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Introduction to Customer
Relationship Management
(CRM)

Semester Ganjil 2013/2014

 Learning Objectives

 Understand the basic concept of CRM

 Identify the four major perspectives on CRM
 Define several common misunderstandings
about CRM
 Understand five generic models of CRM
 Overview of history and development of CRM
Sales Cycle

(1) Identify (2) Estimate

Prospect Sales Potential

(5) Initiate and Maintain

(3) Manage Leads
Customer Relationship

(4) Forecasting
Sales
 CRM Stands for?

Customer Relationship Management

OR

Customer Relationship Marketing

OR

Continuous Relationship Marketing

 Selected definitions of CRM [1]

 CRM is an information industry term for

methodologies, software, and usually
Internet capabilities that help an enterprise
manage customer relationships in an
organized way
 CRM is the process of managing all aspects of
interaction a company has with its
customers, including prospecting, sales, and
service
 CRM applications attempt to provide insight into and
improve the company/customer relationship by
combining all these views of customer interaction into
one picture
 Selected definitions of CRM [2]

 CRM is an integrated approach to

identifying, acquiring, and retaining
customers
 By enabling organizations to manage and
coordinate customer interactions across
multiple channels, departments, lines of
business, and geographies, CRM helps
organizations maximize the value of every
customer interaction and drive superior
corporate performance
 
 Selected definitions of CRM [3]
 CRM is an integrated information system that
is used to plan, schedule and control the pre-
sales and post-sales activities in an organization
 CRM embraces all aspects of dealing with prospects
and customers, including the call center, sales force,
marketing, technical support and field service
 The primary goal of CRM is to improve long-term
growth and profitability through a better
understanding of customer behaviour
 CRM aims to provide more effective feedback and
improved integration to better gauge the return on
investment (ROI) in these areas
 Selected definitions of CRM [4]

 CRM is a business strategy that

maximizes profitability, revenue and
customer satisfaction by organizing
around customer segments, fostering
behaviour that satisfies customers,
and implementing customer-centric
processes
 Core Definition of CRM

 CRM is the core business strategy that

integrates internal processes and
functions, and external networks, to
create and deliver value to targeted
customers at a profit
 It is grounded on high quality customer-
related data and enabled by information
technology
 CRM is Founded on Four Tenets

1. Customers should be managed as important

assets
2. Not all customers are equally desirable
3. Customers vary in their needs, preferences, and
buying behavior
4. By better understanding their customers,
companies can tailor their offerings to maximize
their overall value
The CRM Advantages

Better Increases
Customer Market
Knowledge Share

Creates Up
Quicker Cash Flow and Cross-Selling
Opportunities

Increased
Product
Acceptance
 Why CRM Systems are Being Used ?

 Identifying prospects
 Acquiring customers
 Developing customers
 Cross-selling and up-selling
 Servicing
 Retaining
 Increasing loyalty
 Winning back defectors
 CRM’s Benefits for Retail Banks (Example)

 Increase in average products sold per customer

over one year from 4.6 to 6.2
 3-5 percent decrease in administrative costs
 200 percent return on technology investment
through cost reduction over one year
 96 percent reduction in average time for a CCC
agent to refer a customer to a branch loan office
 83 percent decrease in average customer info
retrieval time
 15 percent increase in product revenue in one year

Lowell Alcorn and Anton Wiryawan, Mortgage Banking (Feb 2004): 74-78
 A Customer Focus Can Aid Retention

 Annual Defection Rates

 Newspaper subscriptions 66 percent

 Residential tree and lawn care 32 percent
 U.S. long distance telephone 30 percent
 Clothing catalogues 25 percent
 Internet service providers 22 percent

Griffen and Lowenstein 2001

 Customer Retention and Profits

 Increase retention 5 percent and improve

profitability in net present value from 20-85
percent
 It costs five to ten times more to obtain a
new customer than it does to keep an
existing one
 Which Companies Benefit Most from CRM?

 Companies serving large numbers of

customers through complex and frequent
interactions:
 Communications companies
 Retail banks
 Insurance companies
 Healthcare organizations
 Utilities
 Companies with a steep skew
 Companies in “lost for good” markets
 Which Companies Benefit the Least from CRM Today?

 Companies that engage in minimal interactions

with each customer
 Auto dealers
 Government agencies

 Companies with simple transaction

 Movie theater
 Retail stores
 Types of CRM

Type of CRM Dominant characteristic

a core customer-centric business strategy
Strategic that aims at winning and keeping profitable
customers
focuses on the automation of customer-
Operational facing processes such as selling, marketing
and customer service
focuses on the intelligent mining of
Analytical customer-related data for strategic or tactical
purposes
applies technology across organizational
Collaborative boundaries with a view to optimizing
company, partner and customer value
 Strategic CRM

 Focus upon the development of a

customer-centric business culture that is
dedicated to winning and keeping the
customers
 Customer-centricity competes with other
business logics
 E.g. Philip Kotler identifies three other major
business orientations: product, production and
selling
 Customer Centricity & Other Business Logics [1]

1. Product-oriented businesses believe that

customers choose products with the best
quality, performance, design or features
2. Production-oriented businesses believe that
customers choose low-price products
3. Sales-oriented businesses make the
assumption that if they invest enough in
advertising, selling, public relations (PR)
and sales promotion, customers will be
persuaded to buy
 Customer Centricity & Other Business Logics [2]

4. A customer or market-oriented company

shares a set of beliefs about putting
the customer first
 It collects, disseminates and uses customer and
competitive information to develop better value
propositions for customers
 A customer-centric firm is a learning firm that
constantly adapts to customer requirements and
competitive conditions
 Operational CRM
Marketing automation
Market segmentation
Campaign management
Event-based (trigger) marketing
Sales force automation
Account management
Lead management
Opportunity management
Pipeline management
Contact management
Quotation and proposal generation
Product configuration
Service automation
Case (incident or issue) management
Inbound communications management
Queuing and routing
Service level management
 Marketing Automation

 Applies technology to marketing processes

 Market segmentation
 Campaign management
• Allow marketers to use customer-related data in order to
develop, execute and evaluate targeted communications and
offers
 Event-based (trigger) marketing
• Describe messaging and offer presentation to customers at
particular points in time
• Event-based campaigns can be initiated by customer
behaviours or contextual conditions
• Ex. A call to contact center is an example of a customer
 Sales-force Automation
 The original form of operational CRM
 Applies technology to the management of a company’s
selling activities
 Improve and standardize the selling process
 Consist of:
 Account management
 Lead management: enable users to qualify leads and assign
them to the appropriate salesperson
 Opportunity management
 Pipeline management
 Contact management: manage their communications
programme with customers
 Quotation and proposal generation: allow the salesperson to
automate the production of prices and proposals for customers
 Product configuration: enable salespeople or the customer
themselves, automatically to design and price customized
products, services or solutions to problems
 Service Automation

 Allow companies to manage their service

operations, whether deliverd through call
centre, contact centre, web or face-to-face
 Consists of:
 Case (incident or issue) management
 Inbound communications management
 Queuing and routing
 Service level management
 Sources of Customer-related Data for Analytical CRM

 Internal sources
● Sales data (purchase history), financial data (payment
history, credit score), marketing data (campaign response,
loyalty scheme data) and service data.
 External sources
● Geo-demographic and life-style data from business
intelligence organisations, for example.
 Beneficiaries of Analytical CRM
 Customer
● Analytical CRM can deliver timely,
customized, solutions to the customer’s
problems, thereby enhancing customer
satisfaction.
 Company
● Analytical CRM offers the prospect of more
powerful cross-selling and up-selling
programs, and more effective customer
retention and customer acquisition programs.
 Misunderstandings about CRM

1. CRM is database marketing

2. CRM is a marketing process
3. CRM is an IT issue
4. CRM is about loyalty schemes
5. CRM can be implemented by any
company
 CRM Constituencies

1. Companies implementing CRM

2. Customers and partners of those companies
3. Vendors of CRM software
4. CRM application service providers (ASPs)
5. Vendors of CRM hardware and infrastructure
6. Management consultants
 CRM Challenges Vary Across Context

1. Banks
2. Auto manufacturers
3. High tech companies
4. Consumer goods manufacturers
5. Not-for-profits
 The IDIC Model of CRM
 Identify who your customers are and build a
deep understanding of them
 Differentiate your customers to identify which
customers have most value now and which
offer most for the future.
 Interact with customers to ensure that you
understand customer expectations and their
relationships with other suppliers or brands
 Customize the offer and communications to
ensure that the expectations of customers
are met.
The QCi Model of CRM
The CRM Value Chain

The CRM Value Chain

Customer Customer Network Value Manage

Portfolio Intimacy Development Proposition The
Primary Analysis (SCOPE) Development Customer
stages Lifecycle

Leadership and culture

Supporting Data and information technology

conditions
People

Processes
Payne’s 5-process Model of CRM
 Gartner’s Competency Model of CRM

1. CRM Vision: Leadership, Social Worth, Value Proposition

2. CRM Strategy: Objectives, Segments, Effective Interaction

3. Valued Customer Experience 4. Organizational Collaboration

Culture and Structure
Understand Requirements Customer Understanding
Monitor Expectations People: Skills,Competencies
Satisfaction vs.Competition Incentives and Compensation
Collaboration and Feedback Employee Communications
Partners and Suppliers

5. CRM Processes: Customer Life Cycle, Knowledge Management

6. CRM Information: Data, Analysis, One View Across Channels
7. CRM Technology: Applications, Architecture, Infrastructure
8. CRM Metrics: Cost to Serve, Satisfaction, Loyalty, Social Costs
 References

 Francis Buttle, Customer Relationship

Management: Concepts and Technologies,
2e, Elsevier Ltd., 2009
 Baran, Galka and Strunk, Principles of
Customer Relationship Management,
South-Western, 2008