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  1. 1. Customer Relationship Management The philosophy of CRM is the recognition of the fact that a long-term relationship with customers can be one of the most important assets of an organization, providing competitive advantage and increased profitability. TreeWorks Bvd. Coposu nr. 4 bl. 105 A sc. A ap. 1 Bucuresti, Romania Phone: +4021.326.06.02 Fax: +4021.326.72.33
  2. 2. Introduction ___________________________________________________3 Content CRM Fundamentals ____________________________________________4 How It Works? _________________________________________________5 CRM Systems and Technology _________________________________7 Defining CRM Objectives ______________________________________8 CRM Goals Differentiated by Departments ____________________9 Customers ___________________________________________________10 Purposes of Customer Relationship Management ____________11 Measuring the Success of CRM ______________________________13
  3. 3. Introduction CRM is a business philosophy that describes a strategy placing the client in the center of its processes, its activities and its culture. IT applications are the tools that allow an Many industries evolved their method of organization to implement the CRM doing business over the years. The providers strategy. The new IT developments can help that offer large amounts of products an organization regularly adapt its struggled over the years to create brands strategies. based on quality and price. But the clients' empowerment and their importance have The main CRM concept is quite simple. increased. Today, in an environment ruled Throughout many years, the companies by Internet, when changing providers can focused their efforts primarily on lowering be done with just a few mouse-clicks, the the costs and improving their internal problem becomes more complex. It affects efficiency. Thus they concentrated more on each organization, no matter if it the internal processes, often automatizing concentrates on clients or on business. back-office functions elements like manufacturing, logistics and finance. It has been proven that necessary costs for client maintenance are significantly lower In contrast, the management effort than those associated with new client invested in client service, for example acquisition. While businesses will continue selling and marketing, was often relegated to extend the clients database, they should in a last place. As the market gets stronger also concentrate on keeping and multiplying and the providers become more efficient in the best of these clients. Increasing a offering products or services, it becomes client's action - or in other words the more difficult to differentiate between quantity of business each client generates - rivals. What is the true difference between becomes as important as increasing the two types of toothpaste? In the meantime, action of the market. Through a good as the quality of services and products administration of the relationship with a improves, client expectations increase. As good client, the profitability will certainly long as the client has the possibility of grow. changing his provider, it becomes harder to Essentially, the above represents the keep him loyal. In conclusion, it is highly concept of Customer Relationship important for a modern company to own a Management. system that will shorten the reaction time to customers' requests and complaints, thus offering support and quality for its services. 3
  4. 4. CRM Fundamentals The term CRM became popular in the mid-1990s even though the principles that underline the concept of relationship management - representing the essence of marketing - are not new and have been practiced for a long time, especially by small businesses. Since the marketing instruments used by According to studies, the average small businesses (e.g., mostly personal company loses between 20 and 50 contact between buyer and seller and percent of its customers every year, and therefore a good knowledge of the buyers also finds it hard to retain its best needs) are not achievable for larger customers. businesses, CRM technology should enable Deregulation, diversification and managing customer relationships on a larger globalization have stimulated a dramatic scale. rise in competition. These marketplace realities have forced companies to switch The philosophy of CRM is the recognition from a product-centric approach to a that a long-term relationship with customer-centric approach. According to customers can be one of the most IDC, the CRM industry gained momentum in important assets of an organization, the past years and the CRM application providing competitive advantage and market increased by 84 percent, to $6.2 increased profitability. billion in 2000. 4
  5. 5. How It Works? Customer Relationship Management (CRM) is a complex system, consisting of procedures, strategies, software and web applications, that assists a company in organizing and managing the relationship with its clients. Figure 1
  6. 6. CRM facilitates the interaction with clients Generally, this consists of pages that through the most efficient, the fastest and contain answers to the most frequently the most sofisticated channel of asked questions (FAQs). More complex communication - the Internet. It is a systems analyze the questions and search solution that concentrates on the people, the database for possible answers. In each the processes and the information from case, the system should be updated within a company, and aims to support its constantly, as new problems and new clients better and increase the level of solutions appear. The most sophisticated fidelity/loyalty. systems will automatically quot;learnquot; from the cases where the problems were solved, The spectacular growth and the continuous adding the necessary information in their reevaluation of the organizations that use databases. websites brought the Internet to the Because many users don't trust the web attention of today's management concept, part of the Internet support philosophy. The Internet offers another systems will offer different ways to infrastructure through which the communicate directly with the agents, organizations can interact with clients in including online chatting. Most of the web the same way they interact through phone, based systems will have this feature, that fax or email. The complexity of this will allow clients to be contacted or to interaction through multiple channels contact the agents directly over the phone, indicates some areas in which technology thus respecting the request of receiving can reduce personnel effort and services through the favorite channel of investments. communication. When this facility is At this moment, many companies consider activated in an integrated system, the that the advantage of the web is actually contact center will have the possibility to the fact that visitors can find answers on identify the client immediately and to their own, thus minimizing the effort of the access his interaction history with the companies, reducing direct contact with organization. the agents and improving the efficiency. Figure 2 6
  7. 7. CRM Systems and Technology Data sources that are used in CRM systems are customer service inquiries, customer surveys or sales force input such as purchase history, shipping history, account data, demographic data and Web sales data. Since a part of this information is obtained Some examples of CRM initiatives are: through enterprise resource planning - A database that specifically tracks systems, ERP databases must be integrated customer service issues; with some aspects of the CRM databases. - A web page that allows customers to Furthermore, CRM technology includes check inventory availability, order different aspects of information status, and place orders; - Data warehousing to build an management, including integration with information database to better other enterprise-related systems and understand your customers; methods that convert data to usable - Capturing visitor data including their information. CRM uses technology, strategic planning and personal marketing techniques name, e-mail, location, and purchasing to build a relationship that increases profit preferences. margins and productivity. It uses a business strategy that puts the customer at the core of a company's processes and practices. The implementation of CRM software should come along with a change of the company's mindset to become more customer oriented. It requires this customer focused business philosophy to support effective sales, marketing, and customer service and order fulfillment. 7
  8. 8. Defining CRM Objectives The business objectives for the Furthermore, The Conference Board implementation of CRM software are: surveyed 96 global firms in order to analyze - Increased customer number and the CRM programs. 52 percent of the customer profitability; interviewed companies have implemented a - Increase in market share; CRM solution and, among others, the top - Increased campaign response; three strategic motives were to increase - Higher customer satisfaction ratings; customer retention and loyalty, to respond - Greater number of returning customers effectively to competitive pressure and to on the Web site; achieve a competitive advantage, and to - Simplified internal organization (shrink differentiate competitively based on workflow, shortens cycle times, and customer service superiority (see Figure eliminates non-productive information 10). flow). Figure 3 8
  9. 9. CRM Goals Differentiated by Departments Different departments have different objectives when adopting a CRM program. In the following, some examples of Sales - The sales department objectives are - department-specific goals are presented: to deploy sales force automation across regions, to track contact history, to Customer Support - Customer service streamline the sales process, and to qualify - objectives are: obtain basic information prospects based on past experience. about customers and their complaints, Field Service - Field service implies the - customer satisfaction monitoring and service or repair of the customer's faster complaints resolution in order to equipment on the customer's premises. raise customer retention rates, to Field service engineers need to monitor increase self-service efficiencies, and to customer complaints and repairs histories. mitigate the need for in-person assistance. Marketing - The marketing department - is interested in performing dynamic customer segmentation to begin more targeted customer communications and campaigns, refined marketing campaigns, customer satisfaction by segment analysis, and tracking campaign responses. 9
  10. 10. Customers About one third of the 100 companies According to a survey conducted by The surveyed have a CRM strategy, but again Database Group concluded in November only one third of them achieved their plans. 2000, retailers with an implementation However, about a quarter executes level of 15.1 percent – one of the important components of CRM. These pioneering sectors for CRM – and utilities components are, e.g., the ability to deal companies with 17.9 percent with customers consistently across multi implementation level lead the field for CRM communications channels (21 percent of strategy. Banks and insurers are heaving companies) and the linkage of key customer relatively poor CRM implementation levels, information databases (28.8 percent of 7.3 percent, and 4.4 percent companies). implementation level respectively, but are expected to catch up in the next years. However, their share on total customers is very high (see also Figure 4). Figure 4 10
  11. 11. Purposes of Customer Relationship Management CRM, in its broadest sense, means managing all the interactions and business activities between a company and its customers. This includes, but is not limited to, • Provides a mechanism to track all points improving customer service. A good CRM of contact between a customer and the program will allow a business to acquire company, and does it in an integrated customers, service the customer, increase way, so that all the sources and the the value of the customer to the company, types of contacts are included, and all retain good customers, and determine the users of the system see the same which customers can be retained or given a view of the customer (reduces higher level of service. A good CRM program confusion). can improve customer service by facilitating • Helps to identify potential problems communication in several ways: quickly, before they occur. • Increases the efficiency of customer • Provides an user-friendly mechanism for interaction through all the registering customer complaints communication channels available. (complaints that are not registered with • Facilitates the collaboration between the company cannot be resolved, and the client and the provider using the are a major source of customer web, thus reducing the costs of dissatisfaction). customer relations management. • Provides a fast mechanism for handling • Provides product information, product problems and complaints (complaints use information and technical assistance that are resolved quickly can increase on web sites that are accessible 24 customer satisfaction). hours a day, 7 days a week. • Provides a fast mechanism for • Identifies how each individual customer correcting service deficiencies (correct defines quality, and then designs a the problem before other customers service strategy for each customer, experience the same dissatisfaction). based on these individual requirements • Uses internet cookies to track customer and expectations. interests and personalizes product • Provides a fast mechanism for managing offerings accordingly. and scheduling follow-up sales calls to • Provides a fast mechanism for managing assess post-purchase cognitive and scheduling maintenance, repairs dissonance, repurchase probabilities, and on-going support (improves repurchase times, and repurchase efficiency and effectiveness). frequencies. 11
  12. 12. Figure 5 12
  13. 13. Measuring the Success of CRM As mentioned, one of the most difficult parts of a CRM project is defining success parameters. Even if the success factors are different, in Another financial success indicator is the the end many companies choose the ROI customer lifetime value (CLV). It allows (Return on Investment) as the only success companies to measure beyond one time factor, although this choice is controversial. period and beyond one customer, and Sometimes, CRM systems measure the ROI combines both the discounted cash flow, simply as the incremental revenue or the activity costs and the probabilities for margin return from implementing a CRM customer retention to help understand the technology. This has only limited impact of different CRM scenarios. The applicability, as it doesn’t give sufficient profitability outcomes of the most likely insight to make ongoing decisions that scenarios that can be implemented must be improve the customer relationship. It compared to find the best path to increase considers the problem only from the total profitability. business point of view, and sees the customer only as a source of revenue, while 30% CRM ROI should integrate both the margin and the customer satisfaction. 25% 25% 23% A study conducted by the researchers at the 20% University of Dayton illustrates four major 20% measurements for CRM success: 18% - The CRM's ability to impact corporate strategy (according to 25 percent of 15% respondents); - Successful technological integration 10% (according to 23 percent of respondents); - Enhanced strategic partnerships 5% (according to 20 percent of respondents); - Assimilation of CRM-related 0% technologies (according to 18 percent of The CRM's ability to impact corporate respondents). strategy Successful technology integration Enhanced strategic partnerships Assimilation of CRM-related technologies 13
  14. 14. TreeWorks Bvd. Coposu nr. 4 tel:+4021.326.06.02 bl. 105 A sc. A ap. 1 fax:+4021.326.72.33 Bucuresti, Romania