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CHAPTER 9




       CUSTOMER
      RELATIONSHIP
      MANAGEMENT



McGraw-Hill/Irwin    ©2008 The McGraw-Hill Companies,...
9-2




      Chapter Nine Overview
• SECTION 9.1 – CUSTOMER RELATIONSHIP
  MANAGEMENT
  – Business Benefits of CRM
  – Us...
SECTION 9.1




       CUSTOMER
      RELATIONSHIP
      MANAGEMENT



McGraw-Hill/Irwin     ©2008 The McGraw-Hill Compani...
9-4




          LEARNING OUTCOMES
1. Compare operational and analytical customer
   relationship management

3. Explain ...
9-5




   BUSINESS BENEFITS OF CRM

• CRM enables an organization to:
  – Provide better customer service
  – Make call c...
9-6




              CRM BASICS

• Organizations can find their most valuable
  customers through “RFM” - Recency,
  Freq...
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           The Evolution of CRM

• CRM reporting technology – help organizations
  identify their customers across...
9-8




        The Evolution of CRM
• Three phases in the evolution of CRM
  include reporting, analyzing, and
  predicti...
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The Evolution of CRM
9-10




  Operational and Analytical CRM

• Operational CRM – supports traditional
  transactional processing for day-to-...
9-11




Operational and Analytical CRM
9-12




Using IT to Drive Operational CRM
9-13




    Marketing and Operational CRM
•   Three marketing operational CRM
    technologies:
    1. List generator – c...
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       Sales and Operational CRM
•   The sales department was the first to begin
    developing CRM systems with ...
9-15




        Sales and Operational CRM
•   Sales and operational CRM technologies
    1. Sales management CRM system –...
9-16




         Sales and Operational CRM

•    CRM Pointers for Gaining Prospective
     Customer
    1.   Get their at...
9-17



          Customer Service and
            Operational CRM
•   Three customer service operational CRM
    technolo...
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Customer Service and
  Operational CRM
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              USING IT TO DRIVE
              ANALYTICAL CRM
•   Personalization – when a Web site knows enough ab...
9-20



             USING IT TO DRIVE
             ANALYTICAL CRM
•    Analytical CRM information examples
    1.   Give ...
9-21



    OPENING CASE QUESTIONS
      Customer First Awards
1. Summarize the evolution of CRM and provide
   an example...
9-22



    OPENING CASE QUESTIONS
      Customer First Awards
1. How could Progressive and Mini’s
   customer service dep...
SECTION 9.2




        CUSTOMER
      RELATIONSHIP
      MANAGEMENT
       STRATEGIES


McGraw-Hill/Irwin     ©2008 The M...
9-24




         LEARNING OUTCOMES

1. Identify the primary forces driving the explosive
   growth of customer relationsh...
9-25



    CUSTOMER RELATIONSHIP
MANAGEMENT’S EXPLOSIVE GROWTH

       CRM Business Drivers
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    CUSTOMER RELATIONSHIP
MANAGEMENT’S EXPLOSIVE GROWTH

 Forecasts for CRM Spending (in billions)
9-27



       CUSTOMER RELATIONSHIP
    MANAGEMENT’S SUCCESS FACTORS

•     CRM success factors include:
     1.   Clearl...
9-28



CURRENT TRENDS: SRM, PRM, AND
            ERM
•   Current trends include:
    –   Supplier relationship management...
9-29




           FUTURE CRM TRENDS

•   CRM future trends include:
    –   CRM applications will change from employee-o...
9-30



    OPENING CASE QUESTIONS
      Customer First Awards
1. How might Progressive’s business model
   change if it d...
9-31



    OPENING CASE QUESTIONS
      Customer First Awards
1. Explain SRM and how Mini could use it
   to improve its ...
9-32



        CLOSING CASE ONE
  Fighting Cancer with Information
1. How could the ACS’s marketing department
   use ope...
9-33



        CLOSING CASE ONE
  Fighting Cancer with Information
1. Describe the benefits ACS could gain
   from using ...
9-34



          CLOSING CASE TWO
          Calling All Canadians
1. What are the two different types of CRM and
   how c...
9-35



        CLOSING CASE TWO
        Calling All Canadians
1. How will outsourcing contact centers
   (call centers) t...
9-36



        CLOSING CASE THREE
           The Ritz-Carlton
1. What are the two different types of CRM and
   how has t...
9-37



        CLOSING CASE THREE
           The Ritz-Carlton
1. Describe three ways Ritz-Carlton can
   extend its custo...
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  • CLASSROOM OPENERGREAT BUSINESS DECISIONS – Harley-Davidson Begins the Harley Owners Group (H.O.G.) to Encourage Customer Involvement One of the biggest assets for Milwaukee-based Harley-Davidson Motorcycle Company is its intensely loyal customers. After struggling against Japanese competition throughout the 1960s and 1970s, the company turned a corner in 1981 when a group of 13 senior Harley-Davidson executives purchased the company. Vaughn Beals, the leader, celebrated with a victory ride from the company’s factory in York, Pennsylvania, to its headquarters in Milwaukee. The new owners decided to begin the Harley Owners Group (H.O.G) to get customers more involved with the product. HOG worked. With HOG, the company was able to key into its greatest asset – the people who care about the Harley-Davidson company. HOG opened a dialog outside the company with its loyal customer base and inside the company with its workforce. In 1993, a little over 10 years after the start of HOG, the company celebrated its 90th anniversary with more than 100,000 HOG members converging on Milwaukee for a drive-through parade featuring 60,000 Harley-Davidson machines.
  • 9.1Compare operational and analytical customer relationship management.Operational CRM supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers. Analytical CRM supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers. The primary difference between operational CRM and analytical CRM is the direct interaction between the organization and its customers.9.2 Explain the formula an organization can use to find its most valuable customers.An organization can find its most valuable customers by using a formula that industry insiders call RFM— Recency, Frequency, and Monetary value. In other words, an organization must track:How recently a customer purchased items (recency).How frequently a customer purchases items (frequency).How much a customer spends on each purchase (monetary value).9.3 Describe and differentiate the CRM technologies used by sales departments and customer service departments.The three primary operational CRM technologies a sales department can implement toincrease customer satisfaction are:Sales management CRM systems. Sales management CRM systems automate each phase of the sales process, helping individual sales representatives coordinate and organize all of their accounts. Features include calendars to help plan customer meetings, alarm reminders signaling important tasks, customizable multimedia presentations, and document generation.Contact management CRM systems. A contact management CRM system maintains customer contact information and identifies prospective customers for future sales. Contact management systems include such features as maintaining organizational charts, detailed customer notes, and supplemental sale information.Opportunity management CRM systems. Opportunity management CRM systems target sales opportunities by finding new customers or companies for future sales. Opportunity management systems determine potential customers and competitors and define selling efforts including budgets and schedules. Advanced opportunity management systems can even calculate the probability of a sale, which can save sales representatives significant time and money when attempting to find new customers. The three primary operational CRM technologies a customer service department can implement to increase customer satisfaction are:Contact center. A contact center (or call center ) is where customer service representatives (CSRs) answer customer inquiries and respond to problems through a number of different customer touchpoints. A contact center is one of the best assets a customer driven organization can have because maintaining a high level of customer support is critical to obtaining and retaining customers.Web-based self-service. Web-based self-service systems allow customers to use the Web to find answers to their questions or solutions to their problems. Call scripting. Call scripting systems access organizational databases that track similar issues or questions and automatically generate the details for the CSR who can then relay them to the customer. The system can even provide a list of questions that the CSR can ask the customer to determine the potential problem and resolution. This feature helps CSRs answer difficult questions quickly while also presenting a uniform image so two different customers do not receive two different answers.Describe and differentiate the CRM technologies used by marketing departments and sales departments.The three primary operational CRM technologies a marketing department can implement to increase customer satisfaction are:List generator. List Generator List generators compile customer information from a variety of sources and segment the information for different marketing campaigns. Information sources include Web site visits, Web site questionnaires, online and off-line surveys, flyers, toll-free numbers, current customer lists, and so on. After compiling the customer list, an organization can use criteria to filter and sort the list for potential customers. Filter and sort criteria can include such things as household income, education level, and age. List generators provide the marketing department with a solid understanding of the type of customer it needs to target for marketing campaigns.Campaign management. Campaign Management Campaign management systems guide users through marketing campaigns performing such tasks as campaign definition, planning, scheduling, segmentation, and success analysis. These advanced systems can even calculate quantifiable results for return on investment (ROI) for each campaign and track the results in order to analyze and understand how the company can fine tune future campaigns.Cross-selling and up-selling. Cross-Selling and Up-Selling Two key sales strategies a marketing campaign can deploy are cross-selling and up-selling. Cross-selling is selling additional products or services to a customer. Up-selling is increasing the value of the sale.The three primary operational CRM technologies a sales department can implement to increase customer satisfaction are:Sales management CRM systems. Sales management CRM systems automate each phase of the sales process, helping individual sales representatives coordinate and organize all of their accounts. Features include calendars to help plan customer meetings, alarm reminders signaling important tasks, customizable multimedia presentations, and document generation.Contact management CRM systems. A contact management CRM system maintains customer contact information and identifies prospective customers for future sales. Contact management systems include such features as maintaining organizational charts, detailed customer notes, and supplemental sale information.Opportunity management CRM systems. Opportunity management CRM systems target sales opportunities by finding new customers or companies for future sales. Opportunity management systems determine potential customers and competitors and define selling efforts including budgets and schedules. Advanced opportunity management systems can even calculate the probability of a sale, which can save sales representatives significant time and money when attempting to find new customers.
  • As the business world increasingly shifts from product-focus to customer-focus, most organizations recognize that treating existing customers well is the best source of profitable and sustainable revenue growthAsk your students why, in the age of e-business, an organization is challenged more than ever before to truly satisfy its customersBusiness 2.0 ranked \"You - the customer\" as one of the 50 people who matter now for 2006. http://money.cnn.com/magazines/business2/peoplewhomatter/ These Web sites show the power people have in the consumer market todayhttp://www.ihatedell.net/http://www.donotbuydodge.ca/
  • Once a company knows this information, it can begin to strategize marketing campaigns, sales promotions, and other ways to increase businessFor example: If Ms. Smith buys only at the height of the season, then the company should send her a special offer during the “off-season”Ask your students if they have received any personalized promotions latelyHow did the company gather information on the student to be able to offer the personalized promotion?
  • ReportingHelp organizations identify their customers across applicationsAnalyzingHelp organizations segment their customers into categories such as best and worst customersPredictingHelp organizations make predictions regarding customer behavior such as which customers are at risk of leaving
  • ReportingHelp organizations identify their customers across applicationsAnalyzingHelp organizations segment their customers into categories such as best and worst customersPredictingHelp organizations make predictions regarding customer behavior such as which customers are at risk of leaving
  • Ask your students to define additional examples of reporting, analyzing, and predicting questionsCLASSROOM EXERCISEImplementing a CRM StrategyOrganizations can find their most valuable customers through “RFM” - Recency, Frequency, and Monetary valueHow recently a customer purchased items (Recency)How frequently a customer purchased items (Frequency)How much a customer spends on each purchase (Monetary Value)Break your students into groups and ask them to form a CRM strategy for a new company that sells office supplies. Have your students present their strategy to the class. The strategy should address how to gain new customers and how to keep existing customers. For example,The company should create personal promotions for its best customersThe company should target new customers in the surrounding area, especially business customersThe company should try to buy a list of business customers in the area from a valid sourceThe company should advertise in local trade papers, newspapers, radio stations, and restaurantsThe company should track the responses it receives from the various advertising sources
  • Can you list a few examples of front-office systems?Customer service, sales, billingCan you list a few examples of back-office systems?Accounting, finance, human resources, data warehousesAsk your students which systems are more important to an organization – front-office or back-officeAns: Both, one cannot function without the otherCLASSROOM EXERCISEDesigning a Digital Dashboard for a CRM SystemDigital dashboards offer an effective and efficient way to view enterprisewide information at near real-time. According to Nucleus Research, there is a direct correlation between use of digital dashboards and a company’s return on investment (ROI), hence all executives should be using or pushing the development of digital dashboards to monitor and analyze organizational operations.Break your students into groups and ask them to develop a digital dashboard for a CRM system. Be sure your students have addressed all of the following in their digital dashboard:CustomersSalesMarketingCustomer serviceOrder entryBillingCollectionsCredit limitsShippingTransportation
  • Walk-through the Figure with your studentsWhy would an organization have a separate system for each front-office system and each back-office system?Most organizations operate functional “silos”, and each department typically has its own systemsA company might purchase an ERP and then all of the functional silos would be on one system, however, this doesn’t happen very often in the real world. Most organizations require anywhere from 10 to 100 to 1,000 different systems to run their businessFinding one system that could meet all the needs of an entire organization from billing to sales is almost impossibleFor this reason, the CRM system is the integrator, gathering all of the customer information from the many different system to obtain a single view of the customerPersonalization is one of the benefits of an analytical CRM systemPersonalization occurs when a Web site can know enough about a person’s likes and dislikes that it can fashion offers that are more likely to appeal to that person
  • Operational CRM technologies for sales, marketing, and customer service departments
  • How many of you are marketing majors?Do you anticipate using these types of technologies in the marketing department?
  • Walk your students through the sales process displayed in the above figure
  • Ask your students to identify additional pointers for gaining prospective customers1. Get their attention If you have a good prospect, chances are that he or she receives dozens of offers from similar companies. Be sure your first contact is professional and gets your customer’s attention.2. Value their time When you ask for a meeting, you are asking for the most valuable thing a busy person has— time. Many companies have had great success by offering high-value gifts in exchange for a meeting with a representative. Just be careful because some organizations frown on expensive gifts. Instead, offer these prospective customers a report that can help them perform their jobs more effectively.3. Overdeliver If your letter offered a free DVD in exchange for a meeting, bring a box of microwave popcorn along with the movie. Little gestures like these tell customers that you not only keep your word, but also can be counted on to overdeliver.4. Contact frequently Find new and creative ways to contact your prospective customers frequently. Starting a newsletter and sending out a series of industry updates are excellent ways to keep in contact and provide value.5. Generate a trustworthy mailing list If you are buying a mailing list from a third party be sure that the contacts are genuine prospects, especially if you are offering an expensive gift. Be sure that the people you are meeting have the power to authorize a sale.6. Follow up One of the most powerful prospecting tools is a simple thank-you note. Letting people know that their time was appreciated may even lead to additional referrals.
  • Contact center (call center) – where CSRs answer customer inquiries and respond to problems through different touchpoints Web-based self-service system – allow customers to use the Web to find answers to their questions or solutions to their problemsClick-to-talk –customers click on a button and talk with a CSR via the InternetCall scripting system – access organizational databases that track similar issues or questions and automatically generate the details to the CSR who can then relay them to the customerDocumedics is a health care consulting company that provides reimbursement information about pharmaceutical products to patients and health care professionals. The company currently supports inquiries for 12 pharmaceutical companies and receives over 30,000 customer calls per month. Originally, the company had a data file for each patient and for each pharmaceutical company. This inefficient process resulted in the potential for a single patient to have up to 12 different information files if the patient was a client of all 12 pharmaceutical companies. To answer customer questions, a CSR had to download each customer file causing tremendous inefficiencies and confusion.
  • A contact center is part of the customer service department and falls into the category of operational CRMA contact center (call center) is where CSRs answer customer inquiries and respond to problems through different touchpointsA contact center is one of the best assets a customer-driven organization can have because maintaining a high level of customer support is critical to obtaining and retaining customersAutomatic call distribution, IVR, and predictive dialing are only three of many different systems available to help an organization automate its contact centers
  • Analytical CRM has the ability to provide an organization with information about their customers that was previously impossible to locate, and the resulting payback can be tremendous.
  • Ask your students to provide additional examples of analytical CRM 1. Give customers more of what they want Analytical CRM can help an organization go beyond the typical “Dear Mr. Smith” salutation. An organization can use its analytical CRM information to make its communications more personable. For example, if it knows a customer’s shoe size and preferred brand it can notify the customer that there is a pair of size 12 shoes set aside to try on the next time the customer visits the store.2. Find new customers more of what they want similar to the best customers Analytical CRM might determine that an organization does a lot of business with women 35 to 45 years old who drive SUVs and live within 30 miles of a certain location. The company can then find a mailing list that highlights this type of customer for potential new sales.3. Find out what the organization does best Analytical CRM can determine what an organization does better than its competitors. For example, if a restaurant caters more breakfasts to midsized companies than its competition does, it can purchase a specialized mailing list of midsized companies in the area and send them a mailing that features the breakfast catering specials.4. Beat competitors to the punch Analytical CRM can determine sales trends allowing an organization to offer the best customers deals before the competition has a chance to. For example, a clothing store might determine its best customers for outdoor apparel and send them an offer to attend a private sale right before the competition runs its outdoor apparel sale.5. Reactivate inactive customers Analytical CRM can highlight customers who have not done any business with the organization in a while. The organization can then send them a personalized letter along with a discount coupon. It will remind them of the company and may help spark a renewed relationship.6. Let customers know they matter Analytical CRM can determine what customers want and need, so an organization can contact them with this information. Anything from a private sale to a reminder that the car is due for a tuneup is excellent customer service.
  • 1. Summarize the evolution of CRM and provide an example of a reporting, analyzing, and predicting question Progressive might ask its customers.There are three phases in the evolution of CRM: (1) reporting, (2) analyzing, and (3) predicting. CRM reporting technologies help organizations identify their customers across other applications. CRM analysis technologies help organizations segment their customers into categories such as best and worst customers. CRM predicting technologies help organizations make predictions regarding customer behavior such as which customers are at risk of leaving. Reporting questionsWhat was the major cause of your accident?How helpful was the progressive insurance representative during your claim?Where was your accident?What kind of car were you driving?Whose fault was the accident?What kind of car was the other vehicle?What time of day was the accident?What were the road conditions when the accident occurred?Analyzing questionsWhy are there so many customer accidents in one specific location?Why are there so many customers that drive a certain type of car getting into accidents?Why do certain types of weather conditions cause more accidents for our customers?Why are certain customers continually getting into accidents?Why are so many customer accidents during a certain time of the day?Predicting questionsWhat customers are at risk of leaving?What additional insurance products will our customers buy?Which customers should we discontinue providing insurance for?Which customers should we try to sell additional insurance to?What can we do to reduce the number of accidents?Are there certain types of cars that we can reduce the insurance on?Are there certain types of cars that we should increase the insurance on?2. How could Progressive’s marketing department use CRM technology to improve its operations?The three primary operational CRM technologies a marketing department can implement to increase customer satisfaction are:List generator. List Generator List generators compile customer information from a variety of sources and segment the information for different marketing campaigns. Information sources include Web site visits, Web site questionnaires, online and off-line surveys, flyers, toll-free numbers, current customer lists, and so on. After compiling the customer list, an organization can use criteria to filter and sort the list for potential customers. Filter and sort criteria can include such things as household income, education level, and age. List generators provide the marketing department with a solid understanding of the type of customer it needs to target for marketing campaigns.Campaign management. Campaign Management Campaign management systems guide users through marketing campaigns performing such tasks as campaign definition, planning, scheduling, segmentation, and success analysis. These advanced systems can even calculate quantifiable results for return on investment (ROI) for each campaign and track the results in order to analyze and understand how the company can fine tune future campaigns.Cross-selling and up-selling. Cross-Selling and Up-Selling Two key sales strategies a marketing campaign can deploy are cross-selling and up-selling. Cross-selling is selling additional products or services to a customer. Up-selling is increasing the value of the sale.Progressive can use any of the above to increase the efficiency and effectiveness of its marketing department.3. How could Mini’s sales department use CRM technology to improve its operations?Mini can use any of the following CRM sales technologies to improve its operations: Sales management systems automate each phase of the sales process, helping individual sales representatives coordinate and organize all of their accounts. Contact management systems maintain customer contact information and identify prospective customers for future sales. Opportunity management systems target sales opportunities by finding new customers or companies for future sales.
  • 4. How could Progressive and Mini’s customer service departments use CRM technology to improve their operations?The three primary operational CRM technologies a sales department can implement to increase customer satisfaction are:Sales management CRM systems. Sales management CRM systems automate each phase of the sales process, helping individual sales representatives coordinate and organize all of their accounts. Features include calendars to help plan customer meetings, alarm reminders signaling important tasks, customizable multimedia presentations, and document generation.Contact management CRM systems. A contact management CRM system maintains customer contact information and identifies prospective customers for future sales. Contact management systems include such features as maintaining organizational charts, detailed customer notes, and supplemental sale information.Opportunity management CRM systems. Opportunity management CRM systems target sales opportunities by finding new customers or companies for future sales. Opportunity management systems determine potential customers and competitors and define selling efforts including budgets and schedules. Advanced opportunity management systems can even calculate the probability of a sale, which can save sales representatives significant time and money when attempting to find new customers. 5. Define analytical CRM and its importance to companies like Progressive and Mini.Analytical CRM supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers. The primary difference between operational CRM and analytical CRM is the direct interaction between the organization and its customers. Progressive and Mini can use analytical CRM to perform analyzing and predicting CRM strategies. Maturing analytical CRM and behavioral modeling technologies are helping numerous organizations move beyond legacy benefits such as enhanced customer service and retention to systems that can truly improve business profitability. Unlike operational CRM that automates call centers and sales forces with the aim of enhancing customer transactions, analytical CRM solutions are designed to dig deep into a company’s historical customer information and expose patterns of behavior on which a company can capitalize. Analytical CRM is primarily used to enhance and support decision making and works by identifying patterns in customer information collected from the various operational CRM systems.
  • 9.5 Identify the primary forces driving the explosive growth of customer relationship management.The primary forces driving the explosive growth of CRM include:Automation/Productivity/EfficiencyCompetitive advantageCustomer demands/requirementsIncrease revenuesDecrease costsCustomer supportInventory controlAccessibility9.6 Summarize the best practices for implementing a successful customer relationship management system.CRM success factors include:Clearly communicate the CRM strategy Define information needs and flowsBuild an integrated view of the customerImplement in iterationsScalability for organizational growth9.7 Compare customer relationship management, supplier relationship management, partner relationship management, and employee relationship management.Supplier relationship management (SRM) focuses on keeping suppliers satisfied by evaluating and categorizing suppliers for different projects, which optimizes supplier selection. Partner relationship management (PRM) focuses on keeping vendors satisfied by managing alliance partner and reseller relationships that provide customers with the optimal sales channel. Employee relationship management (ERM) provides employees with a subset of CRM applications available through a Web browser.
  • Brother International experienced skyrocketing growth in its sales of multifunction printersAlong with skyrocketing sales growth came a tremendous increase in customer service callsWhen Brother failed to answer the phone fast enough, product returns started to increaseBrother purchased, designed, developed, and deployed SAP’s CRM solutionThe 1.8 million calls dropped to 1.57 million – reducing call center staff from 180 agents to 160 agentsThe CRM system has also reduced call duration by an average of one minute, saving the company $600,000 per yearCLASSROOM EXERCISECRM AGAINBreak your students into groups and ask them to identify how each of the “CRM business drivers” in the figure is supported by a CRM systemFor example, how does CRM help an organization automate, increase productivity, and improve efficiency?Ans: The Brother example mentioned above is a perfect example of how a CRM system can do all three of these things for an organizationThe answers to these questions will vary and the goal of the activity is for students to understand the many different benefits an organization can gain through a CRM system
  • Can you think of an industry or company that would not benefit from a CRM system?Every business can benefit from CRM!Business 2.0 recently rated the top 50 important people for 2006The number 1 person was “You, The Consumer”, due to the information age, personalization, and the growing importance of the consumer
  • Clearly communicate the CRM strategy – ensuring that all departments and employees understand exactly what CRM means and how it will add value to the organization is critical to the success of the implementationDefine information needs and flows – the organization must understand all of the different ways that information flows into and out of the organization to implement a successful CRM system. If the organization misses one of the information flows, such as a customer service Web site, then none of that information from that Web site will be integrated into the CRM system and the company will not have a complete view of its customersBuild an integrated view of the customer – the CRM system must support the organization's strategies and goalsImplement in iterations – avoid the big-bang approach and implement in small, manageable, piecesScalability for organizational growth – ensure the system can support the organization's future growthCLASSROOM EXERCISECRM CorrelationsBreak your students into groups and have them compare and analyze the SCM industry success factors and the CRM industry success factors to determine any correlationsAns: Many of the success factors are the same. The sooner your students learn and understand these success factors, such as implementing in iterations or small pieces, the sooner they can apply them to any big system installation and help ensure IT system success
  • Supplier relationship management (SRM) focuses on keeping suppliers satisfied by evaluating and categorizing suppliers for different projects, which optimizes supplier selection. SRM applications help companies analyze vendors based on a number of key variables including strategy, business goals, prices, and markets. The company can then determine the best supplier to collaborate with and can work on developing strong supplier relationships with that supplier. The partners can then work together to streamline processes, outsource services, and provide products that they could not provide individually.Partner relationship management (PRM) focuses on keeping vendors satisfied by managing alliance partner and reseller relationships that provide customers with the optimal sales channel. PRM’s business strategy is to select and manage partners to optimize their long-term value to an organization. In effect, it means picking the right partners, working with them to help them be successful in dealing with mutual customers, and ensuring that partners and the ultimate end customers are satisfied and successful.Employee relationship management (ERM) provides employees with a subset of CRM applications available through a Web browser. Many ERM applications assist the employee in dealing with customers by providing detailed information on company products, services, and customer orders. ERM applications typically offer expense tracking, project management tracking, performance appraisals, training, benefits, and company news.
  • Ask your students how they view the future of CRM
  • 6. How might Progressive’s business model change if it decreased its investments in CRM technologies?Marinating solid relationships with its customers and helping its customers through an efficient and effective business process is the core of Progressive’s business model. If Progressive decided to discontinue its investment in CRM it would risk losing its customers and moving in the opposite direction of its core values.7. How might Mini’s business model change if it decreased its investments in CRM technologies?Personalization occurs when a Web site can know enough about a person’s likes and dislikes that it can fashion offers that are more likely to appeal to that person. Offering personalized and customized customer strategies is Mini’s strategic mission. CRM technologies enable personalization and mass customization. Without these technologies Mini could not continue to operate towards its strategic mission.8. Describe the CRM industry best practices and explain how Progressive is using each.Clearly communicate the CRM strategy – ensuring that all departments and employees understand exactly what CRM means and how it will add value to the organization is critical to the success of the implementation. Progressive communicates with each of its customers via the Internet, marketing materials, and the insurance agent.Define information needs and flows – the organization must understand all of the different ways that information flows into and out of the organization to implement a successful CRM system. If the organization misses one of the information flows, such as a customer service Web site, then none of that information from that Web site will be integrated into the CRM system and the company will not have a complete view of its customers. Progressive not only defines where information flows throughout its organization, it used business process reengineering to focus on how the information can flow more efficiently and effectively throughout its organization.Build an integrated view of the customer – the CRM system must support the organization's strategies and goals. Progressive has only one agent who is responsible for all of the details of each customers claim. This give the agent a comprehensive view of each customer.Implement in iterations – avoid the big-bang approach and implement in small, manageable, pieces. Progressive’s systems all talk to each other and allow a claim to be automatically expedited to a payment.Scalability for organizational growth – ensure the system can support the organization's future growth. Progressive is on the cutting edge and using technology to gain a competitive advantage.
  • 9. Explain SRM and how Mini could use it to improve its business.Supplier relationship management (SRM) focuses on keeping suppliers satisfied by evaluating and categorizing suppliers for different projects, which optimizes supplier selection. SRM applications help companies analyze vendors based on a number of key variables including strategy, business goals, prices, and markets. The company can then determine the best supplier to collaborate with and can work on developing strong relationships with that supplier. The partners can then work together to streamline processes, outsource services, and provide products that they could not provide individually. Mini works with many different suppliers from tire companies to part companies. Mini needs to focus on building strong relationships with its partners to keep its business on track. If a partner fails to deliver, Mini’s customer, and bottom-line revenue- is affected.10. Explain ERM and how Progressive could use it to improve its business.Employee relationship management (ERM) provides employees with a subset of CRM applications available through a Web browser. Many of the ERM applications assist the employee in dealing with customers by providing detailed information on company products, services, and customer orders. Progressive’s employees directly interact with its customers. Providing ERM applications will enable Progressive’s employees to work more efficiently and effectively. Employees play a major role in Progressive’s business processes and strategic mission.
  • 1. How could the ACS’s marketing department use operational CRM to strengthen its relationships with its customersThe ACS can use operational CRM to gain a single view of its constituents and all information required to serve them. Three marketing operational CRM technologies that the ACS could use include list generators, campaign management systems, and cross-selling and up-selling. List generators compile customer information from a variety of sources and segment the information for different marketing campaigns. Campaign management systems guide users through marketing campaigns. Cross-selling is selling additional products or services. Up-selling is increasing the value of the sale.2. How could the ACS’s customer service department use operational CRM to strengthen its relationships with its customers?There are three primary customer service operational CRM technologies that the ACS could use to strengthen its relationships with its customers including contact centers, web-based self-service, and call scripting. Contact center (call center) is where CSRs answer customer inquiries and respond to problems through different touchpoints. Web-based self-service allows customers to use the Web to find answers to their questions or solutions to their problems. Call scripting accesses organizational databases that track similar issues or questions and automatically generates the details to the CSR, who can then relay them to the customer.3. Review all of the operational CRM technologies and determine which one would add the greatest value to ACS’s businessStudent answers to this question will vary. The important factor in this decision will be the students’ justification for their answer.
  • 4. Describe the benefits ACS could gain from using analytical CRMAnalytical CRM relies heavily on data warehousing technologies and business intelligence to glean insights into customer behavior. These systems quickly aggregate, analyze, and disseminate customer information throughout an organization. Analytical CRM has the ability to provide the ACS with information about their customers and constituents that was previously impossible to locate, and the resulting payback can be tremendous. The business intelligence provided by an analytical CRM system can provide the ACS with facts that can help lead to innovative cancer drugs and the possible elimination of the disease.5. Summarize SRM and describe how ACS could use it to increase efficiency in its businessSupplier relationship management (SRM) focuses on keeping suppliers satisfied by evaluating and categorizing suppliers for different projects, which optimizes supplier selection. SRM applications help companies analyze vendors based on a number of key variables including strategy, business goals, prices, and markets. The company can then determine the best supplier to collaborate with and can work on developing strong supplier relationships with that supplier. The partners can then work together to streamline processes, outsource services, and provide products that they could not provide individually.
  • 1. What are the two different types of CRM and how can they be used to help an organization gain a competitive advantage?Customer relationship management involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization’s profitability. Operational CRM supports traditional transactional processing for day-to-day front-office operational or systems that deal directly with the customers. Analytical CRM supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers. Analytical CRM relies heavily on data warehousing technologies and business intelligence to glean insights into customer behavior. These systems quickly aggregate, analyze, and disseminate customer information throughout an organization. Analytical CRM has the ability to provide an organization with information about their customers and constituents that was previously impossible to locate, and the resulting payback can be tremendous.2. Explain how a contact center (or call center) can help an organization achieve its CRM goalsA contact center is part of the customer service department and falls into the category of operational CRM. A contact center (call center) is where CSRs answer customer inquiries and respond to problems through different touchpoints. A contact center is one of the best assets a customer-driven organization can have because maintaining a high level of customer support is critical to obtaining and retaining customers. There are numerous systems available to help an organization automate its contact centers including:Automatic call distribution – a phone switch routes inbound calls to available agentsInteractive voice response (IVR) – directs customers to use touch-tone phones or keywords to navigate or provide informationPredictive dialing – automatically dials outbound calls and when someone answers, the call is forwarded to an available agent3. Describe three ways an organization can perform CRM functions over the InternetIntranets are a great way to provide information to important customers over the Internet. Organizations can push information to their customers with e-mails discussing new promotions and sales. Offering a Web site that is user friendly is one of the best ways to offer customer support and sales over the Internet.
  • 4. How will outsourcing contact centers (call centers) to Canada change as future CRM technologies replace current CRM technologies?CRM future trends include:CRM applications will change from employee-only tools to tools used by suppliers, partners, and even customersCRM will continue to be a major strategic focus for companiesCRM applications will continue to adapt wireless capabilities supporting mobile sales and mobile customersCRM suites will incorporate PRM and SRM modules
  • 1. What are the two different types of CRM and how has the Ritz-Carlton used them to become a world-class customer-service business?Operational CRM supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers. Analytical CRM supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers. The primary difference between operational CRM and analytical CRM is the direct interaction between the organization and its customers. The Ritz-Carlton is a leader in customer service. It uses CRM for everything from knowing a customer’s name to recognizing a customer’s birthday.2. Determine which of Ritz-Carlton’s six steps of customer service is the most important for its business.They are all important!3. Rank Ritz-Carlton’s six steps of customer service in order of greatest to least importance in a CRM strategy for an online book-selling business such as Amazon.com.Student answers to this question will vary. The important part is that they justify why the order in relation to Amazon’s business strategy. It is also important that the student understand that these strategies can be applied to any business that wants to succeed in CRM.
  • 4. Describe three ways Ritz-Carlton can extend its customer reach by performing CRM functions over the Internet.There are numerous ways that the Ritz-Carlton can extend its reach including personalization through a Web site that offers activities in the area, information on conferences that customers might want to attend, and menu plans that customers can place orders before they arrive or during their stay.5. What benefits could the Ritz-Carlton gain from using analytical CRM?Analytical CRM supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers. The primary difference between operational CRM and analytical CRM is the direct interaction between the organization and its customers. Ritz-Carlton can use analytical CRM to answer analysis and predicting questions. 6. Explain ERM and describe how the Ritz-Carlton could use it to increase efficiency in its business.Employee relationship management (ERM) provides employees with a subset of CRM applications available through a Web browser. Many of the ERM applications assist the employee in dealing with customers by providing detailed information on company products, services, and customer orders. The Ritz-Carlton’s employees directly interact with its customers. Providing ERM applications will enable the employees to work more efficiently and effectively. Employees play a major role in Ritz-Carlton’s business processes and strategic mission.
  • Transcript of "Customer Relationship Management"

    1. 1. CHAPTER 9 CUSTOMER RELATIONSHIP MANAGEMENT McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved
    2. 2. 9-2 Chapter Nine Overview • SECTION 9.1 – CUSTOMER RELATIONSHIP MANAGEMENT – Business Benefits of CRM – Using Information Technology to Drive Operational CRM – Using Information Technology to Driver Analytical CRM • SECTION 9.2 – CUSTOEMR RELATINSHIP MANAGEMENT STRATEGIES – Customer Relationship Management’s Explosive Growth – Customer Relationship Management Success Factors – Current Trends: SRM, PRM, ERM – Future CRM Trends
    3. 3. SECTION 9.1 CUSTOMER RELATIONSHIP MANAGEMENT McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved
    4. 4. 9-4 LEARNING OUTCOMES 1. Compare operational and analytical customer relationship management 3. Explain the formula an organization can use to find its most valuable customers 5. Describe and differentiate the CRM technologies used by sales departments and customer service departments 7. Describe and differentiate the CRM technologies used by marketing departments and sales departments
    5. 5. 9-5 BUSINESS BENEFITS OF CRM • CRM enables an organization to: – Provide better customer service – Make call centers more efficient – Cross sell products more effectively – Help sales staff close deals faster – Simplify marketing and sales processes – Discover new customers – Increase customer revenues
    6. 6. 9-6 CRM BASICS • Organizations can find their most valuable customers through “RFM” - Recency, Frequency, and Monetary value – How recently a customer purchased items (Recency) – How frequently a customer purchased items (Frequency) – How much a customer spends on each purchase (Monetary Value)
    7. 7. 9-7 The Evolution of CRM • CRM reporting technology – help organizations identify their customers across other applications • CRM analysis technologies – help organization segment their customers into categories such as best and worst customers • CRM predicting technologies – help organizations make predictions regarding customer behavior such as which customers are at risk of leaving
    8. 8. 9-8 The Evolution of CRM • Three phases in the evolution of CRM include reporting, analyzing, and predicting
    9. 9. 9-9 The Evolution of CRM
    10. 10. 9-10 Operational and Analytical CRM • Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers • Analytical CRM – supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers
    11. 11. 9-11 Operational and Analytical CRM
    12. 12. 9-12 Using IT to Drive Operational CRM
    13. 13. 9-13 Marketing and Operational CRM • Three marketing operational CRM technologies: 1. List generator – compiles customer information from a variety of sources and segment the information for different marketing campaigns 2. Campaign management system – guides users through marketing campaigns 3. Cross-selling and up-selling • Cross-selling – selling additional products or services • Up-selling – increasing the value of the sale
    14. 14. 9-14 Sales and Operational CRM • The sales department was the first to begin developing CRM systems with sales force automation – a system that automatically tracks all of the steps in the sales process
    15. 15. 9-15 Sales and Operational CRM • Sales and operational CRM technologies 1. Sales management CRM system – automates each phase of the sales process, helping individual sales representatives coordinate and organize all of their accounts 2. Contact management CRM system – maintains customer contact information and identifies prospective customers for future sales 3. Opportunity management CRM system – targets sales opportunities by finding new customers or companies for future sales
    16. 16. 9-16 Sales and Operational CRM • CRM Pointers for Gaining Prospective Customer 1. Get their attention 2. Value their time 3. Overdeliver 4. Contact frequently 5. Generate a trustworthy mailing list 6. Follow up
    17. 17. 9-17 Customer Service and Operational CRM • Three customer service operational CRM technologies: 1. Contact center (call center) 2. Web-based self-service system • Click-to-talk 3. Call scripting system
    18. 18. 9-18 Customer Service and Operational CRM
    19. 19. 9-19 USING IT TO DRIVE ANALYTICAL CRM • Personalization – when a Web site knows enough about a persons likes and dislikes that it can fashion offers that are more likely to appeal to that person • Analytical CRM relies heavily on data warehousing technologies and business intelligence to glean insights into customer behavior • These systems quickly aggregate, analyze, and disseminate customer information throughout an organization
    20. 20. 9-20 USING IT TO DRIVE ANALYTICAL CRM • Analytical CRM information examples 1. Give customers more of what they want 2. Value their time 3. Overdeliver 4. Contact frequently 5. Generate a trustworthy mailing list 6. Follow up
    21. 21. 9-21 OPENING CASE QUESTIONS Customer First Awards 1. Summarize the evolution of CRM and provide an example of a reporting, analyzing, and predicting question Progressive might ask its customers 3. How could Progressive’s marketing department use CRM technology to improve its operations? 5. How could Mini’s sales department use CRM technology to improve its operations?
    22. 22. 9-22 OPENING CASE QUESTIONS Customer First Awards 1. How could Progressive and Mini’s customer service departments use CRM technology to improve their operations? 3. Define analytical CRM and its importance to companies like Progressive and Mini
    23. 23. SECTION 9.2 CUSTOMER RELATIONSHIP MANAGEMENT STRATEGIES McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved
    24. 24. 9-24 LEARNING OUTCOMES 1. Identify the primary forces driving the explosive growth of customer relationship management 3. Summarize the best practices for implementing a successful customer relationship management system 5. Compare customer relationship management, supplier relationship management, partner relationship management, and employee relationship management
    25. 25. 9-25 CUSTOMER RELATIONSHIP MANAGEMENT’S EXPLOSIVE GROWTH CRM Business Drivers
    26. 26. 9-26 CUSTOMER RELATIONSHIP MANAGEMENT’S EXPLOSIVE GROWTH Forecasts for CRM Spending (in billions)
    27. 27. 9-27 CUSTOMER RELATIONSHIP MANAGEMENT’S SUCCESS FACTORS • CRM success factors include: 1. Clearly communicate the CRM strategy 2. Define information needs and flows 3. Build an integrated view of the customer 4. Implement in iterations 5. Scalability for organizational growth
    28. 28. 9-28 CURRENT TRENDS: SRM, PRM, AND ERM • Current trends include: – Supplier relationship management (SRM) – focuses on keeping suppliers satisfied by evaluating and categorizing suppliers for different projects, which optimizes supplier selection – Partner relationship management (PRM) – focuses on keeping vendors satisfied by managing alliance partner and reseller relationship that provide customers with the optimal sales channel – Employee relationship management (ERM) – provides employees with a subset of CRM applications available through a Web browser
    29. 29. 9-29 FUTURE CRM TRENDS • CRM future trends include: – CRM applications will change from employee-only tools to tools used by suppliers, partners, and even customers – CRM will continue to be a major strategic focus for companies – CRM applications will continue to adapt wireless capabilities supporting mobile sales and mobile customers – CRM suites will incorporate PRM and SRM modules
    30. 30. 9-30 OPENING CASE QUESTIONS Customer First Awards 1. How might Progressive’s business model change if it decreased its investments in CRM technologies? 3. How might Mini’s business model change if it decreased its investments in CRM technologies? 5. Describe the CRM industry best practices and explain how Progressive is using each
    31. 31. 9-31 OPENING CASE QUESTIONS Customer First Awards 1. Explain SRM and how Mini could use it to improve its business 3. Explain ERM and how Progressive could use it to improve its business
    32. 32. 9-32 CLOSING CASE ONE Fighting Cancer with Information 1. How could the ACS’s marketing department use operational CRM to strengthen its relationships with its customers? 3. How could the ACS’s customer service department use operational CRM to strengthen its relationships with its customers? 5. Review all of the operational CRM technologies and determine which one would add the greatest value to ACS’s business
    33. 33. 9-33 CLOSING CASE ONE Fighting Cancer with Information 1. Describe the benefits ACS could gain from using analytical CRM 3. Summarize SRM and describe how ACS could use it to increase efficiency in its business
    34. 34. 9-34 CLOSING CASE TWO Calling All Canadians 1. What are the two different types of CRM and how can they be used to help an organization gain a competitive advantage? 3. Explain how a contact center (or call center) can help an organization achieve its CRM goals 5. Describe three ways an organization can perform CRM functions over the Internet
    35. 35. 9-35 CLOSING CASE TWO Calling All Canadians 1. How will outsourcing contact centers (call centers) to Canada change as future CRM technologies replace current CRM technologies?
    36. 36. 9-36 CLOSING CASE THREE The Ritz-Carlton 1. What are the two different types of CRM and how has the Ritz-Carlton used them to become a world-class customer-service business? 3. Determine which of Ritz-Carlton’s six steps of customer service is the most important for its business 5. Rank Ritz-Carlton’s six steps of customer service in order of greatest to least importance in a CRM strategy for an online book-selling business such as Amazon.com
    37. 37. 9-37 CLOSING CASE THREE The Ritz-Carlton 1. Describe three ways Ritz-Carlton can extend its customer reach by performing CRM functions over the Internet 3. What benefits could the Ritz-Carlton gain from using analytical CRM? 5. Explain ERM and describe how the Ritz- Carlton could use it to increase efficiency in its business
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