers routinely conduct various
marketing campaigns. They may be for:
Launch of a new product
Increase visibility of an existing product
Re-launch of an old product with more features Campaigns for specific occasions & others
Many of these campaigns may be conducted in multi
locations across various communication channels
Campaign management solutions are software products thathelp plan, design, execute & measure the effectiveness of
marketing campaigns
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Campaign Management
Campaign management software works as follows:
Segment: Defining the campaign population & using different
models to filter them
Plan: Creating the campaign
Execute: Scheduling the campaign across various channels like direct
mail, email, telephone, SMS etc.. Track: Monitoring direct & inferred responses & tracking return on
investment
Campaign management usually depends on Interruption
marketing
Interruption marketing happens when a customer receives anunannounced phone call or unsolicited e-mail. Eg: pop-up windows in
Internet
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Campaign Management
Another type of campaign management E-campaign
management based on Permission marketing
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Response Management
Depending on which type of campaign management is used,
the response also varies
2 types of response management
Traditional response management
E-marketing response management
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Traditional Response Management
Marketing campaign
Email Telephone
response
Others
Campaign refinement
Registration
information
New Marketing campaign
ETR
ORI
Time
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E-marketing Response Management
Email Telephone
response
OthersRegistration
information
Time
E-marketing campaign
Feedback
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Response Management
E-marketing response management is the process by which
huge amount of customer feedback is consolidated for a
campaign & the result studied as the campaign progresses
Hence mistakes made are rectified as the campaign progresses
In the traditional method, marketing people had to wait till a
campaign was over to learn about the mistakes made & hencelaunch another campaign.
Time involved was enormous , almost double the time involved in e-
marketing response
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CHAPTER 4
Relationship Management in
Business To Business
Commerce
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Building customer loyalty in business-to business
market
Need As end customers demand better value proposition from the
manufacturer in terms of quality, product variety & convenience;
manufacturers expect the following from their vendors
Greater responsiveness
Reliability Quality consciousness
Higher service level
Integration with their system
Bundled products & services
Fierce competition & maturing markets have forced vendors to focus
on building loyalty with their customers
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Building customer loyalty in business-to business
market
Market Intelligent Enterprise model of PriceWaterHouseCooper
Market Intelligent enterprise is an enterprise that instutionalises the capacity
to acquire & apply market information quickly across & effectively manage
customer relationships with the best customers & the best prospects
Aligns strategy & process
with customer expectation
Identify customer expectation
Collect customer information as
strategic asset
Managing customer expectation
Managing customer
relationship based on
ongoing customer value
Embrace market intelligent
technology
Developing a MIE
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Building customer loyalty in business-to business
market
Collecting customer information as strategic asset Collects information not only on its current customers but also its
prospective & target customers
Salesmen an important source for critical customer information. Hence
important to educate them on the value & methodology of collecting this
information Identifying customer expectation
Customer expectation would generally be a combination of the following
Supply reliability & flexibility
Supply lead time (time between production & delivery)
Quality
Price
Technological support
Integration with customers process & systems
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Building customer loyalty in business-to business
market Most industrial customers have a well defined vendor evaluation
methodology..hence necessary for the market intelligence enterprise to
identify the key drivers of customers expectations
It can either be changing end market conditions or the specific
competitive advantage of the manufacturer
Aligning strategies & processes with customer expectations Processes like manufacturing cycle, procurement time & delivery time tobe redesigned according to customers expectation
The processes to be aligned after identifying the key process matrix of
the customer
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Building customer loyalty in business-to business
market Managing customer expectation
Post alignment of processes, it is necessary to communicate the same to
the customer
This can be done by managing customer interactions across various
touch points like marketing, customer support, billing & payment,
product development
If practised properly, a market intelligent enterprise can change a
customer who is a terrorist into an advocate
Terrorist
Rejecters
Defectors
Vulnerable Advocate
Supporter
B ildi l l i b i b i
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Building customer loyalty in business-to business
market One of the objectives of managing customer expectation for an enterprise
is to convert key customers to advocates & address the grievances ofterrorists
In between the Rejectors, Defectors, Vulnerable & Supporters are the
different stages through which a customer passes if handled properly by
the business
Managing customer relationship based on ongoing customervalue
Key customers can be identified on two basis
Customer Lifetime Value: Total amount of value the customer brings tothe business directly or indirectly during his/her lifetime
Generally measured as the monetary benefits the customer brings to the
business
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Building customer loyalty in business-to business
market
Strategic importance of customer : Strategic importancecan be realised by considering the following points
How important is the customer to the achievement of the mission of
the enterprise?
What will be the overall impact of losing a particular customer?
Does the enterprise gain any technical know how/skill set from thecustomer?
Based on the above values, the customers can be scaled on an increasing
basis as shown below
1. Do nothing/sell current value
2. Limited enhancement, cross sell with bundled benefits
3. Respond with enhanced feature & discount with certain parameters
4. Respond & match with competitors offer
5. pre-emptive refinement of offerCustomerValue
B ildi t l lt i b i t b i
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Building customer loyalty in business-to business
market Embracing market intelligent technology
Technology plays an important role by facilitating information flow
across the value chain
But, the technology used like business application (ERP, CRM
packages) & database used should be integrated properly to help
relationship building with customers
Mail,face to face, self-service,
telephone
Front office Back office
Data warehouse & operational
data stores
Customer/Prospect/
Employee touch points
Business applications
Data stores
M/ETechnolo
gytemplate
K A t M t R l ti hi Ch i
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Key Account Management or Relationship Chain
Weaving the web:
Planning the
relationship
Mapping the
customer
organisation
Understand value
drivers
Formalising the web:
Forming the
contact matrix
Owning the
relationship
Monitor tangible
delivery
Managing the web:
Positive impact
analysis
Managing total
Business
experienceEnhancing the web
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Key Account Management or Relationship Chain
A dedicated account team forms a contact matrix wherein
different members from the vendor team develop & maintain
contacts at various levels in the manufacturing organisations
The relationship is built through the following steps
Weaving the web: The first stage involves laying thefoundation for the relationship. It involves the following:
Planning the relationship
During this stage, vendor consistently delivers in terms of
specifications, performance, quality, reliability etc.
Long term & short term plans are formulated based on customersgrowth potential
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Key Account Management or Relationship Chain
Mapping the customer organisation
Vendor identifies key people in the customers organisation
responsible for the business of the customer with the vendor
Key people can be decision makers like purchase manager,
production manager etc. or influencers like finance manager etc.
Understanding value drivers
Each of the key players identified above will have different value
drivers ie: they consider certain things to be more important than
others.
For eg: for the purchase manager, cost might be the value driver, for
production manager, timely delivery might be the value driver
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Key Account Management or Relationship Chain
Formalising the web:
Forming the contact matrix
Key account management is decided at this stage
Members of the team are matched with the key people in the
customers organisation.
For eg; R&D expert in the vendors team will be mapped with theend users in the manufacturers company because the end users can
give critical inputs which R&D expert can implement during product
development
Owning the relationship
At any point of time, the vendor is responsible for the relationship Road map & timetable for the visits are created at this stage
Two things are very important for the sustainability of the
relationship
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Key Account Management or Relationship Chain
Hierarchy: There must be equal participation from all levels of the
organisation on both the sides Personal chemistry: People having one o one relationship must be
comfortable in the interactions
Monitoring tangible delivery
A serious failure in delivery of promises, either tangible or
intangible at this stage can be perceived as a breach of trust
Managing the web: Relationship has to be managed to givehigher value ie: profitability for the vendor & enhanced
solutions for the customers. This can be done by 2 steps:
Positive impact analysis: Using increased exposure that thevendor gets with the customer, the interfaces can be classified into
3 kinds
K A M R l i hi Ch i
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Key Account Management or Relationship Chain
Positive impact analysis: Using increased exposure that the
vendor gets with the customer, the interfaces can be classified into
3 kinds
Necessary impact interfaces: These things must be done like
quotation, on time delivery etc.
High impact interfaces: These activities by the vendor are highly
appreciated by the manufacturer eg: giving a toll-free number for
service queries
Low impact interfaces: These things that the vendor does goes
unnoticed by the manufacturer eg: changing the colour of the
package
Managing total business experience
Vendors organisation is aligned to the customers processes
All interaction points are monitored & quality of interaction specified
internally. Thus the total experience of the business customer is managed
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