Ch. 11- Customer Relationship Management

CRM HOW:

*Communicating* *Understanding* customer behavior/requirements *Building* a system to satisfy those requirements

Post-Transaction Elements

*occur after the sale*. Includes warranty repair capabilities, complaint resolution, product returns, operating information, etc.

Pre-Transaction Elements

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

Customer Service 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.

Customer Service as a Philosophy

Customer service is a company-wide commitment to providing customer satisfaction by placing emphasis on quality and quality management.

Customer Service 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 activity.

Measuring Customer Satisfaction

Customers can provide feedback about product(s), service(s), the organization, etc. This can be done through *surveys, questionnaires and direct phone calls* to customers. Decisions have to be made regarding how to *capture and analyze* the data so you can use it productively going forward. The data 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.

Step 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 sales staff.

Field Service Management

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

A successful CRM program is both simple and complex:

It is *simple* in that it involves training users within the company to make *customers feel valued*. It is *complex* in that it also means finding affordable ways to identify potentially thousands/millions of customers, and then designing *customer contact strategies* geared toward creating *customer satisfaction and loyalty*

Companies need a CRM program in order to:

1. *Acquire* new customers 2. *Retain* existing customers 3. *Meet the Changing Expectations* of customers -Due to: social and demographic factors, economics, competitor's products and marketing efforts, and other market experiences.

"Seven R's Rule"

1. the right *product* 2. the right *quantity* 3. the right *quality* 4. the right *place* 5. the right *time* 6. the right *customer* 7. the right *costs* + the right documentation =*Perfect Order*

Up-selling:

persuading a customer to buy a more *expensive item or upgrade* a product/service to make the sale more profitable. Also involves selling the customer extra features or add-ons to an existing product. *Example*: "Would you like to super-size your order?"

Customer service:

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

*CRM is not for every customer*...

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

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 Defection Analysis and Churn Reduction...

go hand-in-hand to determine why customers leave and finding ways to retain them.

Call Centers (or Customer Contact Centers)

links an organization and its customers. Facility housing personnel respond to *customer queries*. These personnel may provide customer service or *technical support*. Gives customers access to the information they want and enhances the *customer-to-business relationship*. Help continuously monitor customer service parameters in an effort to gauge performance and improve quality/efficiency. By utilizing a Call Center, internal resources can be freed up to focus on company's core competencies

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.

Trends in CRM

-customer data privacy -social media -cloud computing

Step 5 - Establish Performance Measures

Allows the firm to: Determine if objectives have been met Compare actual to planned variance (take action to correct issues)

Relationship Marketing or Permission Marketing

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

Step 1. Creating the CRM Plan:

CRM Objectives CRM's fit with corporate strategy New applications to be purchased or developed Integration or replacement of existing systems Personnel Requirements The costs/time frame for implementation

Step 4 - Integrate Existing CRM Applications

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

Call Centers can...

Categorize calls Determine average resolution time Increase customer satisfaction Provide input to forecast future demand Improve the productivity of staff May be in-house or outsourced "There's nothing worse than calling your service provider and finding out that you know more than the person on the other end of the line"

Predicting Customer Behaviors

Companies can collect customers *buying history, preferences*, and *trend information*, which can be used to *predict customer buying behaviors going forward*. This information can be used to determine how effective *marketing, advertising and promotions* have been, and whether these practices *should be continued or altered*. This information can be used to create *accurate forecasts* and more effective *marketing and sales budgets*.

Social Media

Creating/cultivating virtual communities around product or brand will engage consumers

Customer Service can have multiple meanings

Customer Service as a Philosophy, Activity, Performance Measure

Step 3 - Select the Right Application and Provider

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

CRM BY:

Focusing on *customer requirements* Delivering products and services in a manner resulting in *customer satisfaction*

Event Based Marketing

Form of marketing that identifies key *events in customer and business lifecycle*. When an event occurs a customer specific marketing activity is undertaken. Event examples: 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. More *personalized form of marketing* which can help to form personal connections with the customers.

Segmenting Customers

Practice of *dividing a customer base into groups* of individuals *similar* in specific ways *relevant to marketing*. In short, groups customers to create specialized communications about products. Different *ways to group customers*: demographics, income, geography, buying preferences, etc. Allows company to focus on a particular population of customers to sell a specific product, or to define specific product(s) for a particular segment. If a company can identify different segments of customers, they can be more *efficient and effective* in use of resources by *tailoring programs and initiatives*.

Customer Lifetime Value (CLV)

Prediction of the *net profit attributed to the entire future relationship with a particular customer*. Some customers are worth more than others, and identifying your key customers can be extremely valuable. 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 can be expected from particular customers.

Customer Defection Analysis

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

Churn Reduction

Process of customers changing their buying preferences because they find better or cheaper products and services elsewhere. All the efforts companies develop to *stop losing customers* to competition

Sales Activity Management

Tool offering sales reps a guided sequence of sales activities

"Finding a new customer costs 5 - 10 times as much as keeping an existing customer" and 5% improvement in customer retention can result in a 75% increase in profits

True

Personalizing Customer Communications

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

Just as companies must create methods for finding/developing good suppliers,

companies must create methods for becoming and staying *good suppliers themselves*

Sales Force Automation (SFA)

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

Strategically significant customers are customers:

With *high life-time value*, i.e., customers that'll constantly buy the product(s) or use the service(s) long-term. Who serve as *role models* or benchmarks for others. Who *inspire change* in the supplier and/or the supply chain.

Cloud Computing (Software as a Service)

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

CRM is about

building and maintaining profitable long-term customer relationships beyond the one-off buy and sell transaction.

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 and potentially eliminates errors. Customers can edit/modify information. Customer can *opt into or out of* future sales, subscriptions, emails and other information if desired.

Transaction Elements

*occur during the sale*. Includes order lead time, order processing capabilities, distribution system accuracy, etc.

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

A successful CRM program can provide companies with improvements and benefits. Some of the most important are:

1. Increased customer *satisfaction, loyalty, and, retention* 2. *Faster* responses to inquiries. 3. Increased *revenue*. 4. *Growth* of customer base through referrals. 5. A simplified/more *cost effective* marketing & sales process. 6. Increase *sales effectiveness*. 7. Increased sales through cross-selling and/or up-selling. 8. Access to updated *customer information* and *personalized interactions*. 9. *Automation* of repetitive tasks.

Customer Service Elements

1. Pre-transaction Elements 2. Transaction Elements 3. Post-transaction Elements

Key Tools and Components of CRM

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

CRM's Role in Supply Chain Management

A company must find ways to meet customers needs; *otherwise*, just as any firm would react with a non-performing supplier, *the customer goes elsewhere* and takes *future purchases* with them.

Focus on Strategically Significant Customers

Not all markets and customers are equally important. -Building relationships with customers providing little value can be counterproductive. Relationships should be built with *strategically significant customers* that are likely to provide the most value for the effort.

Managing Customer Service Capabilities

Performance measures are often designed around satisfying the Seven R's. These kinds of services can come at a cost

Step 6 - Providing CRM Training for All Users

Provide/require training for all 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

CRM Philosophy

Put the customer first

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

Target Marketing

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 Usually much more effective than mass marketing; allows company to *focus* efforts on marketing to those customers *most likely* to respond. Is a more efficient use of the company's resources and 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 chances of being a nuisance

Many companies *do not sell their products directly to end-product consumers*, therefore,

they need to ensure their *intermediate customers* are able to represent their company's products.

Customer Relationship Management (CRM)

transformation of people, process, and technology required to become a *customer-centric organization* Involves acquiring, retaining and *partnering with selective customers* to create superior value for both company and customer. A means and method to enhance the experience of customers so they'll *remain customers for life*.

Cross-selling:

when a company sells additional *related or complementary* products/services 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.