Chapter 10 CUSTOMER RELATIONSHIP MANAGEMENT

LEARNING OBJECTIVES You should be able to:  Discuss the strategic importance of CRM  Describe the components of a CRM initiative  Calculate customer lifetime value  Discuss the imple

CUSTOMER

RELATIONSHIP MANAGEMENT

Chapter 10

LEARNING OBJECTIVES

You should be able to:

 Discuss the strategic importance of CRM

 Describe the components of a CRM initiative

 Calculate customer lifetime value

 Discuss the implementation procedures used for CRM programs

 Describe how information is used to create customer satisfaction & greater profits for the firm

 Describe importance of data security

 Describe how social media and cloud computing have impacted CRM

MBA Nguyen Phi Hoang@2015_SCM

CHAPTER OUTLINE

• Introduction

• Customer Relationship Management Defined

• CRM’s Role in Supply Chain Management

• Key Tools & Components of CRM

• Designing & Implementing a Successful CRM Program

• Trends in CRM

 CRM means focusing on customer requirements, then delivering products and services in a manner resulting in high levels of customer satisfaction

 Also refers to automated transaction and communication applications, however this can cause problems for some firms

 CRM must still include talking to customers,

understanding their behavior and their requirements, and then building a system to satisfy those requirements

“Finding a new customer costs five times

as much as keeping an old customer”

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Customer Relationship Management (CRM)

Defined

“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—indeed to buy again.”

“…managing the relationships among people within an

organization and between customers and the company’s

customer service representatives in order to improve the

bottom line/key issues.”

“… to keep track of customers, learning about each one’s likes and dislikes from various sources like transaction records, call-center logs, web site clicks, and search engine queries.”

More simply – Building & maintaining profitable long-term

customer relationships

CRM’s Role in Supply Chain Management

The firm seeks position as a value-enhancing

supplier to its customers.

 Firms must create methods for finding &

developing good suppliers.

 Firms must create methods for becoming & staying good suppliers themselves.

 It may be necessary for a firm to certify its

intermediate customers as to their ability to adequately represent their firm’s products.

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Key Tools &

Components of CRM

 Segmenting Customers –

 Grouping customers to create specialized communications about

products/service

 Analyze the information from such groups of clients which can tell to firm some useful ideas

 Firm then can use Target marketing efforts - e-mail or direct mail to response to their clients This way saves labor & postage, reduces chances of being a nuisance to clients

 Relationship marketing or permission marketing

 customers select the type & time of communication Requires software

& customer participation

 Cross selling - Additional products are sold as the result of an

initial purchase (e.g., e-mails from Amazon.com describing other books bought by people)

Key Tools & Components

of CRM (Continued)

 Predicting Customer Behaviors - firms forecast

likelihood of customers’ purchases

 Customer Defection Analysis - finding methods to retain customers

 Churn reduction - reducing customer defections

 Customer Value Determination - verify the customer

lifetime value for individuals or segments

 Personalizing Customer Communications

-Understanding customer behaviors & preferences, firms customize communications

 Clickstream, how a customer navigates a Web site

 Event based Marketing - offer the right products &

services to customers at the right time 8

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Automated Sales Force Tools

Sales Force Automation (SFA)- Used for documenting field

activities, communications with the home office, & retrieving sales history

 Sales Activity Management- Tool offering sales reps a

guided sequence of sales activities

 Sales Territory Management- Sales managers obtain

information of each sales rep’s activities (e.g., total sales per sales rep.)

 Lead Management- Sales reps can follow prescribed tactics

when dealing with prospects to aid closing the deal.

 Knowledge Management- Enables quick decision making,

better customer service, & a better-equipped & happy

sales staff.

Key Tools &

Components of CRM

(Continued)

Managing Customer Service Capabilities

 What does customer service actually mean?

 “Seven Rs Rule” having the right product, in the right

quantity, in the right condition, at the right place, at the

right time, for the right customer, at the right costs

 Performance measures are often designed around

satisfying the seven Rs These kinds of services can come at a cost

Key Tools &

Components of CRM

(Continued)

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Customer Service Elements

Pre-transaction elements - precede the sale (e.g.,

customer service policies, the mission statement, org structure, & system flexibility)

Transaction elements - occur during the sale &

include the order lead time, the order processing

capabilities & the distribution system accuracy

Post-transaction elements - occur after the sale &

include warranty repair capabilities, complaint resolution, product returns, & operating information

Key Tools &

Components of CRM

(Continued)

Call Centers

Can categorize calls, determine average resolution time, forecast future demand, improve the overall productivity of the staff, increasing customer

satisfaction levels

Key Tools &

Components of CRM

(Continued)

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 Website Self-Service

 Web sites act as support mechanisms for call centers Customers can access their account information & operating hours, contact information, etc.

 Customers can communicate directly with product specialists

using wireless devices & the right diagnosis can be made quickly

 Customers are frequently given opportunities to provide feedback about a product, service, or organization

 Two important issues are ability to assure privacy & ability to

minimize customer harassment

Key Tools &

Components of CRM

(Continued)

Designing &

Implementing a Successful CRM Program

Step 1 Creating the CRM Plan:

 Objectives of the CRM program

 CRM’s fit with corporate strategy

 New applications to be purchased or developed

 Integration or replacement of existing legacy

systems

 Personnel Requirements- personnel, training,

policies, Upgrades, & maintenance &

 The costs & time frame for implementation

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Designing & Implementing a Successful CRM Program

(Continued)

Step 2 - Involve CRM users from Outset/beginning

- Employees should understand how it affects their jobs

 Create a project team with members from all affected

organizational areas

 Test with a pilot application

Step 3 - Select the Right Application & Provider -

Find an appropriate application & determine the extent of

customization

 Visit trade show, read trade literature, hire consultant, etc

 Compare based on performance, security, reporting

capabilities, system availability, etc

Step 4 - Integrate Existing CRM Applications -

CRM is a collection of various applications

implemented over time.

 Customer contact mechanisms need to be

coordinated so that every CRM user in the firm

knows about all of the activity associated with each customer

 Centralized database or data warehouse containing

all customer information

Designing &

Implementing a Successful CRM Program (Continued)

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Step 5 - Establish Performance Measures – This allows the firm to –

 Determine if objectives have been met

 Compare actual to planned variance

Designing &

Implementing a Successful CRM Program (Continued)

Step 6 - Providing CRM Training for All

Users -

 Provide & require training for all of the initial users

& then provide training on an ongoing basis as

applications are added

 Training can also help convince key users like

sales, call center, & marketing personnel of the

benefits & uses of CRM applications

Designing &

Implementing a Successful CRM Program (Continued)

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Trends in CRM

 Rules & laws regarding invasion of privacy include Patriot Act in the US and Internet Privacy Law in the EU

 Creating and cultivating virtual communities around

product or brand is a powerful way to engage consumers

 Ala carte & on demand offerings accessed via web

browser

 Changing the cost structure of CRM applications