Chapter 11 - Customer Relationship Management

sales activity management

tool offering sales reps a guided sequence of sales activities

CRM is not for every customer

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

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

churn reduction

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

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.

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

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

Call Centers (or customer contact centers)

-a call center links an organization and its customers together -it is a facility housing personnel who respond to customer queries -these personnel may provide customer service or technical support -it gives customers quick 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 and efficiency -by utilizing a call center, the company's internal resources can be freed by to focus on the company's core competencies

customer lifetime value (CLV)

-a prediction of the net profit attributed to the entire future relationship with a 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

Target Marketing

-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 email or direct mail saves labor and postage, and reduces the changes of being a nuisance

cloud computing (software as a service)

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

relationship marketing 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" email, 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

CRM is about building and maintaining profitable long term customer relationships beyond the one off buy and sell transaction how

-communicating with customers -understanding their behavior and their requirements -building a system to satisfy those requirements

Trends in CRM

-customer data privacy -social media -cloud computing

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 is about building and maintaining profitable long term customer relationships beyond the one off buy and sell transaction by

-focusing on customer requirements -delivering products and services in a manner resulting in high levels of customer satisfaction

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

Segmenting Customers

-the practice of dividing a 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 allow a company to zero in 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

CRM's Role in Supply Chain Management

-to be successful, a company must find ways to meet its customer needs; otherwise, just as any firm would react with a non-performing supplier, the customer goes elsewhere and takes years worth of future purchases with them -just as companies must create methods for finding and developing good suppliers, companies must create methods for becoming and staying good suppliers themselves -because many companies do not sell their products directly to end product consumers, companies may also need to train and certify that their intermediate customers are able to adequately represent their company's products

personalizing 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 -- 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

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

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

cross 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, you may be shown other similar items to the one you are looking at, or companion products to the item that you are considering

Customer Relationship Management

Customer relationship management (CRM) is the transformation of the people, process, and technology required to become a customer-centric organization -a philosophy of putting the customer first -it involves acquiring, retaining and partnering with selective customers to create superior value for both the company and the customer -it provides a means and a method to enhance the experience of individual customer so that they will remain customers for life

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.

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

Focus on Strategically Significant Customers

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

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 eliinates errors -customers can edit and modify the information accordingly -customer can opt into or out of future sales, subscriptions, corporate information, emails and other information if desired

Customer service elements

Pre-transaction Elements Transaction Elements Post-transaction Elements

Key tools and components of CRM

Predicting Customer Behaviors Segmenting Customers Target Marketing Event Based Marketing Cross Selling and Up-Selling Personalizing Customer Communications Relationship or Permission Marketing Analyzing Customer Defection Customer Lifetime Value (CLV)

customer data privacy

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

automated sales force tools

Sales Activity Management Sales Territory Management Lead Management Knowledge Management

sales territory management

Sales managers obtain information on each sales rep's activities

sales force automation SFA

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

Customer relationship management program

a successful CRM program is both simple and complex: -it is simple in that it involves training users within the company to make customer feel valued -it 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 customer satisfaction and loyalty among your segments of customers

Goals and benefits of CRM

a successful well designed CRM program can provide companies with many improvements and benefits. some of the most important are: 1. increased customer satisfaction 2. increased customer loyalty and retention 3. faster reposes to customer inquiries 4. increased revenue 5. growth of the customer base through referrals 6. a simplified and more cost effective marketing and sales process 7. increase sales effectiveness. closing sales faster 8. increased sales through cross-selling and/or up-selling 9. access to updated customer information and personalized interactions 10. automation of repetitive tasks

why do companies need CRM

companies need a customer relationship management program in order to: 1. acquire new customers 2. retain their existing customers 3. 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

social media

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

measuring customer satisfaction

customer 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

what is customer service?

customer service can have multiple meanings even within the same organization -customer service as a philosophy -customer service as an activity -customer service as a performance measure

knowledge management

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

field service management

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

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

customer defection analysis and churn reduction

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

up selling

involves persuading a customer to buy a more expensive item or 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

Post-transaction elements

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

transaction elements

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

establish performance measures

this allows the firm to: -determine if objectives have been met -compare actual to planned variance (taken action to correct issues)

managing customer service capabilities

performance measures are often designed around satisfying the seven R's. these kinds of services can come at a cost "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 cost + right documentation = the perfect order

pre-transaction elements

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

5% improvement in customer retention can

result in 75% increase in profits

lead management

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

customer defection analysis

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