Customer Relationship Management

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Customer Relationship Management

  1. 1. Workshop : CUSTOMER RELATIONSHIP MANAGEMENT
  2. 2. CONCEPT AND THINKING BEHIND CRM
  3. 3. THERE ARE ONLY 3 MARKETING FUNCTIONS <ul><li>Acquiring customers </li></ul><ul><li>Retaining or reactivating them </li></ul><ul><li>Selling them more products </li></ul><ul><li>Everything else is a modification of one of these three functions </li></ul><ul><li>Increasing the value of customer base : </li></ul>
  4. 4. DISCUSS Identify the percentage of your company’s current and future effort to grow :
  5. 5. PROFIT IMPACT OF 5% INCREASE IN RETENTION RATE
  6. 6. A LOYAL CUSTOMER IS ONE WHO … 1. Shows Behavioral Commitment : ~ Buys from only one supplier, even though other options exist ~ Increasingly buys more and more from a particular supplier ~ Provides constructive feedback/suggestions 2. Exhibits Psychological Commitment : ~ Wouldn’t consider terminating the relationship ~ Has a positive attitude about the provider ~ Says good things about the provider
  7. 7. CUSTOMER RETENTION (LOYALTY) PAYS OFF <ul><li>Retaining old customer costs less money </li></ul><ul><li>Customers spend more, increased “share of wallet” </li></ul><ul><li>They get comfortable dealing with us </li></ul><ul><li>They spread positive word of mouth </li></ul><ul><li>They cost less to serve </li></ul><ul><li>They are less price sensitive </li></ul><ul><li>They are more forgiving when something goes wrong </li></ul><ul><li>They make our marketing program more efficient </li></ul>
  8. 8. MARKET SHARE VS. SHARE OF CUSTOMER
  9. 9. SATISFACTION VS. LOYALTY Satisfied Customers Loyal Customers Churn/Defector Customers SATISFIED NOT SATISFIED <ul><li>Reason : </li></ul><ul><li>Variety seeking behavior </li></ul><ul><li>Low attachment </li></ul><ul><li>Low exit barrier </li></ul><ul><li>Alternative access </li></ul><ul><li>Competitors create churn </li></ul><ul><li>event </li></ul>
  10. 10. CRM REVOLUTION/EVOLUTION IN INDONESIA <ul><li>Priority customer in banking industry </li></ul><ul><li>Increased call – center </li></ul><ul><li>Frequent flier programs </li></ul><ul><li>Community / clubbing development </li></ul><ul><li>Point reward offering </li></ul><ul><li>Membership program </li></ul><ul><li>Increased below the line activities </li></ul>
  11. 11. LOYALTY IN THE CRM PROCESS Transaction Product Relation Share of Wallet Dialog Share of Life Customer Acquisition (1) Customer Retention (2) Customer Relationship (3)
  12. 12. QUOTES FOR CRM <ul><li>CRM is not a software package . It is not a database . It is not a call center . It is not a loyalty program , a customer service program. CRM is a philosophy in its entirety . </li></ul><ul><li>CRM is more than just an out growth of direct marketing and the event of new technology. </li></ul><ul><li>The objective of CRM is to focus more on customer retention and growth faster than pursue all types of customers at great expense only to lose them. </li></ul>
  13. 13. CRM DEFINITION, ITS FACTS & OTHER LABELS <ul><li>Customer Relationship Management is an enterprise strategy in understanding and influencing customer behavior through meaningful communication in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability . </li></ul><ul><li>CRM facts : </li></ul><ul><li>CRM is easy for small companies </li></ul><ul><li>CRM is not easy for large companies </li></ul><ul><li>CRM is a process not a project </li></ul><ul><li>CRM & other labels : </li></ul><ul><li>One–to–one relationship management </li></ul><ul><li>Customer intimacy </li></ul><ul><li>Integrated Marketing Communication (IMC) </li></ul>
  14. 14. EVOLUTION OF CUSTOMER METRICS CRM Metrics Improve Market & Campaign Metrics Companies Mature into CRM Metrics
  15. 15. STRATEGIC AND TACTICAL GOALS OF CRM <ul><li>CRM’s goal is to increase the opportunity by improving the process to communicate with the right customer , providing the right offer (product and price), through the right channel , at the right time . </li></ul><ul><li>Right Customer : </li></ul><ul><li>Manage customer relationships throughout their life cycle </li></ul><ul><li>Realize customer potential by increasing “Share of Wallet” </li></ul><ul><li>Right Offer : </li></ul><ul><li>Efficiently introduce customer and prospects to your company and its products </li></ul><ul><li>and services </li></ul><ul><li>Customize your offering for each customer </li></ul><ul><li>Right Channel : </li></ul><ul><li>Coordinate communications across every customer touch point </li></ul><ul><li>Ability to communicate to customer’s channel preference </li></ul><ul><li>Capture and analyze channel information for continuous learning </li></ul><ul><li>Right Time : </li></ul><ul><li>Efficiently communicate to customers based on time relevance </li></ul><ul><li>Ability to communicate with real/near-real time or traditional marketing </li></ul>
  16. 16. CRM DIMENSIONS (1)
  17. 17. CRM DIMENSIONS (2) <ul><li>Strategic CRM : </li></ul><ul><li>Customer value </li></ul><ul><li>Competitive differentiation </li></ul><ul><li>Market segmentation and targeting </li></ul><ul><li>Strategic positioning </li></ul><ul><li>Operational CRM : </li></ul><ul><li>Customer service </li></ul><ul><li>Customer data capture </li></ul><ul><li>Customer database </li></ul><ul><li>Analytical CRM : </li></ul><ul><li>Software and hardware for CRM </li></ul><ul><li>Pareto analysis, profitability analysis, etc </li></ul><ul><li>Data mining and statistical analysis </li></ul>
  18. 18. Steps of Managing CRM : CUSTOMER PROFILING IDENTIFICATION
  19. 19. FOUR CRITICAL TASKS FOR CRM Identify customers Differentiate customers Interact with customers Customize treatment Analysis Strategy Implementation Implementation
  20. 20. IDENTIFYING CUSTOMER (1) <ul><li>STEP 1 – How Much Customer Identification … </li></ul><ul><li>Take any inventory of all of the customer data already available in any kind of </li></ul><ul><li>electronic format </li></ul><ul><li>Find customer identifying info that is “on file” but not electronically compiled </li></ul><ul><li>STEP 2 – Get Customers To Identify Themselves … </li></ul><ul><li>Define : Decide what information will comprise the actual customer’s identity </li></ul><ul><li>(Is it name and address? Home phone number? Account number?) </li></ul><ul><li>Collect : Arrange to collect these customer identities </li></ul><ul><li>Link : Once a customer’s identity is fixed, it must be linked to all transactions </li></ul><ul><li>and interactions with that customer, at all point of contact, and within all the </li></ul><ul><li>enterprise’s different operating units and divisions </li></ul><ul><li>Integrate : The customer’s identity must be integrated into the information </li></ul><ul><li>system the enterprise uses to run its business </li></ul><ul><li>Recognize : The customer who returns to a different part of the organization </li></ul><ul><li>needs to be recognized as the same customer </li></ul><ul><li>Store : Identifying information about individual customers must be stored and </li></ul><ul><li>maintained in one or several electronic databases </li></ul>
  21. 21. IDENTIFYING CUSTOMER (2) <ul><li>STEP 2 – Get Customers To Identify Themselves … (Cont’d) </li></ul><ul><li>Update : All customer data is subject to change and must be regularly </li></ul><ul><li>verified, updated, improved, or revised </li></ul><ul><li>Analyze : Customer identity must serve as the key inputs for analyzing </li></ul><ul><li>individual customer difference </li></ul><ul><li>Make available : The customers data must be made available to people </li></ul><ul><li>and functions within the enterprise that need access to it </li></ul><ul><li>Secure : Because individual customer identities are both competitively </li></ul><ul><li>sensitive and threatening to individual customer privacy, it is critical to </li></ul><ul><li>secure this information to prevent its unauthorized use </li></ul>
  22. 22. THREE TYPES OF DATA
  23. 23. Steps of Managing CRM : DIFFERENTIATION & SEGMENTATION
  24. 24. THE LOGIC OF SEGMENTATION STRATEGY <ul><li>Not all buyers are a like </li></ul><ul><li>Sub groups of people with similar behavior, value, and backgrounds </li></ul><ul><li>may be identified </li></ul><ul><li>The sub groups will be smaller and more homogeneous than the market </li></ul><ul><li>as a whole </li></ul><ul><li>It should be easier to deal with smaller group of similar customers than </li></ul><ul><li>with large groups of dissimilar customers. </li></ul><ul><li>Segmentation alternatives : </li></ul><ul><li>1. Segmentation by customer needs : </li></ul><ul><li>~ Geographic </li></ul><ul><li>~ Demographic </li></ul><ul><li>~ Psychographic </li></ul><ul><li>~ Behavioral </li></ul><ul><li>2. Segmentation by economic perspectives : </li></ul><ul><li>Customer Lifetime Value (CLV) </li></ul>
  25. 25. SEGMENTATION ALTERNATIVES (1) CUSTOMER NEEDS Bases for Segmentation of Consumer Markets Geographic : 1. Political boundaries 2. Climatic regions 3. Population boundaries Demographic : 1. Age 2. Sex 3. Race 4. Marital status 3. Family size 4. Family life cycle Socio – economic : 1. Occupation 2. Education 3. Income 4. Social class Psycho – graphic / Lifestyle : 1. Activities 2. Interest 3. Opinion 4. Values Behavior Patterns : 1. Type of store 2. Time of purchase 3. Number of units purchased 4. Shopping frequency 5. Media habit Consumption Patterns : 1.Heavy usage vs light usage 2. Occasion 3. Loyalty to brand 4. Ownership of other product
  26. 26. SEGMENTATION ALTERNATIVES (2) <ul><li>Differentiating based on Needs : </li></ul><ul><li>Customer needs are dynamic </li></ul><ul><li>Customer needs often correlate with customer value </li></ul><ul><li>There is not single best way to differentiate customers by their needs </li></ul><ul><li>Psychological is more important than demographic in determining </li></ul><ul><li>customer needs. </li></ul><ul><li>Profitability Measures : </li></ul><ul><li>Short Term : </li></ul><ul><li>~ Profit per transaction </li></ul><ul><li>~ Periodical profit per customer </li></ul><ul><li>Long Term : </li></ul><ul><li>~ Customer Lifetime Value (CLV) </li></ul><ul><li>~ Proxy – based variables </li></ul><ul><li>~ RFM (Recency Frequency Monetary) </li></ul>
  27. 27. SEGMENTATION ALTERNATIVES (3) <ul><li>Differentiating based on CLV : </li></ul><ul><li>CLV is a measure of the net profit that a firm will receive from a given customer </li></ul><ul><li>during his/her future lifetime as the firm’s customer. </li></ul><ul><li>As a general rule, the highest customer lifetime value are those : </li></ul><ul><li>Spend the most each year </li></ul><ul><li>Use product/service most frequently each month </li></ul><ul><li>Have lower processing cost </li></ul><ul><li>Have the lowest rates defection </li></ul><ul><li>The value of customer : </li></ul><ul><li>CLV = Customer Lifetime Value </li></ul><ul><li>m = Margin per customer per period </li></ul><ul><li>r = Retention rate </li></ul><ul><li>i = Discount rate </li></ul>
  28. 28. Steps of Managing CRM : INTERACTION
  29. 29. INTERACTING WITH CUSTOMER
  30. 30. A-PLUS INFORMATION <ul><li>Definition : </li></ul><ul><li>Information is needed by people to get the full benefit of virtually all products or services. </li></ul><ul><li>The special demands of E-Commerce : </li></ul><ul><li>A-plus information is more timely, clearer, or more useful than the customer anticipates. </li></ul><ul><li>How to produce A-plus information? </li></ul><ul><li>Provide informational hand holding </li></ul><ul><li>Select informational media carefully </li></ul><ul><li>Constantly strive for message clarity : </li></ul><ul><li>~ Consider an audit of your company’s writing </li></ul><ul><li>~ Use repetition </li></ul>
  31. 31. Steps of Managing CRM : CUSTOMIZATION
  32. 32. CRM BONDING LEVEL 1 <ul><li>The customer is tied to the firm primarily through financial incentives, lower prices for greater volume purchases or lower prices for customers who have been with the company a long time. </li></ul><ul><li>Examples : </li></ul><ul><li>Volume and frequency reward </li></ul><ul><li>Bundling or cross-selling </li></ul><ul><li>Fair pricing </li></ul>FINANCIAL BOND
  33. 33. CRM BONDING LEVEL 2 <ul><li>The customer is bound through long-term relationship. </li></ul><ul><li>Social bond includes : </li></ul><ul><li>Continuous relationship </li></ul><ul><li>Personal relationship </li></ul><ul><li>Social bonds among customers </li></ul>SOCIAL BOND
  34. 34. CRM BONDING LEVEL 3 <ul><li>The customer is tied by providing business solution. </li></ul><ul><li>Business bond includes : </li></ul><ul><li>Customization </li></ul><ul><li>Innovation & anticipation </li></ul><ul><li>Customer intimacy </li></ul>BUSINESS BOND
  35. 35. CRM BONDING LEVEL 4 <ul><li>The customer is tied by providing customized services that are designed right into the service delivery system for that client. </li></ul><ul><li>In most cases, customized services are technology based and make the customer more productive. </li></ul><ul><li>Examples are : </li></ul><ul><li>Integrated information system </li></ul><ul><li>Shared processed & equipment </li></ul>STRUCTURAL BOND
  36. 36. LOYALTY PROGRAM WITH POINT REWARD <ul><li>Customers are not equal </li></ul><ul><li>Behavior follow reward </li></ul><ul><li>Response varies with the degree of reward attractiveness </li></ul><ul><li>Key success factor of point reward : </li></ul><ul><li>1. Commitment </li></ul><ul><li>2. Differentiation </li></ul><ul><li>3. Flexibility </li></ul><ul><li>4. Simplicity </li></ul><ul><li>5. Appropriateness of reward </li></ul>
  37. 37. Steps of Managing CRM : TOOLS & ANALYSIS
  38. 38. DATA MINING <ul><li>Known as Knowledge Discovery in Databases (KDD). </li></ul><ul><li>Receiving increasing attention in the business, has been growing more than 20% every year over the last five years. </li></ul><ul><li>Definition : </li></ul><ul><li>Data mining is a process of extracting & presenting actionable, implicit, and novel information from data to solve a business problem. </li></ul><ul><li>Process : is not just a technique, but a series of interrelated steps </li></ul><ul><li>Extracting : some effort in finding information that may be hidden and can also </li></ul><ul><li>be used to confirm known or suspected information </li></ul><ul><li>Presenting : outputting the discovered information in forms such as reports, </li></ul><ul><li>models, or rules </li></ul><ul><li>Actionable : information is of the form that decisions and actions can be taken </li></ul><ul><li>Implicit : information can be discovered using various data mining techniques </li></ul><ul><li>Novel : information will be new and useful </li></ul><ul><li>Information is distinct from data in that it embodies knowledge of a pattern that give meaning to the data. </li></ul><ul><li>(R. SWIFT) </li></ul>
  39. 39. THE ROLE OF DATA MINING <ul><li>Convert data into information and knowledge, such that the right </li></ul><ul><li>decisions can be made. </li></ul><ul><li>Provide the mechanisms to deploy knowledge into operational </li></ul><ul><li>systems, such that the right actions occur. </li></ul>Data Information Knowledge Decisions & Actions
  40. 40. TECHNOLOGY AND TOOL Campaign Management Software Customer Service & Support Solution Contact Center Management Reporting & Analytical Tool
  41. 41. THANK YOU

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