CRMAmazon’s CEO Jeff Bezos called Amazon.com the most customer-centric company in the world: "Our goal is to be Earth's most customer-centric company. I will leave it to others to say if we've achieved that. But why? The answer is three things: The first is that customer-centric means figuring out what your customers want by asking them, then figuring out how to give it to them, and then giving it to them. That's the traditional meaning of customer-centric, and we're focused on it. The second is innovating on behalf of customers, figuring out what they don't know they want and giving it to them. The third meaning, unique to the Internet, is the idea of personalization: Redecorating the store for each and every individual customer. If we have 10.7 million customers, as we did at the end of the last quarter, then we should have 10.7 million stores." (in Gregory 1999).

3. CRM - introduction Evolution of marketing thought: production orientation ->

sales orientation -> marketing orientation -> CRM.

CRM is characterized by a strong reliance on building relationships with key customers through the use of sophisticated information technology.

Customer relationships are assets that call for investment and can be managed in order to improve customer retention and profitability.

CRM1 Introduction

CRM typically involves three general areas of business: a Customer service system, a Marketing information system and a Sales force management system.

Integrated CRM software is often also known as "front office solutions."

CRM1 Introduction Reasons for the growing prominence of relationship marketing:1. The growth of the service economy.

2. The heightening of competitive intensity, which makes customer retention of paramount importance.

3. A high correlation exists between defection rate and profitability, and that to retain existing customers are much cheaper than to acquire new customers, and customers become increasingly profitable the longer the relationship lasts.

CRM1 Introduction Reasons for the growing prominence of relationship marketing:4. Product-based advantages are increasingly short-lived,

committed relationships are among the most durable of advantages.

5. Good relationships are hard for competitors to imitate, and there is no substitute for them that competitors can buy in the marketplace.

CRM Objectives Provide product information, product use

information, and technical assistance on web sites that are accessible 24 / 7.

Provide a fast mechanism for handling problems and complaints.

Use internet technologies to track customer interests and personalize product offerings accordingly.

Use the internet to engage in collaborative customization or real-time customization.

CRM Objectives Provide a fast mechanism for managing and

scheduling followup sales calls, scheduling maintenance, repair, and on-going support.

Provide a mechanism to track all points of contact between a customer and the company, and do it in an integrated way so that all users of the system see the same view of the customer.

Integration of CRM into other functional systems.

A Typical CRM System

4 Customer Relationship Marketing

• Characteristics of an asset that helps company to increase its competitive advantages:

1. It helps add value to the company's products or services for higher levels of customer satisfaction.

2. The asset is rare.

3. The asset cannot be imitated or copied easily by competitors.

4. There is no substitute for the asset.

Can CRM create assets that fulfill the above criteria?

Customer Relationship Management

How CRM improves performance:

Customer Relationship Management

2 Definition of CRM CRM is a comprehensive strategy and process

that enables an organization to identify, attract and increase customer loyalty of profitable customers by maintaining long-term relationships with them.

It is a set of activities that involve gathering and analyzing accurate data on customers for the identification and satisfaction of key customer needs at a profit through coordinated efforts of different functional units of a corporation. These activities include focusing on key customers, organizing around CRM and knowledge-based management.

Focusing on Key Customers1. Key Customer-centric Marketing2. Key Customer Lifetime Value Identification3. Personalization4. Interactive Cocreation Marketing

Organizing around CRM1. Interfunctional Integration2. Internal Marketing

Knowledge-based Management1. Knowledge Generation2. Knowledge Dissemination and Sharing3. Knowledge Responsiveness4. Technology-based Knowledge Management

CRM Orientation

Conceptualization: CRM

Conceptualization: CRM

1. Focusing on Key Customers:a. Key Customer-centric Marketing: 80% of profits come from 20% of loyal

customers. Key customers effectively subsidize a large

number of marginal and, in many cases, unprofitable customers.

An overwhelming customer-focused mindset or culture perpetuating within the company.

Conceptualization: CRM

1. Focusing on Key Customers:b. Key Customer Lifetime Value Identification: For nonprofitable customers, the appropriate

strategy is outsourcing or even “fire” them; or charge them a higher price for services rendered to them.

CAc. Personalization Increasing diversity in demand. One-to-one marketing through customized offerings.

Conceptualization: CRM

1. Focusing on Key Customers:d. Interactive Cocreation Marketing Cocreation marketing or “prosumption” involves both

the marketers and the customer who interact in aspects of the design, production, and consumption of the product or service.

The interactive nature of the Internet and electronic CRM applications facilitate cocreation marketing.  

Cocreation allows a firm to get close enough to acquire not just the observable, but also the deeper tacit components of the needs and wants of key customers. 

Conceptualization: CRM2. Organizing around CRMa. Interfunctional Integration All areas of the organization work toward the

common goal of forging and nurturing strong customer relationships.  

Examples of organizational structural designs for CRM: customer-focused teams, cross-discipline segment teams, or cross-functional teams. All these designs pinpoint the importance of interfunctional coordination.

Conceptualization: CRM2. Organizing around CRMb. Internal Marketing Internal marketing means that a firm needs to satisfy the

needs of employees and establish a good relationship with them (the means) before the latter would be motivated to help the firm establish a long-term relationship with customers (the end). 

A significant correlation between job satisfaction and employees’ service performance.  

Greater employee satisfaction results in higher adaptability, which is the ability and willingness of a service employee to adjust their behavior to the individual or extra demands of a customer. 

3. CRM -Conceptualization2. Organizing around CRMb. Internal Marketing Internal marketing comprises of:

i. Market training and education - customers are more satisfied with the service encounter when employees possess the ability and competence to solve their problems.

ii. Clear role expectations & employee empowerment - employees who are unsure of their role expectations are likely to exhibit decreased job satisfaction and performance.

Conceptualization: CRM2. Organizing around CRMb. Internal Marketing Internal marketing comprises of:iii. Reward systems -  behavior-based evaluation that

involves evaluating employees on the basis of effort, commitment, teamwork, customer orientation, friendliness, the ability to solve customer problems, and other behaviors that are directed toward improved service quality should be used instead of evaluations based solely on measurable outcomes like sales volume achieved.  

iv. Employee involvement.

Conceptualization: CRM3. Knowledge-based Management Knowledge can be defined as the valuable end product

obtained from processing information, the latter itself being an end product of data processing.

Knowledge includes rules of thumb, generalizations, interpretations and insights that can be very useful for strategic decision making.

In an organizational context, knowledge is often incorporated in organizational processes, structures, and technology.

The success of a firm depends on the creation, transfer, and application of knowledge.

Conceptualization: CRM3. Knowledge-based Management Knowledge-based management includes:a. Knowledge Generation - data must be captured at

various points of contact with customers, and from interactive feedback systems that gauges customers’ viewpoints and their expectations.

b. Knowledge Dissemination and Sharing Knowledge codification facilitates knowledge

dissemination and sharing, and helps to transform local knowledge into organization-level knowledge.

Customer knowledge is shared and should be made available at every point of contact.

Conceptualization: CRM

3. Knowledge-based Managementc. Knowledge Responsiveness

d. Technology-based Knowledge Management

Antecedents of CRM Top management support- CEO must have the

right state of mind and commitment, and must give clear signals and establish clear values to the entire corporation regarding its commitment to the CRM concept.

Good interdepartmental relations based on reciprocity and trust.

A corporate culture characterized by market-driven sentiments.

Departmentalization, formalization and centralization inhibit CRM.

Consequences of CRM Improved ROI, sales growth,

customer retention and market share.

Moderators of the CRM - profitability link Government legislation and public pressure

towards privacy, price discrimination etc. Whether or not target customers prefer

customized products and services, which is usually more expensive.

Customer relationship proneness. Degree of competition.

Moderators of the CRM - profitability link The weaker the economies, the stronger the

relationship between CRM and business performance.

Industries that have high diversity in demand and low cost of adaptation (e.g., service firms) will be at the forefront of CRM practices. Conversely, industries in which the cost of customization in production is high and the majority of customer requirements are not variable will not see the rapid expansion of CRM.

Customer Relationship ManagementSteps:

Customer Relationship Management

• Other CRM technology add-ons:

1. Call-back.

2. Automated e-mail response.

3. Interactive chat.

4. Voice over Internet Protocol (VoIP).

Customer Relationship Management

5. Points to note:

a. Make simple queries or data requests into self-service transactions.

b. Use email to respond to complex product support transactions that do not require an immediate response.

c. Use human intervention capabilities to provide sales and complex product support for transactions that require an immediate response.

• eCRM services chart.

• See also http://ihome.cuhk.edu.hk/~b048773/myweb/crm.htm.

• Problems with CRM:

1. High failure rates of CRM implementation -- reported by analyst firms and the media as reaching up to 70 percent.

Customer Relationship Management

• High failure rates of CRM implementation -- reported by analyst firms and the media as reaching up to 70 percent.

• Overall, CRM users and evaluators are not very satisfied with the software.

• Difficulty of implementation.

• Standardized products offering less adaptation to users’ uniquerequirements.

• Disjoint CRM systems.

• Costly esp. for SME.

3. CRM - challenges