Conceptual Foundation of CRM

Evolution of CRMBenefits of CRM

Schools of thought on CRM Different Definitions of CRM

Product marketing Direct Marketing Target Marketing

Relationship Marketing

MASS MARKET RELATIONSHIPMARKETING SEGMENTATION MARKETING

ONE TO ONE MARKETING

CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management (CRM)

• CRM is the strategic use of information, processes, technology and people to manage the customer’s relationship with your company ( Marketing, Sales, Services and Support) across the whole customer life cycle.

• CRM is the process of storing and analyzing the vast amounts of data produced by sales calls, customer-service centers and actual purchases, supposedly yielding greater insight into customer behavior. CRM also allows businesses to treat different types of customers differently in some cases, for instance, by responding more slowly to those who spend less or charging more to those who require more expensive handholding.

Wall Street Journal, 21 May’2006.

“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.”

More definition of CRM

Online insurance company view on CRM:Motivating customers to initiate revenue generating contacts with us.

A catalog retailer on CRM :Increasing the likelihood of the right response by a customer segment.

A mid market financial institutions view on CRM:We want to attract customers both old and new through more personalized communications.

• CRM , the term often referred to marketing. This is because CRM can be considered from a number of perspectives.

– Information Technology (IT) perspective – The Customer Life Cycle (CLC) perspective – Business Strategy perspective

Business Strategy and CRM

• Three key phases:– Customer Acquisition – Customer Retention – Customer Extension

• Three contextual factors:– Marketing Orientation. – Value Creation. – Innovative IT.

Information Technology (IT) perspective

• CRM is more than just software. For the purposes of this introduction - Information Technology (IT) and CRM have three key elements,

– Customer Touch Points, – Applications, and – Data Stores.

The Customer Life Cycle (CLC) perspective

• The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC).

• CLC focuses upon the creation of and delivery of lifetime value to the customer.

• CLC is a summary of the key stages in a customer's relationship with an organization.

Objectives of CRM

• Identification of potential customers.• Understanding of customer needs, Both current and latent.• Differentiating profitable from unprofitable customers and segments.• Decreasing attrition by increasing value and satisfaction.• Increasing usage of current products and services.• Increasing referrals.• Winning back lost customers.• Moving customers up the relationship hierarchy from strangers to

acquaintances to friends to partners.• Integrating marketing and sales efforts throughout the various channels

used by the company.

GOALS OF CRM

DIFFERENTIATING CUSTOMER• All the customers are not equal, recognize and reward the best

customer. For this the CRM needs to understand.• Sensitivity, tastes, preference and personalities.• Life style and age• Culture background and education• Physical and psychological characteristics.

DIFFERENTIATING OFFERING• A CRM solution needs to differentiate between low value customer and

a high value customer.• High Value customer requiring high value customer offerings.• Low Value customer with potential to become high value in near future.• High Value customer requiring high value service.

KEEPING EXISTING CUSTOMER

• Grading customer from satisfied to very dissatisfied shall help the organization in always improving its customer satisfaction level and scores. As satisfaction level of each improves so shall the customer retention with the organization.

– Attempts to “own” the lion share of customer spending and/or “share of mind” in a particular product category

– Building brand equity, maintaining vigilant customer contact, keeping current with the market trends is critical

– 5% points increase in customer retention=20-125% increase in profit

• CUSTOMER LIFE TIME VALUE

• By identifying life stage and life event trigger the points by customer ,marketers can maximize share of purchase potential.– Refers to the net present value of the potential revenue stream for

any particular customer over a # of years– Starts with current purchase activity then extrapolates to include

potential additions from cross-selling, upgrades, total ownership, etc.

Goal of CRM

Lifetime Value (LTV)– Refers to the net present value of the potential revenue stream for

any particular customer over a # of years– Starts with current purchase activity then extrapolates to include

potential additions from cross-selling, upgrades, total ownership, etc.

Customer Ownership– Attempts to “own” the lionshare of customer spending and/or

“share of mind” in a particular product category– Building brand equity, maintaining vigilant customer contact,

keeping current with the market trends is critical– 5% points increase in customer retention=20-125% increase in profit

THE CRM VALUE CHAIN

Customer data Customer information Customer Knowledge

Customer wisdom

CRM BUSINESS CYCLE

Customer Life CycleThe total time that the customer is engaged with your company from the customer’s experience and view point.

Consider Purchase Set up Use

Customer AssetLoyal customers continue to buy more as they perceive value in the relationship.

Customer Information: It is a tangible company asset that can be inventoried and managed. Critical element for building loyalty.

Customer Value: It is calculated on the basis of purchases made by anindividual.

CRM Concepts

Information

Technology

Process

People

Components of CRM

The components of CRM

1.Information: Information is the raw material of CRM. These types of information are useful to CRM.– Identification Data-Marketing Data

2.Process: Customer –centered processes are the product of CRM. Some examples are:-Customer Touch points

3.Technology: Technology is the machinery that enables CRM to work.-Software Products-Networking

-Databases

4.People:People are the power supply of CRM.-Training and education-Measurements and rewards

Customer Touch points

Touch points are the means (media) that we use to interact with our customers.

1. Mail2. Toll-free-Number3. Phone / fax4. Event5. Internet6. Kiosks7. Broadcast8. E-Mail9. Personal

Common myths about CRM

1. CRM is the solution that will solve all our customer problems, it’s all the software tools that make it easier for a customer to do business with us.

2. CRM is the internet.3. CRM is just the latest name for Direct Marketing.4. CRM means recognizing a customer wherever he interacts with our

company, a 360 degree view of the customer.5. CRM means scoring and measuring customer value.6. CRM is sales rep productivity tools.

Types of CRM

• Operational CRM

• Analytical CRM

• Collaborative CRM

CRM Architecture

Operational CRM

The operational application of CRM enables effective interaction withcustomers. For this purpose various tools are used. Operational CRM provides support to “Front Office" business processes,including sales, marketing and service. Each interaction with a customer is generally added to a customer'sContact history, and staff can retrieve information on customers from theDatabase when necessary.These contact management tools aim to reduce costs by improvedProcess efficiency and use of media based communication channels. These are also aimed to provide customers with a consistent interfaceAcross all communication channels. Banks are an exemplary implementation of CRM as customer contactmanagement.Channel management tools aim to understand how customer interactswith the company. It aims to deliver products and services acrossmultiple channels in effective, efficient, and consistent manner.

Analytical CRM

The data collected in operational management is analyzed to segment customers. The valuable information thus obtained is used to satisfy customers. Analytical CRM is composed of:

• Pattern discovery component • Product and customer analysis component • Multitude component • Sorting and customer fractionation component • Customer value evaluation component

Analytical solutions provided for most companies are integrated view of customer across all channels and applications, campaign performance analysis, customer profitability analysis, cross-selling and up selling. The analytical solutions help answer questions like:

Who are their best customers? Whom they are likely to loose? How to retain them? How to attract new customers? How to improve profitability of customers?

Analytical CRM analyzes customer data for a variety of purposes:Design and execution of targeted marketing campaigns to optimize marketing effectiveness.Design and execution of specific customer campaigns, including customer acquisition, cross-selling, up-selling, retention.Analysis of customer behavior to aid product and service decision making (e.g. pricing, new product development etc.) Management decisions, e.g. financial forecasting and customer profitability analysis Prediction of the probability of customer defection (churn analysis) Analytical CRM generally makes heavy use of data mining..

Collaborative CRM

The various departments of company like the sales, technical support, and marketing, share the information they collect about customers. The objective is to improve the quality of customer service and increase customer loyalty.

It allows the company to synchronize and manage efficient, productive interaction with customers, prospects, partners, and internal associates across all communication channels. The customers' viewpoint is taken care of at every transaction level thus enabling better service to the customer. Collaborative CRM also reduces web service costs by enabling web collaboration.

• Collaborative CRM covers the direct interaction with customers, for a variety of different purposes, including feedback and issue-reporting. Interaction can be through a variety of channels, such as web pages, email, automated phone (Automated Voice Response AVR) or SMS.

• The objectives of collaborative CRM can be broad, including cost reduction and service improvements

Integrated CRM Architecture

TECHNOLOGICAL ARCHITECTURE