CHAPTER 11. Customer Relationship Management and Supply Chain Management

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1 CHAPTER 11 Customer Relationship Management and Supply Chain Management

2 CHAPTER OUTLINE 11.1 Defining Customer Relationship Management 11.2 Operational Customer Relationship Management Systems 11.3 Analytical Customer Relationship Management Systems 11.4 Other Types of Customer Relationship Management Systems 11.5 Supply Chains 11.6 Supply Chain Management 11.7 Information Technology Support for Supply Chain Management

3 LEARNING OBJECTIVES 1. Define customer relationship management and collaborative CRM, and identify the primary functions of both processes. 2. Describe the two major components of operational CRM systems, list three applications used in each component, and provide at least one example of how businesses use each application. 3. Describe analytical CRM systems, and describe four purposes for which businesses use these systems. 4. Define mobile CRM systems, on-demand CRM systems, and open-source CRM systems, and identify one main advantage and one main drawback of each.

4 LEARNING OBJECTIVES (continued) 5. Define the term, supply chain, and describe the three components and the three flows of a supply chain. 6. Identify two major challenges in setting accurate inventory levels throughout the supply chain, and describe three popular strategies to solve supply chain problems. 7. Define the terms electronic data interchange (EDI), extranet, and portal, and explain how each of these applications helps support supply chain management.

5 The Sales Funnel

6 11.1 Defining Customer Relationship Management

7 From Neighborhood Stores Personal MONKEY BUSINESS-LBR/Age Fotostock America, Inc.

8 To Today.. Impersonal Mobile population and the Web Giant malls

9 The Need for CRM It costs six times more to sell to a new customer than to sell to an existing one. A typical dissatisfied customer will tell 8-10 people. By increasing the customer retention rate by 5%, profits could increase by 85%. Odds of selling to new customers = 15%, compared to the odds of selling to existing customers (50%) 70% of complaining customers will remain loyal if their problem is solved

10 Tenets of CRM One-to-one relationship between a customer and a seller. Treat different customers differently. Keep profitable customers and maximize lifetime revenue from them.

11 Architecture of a CRM System

12 Lifetime Customer Value

13

14 Customer Touch Points

15 Data Consolidation Accounting HR Finance Link Clicked Customer Webs Pages Visited Marketing MIS Document Downloaded Opened/Delivered Data Consolidation = 360-Degree View of Customers

16 11.2 Operational CRM Two major components of operational CRM Customer-touching applications Customer-facing applications

17 Customer-Facing Applications Customer service and support Requests Complaints Request for Information Product Return Sales force automation Marketing Campaign management

18 Refining the Call Center (IT s About Business 11.3)

19 Cross selling Marketing /Sales Up selling additional, related products Bundling

20 Customer-Touching Applications: On-line / Self-Service Search and comparison capabilities Technical and other information and services Solution Knowledgebase Search Comparison Matrix Customized products and services Loyalty programs Customized Products Customized Services

21 11.3 Analytical CRM Analytical CRM systems analyze customer behavior and perceptions in order to provide actionable BI Industry Company Size Dept. Role or Title

22 The Relationship Between Operational CRM and Analytical CRM Customer-facing Applications Sales Marketing Customer Service and Campaign Management Search and Comparison Customized Products Technical Information Personalized Web Pages FAQ / Auto Response Loyalty Programs Support Customer-touching Applications Customer Data Warehouse Data Mining Decision Support Business Intelligence OLAP

23 11.4 Other Types of CRM Systems Mobile CRM Open-source CRM On-demand CRM

24 Mobile CRM on a Smartphone (IT s About Business 11.4)

25 11.5 Supply Chains

26 Generic Supply Chain

27 Supply Chain (recall Figure 1.5)

28 The Flows of the Supply Chain Material flows physical products raw materials supplies Information flows demand shipments orders returns schedules Financial flows payments credit-related data

29 11.6 Supply Chain Management Supply chain management (SCM) Inter-organizational information system (IOS)

30 Push Model forecast production salesperson happy customer

31 Pull Model Source: Milan Zeremski/iStockphoto Dell customer order Dell factory Dell customer

32 Problems Along the Supply Chain Poor customer service Poor quality product High inventory costs Loss of revenues

33 The Bullwhip Effect Order Quantity Order Quantity Order Quantity Order Quantity Time Time Time Time Customer Sales Retail Orders To Wholesaler Wholesaler Orders to Manufacturer Manufacturer Orders to Supplier

34 Solutions to Supply Chain Problems Using inventories Just-in-time inventory Information sharing Vendor-managed inventory

35 11.7 Information Technology Support for Supply Chain Management EDI (Electronic data interchange) Extranet

36 EDI Benefits Minimize data entry errors Length of messages are shorter Messages are secured Reduces cycle time Increases productivity Enhances customer service Minimizes paper usage and storage Limitations Significant initial investment to implement Ongoing operating costs are high due to the use of expensive, private VANs Traditional EDI system is inflexible Long startup period Multiple EDI standards exist

37 Comparing Purchase Order Fulfillment Without EDI Source: Drawn by E. Turban

38 Comparing Purchase Order Fulfillment With EDI Source: Drawn by E. Turban

39 Extranet The main goal of extranets is to foster collaboration between business partners. An extranet is open to selected B2B suppliers, customers and other business partners.

40 The Structure of an Extranet

41 Types of Extranets A company and its dealers, customers or suppliers An industry s extranet Joint ventures and other business partnerships

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