SCM Chapter 11: Customer Relationship Management

Why Do Companies Need CRM?

1. *Acquire* new customers 2. *Retain* their existing customers 3. *Help meet the changing expectations* of customers - Due to things like as social and demographic factors, economics, competitor's products and marketing efforts, and other market experiences. *Loyal customers are the source of most profits, and a relatively small percentage of those customers may generate most of the profits for the company*

5. Establish Performance Measures

Allows the firm to: - Determine if objectives have been met - Compare actual to planned variance

4. Integrate Existing CRM Applications

CRM is a collection of various applications implemented over time. - Customer contact mechanisms need to be coordinated so that every CRM user in the firm knows about all of the activity associated with each customer. - Centralized database or *data warehouse* containing all customer information.

3. Select the Right Application and Provider

Find an appropriate application and determine the extent of customization - Visit trade shows, read trade literature, hire consultant, etc. - Compare based on performance, security, reporting capabilities, system availability, etc.

To be successful, a company must find ways to meet its customers needs; otherwise, just as any firm would react with a non-performing supplier, the customer goes elsewhere and takes years worth of ______________with them.

Future purchases

Field Service Management

Involves setting up the company operations to allow customers to interact directly with the *company's service personnel*. - *Customers can call the service people directly*, and make an appointment with the service person to come out to service the product - Since customers are communicating directly with product specialists for service issues, it is more likely that the *right diagnosis* can be made quickly, which will help to *ensure customer satisfaction*.

Focus on Strategically Significant Customers

Not all markets and customers are equally important. - Building relationships with customers that provide little value can be counter productive

Post-transaction elements

Occur after the sale. Includes warranty repair capabilities, complaint resolution, product returns, & operating information.

Pre-transaction elements

Precede the sale. Includes customer service policies, the mission statement, the organizational structure, system flexibility, etc.

Customer Data Privacy

Rules and laws regarding invasion of privacy include Patriot Act in the US and Internet Privacy Law in the EU

Sales Territory Management

Sales managers obtain information on each sales rep's activities

Lead Management

Sales reps can follow prescribed tactics when dealing with prospects to aid in closing the deal.

Strategically significant customers are:

-Customers with *high life-time value*, i.e., customers that will constantly buy the product(s) or use the service(s) in the long-term. -Customers who serve as *role models* or benchmarks for other customers. -Customers who *inspire change* in the supplier and/or the supply chain.

*CRM is not for every customer*

Some customers don't want to be committed to every brand and/or relationship.

8. Customer Defection Analysis

The process of analyzing the customers who have stopped buying to determine why.

CRM is complex in that it also means finding affordable ways to identify potentially thousands, if not millions, of customers and their needs, and then designing customer contact strategies geared toward creating ________________________________ among your segments of customers.

customer satisfaction and loyalty

Call centers gives customers quick access to the information they want and enhances the _____________________.

customer-to-business relationship

Just as companies must create methods for finding and developing good suppliers, companies must create methods for becoming and staying _______________________

good suppliers themselves

Customer Service is __________________________________________________________________.

The act of taking care of the customer's needs by providing and delivering professional, high quality service before, during, and after the customer's requirements are met.

Churn Reduction

The process of customers changing their buying preferences because they find better or cheaper products and services elsewhere - all of the efforts companies develop to *stop losing customers* to the competition

CRM invloves acquiring, retaining and ____________________________________ to create superior value for both the company and the customer

partnering with selective customers

CRM provides a means and a method to enhance the experience of individual customers so that they will ________________________________________.

remain customers for life

7 R's to Measure and Manage Customer Service Capabilities

the right *product* the right *quantity* the right *quality* the right *place* the right *time* the right *customer* the right *cost* - All 7 R's + the right *documentation* = the *Perfect Order*

What is Customer Service?

CS as a *Philosophy* - Customer service is a company-wide commitment to providing customer satisfaction by placing emphasis on quality and quality management CS as an *Activity* - Customer service is a particular task that a firm must accomplish to satisfy the customer's needs. Order processing, billing and invoicing, product returns, and claims handling are all typical examples of the customer service activities. CS as a *Performance Measure* - Customer service is a category of performance measures, such as the percentage of orders delivered on time and complete, the number of orders processed within acceptable time limits, etc.

Social Media

Creating and cultivating virtual communities around product or brand is a powerful way to engage consumers

Measuring Customer Satisfaction

Customers being given opportunities to provide feedback about product(s), service(s), the organization, etc. - This can be done through *surveys, questionnaires and direct phone calls* to customers asking them their opinions. - Decisions have to be made regarding how to *capture the data, and how to analyze* the information so you can use it productively going forward. - It is of very little value until it can be analyzed and acted upon. - Most companies will need some type of a *database* to manage the data.

2. Involve CRM users from Outset

Employees should understand how it affects their jobs - Create a project team with members from all affected organizational areas. - Test with a pilot application

knowledge management

Enables quick decision making, better customer service, and a better-equipped and happy sales staff.

Website Self-Service

*Portals* for customers to access their account information, check operating hours, ask questions, see product information, find contact information, check on orders, get shipping information, etc. - Customers can put their own *information* into the system which avoids having the company take the time to do it, and also potentially eliminates errors. - Customers can edit and modify the information accordingly - Customers can *opt into or out of* future sales, subscriptions, corporate information, emails and other information if desired.

CRM How:

- *Communicating* with customers - *Understanding* their behavior and their requirements - *Building a system to satisfy those requirements*

6. Cross Selling and Up-Selling

- *Cross-selling* occurs when a company sells an additional *related or complementary* product or service to an existing customer after the initial purchase. *Example:* "Would you like fries with that?" *Example:* If you're buying an item on Amazon.com, you may be shown other similar items to the one you are looking at, or companion products to the item that you are considering. - *Up-selling* involves persuading a customer to buy a more *expensive item, upgrade* a product or service to make the sale more profitable. It also involves selling the customer extra features or add-ons to the product they are already buying or considering. *Example:* "Would you like to super-size your order?"

9. Customer Lifetime Value (CLV)

- A prediction for the *net profit attributed to the entire future relationship with the particular customer* - Some customers are worth a lot more than others, and identifying your key or top tier customers can be extremely valuable to your business. - CLV is an important metric for determining how much money a company is willing to spend on acquiring new customers and how much repeat business a company can expect from particular customers.

4. Target Market

- A segment of customers a company has decided to *aim its marketing efforts* and ultimately its products and/or services towards. A well-defined target market is the first element of any marketing strategy - Target Marketing is usually much more effective than mass marketing, as it allows the company to focus efforts on marketing to those customers *most likely* to respond. - It is a more efficient use of the company's resources and it reduces the chances of being a nuisance to those potential customers who do not fit the targeted criteria. - Using e-mail or direct mail saves labor and postage, and reduces the chances of being a nuisance

Call centers...

- Can categorize calls - Determine average resolution time - Increase customer satisfaction levels - Provide input to forecast future demand - Improve the productivity of the overall staff - May be in-house or outsourced

1. Predicting Customer Behaviors

- If a company is selling products and services to customers, they can also collect customers *buying history, preferences, and trend information*, which could then be used to predict customer buying behaviors going forward. - This information could also be used to determine how effective *marketing, advertising, and promotions* have been in the past, and whether these practices *should be continued or altered* - This predictive information could be used to create a more *accurate forecast* and a more effective *marketing and sales budget*

Goal and Benefits of CRM

- Increased customer *satisfaction*. - Increased customer *loyalty* and *retention* - *Faster* responses to customer inquiries. - Increased *revenue*. - *Growth* of the customer base through referrals. - A simplified and more *cost effective* marketing & sales process. - Increase *sales effectiveness*. Closing sales faster. - Increased sales through cross-selling and/or up-selling. - Access to updated *customer info* and *personalized interactions*. - *Automation* of repetitive tasks.

6. Providing CRM Training for All Users

- Provide and require training for all of the initial users and then provide training on an ongoing basis as applications are added - Training can also help convince key users like sales, call center, and marketing personnel of the benefits and uses of CRM applications

Cloud Computing (Software as a service)

- ala carte and on demand offerings accessed via web browser. - Changing the cost structure of CRM applications

6 Steps to a Successful CRM Program

1. Creating the CRM Plan 2. Involve CRM users from Outset 3. Select the Right Application and Provider 4. Integrate Existing CRM Applications 5. Establish Performance Measures 6. Providing CRM Training for All Users

Key Tools and Components of CRM

1. Predicting Customer Behaviors 2. Personalization of Customer Communications 3. Segmenting Customers 4. Target Marketing 5. Event Based Marketing 6. Cross Selling and Up-Selling 7. Relationship or Permission Marketing 8. Customer Defection Analysis 9. Customer Lifetime Value (CLV)

Customer Defection Analysis and Churn Reduction go hand in hand to determine why customers leave and finding ways to retain them.

5% improvement in customer retention can result in 75% increase in profits.

Call Centers (or Customer Contact Centers)

A call center links an organization and its customers together. - A facility housing personnel who respond to *customer queries*. These personnel may provide customer service or *technical support*. - Help continuously monitor customer service parameters in an effort to gauge performance and improve quality and efficiency. - By utilizing a Call Center, the company's internal resources can be freed up to focus on the company's core competencies.

Transaction elements

Occur during the sale. Includes the order lead time, the order processing capabilities & the distribution system accuracy.

Sales Activity Management

Tool offering sales reps a guided sequence of sales activities

Clickstream

Tracking how a customer navigates a website can help tailor a website's images, ads or discounts based on past usage of the site.

Customer Relationship Management (CRM)

Transformation of the people, process, and technology required to become a *customer-centric organization* *A philosophy of putting the customers first* *CRM is about building and maintaining profitable long-term customer relationships beyond the one-off buy and sell transaction.* - A successful CRM program is both simple and complex

Sales Force Automation (SFA)

Used for documenting field activities, communications with the home office, & retrieving sales history.

CRM is simple in that it involves training users within the company to make ___________________.

customers feel valid

7. Relationship or Permission Marketing

- An approach to selling products and services in which a customer *explicitly agrees in advance* to receive marketing information. Customers self-select the type and time of communication they want. *Example:* An "opt-in" e-mail, where a potential customer signs up in advance for information about certain products or services. The customer is giving permission to the company to provide them with marketing and sales information. - Permission marketing is about building an *ongoing relationship* of increasing depth with customers - Permission marketing does not typically create immediate sales, but rather grabs a customer's attention and preserves a business relationship.

Trends in CRM

- Customer Data Privacy - Social Media -Cloud Computing

5. Event Based Marketing

- Event based marketing is a form of marketing that identifies key *events in the customer and business lifecycle*. - When an event occurs a customer specific marketing activity is undertaken. - An event can be something basic and predicted, like the end of a contract, a holiday, a season, e.g., Memorial Day, 4th of July, Halloween, "Black Friday", "Cyber Monday", Christmas, etc., or something more detailed and personal, like a birthday, a marriage, or a graduation. - Event-based marketing is a *more personalized form of marketing* which can help to form personal connections with the customers.

CRM By:

- Focusing on *customer requirements* - Delivering products and services in a manner resulting in high levels of *customer satisfaction*

1. Creating the CRM Plan

- Objectives of the CRM program - CRM's fit with corporate strategy - New applications to be purchased or developed - Integration or replacement of existing legacy systems - Personnel Requirements - personnel, training, policies, upgrades, and maintenance - The costs and time frame for implementation

3. Segmenting Customers

- The practice of *dividing customer base into groups* of individuals that are similar in specific ways relevant to marketing. - In simple terms, grouping customers to create specialized communications about products. - There are many different ways to group customers, e.g., by demographics, income, geography, buying preferences, etc. - Segmenting customers allows a company to zero in on a particular population of customers to sell a specific product, or to define a specific product(s) for a particular segment of customers. - If a company can identify different segments of customers, they can potentially be more *efficient and effective* in the use of their resources *by tailoring programs and initiatives* for each segment.

2. Personalization of Customer Communications

- Understanding customer behaviors and preferences, allows a firm to customize communications aimed as specific groups of customers and is likely to result in *greater levels of sales.* - When a company communicates with their customers they need to use the customer's "language" and communicate with them in a meaningful way. - Communication that is personalized sends a message to the customer that the company cares about them. - It is a powerful way to differentiate the company from its competitors and it helps to *build customer loyalty*

Because many companies do not sell their products directly to end-product consumers, companies may also need to train and certify that their ______________________are able to adequately represent their company's products

intermediate customers

Relationships should be built with _______________________ ________ that are likely to provide the most value for the effort.

strategically significant customers