crm and external relationships customer relationship management

CRM and external relationships

Customer Relationship Management

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Focus of CRM

Importance for organisation to focus on needs, wants, preferences and values of customer

Use of IT and Internet to cause major transformation in ways organisations interact with customers

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企業策略企業策略企業價值企業價值

B2B ECB2B EC

B2C ECB2C ECB2C ECB2C EC

BIBI

KMKM

SCMSCM ERPERP CRMCRM

CustomerCustomerSupplierSupplier

Electronic Business: Scope

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Significance of CRM

$23b in 2000Estimates of $76b in 2005

Median annual investment ~ $1m, implementation over 4 years

Large companies spend ~ $15m – $30m /year, and between $60m – $130m to full implementation

(Gartner Group 2001)

But, ~ 30% CRM projects never get finished55% to 75% fail to deliver anticipated benefits

60% of managers view CRM as failures

(Morphy 2001, Kiely 2001)

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CRM and Its Relationship with EC

Customer relationship management (CRM): A customer service approach that focuses on building long-term and sustainable customer relationships that add value both for the customer and the company

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Who is the BOSS…

‘There is only one boss. The customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else.’

(Sam Walton, WalMart)

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Notions about customers

Every 5 yrs, av. US organisation lose 50% of customers

Cutting these by 5% double profits(Morphy 2001)

5% in customer retention av. lifetime value of customer of between 35-95%

(Reichheld 1996)

Retaining more customers can have significant impacton organisational performance.

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Top 20% contributed to 150% profit, while the worst 40% results in 50% profit reduction

Customer segments

Pro

fit

1 2 3 4 5 6 7 8 9 10

Twice the normal

turnover

50% profit reduction

Source: Manhattan Consulting Group

Why CRM ?

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‘Present a single face

to the customer’

Customer focus

Customer focus win and retain loyal and profitable customers

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Advantages of customer focus

Accurate view of internal operations

Service to customers Information

Across product lines

Across geographic locations

Across subsidiaries, business units

Across multiple channels

Major challenge for most organisations – cross-functional, complex

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Why are loyal customers more profitable?

Potentialcustomer Customer

Loyalcustomer

Formercustomer

Costs

Benefits

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Acquisition costs incurred once only

Benefits accrue fromLoyal customers referring other new customers

Loyal customers tend to purchase more over time

Loyal customers are less price sensitive

Loyal customers incur fewer administrative costs over time

Note also: damage from dissatisfied customers can escalate

Why are loyal customers more profitable?

(Cash 1999)

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Customer dissatisfaction escalates

Dissatisfiedcustomers

Share badexperiences with others

Loss ofcustomer

loyalty

Dollars lost compoundover time

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Supplier RetailerDistributorManufacturer

Product / service flows

Customer demand flows

Consumer

Supply chain perspective

Demand chain perspective

Concept of demand chain

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No visibility

Customer Relationship

Advertisement, Brand image



Low visibility

Very low visibility

Focal Company

Focal Company

Focal Company

Customer

Customer

CustomerChannel

ChannelSalesmen

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Changes in Relationship

Focal

Sales/ Channels

Customer

As is

Focal

Sales/ Channels

Customer

To Be

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CRM and Its Relationship with EC (cont.)

Classification of CRM programsLoyalty program

Prospecting

Save or win back

Cross-sell/up-sell

eCRM: Customer relationship management conducted electronically

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Scope of CRM1. Foundation of service

2. Customer-centered services

3. Value-added services

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Extent of service1. Customer acquisition (prepurchase support)

2. Customer support during purchase

3. Customer fulfillment (purchase dispatch)

4. Customer continuance support (postpurchase)

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Components of CRM

Customer and Product centric services

Differential MarketingMass marketing

Focused marketing

One-to-one marketing

Customers are not born equal

Sales Managment

Database Marketing

Marketing Management

Service Management

Customer Management

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Benefits of CRMProvides:

choices of products and servicesfast problem resolution and responseeasy and quick access to information

Limitations of CRMRequires integration with a company’s other information systems which is costlyDifficult to support mobile employees

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CRM implementation issuesSteps in building EC strategy focused on customer:

1.focus on the end customer

2.systems and business processes that are designed for ease of use and from the end customer’s point of view

3.efforts to foster customer loyalty

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Five factors required to implement a CRM program effectively:1. Customer-centric strategy

2. Commitments from people

3. Improved or redesigned processes

4. Software technology

5. Infrastructure

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Justifying customer service and CRM programs

Metrics: Standards of performance; may be quantitative or qualitative

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Web-related metrics a company uses to determine the appropriate level of customer support:

Response timeSite availabilityDownload timeTimelinessSecurity and privacyOn-time order fulfillmentReturn policyNavigability

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CRM Applications and Tools: Delivering Customer Service in Cyberspace

CRM applications improve upon traditional customer service by means of easier communications and speedier resolution of customer problems

Customer service adds value to products and services

It is an integral part of a successful business

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CRM Applications and Tools (cont.)

Classifications of CRM applicationsCustomer-facing applications

Customer-touching applications

Customer-centric intelligence applications

Online networking and other applications

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Formation of CRM

Front-endCommunication

CRM

Back-endAnalytical

CRM

CoreOperational

CRM

• CTI• Net Banking• B2C e-Commerce

• Data Mining• OLAP• EIS

• Customer Mgt• Marketing Mgt• Sales Mgt• Service Mgt

Database

Data Mart

Data WarehouseDemographic Data

Transaction Data

Extraction

Transformation

Loading

Operational

Database

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Customer-facing applicationsCustomer interaction center (CIC): A comprehensive service entity in which EC vendors address customer service issues communicated through various contact channels

Intelligent agents in customer service and call centers

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Customer Management

Know your customer

ProblemsCustomer relates to channel/salesmen, not company

Lost of valuable customer data upon departure of sales personnel

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Cases

OnlineMembership

One-to-one relationship

Traditional channelMembership

Data collection and usage

Closer tie to customer

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Autoresponders: Automated e-mail reply systems (text files returned via e-mail), which provide answers to commonly asked questions

Sales force automation (SFA): Software that automates the tasks performed by sales people in the field, such as data collection and its transmission

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Customer-touching applicationsPersonalized Web Pages

E-Commerce Applications

Campaign Management

DM: Direct MailFor traditional market

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Web Self-ServiceActivities conducted by users on the Web to provide answers to their questions (e.g., tracking) or for product configuration

Self-tracking

Self-configuration and customization

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Customer-centric applicationsData reports

Data warehouseA single, server-based data repository that allows centralized analysis, security, and control over the data

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Data analysis and miningAnalytic applications automate the processing and analysis of CRM data

can be used to analyze the performance, efficiency, and effectiveness of an operation’s CRM applications

Data mining involves sifting through an immense amount of data to discover previously unknown patterns

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Online networking and other applicationsForums

Chat rooms

Usenet groups

E-mail newsletters

Discussion lists

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Mobile CRMthe delivery of CRM applications to any user, whenever and wherever needed

Voice communicationpeople are more comfortable talking with a person, even a virtual one, than they are interacting with machines. The smile and the clear pronunciation of the agent’s voice increases shoppers’ confidence and trust

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Business intelligence, data warehousing

Internal and external data is gathered, stored and analysed to provide important information to support decision making of executives

Provide better forecasts of end consumer demand, improved understanding of changing consumer preferences and wants, and so on

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Role of knowledge management and intelligent agents in CRM

Automating inquiry routing and answering queries requires knowledgeGenerated from historical data and from human expertise and stored in knowledge bases for use whenever neededIntelligent agents support the mechanics of inquiry routing, autoresponders, and so on

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Internet Marketing in B2B

Organizational buyer behaviornumber of organizational buyers is much smaller than the number of individual buyers

transaction volumes are far larger

terms of negotiations and purchasing are more complex

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Internet Marketing in B2B (cont.)

Methods for B2B online marketingTargeting customers

contact all of its targeted customers individually when they are part of a well-defined groupaffiliation serviceadvertising

Electronic wholesalersintermediary sells directly to businesses, but does so exclusively online

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Internet Marketing in B2B (cont.)

Affiliate programsPlacing banners on another vendor’s Web site

Content alliance program in which content is exchanged so that all can obtain some free content

Infomediaries

Online data mining services

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One-to-One Marketing and Personalization in EC

One-to-one marketing: Marketing that treats each customer in a unique way

Personalization: The matching of services, products, and advertising content to individual consumers

User profile: The requirements, preferences, behaviors, and demographic traits of a particular customer

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One-to-One Marketing and Personalization in EC (cont.)

Major strategies used to compile user profiles

Solicit information directly from the user

Observe what people are doing online

Build from previous purchase patterns

Perform marketing research

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Cookie: A data file that is placed on a user’s hard drive by a Web server, frequently without disclosure or the user’s consent, that collects information about the user’s activities at a site

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Collaborative filtering: A personalization method that uses customer data to predict, based on formulas derived from behavioral sciences, what other products or services a customer may enjoy; predictions can be extended to other customers with similar profiles

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Variations of collaborative filtering:Rule-based filtering

Content-based filtering

Activity-based filtering

Legal and ethical issues in collaborative filteringInvasion-of-privacy issues

Permission-based personalization tools to request customer permission

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Customer loyaltyCustomer loyalty: Degree to which a customer will stay with a specific vendor or brand

Increased customer loyalty produces cost savings through:

lower marketing costs

lower transaction costs

lower customer turnover expenses

lower failure costs

E-loyalty: Customer loyalty to an e-tailer

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Trust in ECTrust: The psychological status of involved parties who are willing to pursue further interaction to achieve a planned goal

Trust is influenced by many variables

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How to increase EC trustbetween buyers and sellers trust is determined by:

degree of initial success that each party experienced with EC and with each otherwell-defined roles and procedures for all parties involvedrealistic expectations as to outcomes from EC

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Issues in personalizationbrand recognitionsecurity mechanisms help solidify trustdisclose and update latest business status and practices to potential customers and to build transaction integrity into the systemguarantee information and protection privacy through various communication channels

crm and external relationships customer relationship management

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