Chapter 9 - Lecture notes 9 PDF

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Prof. Morad Benyoucef ...

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Chapter 9 – Customer Relationship Management (CRM) The Customer is King Customer-focused organization – aims to achieve the following  Customer identification o Know your customers  Customer differentiation o Each customer’s value is different  Customer interaction o Keep learning about your customers  Customization o Treat each customer uniquely How?  Build and keep customer profiles  Use those profiles to personalize the website and the services Why?  20% of customers generate 80% of the profits  It takes 8-10 calls to sell to a new customer; 2-3 calls to sell to an existing customer  It is 5-10 times more expensive to acquire new customers than to obtain repeat business an existing customer  A typical dissatisfied customer tells 8-10 people Customer Relationship Management (CRM) CRM is a business and technology discipline for managing customer relationships to optimize revenue, profitability, customer satisfaction, and customer retention CRM Systems It is a set of integrated applications to address all aspects of the customer relationship, including sales, marketing, and service    

Capture and integrate customer data from all over the organization Consolidates and analyze the data Integrates customer data Distribute results to various systems and customer touch points across the organization

Additional Note:  Touch point - a method of interaction with the customer  Cross-selling – adds additional products and services to current purchases

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Up-selling – increases the value of the sale by moving purchases to premiums levels, increasing volume, etc.

Recency, Frequency, and Monetary Value (RFM)  How recently a customer purchased items (Recency)  How frequently a customer purchased items (Frequency)  How much a customer spends on each purchased (Monetary Value) CRM Evolution CRM evolution is enabled by advances in Data Warehousing, Data Mining, and Business Intelligence 

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Reporting – asking “what happened?” o Ex. What is the total revenue per customer? Where did we sell the most products? Analysis – asking “why it happened” o Ex. Why did sales not meet forecasts? Predicting – asking “what will happen” o Ex. What customers are at risk of leaving? What products will the customer buy?

Additional Note:  Data warehouse (DW) – an aggregation of all customer data is transferred to the DW for analysis  Data mining – tools that sift through data, looking for trends, patterns, and correlations in support of decision making Operational CRM  Supports transactional processing for day-to-day front-office operations - deals directly with customers and aims of enhancing customer transaction Operational CRM – in Marketing  List generator Compiles customer information from a variety of sources and organizes it for different marketing campaigns 

Campaign management system Guides marketers through marketing campaigns

Operational CRM – in Sales  Sales management CRM system

Automates each phase of the sales process, helping sales representatives coordinate and organize all of their accounts 

Contact management CRM system Maintains customer contact information and identifies prospective customers for future sales

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Opportunity management CRM system Targets sales opportunities by finding new customers or companies for future sales

Operational CRM – in Customer Service  Contact center (call center) Where customer service representatives (CSRs) answer customer inquiries and respond to problems 

Web-based self-service systems Allows customers to use the web to find answers to their questions or solutions to their problems

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Call scripting system Access organizational databases that track similar issues or questions and automatically generates the details to the CSR who can then relay them to the customer

Analytical CRM  Supports back-office operations and strategic analysis - do not deal directly with customers  Digs deep into historical customer data and expose patterns of behaviors on which decision makers can act o Aggregates, analyzes, and disseminates customer information throughout an organization o Relies on data warehousing technologies and business intelligence Examples  Find new customers similar to your best customers o Ex. Analytical CRM can help you determine that you do a lot of business with women 35 to 45 years old who drive SUBs and live within 30 miles of a certain location  You can then find a mailing list that highlights this type of customer for potential new sales  Reactivate inactive customers o Ex. Analytical CRM can highlight customers who have not done any business with you in a while  You can then send them a personalized letter along with discount coupon Additional Note:

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Marketing analytics – allows companies to measure the effectiveness of marketing campaigns

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Sales analytics – provides a key performance indicators (KPIs) and customizable dashboards which improves the effectiveness of sales people by providing real-time, actionable insight into sales opportunities

CRM Best Practices  Clearly communicate the CRM strategy – ensuring that all employees understand what CRM means and how it adds value to the organization  Define information needs and flows – the organization must understand the different ways information flows into and out of the organization, in order to have a complete view of its customers  Build an integrated view of the customer – even though the customer data can reside in separate systems within the organization  Implement in iterations – avoid the “big-bang” approach and implement in small and manageable pieces  Scalability for organizational growth – ensure the system can support the organization’s future growth Examples  Case 1 – Johnson Dental o Uses a basic DIY CRM o Goal – enhance relationships with existing with existing patients o They leveraged existing tools: Excel, Outlook Email and Calendar  These tools help maintain multiple databases on all patients o What is missing – integrating patient info, tracking patients’ trends o Solutions – combined email addresses with calendar entries  This enabled them to send email reminders and offers to their best patients 

Case 2 – Smith Legal Partners o Uses a cloud-based CRM o Goal – increase income

o Solution – used a cloud-based CRM service to launch a direct mail campaign and a social networking campaign to build awareness for personal injury litigation  Automated messages customized to prospects and clients addressing recipients’ specific issues that might be addressed by Smith Legal 

Case 3 – Fix Financial Group o Uses an in-house CRM solution o Problem – struggling to acquire and keep clients o Solution – used their CRM system to contact new and existing clients in different ways o Since it is an in-house CRM solution, it had  The scalability to grow  The flexibility to incorporate new features such as mobile access to engage with mobile customers

Protecting customer Privacy  Most people are wary of data collection required for CRM and feels that it’s an invasion of privacy  Organizations must take these concerns seriously CRM Building Blocs 1. Creating a CRM vision that provides a “big picture” of what the customer-centric organization should look like 2. Defining a weaving a CRM strategy that aligns with broader marketing and sales strategies, and informs operational and production strategies 3. Understanding and engaging the customer 4. Ensuring organizational collaboration between internal groups and external business partners 5. Focusing on improving customer processes 6. Achieving data integrity across the enterprise 7. Leveraging information systems to implement CRM 8. Defining, collecting, and analyzing CRM metrics Limitations of CRM  CRM is firm centric Only relies on transactional and behavioral data pertaining to the interactions of the customer with the firm 

Limited predictive ability Some events are unforeseeable and only the customer knows about their occurrence...