Handouts CRM – Section 1

(CRM Overview)

Suhas Aradhye

Flow

CRM Overview

– Conceptual Framework of Customer Relationship Management

– CRM Literature & Basic Concept

– Link between CRM, Database Marketing, and the Importance of

CRM

– Why is CRM an issue today

– Advantages accruing to Corporate on account of CRM practice

Conceptual Framework of Customer Relationship

Management

"There is only one boss: the customer. And he can fire everybody in the company, from

the chairman on down, simply by spending his money somewhere else. "

Sam Walton,

Multi-billionaire entrepreneur; founder of Wal-Mart

A customer is the most important visitor on our premises

He is not dependant on us

We are dependant on him

He is not an interruption in our work

He is the purpose of it

He is not an outsider on our premises

He is a part of it.

We are not doing him a favor by serving him

He is doing us a favor by giving us the opportunity to do so.

Mahatma Gandhi---1890

Great Customer Service is a MUST!

1 In a recent study, it was shown that the main reason companies lose customers is

because of Poor Customer Service!

2 A whopping 68% of customers say they took their business elsewhere because of

poor customer service!

Satisfaction Is Not Enough!

1 Customer satisfaction is no guarantee of customer retention

2 You must delight the customer.

Why????

• A recent study by Xerox found that over 60% of people who change brands

or stores WERE satisfied with their previous choice.

• People who say they are satisfied are just NOT dissatisfied.

Satisfaction versus Delight

• A satisfied customer is still willing to listen to what the competition has to offer.

• A delighted customer thinks you are the best (only) thing out there.

But Ultimately… Excellent Service is creating an exceptional customer experience every single time

The Service-Profits Chain

The Service-Profit Chain summarizes the benefits to be had as a result of taking customer

service seriously."Putting the Service-Profit Chain to work" - J. L. Heskett, T.O. Jones,

G.W. Loveman, W.E. Sasser Jr, L.A. Schlesinger, 1994.

Seven Fundamental Propositions “Links of the Service-Profit Chain”

Customer Loyalty Drives Profitability and Growth

1 A 5% increase in customer loyalty can boost profits by 25% to 85%.

Customer Satisfaction Drives Customer Loyalty

1 Xerox found that its very satisfied customers were six times more likely to

repurchase company equipment than were customers who were merely satisfied.

Employee Productivity Drives Value

1 Southwest Airlines deplanes and reloads two-thirds of its flights in 15 minutes or

less; pilots fly and average 20 hours more per month than competitors. Fares stay

low while service remains high.

Employee Loyalty Drives Productivity

1 One auto dealer’s annual cost of replacing a sales rep who had eight years of

experience with one who had less than a year was $432,000 in lost sales.

Employee Satisfaction Drives Loyalty

1 In one company study, 30% of all dissatisfied employees expressed an intention

to leave, compared to only 10% of all satisfied employees. Moreover, low

employee turnover was found to be closely linked to high customer satisfaction.

Internal Quality Drives Employee Satisfaction

1 Service workers are happiest when they are empowered to make things right for

customers and when they have the responsibilities that add depth to their work.

CRM Literature & Basic Concept

FOR ANY SERVICE THE BASIC MINIMUM RE QUIREMENT IS

CUSTOMER’S SATISFACTION

What is Customer Satisfaction?

Customer satisfaction is person's feeling of pleasure or disappointment resulting after

comparing a product/service's perceived performance or outcome in relation to his or

her expectations‖.

What is CRM ? (Definition As per The Textbook Recommended)

Customer Relationship Management is a comprehensive strategy and process of

acquiring, retaining and partnering with selective customers to create superior value for

the company and the customer (Both long and short term)

Customer Relationship Management ―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.‖

―… to keep track of customers, learning about each one’s likes and dislikes from various

sources like transaction records, call-center logs, web site clicks, and search engine

queries.‖

More simply: Building & maintaining profitable long-term customer relationships

Who Uses CRM ? From small enterprises to multinational corporations, any business that maintains regular

interaction with customers benefits from a well organized CRM systems

CRM Process Framework

CRM Programs

Customer

Types

Program Types

Mass Markets Distributers B2B Markets

Continuity

Marketing

After Marketing

Loyalty

Programs

Cross-selling

Continuous

Replenishment

ECR Programs

Special Sourcing

Arrangements

One-to-One

Marketing

Permission

Marketing

Personalisation

Customer

Business

Development

Key Account

Global Account

Programs

Partnering /

Co-Marketing

Affinity

Partnering

Co-Branding

Logistics

Partnering

Joint Marketing

Strategic

Partnering

Co-Design

Co-Development

Purpose

Increase Effectiveness

Improve Efficiency

Programs

Account Management

Retention Marketing

Co-op Agreements

Strategic Partnerships

Partners

Criteria

Process

• Team Structure

• Role Specification

• Planning Process

• Process Alignment

• Monitoring Process

• Communication

• Employee Motivation

• Employee Training

Relationship

Performance

• Strategic

• Financial

• Marketing

Retention

Satisfaction

Loyalty

Formation Management

& Governance Performance

Evolution

Enhancement

Improvement

Link between CRM, Database Marketing, and the Importance of CRM

Database Marketing In A Nutshell

Database Marketing is when you store information about your customers or prospects in

your computers database program. You would then use that to more effectively market

to them. Database marketing can save you money by letting you target your promotional

efforts to your best prospects.

Database Marketing

• Customer Databases

– Identify and analyze customer population

– Group based on similarities

– Recommend separate marketing campaigns for different groups

• CRM

– Applies database marketing techniques at customer level

– Develops strong company-to-customer relationships

Benefits of Data Based Customer Value Management Approach

• Integrate and consolidate customer information

• Provide consolidated information across all channels to assist in timely and

relevant communication with customers

• Manage customer cases

• Personalize the service and products offered to each customer to meet

expectations

• Automatically and manually generate new sales opportunities

• Provide flexibility to adapt campaigns to take changes in customer behavior or

information into account

• Yield faster and more accurate follow-up on sales leads, referrals and customer

enquiries

• Manage all business processes by introducing a central point of control ensuring

all business processes are executed in accordance with correct and effective

business rules

• Give top managers a detailed and accurate picture of all sales and marketing

activities

• Instantly react to a changing business environment

Definitions to avoid any confusion

• Direct Marketing is a 1:1 interactive system of marketing which uses one or more

media to effect a measurable response or transaction

• Direct Mail is a (media) channel used to deliver a measurable, personal, direct

marketing message to a targeted person or company

• Relationship Marketing or Customer Relationship Marketing (CRM) is managing

the complete customer experience in pursuit of an intimate customer relationship,

resulting in longer-term customer loyalty, value and profitability

• A database is the engine to automatically manage many of the processes required

to record, profile, segment, report and measure changes in customer behaviour

• Data capability – ability to implement database driven relationship marketing

• ATL = Above the Line = all paid media space we see or hear – TV, press,

magazine, radio, billboard etc

• BTL = Below the Line = 1:1 communications B2B or B2C – direct mail, email or

E-dm, SMS, unaddressed or junk mail, etc

What is Profiling?

• Just a list of names and addresses has little or no value

• We know nothing about the customer at all apart from an address

• Profiling is learning more about the recipient eg:

– Geographic – zip code, people of certain incomes tend to cluster in certain

zip codes

– Gender – M or F

– Age

– Occupation

– Income

– Education

– Children

– Type of car owned

– Credit cards held

– Frequent flyer clubs

– Sports and hobbies

– Etc

• We don’t want to sell names and addresses, we want to sell audiences, just like

other media - press, radio, TV or billboards, who back up their buying with

comprehensive research

Measurement is at the heart of what we do

―If you can’t measure it, you can’t manage it” - the results of all our marketing

communications activity is measured then replicated or fine tuned to improve the

result by:

Setting measurable targets for all marketing activity

Continuously measuring & monitoring the performance of our marketing

activity vs the established target and industry benchmarks

Calculating the ROI on all marketing activity

Analysing what worked and what didn’t, and most importantly why

Fine tuning to improve marketing effectiveness and drive cost efficiencies

Summary: The Nine Mistakes

Lack of a Strategy

Focus on Price

Lack of tests & controls

Too big and delayed

Failure to use the web

Building In-House

Treating all customers alike

Lack of a retention program

Lack of leadership

Rules for success

Put yourself in your customer’s shoes

Build a lifetime value table

Build a database team

Think small, and think fast

Keep your eye on the bottom line

CRM Implemented By Various Industries & Advantages of the

Same

Strategic Innovators In Using Relationship Marketing

It was not just what they sold but, how they sold it!

Reconfiguring the value chain to achieve lower costs and/or better service

They Have Successfully Utilized Effective Relationship Marketing Channels

1 Field sales reps

2 Corporate resellers

3 Master or local distributors

4 Value-added resellers

5 Manufacturer’s agents

6 Brokers

7 Franchises

8 Telemarketers

9 Inbound telesales agents

10 Internet sites

11 Extranets

12 e-Marketplaces

13 Direct Mail

14 OEM’s

15 Retail

16 Kiosk’s

17 Strategic alliances

18 Agents (consultants, affiliates, etc.)

Example #1

OMAHA STEAKS

Fifth Generation Family Owned Company

Started in 1917 In OMAHA in Nebraska by SIMON family

Now Has 200 mfg Plants… 1.5 million Active Consumers

CRM Concept followed

Optimal Product & Market Coverage through selection of

Different Relationship Channels . . .

Reducing Costs & Increasing Productivity

1 Food Service – to Restaurants / Hotels / Institutional Food Service Outlets

1 Consumer Direct Mail Order with Outbound Telemarketing – to 1.5 million active Consumers

1 Retail & Catalogue Resellers – Help companies to develop meat department in their stores in Catalogue or on the

Internet

1 Own Retail Outlets – Give a Customer a Chance to Speak Face to Face with our ―Steak Experts‖ and

Convenience drop in Shopping

1 On Line Marketing – Since 1990 www.omahasteaks.com

Example #2

Charles Schwab

Online Trading / Registered Investment Advisors / Retirement Solutions

Started in 1963 In California by Chuck Schwab

as Investment Advisory Newsletter

then in 1971 as First Commander Corporation

Now has Total Client Asset 1.4 trillion $

Active Brokerage Accounts 7.2 million

Corporate Retirement Plan 1.5 million users

3 month revenue 1111 million $

CRM Concept followed

Customer First &

Innovations in Online Banking

De-Intermediation . . .

Reducing Costs & Increasing Productivity

1973 Change in Company Name – to Charles Schwab & Co. Inc

1979 Started using BETA mainframe system –

1980 Started first 24 hour online trading quotation system –

1982 Started first 24 hr, 7 day/week online order entry & quote service –

1984 Introduced Mutual Fund –

Client Base increased to 9 lac in 1984 from Just 45000 in 1978

1996 Web Trading Online –

1999 After Hours Trading for NASDAQ and Select Listed stocks order on phone

4.30 pm to 7.00 pm Monday to Friday –

2005 Eliminates Account Service & Order Handling fees for Retail Accounts &

Small business retirement plans-