Customer Relationship Management

Managing all aspects of a customer’s relationship with an organization with the goal of increasing customer loyalty and retention and an organization's profitability

Chapter 11 pages 147-155Business Plug-In B9 pages 348-362

Customer Relationship Management (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 a sustainable competitive advantage.

– A customer first approach that revolves around understanding who your customers are

– Shift from product focus to customer focus• Product: sell one product to as many customers as possible• Customer: sell one customer as many products as possible

CRM Philosophy• What are companies trying to do through CRM? – Provide better customer service– Make call centers more efficient– Cross sell products more effectively– Help sales staff close deals faster– Simplify marketing and sales processes– Discover new customers– Increase customer revenues

• For many companies, approximately 20% of their overall IT budget is devoted to CRM.

Using CRM, companies are interested in finding out:

• Who are the best customers?• Which products are the most profitable?

• Companies are using CRM technologies to figure out:– How recently a customer purchased items (recency)– How frequently a customer purchases items

(frequency)– How much a customer spends on each purchase

(monetary value)

Phases of CRM

• What are we trying to do with CRM?– Know who our customers are?– Analyze the customer to understand what the

customer is doing.– Find new customers just like our existing customers

• Operational CRM supports front-office systemsthat deal directly with customers

• Analytical CRM doesn’t directly deal with customers. It is used to support decision making and data analysis by identifying patterns to help the organization understand its customers.

Types of CRM

Analytical CRM• Analytical CRM relies heavily on data warehousing technologies and

business intelligence to glean insights into customer behavior

• These systems quickly aggregate, analyze, and disseminate customer information throughout an organization

• Personalization – when a website knows enough about a person’s likes and dislikes that it can fashion offers that are more likely to appeal to that person

• Determine the value of an individual customer– Who should we invest in?– Who should we service at an average level?– Who should we not invest in at all?

– Since we can’t focus on all of our customers, who should be focus on ? Where can we get the biggest bang for the buck?

• Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers (marketing, customer service, sales, billing, etc.)

• Analytical CRM – supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers (accounting, finance, human resources, data warehouses)

Types of CRM

OPERATIONAL CRM1. List generator – compiles customer information

from a variety of sources and then segments that information by filtering and sorting for different marketing campaigns

2. Cross-selling and up-selling– Cross-selling – selling additional products or services– Up-selling – increasing the value of the sale

3. Sales force automation software is used to automatically tracks all of the steps in the sales process– Sales reps had too much info to maintain and track– Needed to get info out of sales rep heads and into a

system that could be used by all.

OPERATIONAL CRM4. Sales reps can organize and coordinate accounts

so that one reps lead can become a sale by the organization (even if it means someone else makes the sale)

5. Contact management systems can be used to “remember” a customer and all prior dealings with that customer

6. After acquiring a customer, you need to keep the customer through excellent customer service– If you want to ensure customer loyalty and

satisfaction, you must build post-sale relationships• Answer questions Provide solutions to problems

OPERATIONAL CRM (Customer Service)1. Provide consistent answers to questions (database)

2. Make sure customers don’t have to explain their problems AGAIN (database, avoid customer frustration)

3. Emotion detection software to detect when someone is distressed and upset (determine baseline during first few seconds of contact and then looks for deviations)

4. Web-based self-service allows customers to find their own answers.– Federal Express, UPS and other sites with shipment tracking

5. Click-to-talk buttons on a web site

6. Call scripting systems automatically generate the next item or question.– Good way to be consistent

Information Technology and Customer Relationship Management

• Advances in information technology are making it possible to gain a greater understanding of the customers who are buying your products. If an organization understands the characteristics of its customers, it is then in a better position to meet customer needs, and therefore generate even more business.– How are we going to use all of this customer data that we have collected?

• Information Technology is simply a TOOL that can be used to better serve the customer.– How can customer interactions be made easier?– If you understand customer characteristics, you are then positioned to

better serve customers (mine what you have to gain a clearer understanding).

• Result: increase customer loyalty and probably increase revenues

Using Technology in CRM (examples)• Track customer purchases in order to generate a profile for each

customer.

• Identify patterns and predict behavior

• Segment customers (divide into categories)

• User-generated content can be incorporated into new product ideas (YouTube, Twitter, Lego)

• Capture customer info at point of contact (phone, web, in-person)

• Make info available to employees who interact with customers.

• Data mining to uncover patterns of behavior that the company can capitalize.

• Personalization of web site (site changes to reflect viewer preferences and interests)

THE UGLY SIDE OF CRM: WHY

CRM MATTERS

MORE NOW THAN EVER

BEFORE

THE UGLY SIDE OF CRM: WHY CRM MATTERSMORE NOW THAN EVER BEFORE