Customer Relationship Management Lecture1

Customer Relationship Customer Relationship ManagementManagementCRM is 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.

CRM is more than a standalone project for the company, but a business philosophy that affects the company-at-large.

What is Customer Relationship Management (CRM)?CRM is “the development and maintenance of mutually beneficial long-term relationships with strategically significant customers”

(Buttle, 2000)

CRM is “an IT enhanced value process, which identifies, develops, integrates and focuses the various competencies of the firm to the ‘voice’ of the customer in order to deliver long-term superior customer value, at a profit to well identified existing and potential customers”.

(Plakoyiannaki and Tzokas, 2001)

Customer Relationship Customer Relationship ManagementManagement

“Process of creating and maintaining relationships with business customers or consumers”

“A holistic process of identifying, attracting, differentiating, and retaining customers”

“Integrating the firm’s value chain to create enhanced customer value at every step”

“An integrated cross-functional focus on improving customer retention and profitability for the company.”

4

The Move Towards The Move Towards Relationship ManagementRelationship Management

E-commerce companies want to customize the user experience

Supermarkets want to be infomediaries

Credit card companies want to recommend good restaurants and hotels in new cities

Phone companies want to know your friends and family

Bottom line: Companies want to be in the business of serving customers rather than merely selling products

5

CRM is RevolutionaryCRM is Revolutionary Grocery stores have been in the business of

stocking shelves Banks have been in the business of managing

the spread between money borrowed and money lent

Insurance companies have been in the business of managing loss ratios

Telecoms have been in the business of completing telephone calls

Key point: More companies are beginning to view customers as their primary asset

6

Why Now ?Why Now ?

0

200

400

600

800

1000

1200

0 1 2 3 4 5 6 7 8 9 10 11

Year

Num

ber

of C

usto

mer

s (1

000s

) As growth flattens out, exploiting existing customers becomes more important

In this region of rapid growth, building infrastructure is more important than CRM

total customers

new customers

churners

Representative Growth in a Maturing Market

Functions of Customer Relationship Management

Management DecisionProcess

Customer sensitivity

•Diversity•Information•Differentiated offering

Value Creation Process

Technology delivery process•R&D•Technology integration•Efficiency, effectiveness learning

Product delivery process•Concept to launch•Manufacturing process

Customer delivery process•Supply chain•Distribution•Infomediation (distribution of information)

Value-basedStrategies•Pricing•Communication

(Sharma et. al., 2001)

Models of Customer Relationship Management

The Evans and Luskin (1994) model for effective Relationship Marketing

Relationship marketing inputs•Understanding customer expectations•Building service partnerships•Empowering employees•Total quality management

Relationship marketing outcomes•Customer Satisfaction•Customer loyalty•Quality products•Increased profitability

Assessment state•Customer feedback•Integration

(Evans and Luskin, 1994)

Models of Customer Relationship Management

The Brock and Barcklay (1999) model of selling

partner relationship effectivenessIndependence

Relative influence

Mutual trust

Cooperation

Selling partnerrelationshipeffectiveness

Why CRM?Why CRM? To thoroughly understand customer needs– even

before they know it themselves. Decreasing customer churn by increasing

customer satisfaction. Motivating customers to initiate revenue-

generating contacts with the company. Increasing the likelihood of the ‘right response’

by a given customer or customer group. To use technology to improve customer service

and enable greater degree of customer differentiation in order to deliver unique customer interactions.

To attract customers- both new and old- through more personalized communications.

Customer relationship Customer relationship management (CRM)management (CRM)

Combination of strategies and tools that drives relationship programs, reorienting the entire organization to a concentrated focus on satisfying customers.

BENEFITS OF CRM

• Software systems can make sense of huge amounts of data.

• Simplify complex business processes while keeping customers’ interests at heart.

PROBLEMS WITH CRM

• Requires companywide commitment and knowledge of how to use system.

• Failures often result from failure to effectively reorganize firm’s people and processes to take advantage of benefits CRM system offers.

RETRIEVING LOST CUSTOMERS

• Customers leave for a variety of reasons.

• Customer winback—process of rejuvenating lost relationships with customers.

How the Internet changes How the Internet changes the Rulesthe Rules24 hour accessUp-to-the-minute information (stock levels, product features, and prices).

The ability to research product or merchant during a shopping trip.

Online customer support.Online self-servicePersonalized content.

What Is In a Name? What Is In a Name? eCRM: refers to electronic customer

relationship management or CRM which is web-based.

ECRM: or ERM refers to enterprise CRM, meaning a CRM program that spans an enterprise-wide view of customer.

PRM: allows a company to manage its alliance partner and reseller relationships to provide customers with the optimal sales channel.

What Is In a Name? What Is In a Name? cCRM: Collaborative CRM denotes

situations in which customers can interact directly with the company, usually through the Web.

SRM: focuses on keeping the vendors happy.

mCRM: suggests the provision of data to customers, suppliers, and business partners via wireless technologies.

xCRM: a placeholder for hybrid CRMs.

CRM & Business CRM & Business IntelligenceIntelligence

CRM and business intelligence both involve critical business decisions and rely on IT to deliver value.

CRM is more complex than BI.CRM integrates information into

business action.CRM combines data analysis with

deployment of specific business actions. The mandate of CRM is to act on data

and change the fundamental business processes.

Is CRM New?Is CRM New?No!• Simply an extension

of relationship marketing

• Builds on customer service and satisfaction concepts

• Just the latest buzzword for creating customer orientation

• Bottom-line is still the same

Yes!• A shift in corporate

philosophy concerning the approach to value delivery

• Customer-centric approach to value chain

• New and technology-enhanced processes

• Focus is not just on bottom-line, but on top-line

• Goal is to create satisfying experiences across all customer contact points

Managing Customer RelationshipsQualifying prospects for relationship building

Opportunities for adding value

Potential profitability of customer

High

Low

Low High

Use a noncustomizedapproach

Seek betteropportunities

elsewhere

Build a strongand lastingrelationship

Focus onloyalty-building

program

Myths about CRM:Myths about CRM:

CRM has not been successful, it does not work.

CRM is all about technology.CRM is just a fad.CRM is supposed to be able to

improve customer satisfaction, but there is no evidence that improved CRM is worthwhile.

Common Pitfalls that Common Pitfalls that Prevent CRM from Prevent CRM from becoming a Reality becoming a Reality The executive toy syndrome.

The destruction of shareholder value is promoted by measuring the wrong things.

The best practice syndrome.Development is driven by IT alone.It becomes a reengineered reporting

process.Enterprise-wide common performance

management application are lacking.The links to human resources are missing.