overview of crm - walailak universitymit.wu.ac.th/mit/images/editor/images/ch01_s.pdf ·...

Overview of CRM

E-Customer Relationship Management

CHAPTER 1

Objectives

Defines CRM as a process and as a hub of learning for the organization

Outlines costs and benefits of the CRM system for organizations and customers

Old VS. New Marketing OLD MARKETING

Transaction oriented (no future/end of relationship)

All customers are equal 4P marketing

(+preferences) Mass marketing Focus on new customers Broadcast oriented Transaction profit

NEW MARKETING Relationship oriented

(beginning of relationship) Share of wallet oriented

(cross-selling, up-selling) All customers are not equal Relationship marketing Individual marketing Focus on existing customers Dialogue oriented (one-to-

one dialogue with each customer)

Customer lifetime value

Source: Baran, Galka, Strunk (2008), Principles of Customer Relationship Management

Transaction vs. Relationship Oriented

Transactions are one-shot exchanges without any concern for the future

Transaction marketing views the sale as the end of the relationship, whereas relationship marketing views the sale as the beginning of the relationship

Relationships require two-way communications between customers and the organization. Further, information from these communications,

when integrated, recorded, and managed enable relationships to be developed and maintained


Relationship Marketing

The origins of CRM are in the concept of Relationship Marketing

Relationship marketing focuses on maintaining a continuous relationship with

customers and building long-term bonds

Over time, a company learns more and more about the customer’s needs and wants and is therefore able to provide more personalized and relevant one-to-one service Source: Baran, Galka, Strunk (2008), Principles of Customer

Relationship Management

Customer Lifetime Value

The 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

It should be mentioned that it is not the customer’s lifetime that is being estimated; rather it is the period of time that a company

can reasonably expect them to be a customer


CRM: Why Now? The increasing number of high-quality

competitors and products: Consumers today can choose from a large number

of high quality items in every product category. When a company does innovate, its improvements

are quickly copied Companies are creating bonds between themselves

and their customers in order to better retain them; bonds created through CRM strategies foster

loyalty. Loyalty cannot be quickly copied by competitors


Changes in the pace of life: Consumers are demanding quicker and better

service since there are more sources vying for their scarce time

Families in which both spouses work and increasing hours on the job have led to less time available for shopping Companies who have CRM systems that can

help the hurried consumer have a differential advantage


CRM: Why Now?

Internet and Multi-channel Usage: Multi-channel customer contact is the key to CRM

strategy The more environments a company can provide, the

richer its customers’ experiences are likely to be. Companies are developing multi-channel contact

centers (not simply call centers) to provide customers with meaningful interactions

Companies need to maintain contact with customers in both synchronous and asynchronous manners in both live and automated formats

CRM: Why Now?


The Concept of Relationship Management

The function of an enterprise’s marketing activities is to bring buyers and sellers together, to create

customers

While getting customers is fundamental to business success, keeping customer is more important

Major goal of organizations engage in interactions with customers over the

long-term


Consider the local butcher of years ago

When a female customer walked into the shop, the butcher said hello and called the customer

by name

The butcher knew how the customer wanted her steaks and chops trimmed


He knew her family always grilled hamburgers on the weekend

Although he specialized in meats, he also stocked hamburger buns

so his customer needed to make only one stop

She appreciated the personalized service she received

Both the butcher and the customer profited from this loyalty relationship


Making a sale should not be viewed as the end of the marketing process, but rather as the start of the organization’s relationship with

a customer

Successful small firms, such as the traditional butcher, have to be relationship oriented

They know that their customers-buyers who purchase promises of satisfaction prefer to do business repeatedly with people

and organizations they trust


They know that establishing relationships with customers can increase long-run sales and

reduce marketing costs

In summary, a business enterprise must focus on both getting and keeping customers

Customer Relationship Management

A customer relationship management (CRM) system, by its simplest definition, is a process to compile information

that increase understanding of how to manage an organization’s relationships with its customers

Customer Relationship Management CRM, a business strategy that uses

information technology to provide the enterprise with a

comprehensive, reliable, and integrated view of its customer base

so that all processes and customer interactions help maintain and expand mutually beneficial relationships


A CRM strategy should help organizations improve the profitability of their

interactions with current and potential customers

while at the same time making those interactions appear friendlier through

individualization and personalization


The purposes of a CRM system are to enhance customer service,

improve customer satisfaction, and

ensure customer retention by aligning business processes with technology integration


An effective CRM system describes customer relationships in sufficient detail so that all aspects of the organization

can access information, match customer needs with satisfying

product offerings, remind customers of service requirements, know what other products a customer has

purchased


A bank’s CRM should give a service representative in its telephone call center the ability to retrieve a compete record of a

customer’s company interactions seconds after

the customer provide identification information

Many CRM systems allow customers themselves to directly access information about their

transactions with a company

The CRM System as a Hub of Applied Learning

Information technology within a CRM system is a continuous process

The firm recognizes its lack of knowledge and begins to learn about customer segments and

their distinct needs before the first sale is made


From purchases databases, mailing lists, e-mail referrals, and other sources organizations can acquire mountains of data

about potential customers and

thus begin to tailor promotional messages, product features and options


If satisfied with the first transaction, the customer learns to trust the organization

or to believe it will deliver on its promises

The organization learns a bit about the customer’s needs, and a circular process begins as the firm collects

and analyzes data about customer transactions and preferences

that is converted into information for different functional areas


The basis for building effective CRM systems and strategies is to build profitable relationships in the

long term that are mutually beneficial and

that fulfill promises as customer experience the product or service offering


However, many organizations experience difficulties in building information and e-commerce initiatives since implementing the new technology

requires a complex array of skills to capture data from dynamic processes

Further, organizations must balance the need for security with the goal of increasing personalization

The CRM Process as a Hub of Applied Learning

Cultivate and develop

interest, trust, desire

Collect, warehouse, and analyze

data

Recognize needs/wants

of defined segments

Customize channel outlets,

locations

Customize offers,

products, and services

Acquire customer and

establish a relationship

Customize promotion, information, interactions


Potential returns of CRM systems

Potential benefits of CRM systems to the organization

Potential costs of CRM systems to the organization

Potential benefits of CRM systems for customers

Potential costs of CRM systems for customers

Potential Returns of CRM Systems

A fundamental principle of marketing is that customers are different

Some customers cost a great deal to attract and require a great deal of service

The basic tenet is that different customers represent different levels of profit for

the firm


Successful organizations attempt to define characteristics of the best customers, to then estimate the lifetime value of

such customers,

and to adjust marketing strategy accordingly


Best customers A proportion of all customers in an

industry who provide profitable interactions,

cost little to care for, and

who tend to spread positive word-of-mouth information about the organization


Organization, or the CRM champions within the organization, tend to think of all the benefits of the

systems

the promise of increased revenues and lowered costs


Customers, in contrast, may first think of the costs associated with the system and have to be reminded of some of the benefits

For example, if the customer orders one product from a

supplier on the Internet and

there are suddenly 2,000 messages from firms that sell related goods,

the customer may think twice before placing another order on the Web or with that organization


Thus, it can be helpful for organizations to consider the benefits and disadvantages of CRM

systems as they invest in their development

Potential Benefits of CRM Systems to the Organization

Customer focus—the organization is ready to view the purchasing process from the

customer’s point of view,

to empathize with the customer’s feelings, and

to treat the customer’s information with great care

If organization can learn enough about individual customers, then the customer should be more satisfied, trusting,

and willing to talk positively to others about the organization’s wonderful approach


Customer retention—the organization satisfies customers and/or offers variety such that the customer comes back and repeats

transactions

Retaining customers and establishing customer loyalty are major objectives of CRM approaches

An old business adage says, “It costs six times as much to get a new

customer as it does to keep an old customer”


Share of customer/share of wallet the organization wants to please customers to

the point that

they want the organization to sell them something else

Historically, marketers have thought in terms of a single product, and Their goal has been achieving a high share of

the market


In relationship management, the company objective often is to achieve a high share of customer

The company tries to sell an individual customer as many goods and services as it can over the lifetime of that customer’s

patronage


Cross-selling The marketing of complementary products to

existing customers

For example, a retail bank that has a checking account

customer may market

a safety deposit box or a car loan to its customer

overtime, it may be able to get the customer’s home mortgage and equity loan business


Up-selling The marketing of higher value products to new

or existing customers For example,

an insurance company may convince a customer to upgrade coverage,

a credit card company may try to persuade a customer to upgrade to the platinum card, or

a furniture store may attempt to convince a customer to purchase the more expensive version of a table

Potential Costs of CRM Systems to the Organization

A major benefits of an effective CRM approach is that it follows marketers to send the right messages about the right offers

to its best customers at the right time

Achieving that level of quality from a CRM system may require a significant investment in the organization’s

information technology (IT) infrastructure For example, server-based systems, software

licenses and updates, firewalls for security, personnel to install and maintain systems, training for system users in different disciplines, etc..


IT infrastructure the processing capacity required to fulfill

customer needs.

Another significant cost in developing an effective CRM system is the price of process change

an alteration in the habitual pattern for accomplishing a task

Implementing new systems and changing traditional thought patterns may both be very difficult to accomplish


Despite the best efforts of organizations to design effective CRM systems, it is people who must implement those

systems and customers who must appreciate them,

use them with ease, and feel safe in the process

CRM systems hold the promise of growth and benefits but the implementation of such systems carries

with it limits, costs, and other risks

Potential Benefits of CRM Systems for Customer

Customers may also profit from CRM approaches and relationship marketing efforts Continuity

Derived from a relationship with the same seller simplifies the buying process

Implies a stable connection or linkage Reduce the risk of dealing with a new supplier


Buyers become regular customers because they want to do business with organizations that will provide a consistent level of product or

service quality

For example, Most people are loyal to their hairdressers or

barbers They do not want to risk service quality that is

below their expectations or risk disappointing the provider of this personal

service


Effective CRM systems provide a number of contact or touch points

the customer can communicate and explain his or her needs;

for examples,

the telephone,

e-mail,

point-of-purchase, or

customer service desk


For example, The jewelry store salesperson would

often send a note to a male customer just before his wife’s

birthday

Unfortunately, if the salesperson left the company, so did the client information

CRM systems are designed to offer the salesperson’s notebook to the entire firm


In an age when personalization is rare, CRM information technology is bringing it back

Personalization—the organization

knows the customer, by name,

knows the customer’s normal purchasing routine, and

can forecast the customer’s needs

Relationship marketing has been called “one-to-one marketing” Because it allows marketers to tailor offering

to individuals


For example, Neiman Marcus stores now track customers’

buying habits, preferences, and special dates through their computerized cash registers

Sales associates can notify a client when new merchandise comes in or

send a reminder about buying a gift for a personal event like an anniversary

Customers may benefit from feeling special and enjoy being recognized as an important entity to the organization

Potential Costs of CRM Systems for Customers

Perhaps the most obvious cost of the widespread adoption of CRM systems by organizations is the inevitable loss or privacy for customers

Privacy—confidentiality or a feeling that you can have some space to yourself where

other people cannot intrude

Organizations want to know which people purchase which products in which

colors on which days of the week with which credit card


Customers want to feel that no one knows that much about their personal choices

Another intangible cost to the customer of developing a sole-source relationship with an organization is the opportunity cost associated with ignoring

other offers from competitive sources

If customers take the time to search, they may find a better price for the same

features or find options that better meet the original need


As firm “reward” loyal customers by sending them prizes,

extra frequent flyer miles, or

discounts on other products,

customer become less inclined to search for alternatives

Summary

Customer relationship management (CRM) is a business strategy that uses information technology to provide

the enterprise with a comprehensive, reliable, and integrated view of its customer base

so that all business processes and customer interactions help maintain and expand mutually beneficial relationships

Summary

CRM systems help organizations improve the profitability of their interactions with current and potential customers while at the same time making those

interactions safer and friendlier through individualization and personalization

The system’s goals are to enhance customer service,

improve customer satisfaction, and

ensure customer retention

Summary

Customer retention and customer loyalty are major benefits of CRM systems to the organization

Working to retain existing customers by managing relationships with them will generally increase revenues and, in most

cases, reduce costs

Positive outcomes can include a larger share of a customer’s business are a result of activities such as cross-selling and up-selling

Summary

There are also real costs to the organization from implementing CRM systems, including investment in information

technologies and the reactions of people to process changes

Customers benefit from CRM systems and relationship marketing in a number of ways, Including simpler buying processes, ongoing

dialogs with the firm, and personalized attention

Summary

Costs to customers of CRM systems include a loss of privacy and, perhaps, missed opportunities to learn

about or to purchase offerings from other organizations

While CRM systems can be expensive to implement, the long-term benefits should become

apparent as time progress, repeat purchases occur, and customer loyalty deepens

overview of crm - walailak universitymit.wu.ac.th/mit/images/editor/images/ch01_s.pdf ·...

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