EXPLOITING CRM CONNECTING WITH CUSTOMERS A Review RIZWANUL BARI SYNOPSIS: Increasingly demanding customers and intense competition require that strategies associated with customers become an integral and high profile component of all corporate strategy. Patrick Molineux (the author of the book) helps readers think Customer Relationship Management (CRM) as a part of overall corporate strategy - not as a discrete technology strategy or as a stand-alone marketing tool. The book provides guidance on how customer-related ideas, tools and technologies can be used in the real world to help create shareholder value. BRIEF OVERVIEW: Customer service can significantly impact customer retention. Selling to existing customers is cheaper than acquiring new customers. More precise marketing can reduce costs and dramatically improve profits. Customer loyalty is priceless. Relying upon customer inertia to retain customer is increasingly risky. Competition is so fierce these days that mass marketing techniques are inadequate. Meanwhile, new technologies allow organizations to create and store an unparalleled wealth of customer data and enabled them to understand customers needs at an individual level. Based on this, in 80s companies began to understand how to connect with individual customers rather than with a market. The planned extraction of profit from individual customers by delivering value to them is the essence of CRM and the subject of the book. The book is organized into six major parts, each of which contains multiple chapters. Part 1 (Understanding CRM) provides the foundation of the subject. The author describes the background of CRM and explains the ideas and technologies that created it. This part examines some key relevant themes, such as: customer value, loyalty, customer centricity etc. In Part 2 (Defining the CRM Agenda), the author mainly describes how an organization can shape its CRM agenda. This part describes two frameworks that can help organizations to identify the most effective customer management agenda. The author introduces the concepts of value chain, value shop, value network, value pool etc. He explains how value chains benefit from
deploying CRM to sell and service more products more effectively. He also describes in this part how hospitals, insurance brokers, consulting firms etc. can utilize CRM primarily as a knowledge management tool. The author explains how the focus of CRM for banks, telecommunication & utility companies is different and is focused upon convenience, experience, and service, rather than products. He also explains how CRM becomes a tool of capacity and yield management for many companies in airlines, cinemas and hotels. The companies in these market segments create value not by mediating between customers, but by leasing use of infrastructure to customers. Part 3 (Laying the Foundations) of the book introduces the components that should form the foundation of a clear CRM strategy for its successful implementation. The author describes how to construct a value proposition unique to the organization in order to form a springboard for improving CRM. Nevertheless, a value proposition is not sufficient justification for investment in CRM. CRM business cases are rarely constructed with business rigor. The author suggests how to construct a financially rigorous business case based on accepted financial theory. This part also examines why CRM initiatives fail to live up to the expectations. The author mentions that, it is widely reported that CRM fails more often than it succeeds. At the end of this part, the author examines segmentation within corporate strategy and the role of strategic customer segmentation. He suggests how, by deconstructing their customer base, companies can build a customer strategy that differentiates their diverse customer base. In the Part 4 (Creating the Customer- Centric Organization), the author looks at how an organization needs to change in order to deliver the promise made by its brand to its customers. The author defined brand as the construction and delivery of a customer promise. It explains how the brands must be driven deep into the organization to allow the firm to deliver its promise. This part also introduces a framework describing seven drivers of change. It states that implementing a program to change an organization s structure and culture is hard usually harder than implementing a new technology. Whereas brand-driven CRM aims to enable a company to establish a vision of the experience its customers should receive, the drivers of change framework considers how to reengineer the organization to achieve this goal. Part 5 (Delivering CRM) of the book describes the benefits and challenges of the technologies and projects that enable CRM to be divided into six delivery areas, although it is hard to put boundaries around what constitutes CRM as its potential scope is almost limitless. The author mentions that a single customer view is often the foundation and starting point of CRM. He suggests that there is more to a single customer view than meets the eye. He examines the challenges and issues associated with consolidating customer knowledge. He also focuses on customer analysis. He emphasizes the need to improve the effectiveness of customer marketing. This part of the book looks at techniques, tools and technologies to improve marketing or to introduce new marketing media. The author also explores in this part the challenges of a multi-channel and multimedia world. Increasingly, companies are operating through more media and channels. BUSI 5401: Current Topics in Business Information Systems 2
The author also examines the challenges of customers primarily managing themselves through selfservice channels. He tries to answer the question How can you build a self-care strategy that works? Selfservice was one of the driving forces behind massive investment in Internet sites during the dot com boom and bust. The significantly lower transaction costs of selling and servicing customers over the web triggered an avalanche of investment; then reality struck. This also answers the question What is sales automation and how can an organization make most effective use of it? CRM was introduced to many companies through the sales automation. If better marketing was one driver behind CRM, selling more is equally important. In the final part of the book, Part 6 (To Infinity and Beyond), the author looks at three technology-enabled trends that are expected to alter the customer landscape by 2010. He states: by 2010, digital devices that do not yet exist will offer services that we do not yet provide in ways that we cannot yet foresee. They will use bandwidth which is to WAP what a Ferrari is to a horse and cart. By 2010, hundreds of millions of people will never have experienced life without the Internet. This new generation will be buying your products or services or someone else s. This part is a wake up call to the Internet generation: when will it hit your business? The author describes how customer managed relationship will define the CRM landscape by compelling, but also enabling firms to mass customize. The customer is in control. This is more than a cliché. As the B2B and B2C landscapes move closer to the nirvana of perfect markets, customers are increasingly in control of how, when and why they connect with whom. This introduces a new future in which firms must respond rapidly to customers, rather than stalk them with ever increasing precision. Technology is enabling this transformation. RELEVANCE TO THE COURSE: All factors considered, the architectural imperative for CRM is to: (i) capture a large volume of data and transform it into analysis formats to support enterprise-wide analytical requirement; (ii) deploy knowledge an intuitive, integrated system; rapidly enables processing of the intelligence gathered from analytical environment; (iii) calculate metrics by the deployed business rules; identifies pockets of activity by a consumer in real time, enabling truly strategic targeting. Once operational, communications within the organization allow different parts of the organization to share knowledge with one another. For instance, a salesperson might retrieve a historical telephone conversation between one customer and a service representative and then develop a sales pitch based on that particular customer s interests. Another example would be a customer service representative who creates a notice to postpone the invoice for a customer due to an error to the billing cycle. The billing department must then recognize the notice and process the changes made by the customer service representative. Therefore, it is clear that the subject matter of the book covers two main themes of the course: Knowledge Management and Business Intelligence. IMPORTANT MESSAGES: Throughout the book, the author provided some important messages for the readers. BUSI 5401: Current Topics in Business Information Systems 3
The author asks the respective parties to make acquisition of customer data a priority. He asks businesses to consider how they can customize products for customers and how precise that customization can be. The author suggests businesses to focus customer marketing not upon cross-sell, but upon expanding the scope which their network mediates for the customer. He asks to put emphasize the rewards that customers will receive for cross-buying, and that the more they allow the network to mediate for them, the more benefits they will receive. The author also recommends changing the focus of business operational CRM activities to facilitate the customer s use of the network. Understand how customers want to behave within the network and then construct and charge for the infrastructure appropriately. The author asks businesses Do you identify your best customers? If not, how can you do so? He asks businesses to calculate the differential in customer profitability between their most loyal and occasional customers and consider whether or not the creation of a loyalty scheme would be worthwhile. The author states that conventional branding approaches cannot define new form of customer value or effectively integrate and direct business processes to value adding activities. Unique Organization Value Proposition (UOVP) integrates the promise and delivery of value for a customer-centric company. The UOVP itself is the result of a mix of the key drivers of customer value: reputation, performance, product & customer portfolio and networks. The author asks businesses to consider building the UOVP for their respective organization to understand the promise they make to customers. The author also says that it is not sustainable merely to make a compelling promise; that promise needs to be delivered consistently over time. The author also mentions about the importance of CRM business cases. He thinks that the CRM business case is a major strategic document and not merely a financial forecasting exercise. CRM represents a fundamental change and should be evaluated as a strategic, risky and therefore, contingent investment in an unknown future. In any and every CRM initiative, the author suggests businesses to make someone responsible for organizational change. Never embark on any CRM project, however insignificant, without putting a structure in place to address the organizational implications. The author suggests businesses to understand how well they operate across multiple channels and multiple media from both the customers perspective (right offer, right time, right place) and firm s perspective (right medium, right price, right outcome). The author asks to design the sales automation strategy as an integral component of CRM Strategy the emphasis of many sales automation strategies is wrong. The strategy should not be to automate sales people, but to deploy automation to reduce the burden of unproductive activities. He also suggests making automation an organizational and cultural change initiative, not a technology initiative. He asks businesses to involve BUSI 5401: Current Topics in Business Information Systems 4
salespeople in the selection process, and run a pilot. FINAL NOTES: This book views corporate strategy through the lens of the organization s connections with its customers. I recommend the book for individuals who want to have an in-depth look about CRM or who wants to understand how to integrate customer strategy with corporate strategy; the book is also recommended for individuals for whom CRM is already a strategic corporate focus. DETAILS OF THE BOOK: Title: Exploiting CRM Connecting with customers. Author: Patrick Molineux. Publisher: Hodder & Stoughton, London, UK & Management Consulting Association, London, UK. ISBN: 0 340 858036. Pages: 182. BUSI 5401: Current Topics in Business Information Systems 5