CRM Customer Relationship Management

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1 CRM Customer Relationship Management Bianka Parragh, Phd Óbuda University Keleti Károly Faculty of Business and Management Institute of Enterprise Management Approaches of Customer Relationship Management The origins of CRM The rise of CRM The role of CRM Types of CRM 1

2 RE-INVENTING CRM In the late 1990s and early year of the 21th century, CRM was offered up as the next wave of marketing. The tools and techniques that would make traditional marketing obsolete. The automated approaches that would make customer relationships automatic and would enable the marketing organization to shell anything to anyone they chose. CRM was the single solution that would solve every marketing problem. Simply install the software, plug in the customer data and sit back and watch the profils roll in. But it wasn t that simple. It wasn t that easy. And, it simply didn t work that way. Millions of dollars anp pounds and yen and Euros were spent on CRM systems, software and structures but, not enough seemed to come back. The five important things are about the book s approach to CRM 1.Strategic, not more tactics. CRM is a business decision, made by business managers to achieve business goals. So, most of all, this approach to CRM is strategic. 2. Customers, not companies. Payne s approach puts the company and the customer in perspective. If there is no benefits to the customer, there can be no benefit to the company. CRM is reciprocal process. 3. Process, not software. The found is something the organization does, not something the IT group or the marketing department, does or the customer service group does. Process is the key to CRM. 4.Outcomes, not inputs. The focus in on outcomes. What is supposed to happen as a result of the implementation of a CRM approach. 5.Long-term, not short-term, views. Payne describes CRM through a long-term, brand-building and shareholder value view. It allows the organization to focus on customers, not just activities or immediate actions. 2

3 The Benefits of Customer Relationship Management (CRM) 1. Better customer service 2. Increased work capacity 3. More success for your company A strategic framework for CRM Customer Relationship Management, or CRM, is increasingly found at the top of corporate agendas. Companies large and small across variety of sectors are embracing CRM as a major element of corporate strategy. CRM, also more recently called customer management, is a business approach, that seeks to create, develop and enhance relationships with carefully targeted customers in order to improve customer value and corporate profitability and thereby maximize shareholder value. CRM unites the potential of new technologies and new marketing thinking to deliver profitable, long-term relationships. CRM represents a renewed perspective of managing customer relationships based on relationship marketing principles; the key differenc being that today these principles are applied in context of unprecedented technological innovation and market transformation. 3

4 The origins of CRM Transaction Marketing Relationship Marketing In the 1950s: Marketing mix 4P (product, price, promotion, place) Lead to increased demand for the company s offer. In the 1990s: The marketplaces was vastly different from that of the 1950s. (greater customer choice, convinience existed, globalization of markets, new sources of competition innovative business thinking and actions) Philip Kotler Northwestern University Integrated approach: managing the competing interest of customers, staff, shareholders and other stakeholders. The trasition to relationship marketing Emphasis on all market domains and customer relition Relationship marketing Emphasis on customer relation Transactional Marketing Functionally based marketing Cross-functionally based marketing 4

5 The key principles of relationship marketing The three distinguishing characteristics of relationship marketing: An emphasis on retention of profitable customers Maximizing the lifetime value of a customer is a fundamental goal of relationship marketing. Loyal customers represent the goodwill earned by the brand. Loyal customers referring new customers and redicing acquisition costs. An emphasis on multiple markets The model identifies six key groups, or market domains, that contribute to an organization s effectiveness in the marketplace. They are customer markets, influencer (including shareholder) markets, recruitment markets, referrak markets, internal markets, and supplier/alliance markets. An emphasis on a cross-functional approach to marketing To succeed in managing the multiple marketing stakeholders effectively, marketing must be cross-functional. The concept and the philosophy of marketing extend across the business enterprise. Everyone within the business must understand that they perform a role in serving custmers, be they internal or external customers. The rise of CRM The emergence of CRM as a management approach is a consequence of a number of important trends. These include: The shift in business focus from transactional marketing to relationship marketing. The realization that customers are a business asset and not simply a commercial audience. The transition in structuring organizations, on a strategic basis, from functions to processes. The recognition of the benefits of using information proactively rather than solely reactively. The greater utilization of technology in managing and maximizing the value of information. The acceptance of the need for trade-off between delivering and extracting customer value. The development of one-to-one marketing approaches. 5

6 Marketing on the basis of relationships Marketing on the basis of relationships concetrates attention on building customer value in order to retain customers. By building on existing investment, in terms of product development and customer acquisition costs, firms can generate potentially higher revenue and profit at lower cost. Marketing on the basis of transactions, by contrast, involves greater financial outlay and risk. The prominence given to customer service encourages customer contact and customer involvement. As a result, firms can learn more about customers needs and build this knowledge into future product and service delivery. Viewing customers as a business assets The relationships with customers can be selectively managed and further developed to improve customer retention and profitability. CRM stresses indentifying the most profitable customers and building relationships with them that increase the value of this business asset over time. 6

7 Organizing in terms of processes Processoriented firms firms retain their functional excellence in marketing, manufacturing and so on, but recognize that processes are what deliver value to the customer as well as to the supplier. A process is essentially any discret activity, or set of activities, that adds value to an input. In the modern marketplace, customers rarely seek an isolated product; they also want immediate delivery, guaranteed warranty and ongoing service support. The product or service offer is has therefore become multifaceted. Process integration and cross-functional collaboration are defining strengths of CRM. From reactive to proactive use of information Customer service operations and, in particular, call centres, often focus mainly on reactive relationship with customers. BUT Experience has shown, however, that carefully designed proactive customer care initiatives can be much more effective and rewarding. Proactive customer support operation do not wait for complaints to be registered but actively seek to uncover and remedy customer dissatisfaction. 7

8 Deploying IT to maximize the value of information Firm s ability to exploit the value of information relies heavily on the existence of the supportive IT environment. IT components of CRM systems: 1. Data repository (that enables the organization to collect the complete set of information on customers) 2. Applications (that enable value-adding interactions with customers, often across different channels in order to meet their needs. Balancing the value trade-off Creating an appropriate balance beetwen the value delivered to customers and the value received in return and recognizing how this may need to change for different customer segments, is an essential element of CRM. Optimizing the value trade-off means marrying the aforementioned principles of relationship marketing with current marketing trend. 8

9 Developing one-to-one marketing One-to-one marketing is a form of marketing in wich dialoge occurs directly between a company and individual customers or groups of customers with similar needs. Many B2B organizations with large customers customers practise one-to-one marketing through key account management strategies. Smaller customers may be dealt with in a more impersonal way through call centre or mail order strategies. The unique capabilities of the Internet allow marketers to capture the anonymous behaviour necessary to be able to answer the question: What does each customer want? The role of CRM and varying definitions of CRM Organizations often view CRM from a limited perspective or adopt CRM on a fragmented basis. The lack of clarity about CRM is evident in CRM terminology. CRM is an e-commerce application. Data-driven marketing. CRM is a business strategy combined with technology to effectively manage the complete customer life-cycle. A term for methodologies, technologies and e- commerce capabilities used by companies to manage customer relationships. It involves using existing customer information to improve company profitability and customer service. 9

10 What is Customer Relationship Management (CRM)? Customer relationship management (CRM) is a business strategy that uses technology to implement strategies aimed at helping companies acquire new customers, sell more to existing customers, analyze the the effectiveness of marketing activities, and provide better service to increase customer retention. CRM software provides greater access to customer information via a centralized database. CRM? The definition of CRM has a signifficant impact on how CRM is accepted and practised by the entire organization. CRM is not simply an IT solution to the problem of getting the right customer base and growing it. CRM is much more. It involves a profound synthesis of strategic visions, a corporate understanding of the nature of customer within multi-channel environment, the utilization of the appropriate information management and CRM applications and high quality operations, fulfilment and service. CRM emphasizes that managing customer relationships is a complex and ongoing process and a response to and reflection of a rapidly changing marketing environment. 10

11 Relationship marketing, CRM and customer managament a hierarchy Strategic management of relationships with all relevant stakeholders Strategic mamagement of relationships with customers; involving appropriate use of technology Implementation and tactical management of customer interactions RELATIONSHIP MARKETING CUSTOMER RELATIONSHIP MARKETING CUSTOMER MANAGEMENT Types of CRM I. Operational CRM - The automation of business processes with front-office customer contact points. These areas include sales automation, marketing automation and customer service automation. Operational CRM has been a major area of enterprise expenditure as companies develop call centres or adopt sales force automation systems. Analytical CRM This involves the capture, storage, organization, analysis, interpretation and use of data created from the operational side of the business. Collaborative CRM This involves the use of collaborative services and infrastructure to make interaction between a company and its multiple channels possible. This enables interaction between customers, the enterprise and its employees. 11

12 Types of CRM II. Together, the three components of CRM support and feed into each other. Succesful CRM, which results in a superior customer experience, requires integration of all three of these component parts. Collaborative CRM enables customers to contact the enterprise through a range of different channels. Operational CRM facilitates the customer contacts with the organization and subsequent processing and fulfilment of their requirements. Analytical CRM enables the right customers to be targeted with appropriateoffers and permits personalization and the one-to-one marketing to be undertaken throughsuperior customer knowledge. 12