Chapter 10 CUSTOMER RELATIONSHIP MANAGEMENT

Chapter 10
CUSTOMER
RELATIONSHIP
MANAGEMENT


LEARNING OBJECTIVES
You should be able to:
Discuss the strategic importance of CRM
Describe the components of a CRM initiative
Calculate customer lifetime value
Discuss the implementation procedures used for CRM
programs
 Describe how information is used to create customer
satisfaction & greater profits for the firm
 Describe importance of data security
 Describe how social media and cloud computing have
impacted CRM
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CHAPTER OUTLINE
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Introduction
Customer Relationship Management Defined
CRM’s Role in Supply Chain Management
Key Tools & Components of CRM
Designing & Implementing a Successful CRM Program
Trends in CRM

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Introduction
“Finding a new customer costs five times
as much as keeping an old customer”
 CRM means focusing on customer requirements, then
delivering products and services in a manner resulting in
high levels of customer satisfaction
 Also refers to automated transaction and communication
applications, however this can cause problems for some
firms
 CRM must still include talking to customers,
understanding their behavior and their requirements, and
then building a system to satisfy those requirements

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Customer Relationship
Management (CRM)
Defined
“The infrastructure
that enables the delineation of and increase in

customer value, and the correct means by which to motivate
valuable customers to remain loyal—indeed to buy again.”
“…managing the relationships among people within an
organization and between customers and the company’s
customer service representatives in order to improve the
bottom line/key issues.”
“… to keep track of customers, learning about each one’s likes
and dislikes from various sources like transaction records, callcenter logs, web site clicks, and search engine queries.”

More simply – Building & maintaining profitable long-term
customer relationships
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CRM’s Role in Supply
Chain Management
The firm seeks position as a value-enhancing

supplier to its customers.
 Firms must create methods for finding &
developing good suppliers.
 Firms must create methods for becoming &
staying good suppliers themselves.
 It may be necessary for a firm to certify its
intermediate customers as to their ability to
adequately represent their firm’s products.
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Key Tools &
Components of CRM
 Segmenting Customers –
 Grouping customers to create specialized communications about
products/service
 Analyze the information from such groups of clients which can tell to
firm some useful ideas
 Firm then can use Target marketing efforts - e-mail or direct

mail to response to their clients. This way saves labor &
postage, reduces chances of being a nuisance to clients
 Relationship marketing or permission marketing

 customers select the type & time of communication. Requires software
& customer participation

 Cross selling - Additional products are sold as the result of an

initial purchase (e.g., e-mails from Amazon.com describing
other books bought by people)
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Key Tools & Components
of CRM
(Continued)

 Predicting Customer Behaviors - firms forecast
likelihood of customers’ purchases
 Customer Defection Analysis - finding methods to retain
customers
 Churn reduction - reducing customer defections

 Customer Value Determination - verify the customer
lifetime value for individuals or segments
 Personalizing Customer Communications Understanding customer behaviors & preferences, firms
customize communications
 Clickstream, how a customer navigates a Web site

 Event based Marketing - offer the right products &
services to customers at the right time

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Key Tools &
Components of CRM
(Continued)

Automated Sales Force Tools
Sales Force Automation (SFA)- Used for documenting field
activities, communications with the home office, & retrieving
sales history
 Sales Activity Management- Tool offering sales reps a
guided sequence of sales activities
 Sales Territory Management- Sales managers obtain
information of each sales rep’s activities (e.g., total sales
per sales rep.)
 Lead Management- Sales reps can follow prescribed tactics
when dealing with prospects to aid closing the deal.
 Knowledge Management- Enables quick decision making,
better customer service, & a better-equipped & happy

sales staff.

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Key Tools &
Components of CRM
(Continued)

Managing Customer Service Capabilities
 What does customer service actually mean?
 “Seven Rs Rule” having the right product, in the right
quantity, in the right condition, at the right place, at the
right time, for the right customer, at the right costs.
 Performance measures are often designed around
satisfying the seven Rs. These kinds of services can
come at a cost.

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Key Tools &
Components of CRM
(Continued)

Customer Service Elements
Pre-transaction elements - precede the sale (e.g.,
customer service policies, the mission statement, org.
structure, & system flexibility)
Transaction elements - occur during the sale &
include the order lead time, the order processing
capabilities & the distribution system accuracy
Post-transaction elements - occur after the sale &
include warranty repair capabilities, complaint resolution,
product returns, & operating information

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Key Tools &
Components of CRM
(Continued)

Call Centers
Can categorize calls, determine average resolution
time, forecast future demand, improve the overall
productivity of the staff, increasing customer
satisfaction levels

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Key Tools &
Components of CRM
(Continued)

 Website Self-Service
 Web sites act as support mechanisms for call centers. Customers
can access their account information & operating hours, contact
information, etc.

 Field Service Management
 Customers can communicate directly with product specialists

using wireless devices & the right diagnosis can be made quickly

 Measuring Customer Satisfaction
 Customers are frequently given opportunities to provide feedback
about a product, service, or organization

 Customer Privacy Capabilities
 Two important issues are ability to assure privacy & ability to
minimize customer harassment

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Designing &
Implementing a
Successful
CRM
Step 1. Creating
the CRM Plan:
 Objectives
of the CRM program
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, & maintenance &
 The costs & time frame for implementation

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Designing & Implementing a
Successful CRM Program
(Continued)

Step 2 - Involve CRM users from Outset/beginning
- Employees should understand how it affects their jobs
 Create a project team with members from all affected
organizational areas.
 Test with a pilot application

Step 3 - Select the Right Application & Provider -

Find an appropriate application & determine the extent of
customization
 Visit trade show, read trade literature, hire consultant, etc.
 Compare based on performance, security, reporting
capabilities, system availability, etc.
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Designing &
Implementing a
CRM
Step 4 -Successful
Integrate Existing CRM
Applications CRM is aProgram
collection of various applications
implemented over time.

(Continued)

 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.

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Designing &
Implementing a
CRM
Step 5 -Successful
Establish Performance
Measures – This
allows theProgram

firm to –

(Continued)

Determine if objectives have been met
 Compare actual to planned variance

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Designing &
Implementing a
CRM
Step 6 - Successful
Providing CRM Training
for All
Users - Program
(Continued)

 Provide & require training for all of the initial users
& then provide training on an ongoing basis as
applications are added
 Training can also help convince key users like
sales, call center, & marketing personnel of the
benefits & uses of CRM applications

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Trends in CRM
 Customer data privacy
 Rules & laws regarding invasion of privacy include Patriot
Act in the US and Internet Privacy Law in the EU

 Social Media
 Creating and cultivating virtual communities around
product or brand is a powerful way to engage consumers

 Cloud Computing (Software as a Service)
 Ala carte & on demand offerings accessed via web
browser
 Changing the cost structure of CRM applications

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