CRM - Customer Relationship Management

Transcription

1 CRM - Customer Relationship Management 1

2 Customer power Consumer choices gains importance in the decision making process of companies and they feel the need to think like a customer than a producer. 2

3 Customer power Producer-vs-Customer (1) Producers think they are making products. Customers think they are buying services. (2) Producers worry about visible mistakes. Customers are lost because of invisible mistakes. (3) Producers think their technologies create products. Customers think their desires create products. (4) Producers organize for managerial convenience. Customers want their convenience to come first. (5) Producers seek a high standard of performance. Customers care about a high standard of living. 3

4 CRM Although CRM receieved considerable attention in the last decade, there is no clear definitions in the industry or academia. 4

5 What is CRM? Is it a technology solution? Technology: Data warehousing, User tools It can be an excel spreadsheet or a full infrastructure that supports data warehousing, data mining, MIS, reporting etc. E.piphany, SAP, Siebel s CRM, Peoplesoft, Unica are examples of CRM architectures that can be used. 5

6 What is CRM? Is it business analytics/data mining? Analytics: Business analytics Financial analysis Customer analysis... 6

7 What is CRM? Is it marketing? Marketing: Direct mail Outbound telemarketing Inbound telemarketing Internet 7

8 What is CRM? Well, it includes all. Technology CRM Marketing: Analytics 8

9 What is CRM? Five Major perspectives are: (1) CRM as a business process. A business process refers to a group of activities, that can be divided into sub-levels, that convert organizational inputs into desired outputs. It can be defined at two levels: (a) a higher level that includes all activities to build longlasting, profitable and mutually-beneficial customer relationship (b) Norrowly defined as managing customer interactions 9

10 What is CRM? (2) CRM as a strategy. An overall plan for deploying resources to establish a favorable position. Resources are meant for relationship building and maintenance efforts should be allocated based on customers lifetime value to the firm. Building right type of relationship 10

11 What is CRM? (3) CRM as a philosophy. There is a strong link between customer loyalty and corporate profitability. According to this view, most effective way to achieve such loyalty is by proactively seeking to build and maintain long term relationship with customers. This view suggests that firms day-to-day activities be driven by an understanding of customers evolving needs. 11

12 What is CRM? (4) CRM as a capability. Firms must invest in developing and acquiring a mix of resources that enables them to modify their behaviour towards individual customers or groups of customers on a continual basis. Capabilities are knowledge based, complex, cannot be easily purchased, and requires hard to imitate skils. CRM demand that a firm at a minimum should (a) Gather inteligence about its current and prospective customers, & (b) Apply that intelligence to shape its subsequant interactions with customers. 12

13 What is CRM? (5) CRM as a technology. Technology plays a substantial role in CRM efforts, but it is now widely recognized that CRM is more than a technology Technology enables data mining, collecting and storing large quantities of data (how large?), build knowledge from this data, and disseminate the knowledge across organizations. 13

14 What is CRM? We can say: CRM is not just a technology solution that solves all customer related problems. CRM is a business philosophy/strategy that enables people, technology and processes to focus on customer related problems or opportunities. The essence of CRM is understanding customer needs and leveraging that knowledge to improve company profitability. 14

15 What is CRM? CRM has two major subprocesses. (a) Knowledge management: creation, storage, retrieval and application of knowledge. CRM technology provides the tools to store the data, to derive and disseminate the information. 15

16 What is CRM? A CRM system brings together Đnformation about customers Customer characteristics Sales transactions Marketing effectiveness/responsiveness Market trends With large number of customers, CRM relies on information technology. 16

17 What is CRM? (b) Interaction management refers to any instance in which two active parties, which have the ability to influence upon each other, engage in the exchange of values. Interactions should remain consistent, relevant and appropriate. 17

18 What is CRM? 18

19 What is CRM? An effective CRM system describes customer relationship in sufficient detail so that the organization can access information, match customer needs with satisfying product offerings, remind customers of service requirements, know what other products a customer has purchased and so forth. 19

20 What is CRM? For effective CRM 1. Understand the customer and understand them in a timely manner 2. Have two-way conversations with customers 3. Access to customer information across sales, service, management,... across all relevant units of organization 4. Coordinate messages across all contact points 5. Incentive plans based on customer value 6. Organization structured around customers 7. Customer needs anticipated and proactive actions are taken 20

21 CRM process as a hub of learning CRM is another step in concept of marketing. It is a philosopy that tries to satisfy customer needs in return for higher profits. Acquiring information before, during and after a sale is made, becomes a necessity to satisfy customer needs Information technology within a CRM system is a continuous process. 21

22 CRM process as a hub of learning Cultivate and develop interest, trust Recognize needs/wants of defined segment Customize channel outlets, locations Collect, warehouse & analyze data Customize offers, products & services Acquire customer & establish a relationship Customize promotion, information, interactions 22

23 CRM Defined At its simplest, it can be defined as: the systematic use of customer information to attract and retain customers for a long-lasting mutually-beneficial relationship through an on-going dialogue. 23

24 CRM Defined Systemetic use of information Data warehouse Data mining Reporting Attract and Retain customers cross-sell/up-sell Retention focused strategies Contact strategy Cost-efficient acquisition Long-lasting mutually beneficial releationship Customer based metrics Customer evaluation/satisfaction Continious dialogue Real-time response Customer voice in decisions Personalized/timely/customized contacts through multiple channels 24

25 Costs & Benefits of CRM Customers are different and different segment of customers represent different level of profit (revenue and cost) to the corporation. At the same time, they require different level of service and different products. There are potential benefits and costs to - organization - customers 25

26 Costs & Benefits of CRM Benefits Customer Focus Customer retention Share of customer Long-term profitability Costs Infrastructure investments Process change Organization Lifetime value of the relationship Customer Benefits Continuity Contact touch points Personalized service Enhanced satisfaction, safety Costs Privacy Opportunity Exhibit 1.2 Zikmund 26

27 CRM System integrates marketing, analysis & technology... Source Systems Internal & extrenal data Data Warehouse Business Intelligence & Data Mining Execution, Personalization & Automation Message delivery Customer Experiences Extract transform - load Planning/reporting Analysis & Segmentation Modeling & Data mining Customer lists Offer, message customization Business rules & real-time Call center /fax server Web server Production shop Satisfaction metrics Customer feedbacks surveys Tracking differentiation Sales force 27

28 CRM Process Based on several CRM processes, lets try to generalize CRM process that will help us understand why CRM can fail or be succesful. 28

29 CRM Process Customer Strategy Components of CRM process as a continuous loop Track & Learn CRM Customer data Customer Contact (Personalization) Business Case Data Mining - Market Basket Analysis - Clustering/Segmentation - Testing - Descriptive Statistics - Prediction/classification Business Organization 29

30 Business Case Do you need CRM? What questions you should ask? Does your company serve to multiple customers? Do customer service, sales, marketing and management need customer data and do they have access to the same customer data? Does your marketing department targetsegment campaigns? Is the customer needs and wants a priority for your company? Does your company have a high customer retuns rate. Is employee compensation linked to customer satisfaction? Discussion 30

31 Business Case Are you ready for CRM as an organization? What is the information intensity of the organization? Organizational dynamics Organization structure Incentives Interaction between sales, marketing, service, IT, information management departments IT level in the organization Excel Business organization is critical - there is a positive correlation between organization and the CRM success and performance. 31

32 Business Case What is the best approach for your company to implement a CRM system? A Big Bang approach High-level executive sponsorship is required Organization with a customer focus Sophisticated IT level Small increments Do not require high-level executive sponsorship. Divisional/channel leadership. 32

33 Business Organization For a successful CRM implementation, organization needs to: Align objectives and incentives throughout the organization as consistent with a customer centric approach Provide customer managers with authority Recruit and develop the right people with the right skill set Make sure the relationship between employee satisfaction, customer satisfaction, company performance and incentive plan is clearly defined. Have customer-centric metrics 33

34 Business Organization Product-centric, channel-centric or other metrics needs to be converted to customercentric metrics. Traditional Metrics Call duration Customer-centric metrics Retention Average waiting time Product Response rate Customer Customer /Revenue/Profit 34

35 Business Organization With a CRM focus, there needs to be a process and culture change within the organization. Training On the use of customer metrics/scorecard to make decisions Rotations to expose different departments to different methods that deals with the customer Metrics and reporting Customer scorecards linked to business financials and budget Performance Compensation/incentives linked to customer specific metrics 35

36 CRM (customer) Strategy Define business strategy and align CRM strategy with business strategy Understand the customer and define customer segment A company or A household or an individual A telephone number A cookie Or all... 36

37 CRM (customer) Strategy Establish resource requirements Propose methods for learning about customers Creates a starting point for a customer information strategy What information do I need? What information do we currently have? How can I turn information into action? How can we capture information? 37

38 CRM (customer) Strategy Calculate Customer value Identify ways to measure the value of the relationship Revenue: sum of annual revenue per customer Gross profit: revenue-variable cost Customer value score: weighted key performance indicators (such as RFM score) Net present value (NPV): lifetime revenues-lifetime costs discounted to present financial value Use the calculated value to determine customer strategy 38

39 Customer Data Need: Consistently clean, reliable customer level data Continuously accessible by all units within the organization Can efficiently manage large amounts of data. And... Can do all these in a short time period 39

40 Data Mining Data mining/knowledge discovery is defined as the non-trivial process of identifying valid Novel (previously unknown) potentially useful and ultimately understandable patterns in data. Source: Advances in Knowledge Discovery and Data Mining, Fayyad, Piatetsky- Shapiro, Smyth, and Uthurusamy, (Chapter 1), AAAI/MIT Press

41 Data Mining High utility Decisions & Actions Knowledge Information Data Low utility 41

42 Data Mining Many techniques can be used depending on the objective. Market basket analysis Patterns in transactional data Rules based on products purchased together Clustering/segmentation Define customer groups. Within groups, customers are similar to each other, between groups, they are not. Clickstream analysis Optimize web content. Which pages are visited most often, and who visits them Randomized experiment Test/control Experimental design 42

43 Data Mining Many techniques can be used depending on the objective. Descriptive Statistics Mean/median/mode Variance/standard deviation Classification/Prediction Regression Logistic regression Decision trees Neural Networks Data reduction methods Principal components Factor analysis 43

44 Data Mining Knowledge obtained from the data needs to be improved continuously. Measure Stage 1: Test (design & execute) Stage 2: Measure (outcome) Stage 3: Analyze (success?) Stage 4: Learn (adjust strategy) Test Continuous Learning Cycle Learn Analyze Why is it important to learn and refine our knowledge? 44

45 Customer Contact Customer contact is the process of designing Channel Personalize the message Hey Nihat, have you seen our commercial on Dear Mr. Solakoglu, executing, and measuring the customer contacts for any activity that requires an interaction between the customer and the company (i.e. marketing campaigns for a new product). 45

46 Customer Contact Campaign execution is an example of customer contact. Objective High level campaign implementation process Targeting Segmentation Optimization Channel Offer Time Personalization Fulfillment 46

47 Track and Learn Tracking customer interactions to learn and adjust customer strategy is an integral part of CRM process. How did we contact the customer? Was it a success (e.g., a marketing campaign)? Was the outcome of the contact different than what we expected or the previous ones? Can we use the result for future contacts? 47

48 Track and Learn When tracking the contact results, we should be careful not to compare apples and oranges not to confuse cause versus correlation to look for the right definition of success for the relevant audience Remember tracking and analyzing results are linked to data mining efforts and can use a common infrastructure. Results tracking and customer data should be accessible at the same data. 48