Introduction to Customer Relationship Management

7/28/2019 Introduction to Customer Relationship Management

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UNIT 1


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Someone who pays for goods or services.

a current or potential buyer or user of the

products of an individual or

organization(supplier, seller, or vendor) Traditionally only a paying client.


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Existing customers: Purchased/used services

in recent past, most beneficial,chance to

retain them

Former customers:Made previous purchasebut long back,bought similar product from

competitor,value depends on previous

relationship

Potential customers:not yet purchased ,havea need for product, have purchasing power,

authority to decide to buy


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EXTERNAL CUSTOMERS

Paying Client: They give money to the company& company gives them products and/or services.

INTERNAL CUSTOMERS

Employee: Company gives them a paycheck andbenefits and bonuses and they give (hopefully)productive work in return to the company.

Supplier/Vendor: They give products and/orservices to the company & company gives them

money. Business Partner: They give sales and added

value services to the company & company givethem the same and/or percentages of a salethey help make.


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Ways customers interact with the organization

In Person

Telephone

Internet

Kiosks

In Person product support

Financial assistance


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Initiator

Influencer

DeciderPurchaser

User

User

CUSTOMER


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Customer Relationship Management is a

comprehensive approach for creating,

maintaining and expanding customer

relationships. A process to compile information that

increases understanding of how to manage an

organizations relationships with its

customers.


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A business strategy that uses Information

Technology to provide an enterprise with a

comprehensive, reliable and integrated view

of its customer base so that all processes andcustomer interactions help maintain and

expand mutually beneficial relationships.

A comprehensive strategy and process of

acquiring, retaining and partnering withselective customers to create superior value

for the company and the customer.


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High

Low

Relationship

orientation

Pre-industrial

Era

Industrial

Era

Information

Era


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Pre-industrial era: Relationship centric-small

scale

Industrial Era: Product centric

Information Era: Relationship centric-large

scale


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1. Rising Customer Expectations:

Increasing Affluence

Greater awareness: explosive media growth

Customer diversity: mass marketing fails

2. Affordable technological advances


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Cost of Acquiring a customer is high.

Customers are profitable over a period of

time.

Customer profitability is skewedAll customers are NOT equal.

Implications

Competitors may lure top customers

affecting firms revenue in big way.

Firms should adopt different strategies for

different customer groups.


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Programmes to be developed to retain and

build stronger bonds with top customers.

Cost analysis to be done with middle group of

potentials to reduce cost of serving them.Efforts should be made to increase the

profitability of these customers by cross

selling or up selling.

For bottom group, cost of service to bereduced by encouraging them to use lower

cost channels . In some cases, they may be

encouraged to defect to competitors.


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Dependence on periodic surveys and other

ways to gather data is reduced as it is an

ongoing process.

Due to known customer preferences, wastageon mass marketing is reduced.


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95% of customers do not bother to complain.

They just change the seller.

Loyal customers take time to complain and

shift. They give time to sellers. A satisfied customer doesnt tell as much as

a dissatisfied customer.

70% of customers who complain come back if

complaints are dealt with carefully. A satisfied customers feedback helps in

improving service.


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Build long term and profitable relationships

with chosen customers

Getting closer to those customers at everypoint of contact with them.


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It is often said-To have effective CRM , buy

the right application (technology/tools).

The right application is critical. But it is your

CRM strategy that informs which applicationwill be right for you.

CRM Strategy

Organizational Structure

Technology Implementation

CRM strategy drives organizational structure and Technology Implementation


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BusinessObjectives

ProgrammeInitiatives

Departmental Plans

Technology


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Business Objectives:

Outlining 2 to 5 year strategic goals.

Initial planning leading to long term goals.

Programme Initiatives: Short term game plans that move the

company towards long term goals

Measurable initiatives giving clear indications

of forward progress 1-1.5 years scope

Include plans to derive maximum customersatisfaction


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Departmental Plans:

Processes that will determine every dayfunctioning within the organization

Departmental plans with cross-departmentalintegration

Technology:

Drives the entire architecture

Used to automate and enable some or all ofthe business processes and initiatives

Generally a reflection of the co-ordination,or lack thereof, of the organization.


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Functional CRM: For organizations with no departmental

coordination

The modules work for individual dept.

Specialized modules Initial amount spent is high

Departmental CRM:

Some modules common to some dept.

Intra departmental coordination neededPartial CRM: Two to three departments share a

common master database.

Full CRM: Entire organization uses the samedatabase.


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Scalability:large scale usability,expandability

Multiple communication channels

Act as trigger

Assignment: assigning requests to person orgroup

Database: maintain data warehouse

Privacy maintenance: of customer data


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Operational CRM

Analytical CRM

Collaborative CRM


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CRM TECHNOLOGY FRAMEWORK


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Most identifiable part of CRM

Covers customer facing transactions

Includes Sales Force Automation, EnterpriseMarketing Automation, Front Office Suites

Includes typical business functions like

customer service, order management etc.

Eg. SAP CRM-On Demand, PeopleSoft


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Involves 3 general areas

SFA-Sales Force Automation

CSS-Customer Service and support

EMA-Enterprise Marketing Automation


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Includes capture, storage, extraction,

processing, interpretation, reporting of

customer data to user.

Customers data is taken from multiplesources and stored in customer data

repository

Algorithms are used to analyse and interpret

data as needed.Uses data mining

Eg. Micro Strategy


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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).


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Provides point of interaction through variouschannels

Includes Customer Interaction Center(CIC),communication channels like web, email

etc. Direct communication with customers that does

not include a companys sales or servicerepresentative (self service)

Collaborative CRM covers the direct interactionwith customers via a variety of channels, such asinternet, email, automated phone (AutomatedVoice Response AVR), SMS or through mobileemail.


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CRM ENGINE:A database to store customer

information. This can be a CRM specific

database or an Enterprise Data warehouse.

FRONT OFFICE SOLUTIONS: Operational CRM,

requires customer support software, SFA,

EMA,Customer Interaction applications


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ENTERPRISE APPLICATION

INTEGRATION(EAI):link CRM back and front

office solutions, link old with new

applications, allow one system to

communicate with other systems

BACKOFFICESOLUTIONS: Analytical CRM

requires statistical analysis software, work in

background


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The stages a customer goes through from the

time before deciding to do business with an

organization until he/she decides to stop

being a customer.

The progression of steps a customer goes

through when considering, purchasing, using,

and maintaining loyalty to a product or

service. The goal of effective CRM is to get the

customer to move through the cycle again

and again.


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ACQUISITION

suspect

prospect

Customers 1sttransaction

RETENTION

Loyal advocate

Repeat customer

WINBACK

Inactive customer

Lost customer


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Interact with customers andprospective customers

Deliver increased value tocustomers

Acquire customers andprospective customers

Retain valuable customers

Developproducts,services,channels tomeet customers needs

Customize based on customersegments

Understand customers needs

Differentiate based on their

needs characteristics andbehaviour

Understandand

Differentiate

Developand

customize

Interact

andDeliver

Acquire

andRetain


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Amount of money a customer spends while doingbusiness with a firm in his entire lifetime as thefirms customer. It may also include money spentby his referrals.

CLTV in quantitative terms is defined as the netpresent value(NPV) of the future profits to bereceived from a given no. of newly acquired orexisting customers during a specified timeframe.

Some customers have low LTV so org. may notwant to reestablish relationships with those whodemand too much service without correspondingamt of revenue.


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Average sale(A)=Total sale in a year/total no. oftransactions

Average No. of times customer buys from a firm in ayear(B)= Total no. of transactions / total no. ofcustomers

No. of years a customer remains a cust.(C)

No. of referrals(D)

% of referrals who became customers(E)

Gross sales/year/customer=A*B

Gross sales over customers lifetime=A*B*C

Referrals who became customers = D*E

Gross sales from referrals=A*B*C*D*E

Total Value of a satisfied customer=A*B*C+A*B*C*D*E


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Acquisition: Helps to estimate how much tospend to acquire customer

Targeting

ROI(Return on Investment): helps to measurecampaign performance

Customer retention:helps to estimate howmuch to spend to retain

Single customer profitability: can also be

estimated

Provides greater unity across business byestablishing a common base for decisionmaking


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Specification of objectives: different ways of

calculating for different purposes

Organizational commitment: All must be

convinced, not only managers.Continuous collection of relevant data

required to ensure proper assessment

Inability of legacy systems to adapt to new

metrics It is an estimate.It requires hypothesis about

future.Changes in circumstances must be

accounted for.


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Customers satisfied when expectations are

met.

Expectations depend on:

Word of mouth Personal needs :physiological, safety, social,

esteem, self actualization

Past experience

External communication by service provider


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Cost associated with finding new customers

Advertising

Keeping price low

Personal selling Setting up new account

Explaining business

Inefficient dealing


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Profit generated from old satisfied customers

Reduced price sensitivity

Reduced switching to competitors

Increased referrals

Increased repeat purchase


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If losing customers, find the reason,act fast

Implement loyalty programs-loyalty cards

Exceptional service

Current customer satisfied-word of mouthfree publicity


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In case of customer complaint, confused: be

sure to tell whom to contact

Inattentive clients: repeat questions

Product already sold,customer says expectedmore: Ask for his/her opinion about the best

solution

Agitated customer: practice to keep cool

Forced to give product at lower thandeserved price : consider terminating

transaction


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Be customer centric

Listen carefully

Let the customer know that he/she has been

understood If org.is wrong

Express regret

If possible upgrade of service


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Whose fault is not clear-Resolve conflict

Accommodation-settlement of a conflict emphasizing

cooperative behaviour, for customers with high CLV

Compromise-attempt to find a mutually acceptablemiddle ground that is satisfactory to both parties.

Termination

Follow up and prevent recurrence-feedbacktaken

Keep in touch and listen to customers


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Self Study---

Advantages and disadvantages of CRM

THANKS

Documents

Introduction to Customer Relationship Management