MISY 5380 - CRM - Ch. 1: Introduction to Customer Relationship Management

Key processes that help define CRM

1. Strategy development 2. Value creation 3. Multichannel integration 4. Information management 5. Performance assessment

Four steps in CRM

1.Identify your customers in as much detail as possible, including demographics, psychographics, habits, and preferences 2.Differentiate among them (for example, most and least profitable) 3.Interact with your customers (make this interaction more cost-effective through automation whenever possible) 4.Customize your offerings to fit each customer's needs through mass customization or individual tailoring

Strategy development

At both the business level and customer level, with the latter involving decisions regarding the appropriateness of various customer segmentation approaches: mass, segmented, and one-to-one

B2C

Business to consumer

Performance assessment

Includes measuring the success of CRM efforts through metrics on customer acquisition, retention, win-back, satisfaction, loyalty, and profits.

offensive marketing

activities aimed at increasing the size of a firm's customer base

The knowledge base contained in a CRM system will

aid in the acquisition of new customers

The focus of CRM is...

all existing customers

The goal of a company should be to

attract the greatest number of profitable customers

When CRM systems fail, it tends to be as a result of

cultural issues

Objectives of CRM: Understanding customer needs, both

current and latent

Objectives of CRM: Increasing usage of _________

current products and services

To create value, CRM systems sometimes point toward...

de-marketing to certain groups For example, it may benefit a company to add or raise fees to certain customers in order to either make them profitable or drive them away

A good CRM system...

identifies potentially profitable and unprofitable customers early on

Objectives of CRM: Decreasing attrition by _________

increasing value and satisfaction

Why "Management" is important when defining CRM

it pertains to the organization's ability to develop strategies that attract and retain customers

barnacles

long-time customers

Objectives of CRM: Winning back ___________

lost customers

Short message service (SMS)

messages sent to people in a business's market area using geolocators and systems provided by a Web-based service provider

Objectives of CRM: Increasing usage of a greater number of a company's ______________

products and services

Objectives of CRM: Differentiating ________ from ________ customers and segments

profitable, unprofitable

Greater market share and the opportunity to trade customers up and increase the speed of new product acceptance lead to...

quickened cash flow with less volatility and risk

Objectives of CRM: Increasing ___________

referrals

Relationships require...

two-way communications between customers and the organization

Data marts

► subsets of a data warehouse that contain less depth or breadth of information, which allows for more efficient analysis by functional, business unit, or geographic divisions ► generated from data gleaned from a specific function.

Customer Engagement Center

A part of operational CRM that provides a central point of contact for an organization's customers, employing multiple communication channels to support the communication preferences of customers.

Social media channels

Internet forums, blogs, microblogs (e.g., Twitter), and social networking sites (e.g., Facebook)

Information management

Involves collecting, organizing, and using customer data and customer information from all touch points (any point of contact that a customer or prospect has with the company) in order to learn more about each customer and generate the appropriate marketing response.

Value creation

Involves determining what product/ service attributes customers value and which customers and customer segments are valuable to the company. CRM enables companies to identify and direct relationship efforts to those with high customer lifetime values (CLV).

Multichannel integration:

Involves efforts to provide the "perfect customer experience" through integrating all of the means by which consumers interact with organizations including: e-mail, mobile, social media, sales personnel, outlets, customer engagement centers (formerly called call centers or customer contact centers), direct marketing, e-commerce, m-commerce, chat, etc.

Mass customization

a manufacturing and communications technique companies use to produce individually differentiated goods or messages on a mass basis, usually through technological means.

RFM (recency, frequency, monetary value)

an approach to compute a score for each customer based on how recently the customer purchased, how frequently the customer purchases, and how much revenue or profit the customer generates. The score is used to predict the customer's likely response to future marketing expenditures and efforts.

de-marketing

attempts to weaken or extinguish demand when the product or service is unprofitable for the organization

B2B

business to business

Objectives of CRM: Improving ________management

campaign

Performance metrics

enable the company to determine the success of its CRM efforts and the value of each customer

Customer Relationship Management (CRM)

enables an organization to better manage relationships with suppliers, distributors, dealers, etc.

Contact Center

extends coverage to telephone, mail, fax, and e-mail

Second lifetime value (SLTV)

focuses on only the net present value generated after a customer has been reacquired

customer service representative (CSR)

generally working in a Customer Contact Center (CCC)

A company knowing its customers leads to....

greater market share and the opportunity to trade customers up and increase the speed of new product acceptance

Transaction processing systems

inventory, order entry, billing, and accounts receivable information.

Objectives of CRM: Integrating __________ efforts throughout the various channels used by the company

marketing and sales

Sales-Force Automation

oriented toward developing customer relationships and improving satisfaction

Objectives of CRM: Identification of

potential customers

Objectives of CRM: Moving customers up the ______________ from strangers to acquaintances to friends to partners

relationship hierarchy

Managing strategies and tactics

requires effective planning and effective and timely implementation

Objectives of CRM: Increasing customer ___________

service and satisfaction

The more a company knows its customers....

the greater the opportunity to increase market penetration and share of wallet

Management

the identification of prospects, selection and acquisition of relevant prospects, and development of the relationship

Lifetime value (LTV)

the net present value of the customer's profitability throughout the customer-firm relationship

Customer lifetime value (CLV)

the net present value of the future profits to be received from a given number of newly acquired or existing customers during a specified period of years

Data mining

the process of using statistical techniques to uncover patterns, trends, correlations, or other relationships among variables in the data warehouse or data mart.

data warehouse

the repository for all relevant customer and prospect information.

adaptive personalization (also called collaborative filtering)

the sending of company communications and message content based on the company's learning of customer patterns and comparing them with similar customer patterns

steep skew

the top customers account for the vast amount of profits

Skew

the value of a company's customer base in terms of whether or not the top customers account for the vast amount of profits or whether customer value does not vary widely

Objectives of CRM: Increasing usage of more prestigious items produced by a company.

trading up

Workflow and business rules

transmit BI to front-office personnel, enabling them to understand the value they can give each customer when asked to satisfy their requests or as part of a retention strategy.

Transaction Marketing

views the sale as the end of the relationship, whereas relationship marketing views the sale as the beginning.

Permission-based marketing

when a firm asks a current or prospective customer for permission to contact and make product offers (usually via e-mail).

flat skew

whether customer value does not vary widely

CRM systems are being used because they can enhance productivity across the range of key marketing functions

• Identifying prospects • Acquiring customers • Developing customers • Cross-selling • Upselling • Managing migration • Servicing • Retaining • Increasing loyalty • Winning back defectors

CRM definition groupings

• software package, process, system, or technology • data storage and analysis • change in corporate culture • concept of "managing demand" • new strategies focused on current customers

Tangible components to CRM

•Data warehouses •Customer touch points •Customer call centers •Sales-force automation •360-degree view of customers

Firms develop CRM systems for the following reasons

•To increase customer retention and customer loyalty •To stay even with their competition •To attempt to differentiate themselves from their competitors based on their ability to provide outstanding customer service •To encourage development of customer communities and social networks

A comprehensive CRM system should contain these major technology components

► A data warehouse ► Analytical tools ► Campaign management tools ► Interfaces

CRM is founded on these tenets

► Customers should be managed as important assets ► Not all customers are equally desirable ► Customers vary in their needs, preferences, and buying behavior ► By better understanding their customers, companies can tailor their offerings to maximize overall value

When CRM is viewed in terms of systems, it must...

► Gather customer data from all touch points ► Warehouse the data, providing easy access for all ► Deliver useable information based on the data

Multichannel Marketing

► Is the variety of channels (store, telephone, ATM/kiosk, catalog, social networks, and online) that consumers use to interact and transact with an organization ► these users have two to four times more to spend ► In retail banking they are 25-50 percent more profitable

Reasons CRM is a difficult business practice to define

► It can apply to different levels of customers. ► Some of the key components of CRM shift when considering business-to-business (B2B) versus business-to-consumer (B2C) relationships. ► The composition of CRM systems will be different in big versus small companies, even though their objectives will be the same.

defensive marketing

► aimed at existing customers, such as customer retention and service recovery efforts ► has become more profitable

Touch Points

► any point of contact that a customer or prospect has with a company ► can be an inquiry over the phone, in person, or via e-mail

As companies gather information customers, they can avoid attracting customers who...

► buy infrequently ► buy only when products or services are on sale ► frequently return merchandise ► complain often

The business intelligence (BI) system

► captures information from all customer touchpoints. ► consist of data warehouses, data marts, and data mining/ analytic techniques.

360-Degree View

► companies should treat customers throughout the business cycle based on their lifetime profitability ► focus on profitability, not revenue or value

Physical links to back-office systems,

► enable front-office personnel to make fulfillment promises that the company can keep ► examples: inventory control, accounts receivable, and so on,

The Types of Companies Benefiting Least from CRM Systems

► government (state and local) ► energy and natural resources

Customer Interaction Center

► has the ability to generate revenue for the organization ► extends across all channels and functions

Key areas of any CRM system

► integrated front office ► business intelligence ► workflow and business rules ► physical links to back-office systems ► performance metrics

Integrated front office

► provides complete customer profiles to all customer-facing persons, including marketing, sales, and customer service personnel. ► The technologies include customer engagement centers, sales force automation, and the Internet.

The Types of Companies Benefiting Most from CRM Systems

► telecommunications ► banking and insurance ► utilities

Master data management (MDM)

► the process that ensures that customer information is uniform, accurate, complete, and up-to-date. ► records consist of transactional, biographical, and social media interactions pertinent to the company-customer relationship.

Call Center

► where customer communications occur ► fewer than 10% of call centers are based outside the U.S. ► telephone-centered