Customer Relationship

Management (CRM)

Prof. Aparna Kanchan 1

 What is CRM?
• CRM “is a business strategy that aims to understand, anticipate
and manage the needs of an organisation’s current and
potential customers”.

• It is a “comprehensive approach which provides seamless

integration of every area of business that touches the customer-
namely marketing, sales, customer services and field support
through the integration of people, process and technology”

• CRM is a shift from traditional marketing as it focuses on the

retention of customers in addition to the acquisition of new
customers .

• “The expression Customer Relationship Management (CRM) is

becoming standard terminology, replacing what is widely
perceived to be a misleadingly narrow term, relationship
marketing (RM)”.
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 Customer Relationship
Management Definition
Value ( $ )

ns hip
Re latio
he
of t
V alue Duration of Customer Relationship
The

Targeting Acquisition Retention Expansion

• Who Do we target • What is the best channel for • How can we improve • How many products does our
• What segments are most each segment retention average customer buy
profitable • What is the acquisition cost for • What is our average • How can we induce our
• What segments match our Value a channel / segment customer relationship length current base to buy more
Proposition • Do certain channels deliver • How can we hold customer products
• What is the best segmentation certain types of customers for as long as possible • Who are the prime targets for
strategy for us / our industry • Cost effective acquisition • What is the most cost expansion
effective method of retention • What is the cost of expansion

Customer Relationship Management can be simply defined as everything involved with

managing the customer relationship.

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Evolution of Information Requirements

Materials Requirements Planning

(MRP)

Manufacturing Resource Planning

(MRP II)

Enterprise Resource Planning

(ERP)

Supply Chain Management

(SCM)

Customer Relationship Management (CRM)

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 Definition of CRM

“CRM is concerned with the creation,

development and enhancement of
individualised customer relationships with
carefully targeted customers and customer
groups resulting in maximizing their total
customer life-time value”.

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 The purpose of CRM
• “The focus [of CRM] is on creating value for the
customer and the company over the longer term”.

• When customers value the customer service that they

receive from suppliers, they are less likely to look to
alternative suppliers for their needs.

• CRM enables organisations to gain ‘competitive

advantage’ over competitors that supply similar
products or services.

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 Why is CRM important?
• “Today’s businesses compete with multi-
product offerings created and delivered by
networks, alliances and partnerships of
many kinds. Both retaining customers and
building relationships with other value-
adding allies is critical to corporate
performance”.

• “The adoption of C.R.M. is being fuelled by a

recognition that long-term relationships with
customers are one of the most important
assets of an organisation”.

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 Why did CRM develop?
CRM developed for a number of reasons:

• The 1980’s onwards saw rapid shifts in

business that changed customer power
• Supply exceeded demands for most products
• Sellers had little pricing power
• The only protection available to suppliers of
goods and services was in their relationships
with customers

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 What does CRM involve?

CRM involves the following

• Organisations must become customer focused

• Organisations must be prepared to adapt so that
it take customer needs into account and delivers
them
• Market research must be undertaken to assess
customer needs and satisfaction

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CRM is not just software

Business
Strategy

People & Process

Information Technology

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 CRM is not product

CRM is an
integrated
framework and
strategy, not
product

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 Islands of Automation Need To Be Bridged
Over time, channels & operational systems are added to cater to changing
customer demands. The result…several functional groups are interacting with
customers independently.

Sales Force

Customer
Service

Direct Mail

Web

$ Branches

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 Why CRM?
• It costs six times more to sell to new customer than to
sell to an existing one.

• A typical dissatisfied customer will tell 8-10 people

• By increasing the customer retention rate by 5%, profits

could increase by 85%

• Odds of selling to new customers = 15%, as compared

to those for existing customers (50%)

• 70% of the complaining customers will remain loyal if

problem is solved

• 90% of companies do not have the sales and service

integration to support e-commerce 13
 Importance of CRM
Scope Depth
Customer Management Process Threads
Marketing Selling Servicing
Are we making the right level
Customer Relationship and type of marketing, sales,
and service investments in
Customer Interaction Channels

Broadcast Strategies each of our customer

segments?
Mail

Field Personnel
Are we taking a holistic
Customer Relationship approach to our customers
Agents/Distributors across processes and
Structure
channels?
Call Center

Retail

Internet Customer Relationship Have we implemented best

practices and technology in
Performance process/channel?

Back Office Process/Systems

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 Customer Relationship Management and
Shareholder Value
Annual Cash Flow

Service/Usage Revenue

Acquisition
Cost

Duration of
Relationship
Cost of Service

• Customer Life Time Value (LTV) is defined by a customer’s Life Time

worth to the firm and is measured by the net present value (NPV) of the
cash flows generated over the Life Time of the relationship.

Successful Customer Relationship Management can generate positive shareholder value.

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 The Five Key Drivers of the Lifetime Value of a
Customer

• Cost of Targeting;

• Cost of Acquisition;

• Service and Usage Revenue;

• Cost of service; and

• Duration of relationship.

Customer Relationship Management is about making every customer as valuable as

possible over the lifetime of the relationship

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Customer Relationship Management Process
Capture Customer
Capture Customer
Data and Measure
DataResults
and Measure
Results

Capture Customer
The
DataCustomer
and Measure
Results Store Data, Customer
Mine and
Capture
Make Information
The CRM Data and Measure
Accessible
Results
Dynamic

Take Action
Capture to
Customer
Enrich the Customer
Data and Measure
Relationship
Results Capture
Build and Customer
Manage
Data and Measure
Customer Value
Results

• The building blocks of CRM allow an organization to manage this cycle and
use the knowledge on customers to enhance the Life Time value of the
customer portfolio.
• No organization has perfect information on its customers. Knowledge of
customers is continuously enhanced through the CRM dynamic.

Customer Relationship Management is a ongoing, dynamic learning process for an organization

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 Implementing CRM must be approached from an Integrated Perspective

Capture Customer
Capture Customer
Data and Measure
DataResults
and Measure Capturing gigabytes of customer data
Results in disparate operational systems that
are next to impossible to access may
render the data useless.
Taking action to improve the
Capture Customer
relationship without measuring the
results provides no evidence of
The
DataCustomer
and Measure CRM
Results
success or failure and limits the
opportunity for learning. without an Store Data, Customer
Capture Mine and
Make information
Data and Measure
Accessible
Integrated Results
A data warehouse full of data without
Approach the tools to extract knowledge is
nothing more than expensive
inventory.
Take Action
Capture to
Customer Sophisticated mining tools only
Enrich the Customer
Data and Measure produce results only as good as the
Relationship
Results Capture data they mine.
Build and Customer
Manage
Data and Measure
Customer Value
Results
Implementing new technologies without
the knowledge on how to enrich the Developing insights on how to improve the value of the
relationship is likely to yield a return below customer relationship without having the infrastructure to
the cost of the capital expenditure. take action has no impact on the bottom line. In addition,
there is no opportunity to test the ‘theoretical’ analysis.

All areas must be implemented, to some degree, to effectively manage the customer
relationship. When pieces are implemented in isolation, the benefits are less than
overwhelming. 18
 The Building Blocks of CRM
Data Data Knowledge Enabling
Capture Warehousing Management Technologies

Customer Touch
EIS Segmentation Call Centres
Point Integration

Market Customer Sales Process

OLAP
Research Profitability Automation

External
Data Cleansing Data Mining e-Business
Databases

Statistical
MetaData Modeling

Organization

People

Deployment and Support

The building blocks of CRM are the things that need to be in place for an effective Customer
Relationship management program

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 “Strategically significant customers”

• “Customer relationship management

focuses on strategically significant
markets. Not all customers are equally
important”.

• Therefore, relationships should be built

with customers that are likely to provide
value for services

• Building relationships with customers that

will provide little value could result in a
loss of time, staff and financial resources
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Markers of strategically significant customers

• Strategically significant customers need to satisfy at

least one of three conditions :

1. Customers with high life-time values (i.e.

customers that will repeatedly use the service in
the long-term)
2. Customers who serve as benchmarks for other
customers
3. Customers who inspire change in the supplier

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 Three phases of
customer relationship management

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 Managing the Customer Life Cycle:
The Three Phases of CRM
Metrics
•Direct and indirect sales
Acquire •Customer service
Differentiation improvements
• Innovation
• Convenience

Bundling Adaptability
• Reduce Cost • Listening
• Customer Service • New Products
En

n
tai
ha

Re
nc
e

Metrics Metrics
•Lifetime value •Tangible and intangible benefits
•Share of wallet •Brand equity gains
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 Marketing applications of CRM
A CRM system supports the following marketing applications:
1. Sales force automation (SFA). Sales representatives are supported in
their account management through tools to arrange and record customer
visits.
2. Customer service management. Representatives in contact centres
respond to customer requests for information by using an intranet to
access databases containing information on the customer, products and
previous queries.
3. Managing the sales process. This can be achieved through e-commerce
sites, or in a B2B context by supporting sales representatives by
recording the sales process (SFA).
4. Campaign management. Managing ad, direct mail, e-mail and other
campaigns.
5. Analysis. Through technologies such as data warehouses and
approaches such as data mining, customers characteristics, their
purchase behaviour and campaigns can be analysed in order to optimize
the marketing mix.
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 Integrated CRM

Customer
Lifecycle Acquire Enhance Retain

{
Direct Cross-Sell & Proactive
Partial Marketing Up-Sell Service
Functional
Solutions
Sales Force
Customer Support
Automation
Complete
Integrated Integrated CRM Applications
Solutions

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 How to Build a CRM
Infrastructure
1. Involve top management.
2. Define a vision of integrated CRM.
3. Establish the CRM strategy and specify its
objectives.
4. Undertstand the customer.
5. Review cultural changes that will need to occur.
6. Develop a business case.
7. Evaluate current readiness.

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 How to Build a CRM
Infrastructure
8. Evaluate appropriate applications with an
uncompromising focus on ease of doing business.
9. Identify and target quick wins.
10. Put the ownership of the end-to-end project in the
hands of a single manager.
11. Implement in stages.
12. Be sure to create a close-loop CRM environment.
13. Create concrete measurement goals.

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CRM Infrasructures
Business Customer

Process and People Integration

Marketing Sales Services Support

Information and Technology

Integration

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 Five selection principles of a
CRM
Principle 1: CRM Is Not a Software Purchase
Principle 2: CRM Must Adapt to Evolving Business Priorities
Principle 3: CRM Delivers Measurable Business Benefits
Principle 4: Consider Price and Total-Cost-of-Ownership
Carefully
Principle 5: Your Business Is Unique.

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What Capabilities Make Up Leading Edge CRM?
•Operational excellence
– Ensuring responsiveness and
accurate delivery
– Providing seamless interactions across all
interaction channels A
Analytical
•Analytical insight
– Sales planning and forecasting
– Analyzing, predicting and driving customer
value and behaviour
– Identifying the right time to make the right Operational Collaborative
offer to the right market
– Consistently enhancing the customer
experience in virtual channels
O C
•Collaborative optimization
– Involving customers to
better accommodate their needs
– Demand driven supply chain and fulfillment
integration
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 Integration Requirements of Next Gen CRM
Infrastructure
Closed loop CRM infrastructure
must integrate
– Customer content
– Customer contact information
– End-to-end business processes
– The extended enterprise or partners
– Systems

Less than 2% of companies provide on-demand cross-

channel integration of website and call center

42% of top-ranked Web sites took longer than five days to

reply to customer emails or never replied at all
Source: Cisco Systems
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 Next Generation CRM Trends

• The multi-channel integrated experience

• The rise of the call center as a multipurpose
customer contact point
• Listening portals: Next-generation CRM
capabilities
• CRM portals, sales force ASPs, and hosted
applications

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 CRM Key Benefits
• Deeper understanding of customers
• Increased marketing and selling opportunities
• Identifying the most profitable customers
• Making it easier for sales and channel partners to
sell
• Faster response to customer inquiries
• Increased efficiency through automation
• Receiving customer feedback that leads to new
and improved products or services
• Obtaining information that can be shared with
business partners
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Information Technology and CRM

• Technology plays a pivotal role in CRM.

• Technological approaches involving the use of databases,
data mining and one-to-one marketing can assist
organisations to increase customer value and their own
profitability.
• This type of technology can be used to keep a record of
customers names and contact details in addition to their
history of buying products or using services.
• This information can be used to target customers in a
personalised way and offer them services to meet their
specific needs.
• This personalised communication provides value for the
customer and increases customers loyalty to the provider.

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 Information Technology and CRM: Examples

Here are examples of how technology can be used to create

personalised services to increase loyalty in customers:

• Phone calls, emails, mobile phone text messages, or WAP

services (2):
Having access to customers contact details and their service or
purchase preferences through databases etc can enable
organisations to alert customers to new, similar or alternative
services or products
- Illustration: When tickets are purchased online via
Lastminute.com, the website retains the customers details and
their purchase history. The website regularly send emails to
previous customers to inform them of similar upcoming events
or special discounts. This helps to ensure that customers will
continue to purchase tickets from Lastminute.com in the future.
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Information Technology and CRM: Examples

• Cookies
“A “cookie” is a parcel of text sent by a server to a web
browser and then sent back unchanged by the browser each
time it accesses that server. HTTP cookies are used for
authenticating, tracking, and maintaining specific information
about users, such as site preferences and the contents of
their electronic shopping carts” (5).
- Illustration: The online store, Amazon, uses “cookies” to
provide a personalised service for its customers. Amazon
requires customers to register with the service when they
purchase items. When registered customers log in to Amazon
at a later time, they are ‘greeted’ with a welcome message
which uses their name (for e.g. “Hello John”). In addition, their
previous purchases are highlighted and a list of similar items
that the customer may wish to purchase are also highlighted.
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Information Technology and CRM: Examples
• Loyalty cards
“the primary role of a retailer loyalty card is to gather data about customers.
This in turn leads to customer comprehension and cost insights (e.g. customer
retention rates at different spending levels, response rates to offers, new
customer conversion rates, and where money is being wasted on circulars),
followed by appropriate marketing action and follow-up analysis” (6)
- Illustration: The supermarket chain, Shoppers Stop, offers loyalty cards to its
customers. When customers use the loyalty cards during pay transactions for
goods, details of the purchases are stored in a database which enables
Shoppers Stop to keep track of all the purchases that their customers make.
At regular intervals, Shoppers Stop sends its customers money saving
coupons by post for the products that the customers have bought in the past.
The aim of this is to encourage customers to continually return to Shoppers
Stop to do their shopping

• CRM software- “Front office” solutions

- “Many call centres use CRM software to store all of their customer's details.
When a customer calls, the system can be used to retrieve and store
information relevant to the customer. By serving the customer quickly and
efficiently, and also keeping all information on a customer in one place, a
company aims to make cost savings, and also encourage new customers” 38
 Face-to-face CRM
• CRM can also be carried out in face-to-face interactions
without the use of technology

• Staff members often remember the names and favourite

services/products of regular customers and use this
information to create a personalised service for them.

• For example, in a hospital library you will know the name of

nurses that come in often and probably remember the area
that they work in.

• However, face-to-face CRM could prove less useful when

organisations have a large number of customers as it would
be more difficult to remember details about each of them.
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 Benefits of CRM
Benefits of CRM include

• reduced costs, because the right things are being done

(ie., effective and efficient operation)
• increased customer satisfaction, because they are
getting exactly what they want (ie. meeting and
exceeding expectations)
• ensuring that the focus of the organisation is external
• growth in numbers of customers
• maximisation of opportunities (eg. increased services,
referrals, etc.)
• increased access to a source of market and competitor
information
• highlighting poor operational processes
• long term profitability and sustainability 40
 Implementing CRM
• When introducing or developing CRM, a strategic
review of the organisation’s current position should be
undertaken
• Organisations need to address four issues :
1. What is our core business and how will it evolve in the
future?
2. What form of CRM is appropriate for our business now
and in the future?
3. What IT infrastructure do we have and what do we
need to support the future organisation needs?
4. What vendors and partners do we need to choose?
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THANK- YOU

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