customer relationship management (crm)sharif.edu/~albadvi/crmses1.pdfcustomer relationship...

Customer Relationship Customer Relationship Management (CRM) Management (CRM)

Dr A. Dr A. AlbadviAlbadvi

Asst. Prof. Of ITAsst. Prof. Of ITTarbiatTarbiat ModarresModarres UniversityUniversity

Information Technology Engineering Dept.Information Technology Engineering Dept.

Affiliate of Affiliate of SharifSharif University of TechnologyUniversity of Technology

School of Management & EconomicsSchool of Management & Economics

Sept. 2003Sept. 2003

WWW.albadvi.netWWW.albadvi.net

2003 A. 2003 A. AlbadviAlbadvi

Session#1: AgendaSession#1: Agenda

Introduction (Importance of CRM)Introduction (Importance of CRM)

What is CRM? Our definition of CRM What is CRM? Our definition of CRM

and What it is Not? and What it is Not?

Key Benefits of CRMKey Benefits of CRM

CRM ChannelsCRM Channels

CRM market sizeCRM market size

CRM related termsCRM related terms


Meeting Increasing Customer Meeting Increasing Customer NeedsNeeds

MeetMeetCommitmentsCommitments

Reach a Reach a Knowledgeable Knowledgeable

ResourceResource

Know Know My HistoryMy History

Personalized Personalized ServiceService

Source: Source: AvayaAvaya Customer Hierarchy of Customer Hierarchy of NeedsNeedsTMTM

Customer NeedsCustomer Needs

Delivery & FulfillmentDelivery & Fulfillment

Personalized ExperiencePersonalized Experience

Customer Reach & RevenueCustomer Reach & Revenue

Efficiency & Cost SavingsEfficiency & Cost Savings

Enterprise ObjectivesEnterprise Objectives

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QuoteQuote

““There is only one boss: the There is only one boss: the customercustomer……. He can fire everybody in . He can fire everybody in the company, from the Chairman on the company, from the Chairman on down, simply by spending his money down, simply by spending his money somewhere else.somewhere else.””

Sam WaltonSam Walton

Founder, Founder, WalWal MartMart


QuotesQuotes

““All your products are ephemeral. Only your All your products are ephemeral. Only your customers are real.customers are real.””

Don Peppers & Martha Rogers,Don Peppers & Martha Rogers,

““The OneThe One--ToTo--One FutureOne Future””

""Your most unhappy customers are your Your most unhappy customers are your greatest source of learning.greatest source of learning.””

Bill GatesBill Gates

““Business @ the Speed of ThoughtBusiness @ the Speed of Thought””


TOWARDS ONE-TO-ONE MARKETING

“In the 1980s, we saw in every individual a

customer. In the 1990s and beyond, we

ought to see in every customer an individual.”

Jack Welch,CEO, General Electric

QuotesQuotes


Loss of CustomersLoss of Customers

If a company loses If a company loses 10% of its inventory10% of its inventory to to thefttheft

swift action would be taken to stop the lossswift action would be taken to stop the lossButBut

•• If a company loses If a company loses 10% of its customers10% of its customers

–– no one might even notice itno one might even notice it

–– not many things could be done to stop it!not many things could be done to stop it!


The Importance of CRMThe Importance of CRM

80/20 rule80/20 rule

CRM value formula:CRM value formula:

20% 20% of the customers contribute 80% of the revenueof the customers contribute 80% of the revenue

Retention => Reputation => AttractionRetention => Reputation => Attraction


The Development of Lifetime ValueThe Development of Lifetime Value

1999 2000 2001 2002 2003

-2500

-2000

-1500

-1000

-500

0

500

1000

1500

1999

2000

2001

2002

2003

Cost Profit

Costs of servicing customers is reduced over time

Costs of acquiring new customers falls over time


Retaining Customers Equals ProfitabilityRetaining Customers Equals Profitability

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7Year 0

15%

10%

5%

0%

-5%

Cu

stom

er Pro

fit

Individual customerIndividual customer’’s profitability increases each year that the customer is retaines profitability increases each year that the customer is retainedd

Source: PricewaterhouseCoopers research


United States Long Distance Telephone ProfitUnited States Long Distance Telephone ProfitDISTRIBUTION OF

CUSTOMERSESTIMATED PROFIT

DISTRIBUTION

Segment IV

$100+

Segment I

Under $25

Segment II

$25-50

Segment III

$50-100

Do

llars

Sp

ent

Per

Mo

nth

Small percentage of customers accounting for a large percentage of profitsSource: PricewaterhouseCoopers research

14%

22%

24%

40%

53%

36%

10%

1%

36% 89%


What is CRM?What is CRM?

It is a comprehensive set of processes and technologies It is a comprehensive set of processes and technologies for managing the relationships with potential and current for managing the relationships with potential and current customers and business partners across marketing, customers and business partners across marketing, sales, and service regardless of the communication sales, and service regardless of the communication channel.channel.

Brent Brent FreiFrei, President and CEO, Onyx Software, President and CEO, Onyx Software

Customer Relationship Management is the commitment Customer Relationship Management is the commitment of the company to place the customer experience at the of the company to place the customer experience at the center of its priorities and to ensure that incentive center of its priorities and to ensure that incentive systems, processes, and information resources leverage systems, processes, and information resources leverage the relationship by enhancing the experience.the relationship by enhancing the experience.

Peter Keen, Chairman, Keen InnovationsPeter Keen, Chairman, Keen Innovations


What is CRM?What is CRM?

CRM is an enterpriseCRM is an enterprise--wide mindset, dogma, and set of wide mindset, dogma, and set of business processes and policies that are designed to business processes and policies that are designed to acquire, retain, and service customers.acquire, retain, and service customers.

Scott Fletcher, President and COO, Scott Fletcher, President and COO, ePipelineePipeline

CRM is a disciplined business strategy to create and CRM is a disciplined business strategy to create and sustain longsustain long--term, profitable customer relationships.term, profitable customer relationships.

Robert Thompson, President, Front Line Solutions, Inc.Robert Thompson, President, Front Line Solutions, Inc.

Customer Relationship Management (CRM) is a Customer Relationship Management (CRM) is a business strategy to select and manage customers to business strategy to select and manage customers to optimize longoptimize long--term value.term value.

CRMGuru.comCRMGuru.com


A Methodology growing business by effectively managingthe relationship with future, past, and present customers

A Strategy achieving business goals by definingobjectives, implementing a plan, and then measuring results via a system

A System software, hardware, process, and workflow

Marketing, Sales, Support, etc.Automation of Business Processes

A Concept the infrastructure that enables the delineation of and increase in customer value, and the correct means by which to motivate valuable customers to remain loyal

Other Definitions of Other Definitions of CRMCRM


CRM = Customer Relationship CRM = Customer Relationship ManagementManagement

Attracting, developing and maintaining Attracting, developing and maintaining successful customer relationships over timesuccessful customer relationships over timeA strategy for identifying, satisfying, retaining A strategy for identifying, satisfying, retaining and maximizing the value of a companyand maximizing the value of a company’’s best s best customerscustomersAll processes and technologies that All processes and technologies that organizations use to identify, select, acquire, organizations use to identify, select, acquire, develop, retain, and better serve customersdevelop, retain, and better serve customers

Our Definitions of Our Definitions of CRMCRM


360360ºº View of the CustomerView of the Customer

Customer

Department 1

Department 2

Department 3Department 4

Department 5


Interchangeable Terms for CRMInterchangeable Terms for CRM

Customer Relationship ManagementCustomer Relationship Management

Customer Relationship MarketingCustomer Relationship Marketing

Database MarketingDatabase Marketing

MicroMicro--marketingmarketing

1 to 1 Marketing1 to 1 Marketing

Information Driven MarketingInformation Driven Marketing

Technology Enabled MarketingTechnology Enabled Marketing


What CRM is NotWhat CRM is Not

CRM CRM ≠≠ ClickClick stream analysisstream analysisCRM is NOT watching the customer behind his back CRM is NOT watching the customer behind his back and recording what he does in his browserand recording what he does in his browser

CRM CRM ≠≠ ClusteringClusteringCRM is NOT grouping a bunch of customers together CRM is NOT grouping a bunch of customers together and assuming their wants and needs are the same for and assuming their wants and needs are the same for every member of the groupevery member of the group

CRM CRM ≠≠ Statistical Statistical mmodelodelCRM is NOT sCRM is NOT statisticaltatistical mmodelodelss that help tothat help to develop develop marketing strategymarketing strategy

CRM CRM ≠≠ Database applicationsDatabase applicationsCRM is NOT a DBCRM is NOT a DB application application that records all that records all customer informationcustomer information


What CRM is NotWhat CRM is Not

CRM CRM ≠≠ Sales managementSales managementCRM is NOT part of the human resources issues CRM is NOT part of the human resources issues involving salespeopleinvolving salespeople

CRM CRM ≠≠ Contact managementContact managementCRM is NOT managing contacts means of customersCRM is NOT managing contacts means of customers

CRM CRM ≠≠ Audio call recordingAudio call recordingCRM is NOT a tool CRM is NOT a tool for agent assessment for agent assessment which which allowallowss the call centre to provide a better servicethe call centre to provide a better service

CRM CRM ≠≠ Voice over IPVoice over IP ((VoIPVoIP))CRM is NOT a CRM is NOT a technologytechnology to access customers to access customers through different channelsthrough different channels


Why CRM is important?Why CRM is important?

CRM helps to answer some questions:CRM helps to answer some questions:What is the value of a customer?What is the value of a customer?

What is the value of the household?What is the value of the household?

What is the value of a customer's children and What is the value of a customer's children and family over a lifetime?family over a lifetime?

How do we avoid communicating in correctly How do we avoid communicating in correctly with our customers?with our customers?

……

The cost of not doing CRM can be huge.The cost of not doing CRM can be huge.


Achieve a usable

understanding of suspects and

prospects

Measure the effectiveness of

marketing campaigns over

time

Acquire new customers

faster and more efficiently

Better understand and address

customer needs and issues

Relate customer needs and issues to

your businesses products and

services

Improve the customer’s experience by providing self-service help, and by

providing a fast and reliable support process

Understand and monitor a

customer’s buying trends in order topro-actively sell

Customer Retention

Key Benefits of CRMKey Benefits of CRM


CRM Estimated Market SizeCRM Estimated Market Size

Source: Gray and Byun (2001)

(US$ Billion)


CRM Market SizeCRM Market Size

Source: Gray and Byun (2001)


CRM Related TermsCRM Related Terms

PRMPRM (Partner Relationship Management)(Partner Relationship Management)to manage relationships with strategic partners (e.g. to manage relationships with strategic partners (e.g. resellers)resellers)

provide customers with the optimal sales channel provide customers with the optimal sales channel while streamlining the sales processwhile streamlining the sales process

SRMSRM (Supplier (Supplier Relationship ManagementRelationship Management))similar to PRM but focus on actual suppliessimilar to PRM but focus on actual supplies

ERMERM (Employee Relationship Management)(Employee Relationship Management)enables organizations to bridge the gap between enables organizations to bridge the gap between strategic ambitions and operational realitystrategic ambitions and operational reality


CRM Related TermsCRM Related TermseCRMeCRM ((Electronic CRM)Electronic CRM)

CRM that is WebCRM that is Web--basedbasede.g., when you log on to a Amazon.com to see if e.g., when you log on to a Amazon.com to see if theythey’’ve shipped your new booksve shipped your new books

mCRMmCRM (Mobile CRM)(Mobile CRM)provision of data to customers, suppliers, and provision of data to customers, suppliers, and business partners via wireless technologiesbusiness partners via wireless technologies

cCRMcCRM (Collaborative CRM)(Collaborative CRM)denotes situations in which customers can interact denotes situations in which customers can interact directly with the organization, usually through the directly with the organization, usually through the WebWeb

ECRMECRM (Enterprise CRM)(Enterprise CRM)CRM that spans an enterpriseCRM that spans an enterprise--side view of a side view of a customercustomer

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