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
