Customer Relationship Management


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Customer Relationship Management

  1. 1. Customer Relationship Management Marketing Principles Dr. Mary Wolfinbarger
  2. 2. CRM <ul><li>Rather than market to a mass of people or firms, market to each customer individually </li></ul><ul><li>Also called one to one marketing </li></ul><ul><li>Information about the customer (previous purchases, demographic profile) is used to predict future behavior </li></ul><ul><li>Reduce costs wherever possible </li></ul><ul><li>Approach made possible by advances in technology </li></ul><ul><li>Short: 1 to 1 Marketing </li></ul>
  3. 3. CRM Definition <ul><li>CRM is a crossfunctional process for achieving: </li></ul><ul><ul><li>A continuing dialogue with customers </li></ul></ul><ul><ul><li>Across all their contact and access points, with </li></ul></ul><ul><ul><li>Personalized treatment for the most valuable customers </li></ul></ul><ul><ul><li>To increase customer retention and the effectiveness of marketing initiatives </li></ul></ul><ul><ul><ul><li>-- George S. Day “Capabilities for Forging Customer Relationships, MSI Report 00-118 </li></ul></ul></ul>
  4. 4. CRM and the Internet <ul><li>Internet can be used for a more personalized experience </li></ul><ul><li>Customers can get more help and support online </li></ul><ul><li>Increased customer self-service (e.g. ordering) </li></ul><ul><li>Quicker turnaround for customer problems </li></ul><ul><li>More feedback, customer suggestions </li></ul><ul><li>Customers can be tracked and data collected fairly easily online </li></ul><ul><li>BUT, it’s another channel and “touch point” to manage </li></ul>
  5. 5. Why CRM? <ul><li>Loyal customers are the source of most profits </li></ul><ul><ul><li>A relatively small percentage of customers may generate most of the profits </li></ul></ul><ul><ul><li>Marketing cost and efforts are less for existing customers </li></ul></ul><ul><ul><li>Dissatisfied customers tell others about their experiences </li></ul></ul><ul><ul><li>So do satisfied customers </li></ul></ul><ul><li>Slowing the rate of defection grows the customer base </li></ul><ul><li>Reducing costs (e.g. through self-service) </li></ul>
  6. 6. Why CRM? <ul><li>Recent advances in computing and database management technologies have provided means of getting closer to valuable customers </li></ul><ul><li>Short: Why people are talking about 1 to 1 </li></ul><ul><li>E-Commerce increases competition </li></ul>
  7. 7. CRM <ul><li>Rather than focusing on growing transaction volume, objectives are to increase profitability and customer satisfaction </li></ul><ul><li>Involves all corporate functions </li></ul><ul><li>Marketing, manufacturing, customer service, field sales, field service are all “touch points” </li></ul><ul><li>Touch point: any way in which the customer may interact with the firm Short: Using Customer Data – </li></ul>
  8. 8. History of CRM <ul><li>3 previous applications: </li></ul><ul><li>Sales Force Automation </li></ul><ul><li>Customer Service </li></ul><ul><li>Database Marketing (from direct marketing) </li></ul>
  9. 9. Sales Force Automation <ul><li>Contact Management (customer info and contact history for existing customers) </li></ul><ul><li>Activity Management: Calendar and scheduling for sales people </li></ul><ul><li>Opportunity Management: Manage leads for new customers </li></ul>
  10. 10. Sales Force Automation <ul><li>Marketing Information (products, promo, competitors, consumer behavior….) </li></ul>
  11. 11. Customer Service <ul><li>Goal: resolve customer problems quickly </li></ul>
  12. 12. Customer Service <ul><li>Capabilities </li></ul><ul><li>Call Center Management: capture customer feedback for performance measurement, quality control, product development </li></ul><ul><li>Field Service Management: Allocate, schedule and dispatch the right people and materials, view customer history, search for proven solutions </li></ul><ul><li>Help Desk Management: Initiate, modify and track problem reports </li></ul>
  13. 13. Database Marketing <ul><li>Using data to predict which customers will be most responsive to offers </li></ul><ul><li>Hails from direct marketing where customer behavior and responsiveness is most easily tracked </li></ul><ul><li>Important key: clean data </li></ul>
  14. 14. History of CRM <ul><li>Many applications integrate SFA, CS, database management and now even supply chain management (SCM) </li></ul><ul><li>SCM integration has advantages: </li></ul><ul><ul><li>Inventories can be kept low </li></ul></ul><ul><ul><li>Consumer demand can be forecasted in a timely fashion </li></ul></ul><ul><ul><li>More customized products (e.g. Nike) </li></ul></ul><ul><ul><li>Customers can access inventory information in real time </li></ul></ul>
  15. 15. CRM tactics <ul><li>Increase customer satisfaction </li></ul><ul><ul><li>Customer identification: must know and identify the customer across marketing channels, transactions and interactions (Tools:availability of customer information and records to all functions who may interact with customer) </li></ul></ul><ul><ul><li>Customer differentiation: some customers are more valuable to the company than others (Tools: analysis of customer lifetime value; coding, sorting and routing) </li></ul></ul>
  16. 16. CRM tactics <ul><li>Target promotional efforts to customers based on their likelihood of responding </li></ul><ul><li>Use the Internet to decrease number of direct sales people and distribution channels needed </li></ul><ul><li>Increase “share of wallet” through up-selling and cross-selling </li></ul>
  17. 17. Example of Sharing Information <ul><li>Continental Airlines has introduced a Customer Information System where every one of Continental’s 43,000 gate, reservation and service employees will have access to the history and value of each customer. </li></ul><ul><li>The system suggests specific service recovery remedies and perks such as coupons for delays and automatic upgrades. </li></ul><ul><li>The system provides more consistent staff behavior and service delivery. </li></ul>
  18. 18. CRM tactics <ul><li>Sorting and routing customers based on their profitability </li></ul><ul><ul><li>Coding customers: Customers are graded based on how profitable their business is. Service staff are instructed to handle customers differently based on their category code. Why? </li></ul></ul><ul><ul><ul><li>Labor costs have risen yet competitive pressures have kept prices low. </li></ul></ul></ul><ul><ul><ul><li>The end result is that gross margins have been reduced to 5 to 10 percent in many industries. </li></ul></ul></ul><ul><ul><ul><li>Customers have done it to themselves by opting for price, choice, and convenience over high quality service . </li></ul></ul></ul>
  19. 19. CRM tactics <ul><li>Example of Sorting: </li></ul><ul><li>Sears, Roebuck & Co’s most profitable credit card customers get to choose a preferred two-hour time window for repair appointments. </li></ul><ul><li>Regular customers are given a four-hour time window </li></ul>
  20. 20. CRM: Not a Panacea <ul><li>Not feasible for every market and customers </li></ul><ul><ul><li>customers don’t want to be committed to every brand/relationship </li></ul></ul><ul><ul><li>Not feasible for low-involvement, habitual purchasing in B2B or B2C </li></ul></ul><ul><ul><li>Some markets/customers may have low “personalization potential” </li></ul></ul>
  21. 21. CRM: Not a Panacea <ul><li>Shopping agents used by consumers undercut the idea of relp’s </li></ul><ul><li>The organizational capability to produce a seamless/personalized experience is more difficult to master than a transactional approach </li></ul><ul><li>Lower tier customers may become disaffected when they find out service is differentiated </li></ul>
  22. 22. CRM: Not a Panacea <ul><li>Customers change – today’s “silver” customer may be tomorrow’s “gold”; customers in the process of becoming more valuable customers may not be identified (and may switch to another business) </li></ul><ul><li>Peppers and Rogers suggest identifying “Most Growable Customers” (also called second tier customers) </li></ul>
  23. 23. CRM: Not a Panacea <ul><li>“ Past history with other management fads and mounting evidence from the field suggests that most firms will fail to gain even a fleeting advantage from their CRM initiatives. Many will be purely defensive, having been initiated to keep up with the leaders or to narrow disadvantages. Meanwhile, firms such as Oracle, Siebel and the Peppers and Rogers Group are busily diffusing best practices, and hundreds of software vendors are making their latest database, call center, and sales force automation software widely available and economical to use, thus ensuring that all competitors are equally equipped.” -- George Day </li></ul>