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MODULE 8

MODULE 8

CRM & Online Decision Making (3 Hours)

A) Customer Relationship Management

Meaning & Significance of CRM, Types of CRM (Operational, Collaborative,Analytical), Strategies for building relationship marketing, CRM Vs Customerretention, CRM Process-Benefits, CRM process formarketing organizations, brand switching behavior,e-CRM, Meaning, Importance of e-CRM, Difference Between CRM & e-CRMB) On-line Decision Making: Meaning & StepsCase studies in Indian context only

CRM & Online Decision Making

A) Customer Relationship ManagementMeaning & Significance of CRM, Types of CRM (Operational,Collaborative, Analytical), Strategies for building relationship marketing,CRM Vs Customer retention, CRM Process-Benefits, CRM process formarketing organisations, brand switching behaviour,e-CRM, Meaning, Importance of e-CRM, Difference Between CRM & e-CRM

B) On-line Decision Making: Meaning & StepsCase studies in Indian context only

Customer relationship management

Customer relationship management (CRM) is a term applied to processesimplemented by a company to handle its contact with its customers. CRM softwareis used to support these processes, storing information on current and prospectivecustomers. Information in the system can be accessed and entered by employees in

different departments, such as sales, marketing, customer service, training,professional development, performance management, human resourcedevelopment, and compensation. Details on any customer contacts can also bestored in the system. The rationale behind this approach is to improve services

provided directly to customers and to use the information in the system for targetedmarketing and sales purposes.

Mahesh Gowda S DEPT OF MBA, SJ B IT, Bangalore.
http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Customer_servicehttp://en.wikipedia.org/wiki/Traininghttp://en.wikipedia.org/wiki/Professional_developmenthttp://en.wikipedia.org/wiki/Human_resource_developmenthttp://en.wikipedia.org/wiki/Human_resource_developmenthttp://en.wikipedia.org/wiki/Remunerationhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Customer_servicehttp://en.wikipedia.org/wiki/Traininghttp://en.wikipedia.org/wiki/Professional_developmenthttp://en.wikipedia.org/wiki/Human_resource_developmenthttp://en.wikipedia.org/wiki/Human_resource_developmenthttp://en.wikipedia.org/wiki/Remunerationhttp://en.wikipedia.org/wiki/Sales

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While the term is generally used to refer to a software-based approach to handlingcustomer relationships, most CRM software vendors stress that a successful CRMstrategy requires a holistic approach. CRM initiatives often fail becauseimplementation was limited to software installation without providing theappropriate motivations for employees to learn, provide input, and take fulladvantage of the information systems.[1]

Overview

From the outside, customers interacting with a company perceive the business as asingle entity, despite often interacting with a variety of employees in different roles

and departments. CRM is a combination of policies, processes, and strategiesimplemented by a company that unify its customer interaction and provides amechanism for tracking customer information.

CRM includes many aspects which relate directly to one another:

Front office operations Direct interaction with customers, e.g. face to facemeetings, phone calls, e-mail, online services etc.

Back office operations Operations that ultimately affect the activities ofthe front office (e.g., billing, maintenance, planning, marketing, advertising,

finance, manufacturing, etc.) Business relationships Interaction with other companies and partners,

such as suppliers/vendors and retail outlets/distributors, industry networks(lobbying groups, trade associations). This external network supports frontand back office activities.

Analysis Key CRM data can be analyzed in order to plan target-marketing campaigns, conceive business strategies, and judge the success ofCRM activities (e.g., market share, number and types of customers, revenue,

profitability).

Types/Variations of CRM

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There are several different approaches to CRM, with different software packagesfocusing on different aspects. In general, Campaign Management and Sales ForceAutomation form the core of the system (with SFA being the most popular)

Operational CRM

Operational CRM provides support to "front office" business processes, e.g. tosales, marketing and service staff. Interactions with customers are generally storedin customers' contact histories, and staff can retrieve customer information asnecessary.

The contact history provides staff members with immediate access to importantinformation on the customer (products owned, prior support calls etc.), eliminatingthe need to individually obtain this information directly from the customer.

Operational CRM processes customer data for a variety of purposes:

'Managing Campaigns' Enterprise Marketing Automation Sales Force Automation

Sales Force Automation (SFA)

Sales Force Automation automates sales force-related activities such as:

Scheduling sales calls or mailings Tracking responses Generating reports

Analytical CRM

Analytical CRM analyzes customer data for a variety of purposes:

Designing and executing targeted marketing campaigns Designing and executing campaigns, e.g. customer acquisition,cross-selling,

up-selling Analysing customer behavior in order to make decisions relating to products

and services (e.g. pricing, product development)

http://en.wikipedia.org/wiki/Front_officehttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/w/index.php?title=Enterprise_Marketing_Automation&action=edit&redlink=1http://en.wikipedia.org/wiki/Sales_Force_Automationhttp://en.wikipedia.org/wiki/Cross-sellinghttp://en.wikipedia.org/wiki/Cross-sellinghttp://en.wikipedia.org/wiki/Up-sellinghttp://en.wikipedia.org/wiki/Front_officehttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/w/index.php?title=Enterprise_Marketing_Automation&action=edit&redlink=1http://en.wikipedia.org/wiki/Sales_Force_Automationhttp://en.wikipedia.org/wiki/Cross-sellinghttp://en.wikipedia.org/wiki/Up-selling

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Management decisions (e.g. financial forecasting and customer profitabilityanalysis)

Analytical CRM generally makes heavy use ofdata mining.

Sales Intelligence CRM

Sales Intelligence CRM is similar to Analytical CRM, but is intended as a moredirect sales tool. Features include alerts sent to sales staff regarding:

Cross-selling/Up-selling/Switch-selling opportunities Customer drift Sales performance Customer trends Customer margins

Campaign Management

Campaign management combines elements of Operational and Analytical CRM.Campaign management functions include:

Target groups formed from the client base according to selected criteria Sending campaign-related material (e.g. on special offers) to selected

recipients using various channels (e.g. e-mail, telephone, post)

Tracking, storing, and analyzing campaign statistics, including trackingresponses and analyzing trends

Collaborative CRM

Collaborative CRM covers aspects of a company's dealings with customers that arehandled by various departments within a company, such as sales, technical supportand marketing. Staff members within the departments can share informationcollected when interacting with customers. For example, feedback received bycustomer support agents can provide other staff members with information on the

services and features requested by customers. Collaborative CRM's ultimate goal isto use information collected by all departments to improve the quality of services

provided by the company.

Geographic CRM

http://en.wikipedia.org/w/index.php?title=Management_decisions&action=edit&redlink=1http://en.wikipedia.org/wiki/Data_mininghttp://en.wikipedia.org/wiki/Data_mininghttp://en.wikipedia.org/w/index.php?title=Campaign_management&action=edit&redlink=1http://en.wikipedia.org/wiki/Technical_supporthttp://en.wikipedia.org/w/index.php?title=Management_decisions&action=edit&redlink=1http://en.wikipedia.org/wiki/Data_mininghttp://en.wikipedia.org/w/index.php?title=Campaign_management&action=edit&redlink=1http://en.wikipedia.org/wiki/Technical_support

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Geographic CRM (GCRM) combines geographic information system andtraditional CRM. Geographic data can be analyzed to provide a snapshot of

potential customers in a region or to plan routes for customer visits.

Strategy

Several commercial CRM software packages are available, and they vary in theirapproach to CRM. However, as mentioned above, CRM is not just a technology

but rather a comprehensive, customer-centric approach to an organization'sphilosophy of dealing with its customers. This includes policies and processes,front-of-house customerservice, employee training, marketing, systems andinformation management. Hence, it is important that any CRM implementationconsiderations stretch beyond technology toward the broader organizationalrequirements.

The objectives of a CRM strategy must consider a companys specific situationand its customers' needs and expectations. Information gained through CRMinitiatives can support the development of marketing strategy by developing theorganization's knowledge in areas such as identifying customer segments,improving customer retention, improving product offerings (by betterunderstanding customer needs), and by identifying the organization's most

profitable customers.

CRM strategies can vary in size, complexity, and scope. Some companies consider

a CRM strategy only to focus on the management of a team of salespeople.However, other CRM strategies can cover customer interaction across the entireorganization. Many commercial CRM software packages provide features thatserve the sales, marketing, event management, project management, and financeindustries.

Customer Retention

Customer Retention marketing is a tactically-driven approach based on customerbehavior. It's the core activity going on behind the scenes in Relationship

Marketing, Loyalty Marketing, Database Marketing, Permission Marketing, and soforth. Heres the basic philosophy of a retention-oriented marketer:

1. Past and Current customer behavior is the best predictor of Future

customer behavior. Think about it. In general, it is more often true than not true,

http://en.wikipedia.org/wiki/Customerhttp://www.jimnovo.com/Relationship-Marketing-more.htmhttp://www.jimnovo.com/Relationship-Marketing-more.htmhttp://www.jimnovo.com/Customer-Loyalty-more.htmhttp://www.jimnovo.com/programs.htm#datahttp://www.jimnovo.com/programs.htm#permissionhttp://en.wikipedia.org/wiki/Customerhttp://www.jimnovo.com/Relationship-Marketing-more.htmhttp://www.jimnovo.com/Relationship-Marketing-more.htmhttp://www.jimnovo.com/Customer-Loyalty-more.htmhttp://www.jimnovo.com/programs.htm#datahttp://www.jimnovo.com/programs.htm#permission

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and when it comes to action-oriented activities like making purchases and visitingweb sites, the concept really shines through.

We are talking about actual behavior here, not implied behavior. Being a 35-year-old woman is not a behavior; its a demographic characteristic. Take these twogroups of potential buyers who surf the Net:

People who are a perfect demographic match for your site, but have nevermade a purchase online anywhere

People who are outside the core demographics for your site, but havepurchased repeatedly online at many different web sites

If you sent a 20% off promotion to each group, asking them to visit and make afirst purchase, response would be higher from the buyers (second bullet above)than the demographically targeted group (first bullet above). This effect has beendemonstrated for years with many types of Direct Marketing. It works becauseactual behavior is better at predicting future behavior than demographiccharacteristics are. You can tell whether a customer is about to defect or not bywatching their behavior; once you can predict defection, you have a shot atretaining the customer by taking action.

2. Active customers are happy (retained) customers; and they like to "win."They like to feel they are in control and smart about choices they make, and they

like to feel good about their behavior. Marketers take advantage of this by offeringpromotions of various kinds to get consumers to engage in a behavior and feelgood about doing it.

These promotions range from discounts and sweepstakes to loyalty programs andhigher concept approaches such as thank-you notes and birthday cards.Promotions encourage behavior. If you want your customers to do something, youhave to do something for them, and if its something that makes them feel good(like they are winning the consumer game) then theyre more likely to do it.

Retaining customers means keeping them active with you. If you don't, they willslip away and eventually no longer be customers. Promotions encourage thisinteraction of customers with your company, even if you are just sending out anewsletter or birthday card.

The truth is, almost all customers will leave you eventually. The trick is to keepthem active and happy as long as possible, and to make money doing it.


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3. Retention Marketing is all about:

Action Reaction Feedback Repeat.

Marketing is a conversation, as the ClueTrain Manifesto and Permission Marketinghave pointed out. Marketing with customer data is a highly evolved and valuableconversation, but it has to be back and forth between the marketer and thecustomer, and you have to LISTEN to what the customer is saying to you.

For example, let's say you look at some average customer behavior. You look atevery customer who has made at least 2 purchases, and you calculate the numberof days between the first and second purchases. This number is called "latency" -the number of days between two customer events. Perhaps you find it to be 30days.

Now, look at your One-Time buyers. If a customer has not made a secondpurchase by 30 days after the first purchase, the customer is not acting like an"average" multi-purchase customer. The customer data is telling you something iswrong, and you should react to it with a promotion. This is an example of the dataspeaking for the customer; you have to learn how to listen.

This site and the Drilling Down bookare all about how to discover, manage, andlisten to customer data. The data is speaking for the customer, telling you by itsvery existence (or non-existence) there has been an action (or non-action) waitingfor a reaction.

4. Retention Marketing requires allocating marketing resources. You have torealize some marketing activities and customers will generate higher profits thanothers. You can keep your budget flat or shrink it while increasing sales and

profits if you continuously allocate more of the budget to highly profitableactivities and away from lower profit activities. This doesn't mean you should"get rid" of some customers or treat them poorly.

It means when you have a choice, as you frequently do in marketing, instead ofspending the same amount of money on every customer, you spend more on some

and less on others. It takes money to make money. Unless you get a huge increasein your budget, where will the money come from?

For example, let's say you have 1,000 customers, and you have an annual budget of$1,000. You spend $1 on each customer each year, and for that $1, you get back$1.10 in profits. That's an ROI of 10%; you got back $1,100 for spending $1,000.

http://www.cluetrain.com/http://www.permission.com/http://www.booklocker.com/p/books/224.html?s=bot&k=gcusrethttp://www.jimnovo.com/ROI.htmhttp://www.cluetrain.com/http://www.permission.com/http://www.booklocker.com/p/books/224.html?s=bot&k=gcusrethttp://www.jimnovo.com/ROI.htm

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Now, what if you knew spending $2 each year on a certain 50% of customerswould bring back $8 in profits. That's a 400% ROI. Where do you get the extra$1? You take it away from the other 50% of customers. You spend the same$1,000 total and you make back 500 (half the customers) x $8 = $4,000.

If you always migrate and reallocate marketing dollars towards higher ROI efforts,profits will grow even as the marketing budget stays flat.

You have to develop a way to allocate resources to the most profitable promotions,deliver them to the right customer at the right time, and not waste time and moneyon unprofitable promotions and customers. This is accomplished by using the datacustomers create through their interactions with you to build simple models orrules to follow. These models are yourlistening system, like the "30 day latency"model above. They allow the data to speak to you about the customer.

This site and the Drilling Down bookare about teaching you how to build and usethese models yourselfin 30 minutes with an Excel spreadsheet. If you want toincrease sales while reducing the costs ofmarketing to customers, you have toget this book.

From Relationship Marketing to Customer Relationship Marketing

The concept of relationship marketing was first coined by Berry in 1983. Heconsidered it to consist of attracting, maintaining and enhancing customer

relationships within organizations. In the years that followed, companies wereengaging more and more in a meaningful dialogue with individual customers. Indoing so, new organizational forms as well as technologies were used, eventuallyresulting in what we know as Customer Relationship Marketing (CRM). The maindifference between RM and CRM is that the first does not acknowledge the use oftechnology, where the latter uses Information Technology (IT) in implementingRM strategies.

ECRM

e-CRM Electronic CRM concerns all forms of managing relationships withcustomers making use ofInformation Technology (IT).

The essence of CRM

http://www.jimnovo.com/Customer-Retention-more.htm#latencyhttp://www.booklocker.com/p/books/224.html?s=bot&k=gcusrethttp://en.wikipedia.org/wiki/Organizationshttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Information_technologyhttp://www.jimnovo.com/Customer-Retention-more.htm#latencyhttp://www.booklocker.com/p/books/224.html?s=bot&k=gcusrethttp://en.wikipedia.org/wiki/Organizationshttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Information_technology

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The exact meaning ofCRM is still subject of heavy discussions. However, theoverall goal can be seen as effectively managing differentiated relationships withall customers and communicating with them on an individual basis. Underlyingthought is that companies realize that they can supercharge profits byacknowledging that different groups of customers vary widely in their behavior,desires, and responsiveness to marketing.

eCRM

As the internet is becoming more and more important in business life, manycompanies consider it as an opportunity to reduce customer-service costs, tightencustomer relationships and most important, further personalize marketing messagesand enable mass customization. Together with the creation ofSales ForceAutomation (SFA), where electronic methods where used to gather data and

analyze customer information, the trend of the upcoming Internet can be seen asthe foundation of what we know as eCRM today. We can define eCRM asactivities to manage customer relationships by using the Internet, web browsers orother electronic touch points. The challenge hereby is to offercommunication andinformation on the right topic, in the right amount, and at the right time that fits thecustomers specific needs.

Channels through which companies can communicate with its customers, aregrowing by the day, and as a result, getting their time and attention has turned intoa major challenge. One of the reasons eCRM is so popular nowadays is that digital

channels can create unique and positive experiences not just transactions forcustomers. An extreme, but ever growing in popularism, example of the creation ofexperiences in order to establish customer service is the use of Virtual Worlds,such as Second Life. Through this so-called vCRM, companies are able to createsynergies between virtual and physical channels and reaching a very wideconsumer base. However, given the newness of the technology, most companiesare still struggling to identify effective entries in Virtual Worlds. Its highlyinteractive character, which allows companies to respond directly to anycustomers requests or problems, is another feature of eCRM that helps companies

establish and sustain long-term customer relationships.

Furthermore, Information Technology has helped companies to even furtherdifferentiate between customers and address a personal message or service. Someexamples of tools used in eCRM:

http://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Mass_customizationhttp://en.wikipedia.org/wiki/Sales_Force_Automationhttp://en.wikipedia.org/wiki/Sales_Force_Automationhttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Communicationhttp://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Second_lifehttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Mass_customizationhttp://en.wikipedia.org/wiki/Sales_Force_Automationhttp://en.wikipedia.org/wiki/Sales_Force_Automationhttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Communicationhttp://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Second_lifehttp://en.wikipedia.org/wiki/Information_technology

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Personalized Web Pages where customers are recognized and theirpreferences are shown.

Customized products or services (Dell).

CRM programs should be directed towards customer value that competitors cannotmatch. However, in a world where almost every company is connected to theInternet, e-CRM has become a requirement for survival, not just a competitiveadvantage.

Different levels of e-CRM

In defining the scope of e-CRM, three different levels can be distinguished:

Foundational services:

This includes the minimum necessary services such as web site effectiveness andresponsiveness as well as order fulfillment.

Customer-centered services:

These services include order tracking, product configuration and customization aswell as security/trust.

Value-added services:

These are extra services such as online auctions and online training and education.

Self-services are becoming increasingly important in CRM activities. The rise ofthe Internet and eCRM has boosted the options for self-service activities. A criticalsuccess factor is the integration of such activities into traditional channels. Anexample was Fords plan to sell cars directly to customers via its Web Site, which

provoked an outcry among its dealers network.CRM activities are mainly of twodifferent types. Reactive service is where the customer has a problem and contacts

the company. Proactive service is where the manager has decided not to wait forthe customer to contact the firm, but to be aggressive a contact the customerhimself in order to establish a dialogue and solve problems.

Mobile CRM

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One subset of Electronic CRM is Mobile CRM (mCRM). This is defined asservices that aim at nurturing customer relationships, acquiring or maintainingcustomers, support marketing, sales or services processes, and use wirelessnetworks as the medium of delivery to the customers. However, sincecommunications is the central aspect of customer relations activities, many opt forthe following definition of mCRM: communication, either one-way or interactive,which is related to sales, marketing and customer service activities conductedthrough mobile medium for the purpose of building and maintaining customerrelationships between a company and its customer(s).

eCRM allows customers to access company services from more and more places,since the Internet access points are increasing by the day. mCRM however, takesthis one step further and allows customers or managers to access the systems forinstance from a mobile phone orPDA with internet access, resulting in high

flexibility. An example of a company that implemented mCRM is Finnair, whomade it possible for their customers to check in for their flights by SMS. SincemCRM is not able to provide a complete range of customer relationship activities itshould be integrated in the complete CRM system.

CRM Process:

http://en.wikipedia.org/wiki/Communicationhttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/PDAhttp://en.wikipedia.org/wiki/Short_message_servicehttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Communicationhttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/PDAhttp://en.wikipedia.org/wiki/Short_message_servicehttp://en.wikipedia.org/wiki/Customer_relationship_management

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Implementing and integrating CRM solutions

Several CRM software packages exist that can help companies in deploying CRMactivities. Besides choosing one of these packages, companies can also choose todesign and build their own solutions. In order to implement CRM in an effectiveway, one needs to consider to following factors:

Create a customer-based culture in the organization. Adopt customer-based managers to assess satisfaction. Develop an end-to-end process to serve customers. Recommend questions to be asked to help a customer solve a problem. Track all aspects of selling to customers, as well as prospects.

Furthermore, CRM solutions are more effective once they are being implemented

in other information systems used by the company. Examples are TransactionProcessing System (TPS) to process data real-time, which can than be send to thesales and finance departments in order to recalculate inventory and financial

position quick and accurate. Once this information is transferred back to the CRMsoftware and services it could prevent customers from placing an order in the beliefthat an item is in stock while it is not.

Failures

Designing, creating and implementing IT projects has always been risky. Not only

because of the amount of money that is involved, but also because of the highchances of failure. However, a positive trend can be seen, indicating that CRMfailures dropped from a failure rate of 80% in 1998, to about 40% in 2003. Someof the major issues relating to CRM failure are the following:

Difficulty in measuring and valuing intangible benefits. Failure to identify and focus on specific business problems. Lack of active senior management sponsorship. Poor user acceptance. Trying to automate a poorly defined process.

http://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Transaction_Processing_Systemhttp://en.wikipedia.org/wiki/Transaction_Processing_Systemhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Transaction_Processing_Systemhttp://en.wikipedia.org/wiki/Transaction_Processing_Systemhttp://en.wikipedia.org/wiki/Customer_relationship_management