1_Customer Relationship Management

Customer Relationship Management

Dr Sherif Kamel

Outline

 Overview

 Why CRM?

 CRM basics  Defining CRM

 Managing the customer life cycle  5 key drivers of the customer value  4 stages of a customer relationship  Interactivity v individualization

 Challenges to understanding customers

 Remarks

Bits and bytes

 CRM – the hottest buzz word in business today

 Developing a personal and a professional profile about

each customer

 Basic and historical information  Personal preferences

 Trends and habits

 Demographical information  Building a CRM culture

 The power of integration

 Using emerging technology to get closer to the

Current facts…

 Today customers are in charge – they make the rules  Putting technology at the center stage

 Business intelligence is one of the most growing segment in the

marketplace

 Customer loyalty is very difficult to maintain due to competition  Customers want an excellent service and they want to feel special  Most companies think they are customer-focused however in

reality they are product-centric

 There is a need to formulate customer-focused firms which needs:

 CRM strategy

 Organizational change

Economics of customer retention

“Winning back a lost customer can cost up to 50­100 times as much as keeping a  current one satisfied.”

Market size

 CRM market grew 66% in 1999

 34 Billion US dollars by 2003 and probably around 125

billion US dollars by 2004

 60% of the CRM software license market is controlled

by 3 vendors

 Siebel  Trilogy

Why CRM?

 It costs 6 times more to sell to a new customer than to sell

to an existing one

 A typically dissatisfied customer will tell 8 to 10 people

about his/her experience (mainly related to poor customer service)

 The odds of selling to a new customer is 15% versus 50%

to an existing customer

 70% of the customers complaining will do business again

with the company if the complaints are quickly addressed

 90% of existing companies do not have integrated CRM

Customer Relationships Today

Product

Pricing

Community Distribution

Communication Branding

Customer Relationships

Building a customer-centric approach to Internet

CRM Basics

 CRM is the timely delivery of excellent service “customer relationship management”

 CRM is a combination of business process and

technology that seeks to understand a company’s customers from a number of perspectives including:

 Who they are?

 What they do?

Age of the never-satisfied customer…

 CRM becomes a support tool in a time characterized by:

 Increased competition  Globalization

 Growing cost of customer acquisition  High customer turnover

 CRM is all about creating a better value proposition to

customers

 Information and communication technology is now

acting as a catalyst for CRM

 Extended enterprise

Defining CRM

 CRM is an integrated sales, marketing and service

strategy that is based on a timely and accurate information infrastructure and that depends on coordinated enterprise-wide activities

 Example: tracking customers interactions with the firm

 Customer tracking includes steps in the selling and customer

service cycles

 CRM steps include

Defining CRM

 Targeting

 Who do we target?

 What segments are most profitable?

 What segments match our value proposition?

 What is the best segmentation strategy for us/our industry?

 Acquisition

 What is the best channel for each segment?

 What is the acquisition cost for a channel/segment?

Defining CRM

 Retention

 How can we improve retention?

 What is our average customer relationship length?  How can we hold customer for as long as possible?  What is the most cost effective method of retention?

 Expansion

 How many products does our average customer buy?

 How can we induce our current base to buy more products?  Who are the prime targets for expansion?

Goals of CRM

 Using existing relationship to grow revenue

 Using integrated information for excellent service

 Introducing consistent, replicable channel processes

CRM…

 CRM is a business strategy and not a product

 Putting CRM into practice requires developing a set of

integrated applications to address all aspects related to the front-office needs

 CRM could be a major support platform for small and

medium-sized enterprises

 Cost of the information and communication technology

Evolution of information requirements

 Materials requirements planning (MRP)

 Manufacturing resource planning (MRP II)

 Enterprise resource planning (ERP)

 Supply chain management (SCM)

Managing the customer life cycle

Acquiring new customers

Enhancing profitability of existing

customers

Retaining profitable customers

Acquiring

new customers

 Promoting the company’s product and service

leadership

 Redefine the companies competitive edge and

innovations

 Offer a superior product backed by an excellent service

 Example: Browsing on the net, submitting a request, receiving

a phone call

 Encouraging cross-selling and up-selling

 Cross selling is used by suggesting alternative products or up-selling by rendering the customer more informed with the new products and services.

 Broadening the relationship between the company and

the customers

 Providing a value proposition represented by offering a

greater convenience at low cost (one-stop-shopping)  Example: “Best Buy” an electronic retailer with more than 300

stores capitalizes on committed relationships with customers

 3000 calls a day with more than 50% having computer-based

answers and solutions

Retaining

profitable customers for life

 Retention focused on service adaptability

 Delivering not what the market wants but what the customer wants

 Providing a value proposition that offers a proactive

relationship that works on the best interest of the customer

 Example: customer retention is becoming a key competitive

Integrated CRM

Integrated CRM Applications

Sales Force Automation Customer Support

Direct Marketing Cross-sell and Up-sell Proactive Service

Acquire Enhance Retain

Customer Life cycle

Partial Functional

Solutions

How to build a CRM infrastructure

1. Involve top management

2. Decide on a vision of an integrated CRM

3. Establish a CRM strategy and specify its objectives 4. Understand the customer

5. Review cultural changes that will need to occur 6. Develop a business case

7. Evaluate current readiness

8. Evaluate appropriate applications to do a better business 9. Identify and target quick wins

10. Have one manager to own the end-to-end project 11. Implement in stages

Relationship depth and profitability

Magnitude of Purchases

$ $$ $$$

Frequency of Purchases

Long-Term Profitability

Evaluating Relationship Depth

Relationship depth, as measured by the frequency and

magnitude of purchases, is a critical component of customer

Length of customer tenure and

profitability

Short Long

Lifetime

Low High

5 key drivers of the customer value

 Cost of Targeting

 Cost of Acquisition

 Service and Usage Revenue

 Cost of service

4 stages of a customer relationship

Commitment

Commitment Dissolution_Dissolution Exploration /

Expansion Exploration /

Expansion initiated any transactions

Customer

Interactivity v individualization

 Interactivity is the occurrence of two-way communication between

the firm and the customer

 Retail store personnel handle Internet customer service

 Chat rooms are set up to discuss product-related issues

 Customers subscribe to customized versions of firm newsletters

 Technology has made it possible to customize each interaction to

the individual user

 Consumers have privacy concerns about sharing too much information

 For individualization to be attractive, consumers must have unmet

needs

 Costs and complexity for the firm increase with greater personalization

Challenges to understanding customers

 Identify the customer

 Learn from customers

 Know the customers’ value

 Determine best resources

Remarks

 World is moving rapidly to a customer centric business

model

 It is a prerequisite for survival and growth in the

marketplace

 Integration of disparate customer data sources is a

primary technical challenge

 CRM is becoming invaluable as a differentiation tool

 The world is becoming extremely customer centric,

even cultures that have been customer-averse

Conclusions

 A firm is better able to serve customers needs if they

understand them well

 Provision of the products customers want, at the right

time through a consistent service leads to their retention

 CRM gives the complete and rich view of the customer,

enabling tactical and strategic actions to be taken to meet customer needs

 CRM enables consistent customer communication