Part I: Understanding customer relationships
Part I consists of four chapters focused on the following:
Chapter 1: Introduction to CRM
Chapter 2: Understanding relationships
Chapter 3: Managing the customer lifecycle customer acquisition
Chapter 4: Managing the customer lifecycle customer retention and development
CUSTOMER RELATIONSHIP MANAGEMENT
CONCEPTS AND TECHNOLOGIES
Chapter 1
Introduction to CRM
Learning Objectives
By the end of this Chapter you will be aware of:
A definition of CRM
Three major perspectives of CRM: strategic, operational and analytical
Customer-centricity vs other business logics
Where social CRM fits in the CRM landscape
Several common misunderstandings about CRM
The seven constituencies having an interest in CRM
The IDIC model of CRM
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 centre, 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.
Which one is right?…
It depends on your perspective..
Three types of CRM
Type of CRM Dominant characteristic
Strategic Strategic CRM is a core customer-centric business strategy that aims at winning and keeping profitable customers.
Operational Operational CRM focuses on the automation of customer-facing processes such as selling, marketing and customer service.
Analytical Analytical CRM is the process through which organizations transform customer-related data into actionable insight for either strategic or tactical purposes.
Strategic CRM
Strategic CRM is focused upon the development of a customer-centric business culture dedicated to winning and keeping customers by creating and delivering value better than competitors.
Strategic CRM
The culture is reflected in leadership behaviours, the design of formal systems of the company, and the myths and stories that are created within the firm.
In a customer centric culture resources are allocated where they would best enhance customer value, reward systems to promote employee behaviours that enhance customer satisfaction and retention, and customer information to be collected, shared and applied across the business.
CASE STUDY 1: STRATEGIC CRM AT HONDA AUSTRALIA
Read the case study and answer the following questions:
What was the problem the company was facing regarding the handling of customer data?
How the above mentioned problem was solved?
What is meant by the phrase: comprehensive data source and reporting system?
Can we say that the company is using STRATEGIC CRM practices? Justify your answer.
Business Orientation of CRM
(Group Project question 2)
Customer-centricity competes with other business logics.
Kotler identifies three other major business orientations:
product,
production and
selling.
Customer-centricity and other business logics 1 (Group project question 2)
Product-oriented businesses believe that customers choose products with the best quality, performance, design or features.
Production-oriented businesses believe that customers choose low-price products.
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.
Product-oriented businesses
These are often highly innovative and entrepreneurial firms and start-ups.
Little or no customer research is conducted. Management makes assumptions about what customers want.
Product-oriented companies often over-specify or over-engineer the features of the products, which then are too costly for many customers.
The main segment is the price-insensitive innovators, who respond positively to company claims of product excellence, but they are only 2.5 per cent of the potential market.
Product-oriented businesses
Apple is an example
Production-oriented businesses
Production-oriented businesses focus on operational excellence to offer the best value for money, time and/or effort.
Consequently, they strive to keep operating costs low, and develop standardized offers and distribution channels.
Complexity, customization and innovation are very costly and unappealing.
Production-oriented firms focus their innovation on supply chain optimization and simplification and tend to serve customers who want good-enough, low-priced products and services.
Production-oriented businesses
There is a price and convenience segment in most markets but the majority of customers have other requirements.
An excessive focus on operational efficiency might make you blind to disruptive changes just over the horizon; making cheap products that no one wants to buy is not a sustainable strategy.
Sales-oriented businesses
Very often, a sales orientation follows a production orientation. The company produces low-cost products and then has to promote them heavily to shift inventory a make and sell approach.
In markets that are growing rapidly, such approach can promote strong market share growth and economies of scale.
However, the focus on the immediate sale prevents resources to experiment and innovate to serve emerging needs and wants not yet expressed by customers.
Customer-centricity
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
Operational CRM automates customer-facing business processes.
CRM software applications enable the marketing, selling and service functions to be automated and integrated.
Marketing automation (MA) applies technology to marketing processes and the application of the 4Ps.
Sales force automation (SFA) is widely adopted in B2B and it applies technology to the management of a companys selling activities to improve and standardize the selling process.
Service automation involves the application of technology to customer service operations to achieve high levels of efficiency, reliability and effectiveness.
Operational CRM: some applications
CASE STUDY 2: SALES FORCE AUTOMATION AT ROCHE
Read the case study and answer the following questions:
Who are Roches customers?
Initially, how Roche was collecting customer data?
Which were the problems related to the initial data collection process?
What is the new system that Roche adopted regarding customer data collection?
Is this new automated system successful? Why?
Analytical CRM
Analytical CRM, is concerned with capturing, storing, extracting, integrating, processing, interpreting, distributing, using and reporting customer-related data to enhance both customer and company value.
With the application of data mining tools, a company can then analyze these data to provide answers to questions such as:
Who are our most valuable customers?
Which customers have the highest propensity to switch to competitors?
Which customers would be most likely to respond to a particular offer?
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 lifestyle data from business intelligence organizations.
Big data including posts to social media sites and climate sensor data.
It Includes both structured and unstructured data.
Case study 3: ANALYTICAL CRM at AXA SEGUROS
What is the sector that AXA Seguros is operating?
What problems the company was facing?
How they addressed those problems?
What are the benefits of using an Analytical CRM system?
Beneficiaries of analytical CRM
Customer
Analytical CRM can deliver timely, customized solutions to the customers problems, thus enhancing customer satisfaction.
Company
Analytical CRM offers the prospect of more powerful cross-selling and up-selling programmes, and more effective customer retention and customer acquisition programmes.
What about social CRM?
Social CRM is a term widely used by technology firms with solutions to sell.
In time social CRM will become part of a larger discussion of big data.
Social CRM technologies essentially enable users to exploit social network data for customer management purposes.
What about social CRM?
Interactions between individuals within social networks have produced a huge amount of data, often unstructured, which some businesses are now trying to collect, interpret and use to create and maintain long-term beneficial relationships with their customers.
There is, therefore, a desire to integrate organization owned data with that generated socially to create a more comprehensive view of the customer.
Social media data can be used to enhance analytical CRM.
Where consumers use social media (e.g. Facebook) to make purchases, social media become part of operational CRM.
Misunderstandings about CRM
CRM is database marketing
CRM is a marketing process
CRM is an IT issue
CRM is about loyalty schemes
CRM can be implemented by any company
CRM is database marketing
Database marketing is concerned with building and exploiting high-quality customer data-bases for marketing purposes.
CRM is much wider in scope than database marketing that extends to strategic and operational CRM levels in companies.
Note that, only analytical CRM has the appearance of database marketing.
CRM is a marketing process
CRM software applications are used for many marketing activities: market segmentation, customer acquisition, customer retention and customer development (cross-selling and up-selling),
However, the deployment of CRM software to support a companys mission to become more customer-centric often means that customer-related data are shared more widely throughout the enterprise than the marketing function alone.
Operations management can use customer related data to produce customized products and services.
CRM is a marketing process
HR can use customer preference data to help recruit and train staff for the front-line jobs that interface with customers.
R&D can use customer-related data to guide the efforts of new product development.
Customer data can even be shared across the extended enterprise with outside suppliers and partners.
CRM is an IT issue
This is the most serious misunderstanding.
IT is a necessary enabler of CRM in most organizations to store, analyze and distribute huge amounts of data quickly.
It is therefore too easy for senior management to look to the IT to lead CRM implementations and initiatives, rather than the broader strategic view of leadership.
CRM is an IT issue
However, two other important parts of most CRM projects are people and process. People develop and implement the processes that are enabled by the IT.
IT cannot compensate for bad processes and incompetent people.
Not all CRM initiatives involve IT investments. The goal of all CRM projects is the development of relationships with, and retention of, highly valued customers.
This may involve behavioural changes in store employees, education of call centre staff, and a focus on empathy and reliability from salespeople. IT may play no role at all.
CRM is about loyalty schemes
Loyalty schemes are commonplace in many industries whereas some CRM implementations are NOT linked to loyalty schemes.
Loyalty schemes may play two roles in CRM implementations.
First, they generate data that can be used to guide customer acquisition, retention and development.
Second, loyalty schemes may serve as an exit barrier for customers.
CRM can be implemented by any company
Strategic CRM can, indeed, be implemented in any company driven by a desire to be more customer-centric.
Chief executives can establish a vision, mission and set of values that bring the customer into the heart of the business.
Any company can try to implement operational CRM through CRM technology and automation of processes.
CRM can be implemented by any company
Analytical CRM is a different matter, being based on customer-related data. At the very least, data are needed to identify which customers are likely to generate most value in the future, and to identify within the customer base the segments or customers that have different requirements.
Only then can different offers be communicated to each customer group to optimize company and customer value over the long term.
If these data are missing then analytical CRM cannot be implemented.
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 constituencies (Group project question 3)
Companies implementing CRM
Customers and partners of those companies
Vendors of CRM systems
CRM cloud solutions providers
Social media players
Vendors of CRM hardware and infrastructure
Management consultants
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.
CASE STUDY 4: UNITED AIRLINED THE IDIC MODEL
Q1. Identify the customers of United Airlines.
Q2 How an airliner can differentiate its customers according to the value they bring to the firm? Which metrics can be used to identify the most valuable customers?
Q3 How the company interacts with the customers? Can you think of other ways that the company could interact with its customers?
Q4 What kind of service customization is provided by the airline? Can you further recommend other types/examples of service customization for United Airlines?
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