Chapter 5: Customer Relationship Management Introduction Customer Relationship Management involves managing all aspects of a customer s relationship with an organization to increase customer loyalty and retention and an organization s profitability. Business Benefits of CRM CRM is a business philosophy based on the premise that those organizations that understand the needs of individual customers are best positioned to achieve sustainable competitive advantage in the future CRM Basics An organization can find its most valuable customers by using a formula that industry insiders all RFM RFM: Recency, Frequency, and Monetary Value o How recently a customer purchased items (recency) o How frequently a customer purchases items (Frequency) o How much a customer spends on each purchase (Monetary Value) Once a company has gathered this initial CRM information, it can compile it to identify patterns and create marketing campaigns, sales promotions, and services to increase business The Evolution of CRM There are three phases in the evolution of CRM: (1) reporting, (2) analyzing, and (3) predicting CRM reporting technologies: help organizations identify their customers across other applications CRM analysis technologies help organizations segment their customers into categories such as best and worst customers CRM predicting technologies: help organizations make predictions regarding customer behaviour such as which customers are at risk of leaving Operational and Analytical CRM The two primary components of a CRM strategy are operational CRM and analytical CRM Operational CRM supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers Analytical CRM: supports back-office operations and strategic analysis and includes all sytems that do not deal directly with the customers. The primary difference between operational CRM and analytical CRM is the direct interaction between the organization and its customers Using Information Technology to Drive Operational CRM Marketing and Operational CRM
Three primary operational CRM technologies a marketing department can implement to increase customer satisfaction are o List Generator: They compile customer information from a variety of sources and segment the information for different marketing campaigns. They provide the marketing department with a solid understanding of the type of customer it needs to target for marketing campains o Campaign Management: campaign management systems guide users through marketing campaigns performing such tasks as campaign definition, planning, scheduling, segmentation, and success analysis o Cross-Selling and Up-Selling: Two key sales strategies a marketing campaign can deploy are cross-selling and up-selling Cross-selling: is selling additional products or services to a customer Up-selling: is increasing the value of the sale Sales and Operational CRM Sales departments were the first to begin developing CRM systems Sales Force Automation: is a system that automatically tracks all of the steps in the sales process. SFA products focus on increasing customer satisfaction, building customer relationships, and improving product sales by tracking all sales information The Three primary operational CRM technologies a sales department can implement to increase customer satisfaction are o Sales Management CRM systems o Contact Management CRM systems o Opportunity Management CRM systems Sales Management CRM systems: automate each phase of the sales process, helping individual sales representatives coordinate and organize all of their accounts Contact Management CRM systems: Maintain customer contact information and identifies prospective customers for future sales Opportunity Management CRM systems: target sales opportunities by finding new customers or companies for future sales. They determine potential customers and competitors and define selling efforts including budgets and schedules The primary difference between contact management and opportunity management is that contact management deals with customers and opportunity management deals with new customers Customer Service and Operational CRM Sales and marketing are the primary departments that interact directly with customers before a sale. It is actually more important to build postsale relationships if the company wants to ensure customer loyalty and satisfaction One of the primary reasons a company loses customers is bad customer service experiences
The three primary operational CRM technologies a customer service department can implement to increase customer satisfaction are: 1) Contact centre, 2) Web-based self-service, 3) Call scripting Contact Centre: where customer service representatives answer customer inquiries and respond to problems through a number of different customer touchpoints o Contact centres also track customer call history along with problem resolutions-information critical for providing a comprehensive customer view to the CSR. o Common features included in Contact Centres Automatic call distribution: A phone switch routes inbound calls to available agents Interactive voice response (IVR) : Directs customers to use touch-tone phones or keywords to navigate or provide information Predictive dialing: Automatically dials outbound calls when someone answers, the call is forwarded to an available agent Web-based Self-Service: allow customers to use the Web to find answers to their questions or solutions to their problems Call Scripting: Call scripting systems access organizational databases that track similar issues or questions and automatically generate the details for the CRS who can then relay them to the customer Using Information Technology to Drive Analytical CRM Analytical CRM is primarily used to enhance and support decision making and works by identifying patterns in customer information collected from the various operational CRM systems Personalization: occurs when a Web site can know enough about a person s likes and dislikes that it can fashion offers that are more likely to appeal to that person Analytical CRM can help reveal information about which customers are worth investing in, which should be serviced at an average level, and which should not be invested in at all Analytical CRM relies heavily on data warehousing technologies and business intelligence to glean insights into customer behavior Using CRM along with business intelligence allows organizations to make better, more informed decisions and to reap amazing unforeseen rewards Customer Relationship Management Strategies Customer Relationship Management s Explosive Growth In the context of increasing business competition and mature markets, it is easier than ever for informed and demanding customers to defect since they are just a click away from migrating to an alternative Web-based customer care can actually become the focal point of customer relationship management and provide breakthrough benefits for both the
enterprise and its customers, substantially reducing costs while improving service Customer Relationship Management Success Factors CRM solutions make organizational business processes more intelligent CRM is critical to business success CRM is the key competitive strategy to stay focused on customer needs and to integrate a customer-centric approach throughout an organization Using the analytical capabilities of CRM can help a company anticipate customer needs and proactively serve customers in ways that build relationships, create loyalty, and enhance bottom lines CRM Industry Best Practices o Clearly communicate the CRM strategy o Define Information Needs and Flows o Build an Integrated view of the customer o Implement in Iterations o Scalability for Organizational Growth Current Trends: SRM, PRM, And ERM Supplier Relationship Management Supplier relationship Management focuses on keeping suppliers satisfied by evaluating and categorizing suppliers for different projects, which optimizes supplier selection SRM applications help companies analyze vendors based on a number of key variables including strategy, business goals, prices, and markets Partner Relationship Management Partner relationship management: focuses on keeping vendors satisfied by managing alliance partner and reseller relationships that provide customers with the optimal sales channel PRM s business strategy is to select and manage partners to optimize their long-term value to an organization The Primary Benefits of PRM include o Expanded Market Coverage o Offerings of Specialized products and services o Broadened range of offerings and a more complete solution Employee relationship Management Employee Relationship Management (ERM): Provides employees with a subset of CRM applications available through a Web browser. Many of the ERM applications assist the employee in dealing with customers by providing detailed information on company products, services, and customer orders Future CRM Trends
In the future, CRM applications will continue to change from employee-only tools to tools used by suppliers, partners, and even customers As technology advances, CRM will remain a major strategic focus for companies, particularly in industries whose product is difficult to differentiate. CRM will be an alternative way to pursue a differentiation strategy with a nondifferentiable product CRM applications will continue to adapt wireless capabilities supporting mobile sales and mobile customers CRM suites will also incorporate PRM and SRM modules as enterprises seek to take advantage of these initiatives