Customer Relationship Management

Prof Ashish K Mitra

What is CRM? Multiple Choice :

a. Sales Force Automation applicationsb. A marketing buzz wordc. A corporate philosophyd. Software that implements marketing, sales and service

business processe. Implemented through a wide array of applicationsf. A way to improve customer satisfaction and increase

businessg. The next wave of information technology h. Very difficult to implementi. All the abovej. None of the above

• A report published by American Society of Quality and Arthur Anderson Consulting says– A repeat customer costs 1/5th of acquiring a new

customer– A customer tells eight friends about a satisfying experience

and 20 friends for a negative experience.– It is much easier to influence existing customers to buy

10% more than it is to increase the customer base by 10%– 80% of successful new product and service ideas come

from existing customers

Dissatisfied Customers

• Studies show that of 100 dissatisfied customers:– 4 will complain to the business– 91 will leave as customers– 100 will tend to tell 8-20 people each about the

dissatisfaction

Increasing Competitive pressure driving changes…

• ‘Product Centric’ vs ‘Customer Centric’• Market Share vs Share of Customer Wallet• CRM is not new , previously falling under the guise of

customer satisfaction• Worldwide, service organizations have been pioneers

in developing customer retention strategies• Many sectors have turned into commodity markets• All customers are not equal

• Realization by Organizations that customers are a business assets that when managed effectively can derive continuous and sustainable economic value over their lifetime.

• There has been a shift in business focus from transactional to relationship marketing – restructuring their processes around the needs of their strategically significant customers

• CRM involves a comprehensive business strategy. It helps business organize its activities around the customer

• CRM does not enable a quick win. It is a long term approach that has to be adopted at a strategic level

• CRM involves business processes an organization goes through , in order to identify, select, acquire, develop, and retain its most profitable customers, to serve them better.

Business Strategy

How do we deliver stakeholder value and build competitive advantage?

Marketing Strategy CRM Strategy

How do we take advantage ofMarket opportunities andMitigate competitive threats?

How do we get closer to the customers to deliver value tothem & create value for us?

Business Strategy

Marketing Strategy

• Vision: Market Position• Market definition, MR & Audit• Analysis of strengths, weakness,

opportunities & threats• Target market segments• Objective for each market

segment : penetration, development, maintenance & productivity

• Measures: Market Share, Brand equity and Market penetration

• Based on Product life cycle

CRM Strategy

• Vision: Customer Experience• Customer definition : Behavior &

requirement audit• Capability Analysis• Target segments by customer

Value• Objective for each customer

segment: acquisition, development, retention and efficiency

• Measures: Satisfaction, loyalty, cost to serve and employee satisfaction

• Based on the customer lifecycle

• Benefits of CRM fall into three categories:

– Revenue enhancement – Increased Sales revenues, increased win rates

– Cost Savings – Increased margins, decreased general sales and marketing administrative costs

– Strategic Impact – Increased Customer Satisfaction ratings, improved response time, Customer loyalty, take advantage of new business opportunities

• Operational CRM– Sales Force Automation ( SFA)

• Accounts Management• Contact Management• Opportunities Management• Activities Management• Configuration Management• Sales Forecasting

– Customer Service Management• Call Centre Management• Service Request / Customer Complaints Management

• Analytical CRM• Collaborative CRM

Definition of CRM (Peelen’s text book)

• “ The automation of horizontally integrated business processes involving front office customer contact points (marketing, sales, service and support) via multiple, interconnected delivery channels” --- Metagroup, 2000.

• In this definition - CRM is positioned in IT corner.• A company is engaged in CRM if

– Customer is ‘recognized ‘ - irrespective of the type of channel through which he approaches

– Does not need to provide his history to proceed with dialogue

• CRM is “a process that addresses all aspects of identifying customers, creating customer knowledge, building customer relationships, and shaping their perceptions of organization and its products”. This definition refers CRM as a process, attention on customer, developing a longer term mutual interest deeper than the mere purchase / sale transaction.– Above definition requires more attention to be paid to goals vis-à-vis

customers , supplier’s interest goes beyond one sale transaction

– It is important for the customer to get an impression of the company as a whole & its products and for the supplier to get to know the customer more as a person rather than just as a buyer.

– An image is created that customers are recognized, respected & mostly receive special attention

• Gartner group’s definition ( 2004) of CRM – “ an IT enabled business strategy, the outcome of which optimize profitability, revenue and customer satisfaction by organizing around customer segments, fostering customer- satisfying behaviors and implementing customer -centric processes”. . CRM is not postulated as a process but instead as a business strategy

• Goal is to increase revenue and profit, and most importantly , to improve customer satisfaction. Due to the fact that individual customer knowledge is being accumulated, it creates strategic competitive advantage over the competition.

• Customer Satisfaction is not to occur at expense of efficiency & profitability.

• Definition of CRM provided by Regis McKenna highlights the cultural change / mind set change that is needed to be brought in an Organization which pursues CRM is true spirit.

• Since CRM targets building of an infrastructure for ‘real time marketing’ which helps develop a long term customer – supplier relationship - the walls between company and customer are being torn down.

• ‘Privacy’ of both parties are to be carefully defined.

• Customer and company move closer to each another; Each will have to react to and anticipate the other’s action more directly, Organizations will have to adjust their cultures and will have to learn how to operate in a more customer oriented manner. Processes will have to be high quality because customers now be ‘having a look in the supplier’s kitchen’. Companies will not allow the potential advantage of long-term customer-supplier relationships to slip through their fingure.

• Formulate a vision and strategy at the very outset which points the way for the entire CRM programme.

CRM as a business Strategy

• CRM is a business strategy & therefore affects the organization as a whole : marketing, service, logistics, finance, IT , HR etc.

• Back office whose task is to fulfill the promises made by the front office, will ultimately have to learn to cater for individual customers.

• Processes have to be well defined , and will have to be executed flawlessly and efficiently, because after all, the customers are watching.

• In practice CRM strategies of many companies began by focusing on Operational excellence, on Increasing efficiency & reliability. Eg self service provides customers continuous access & at the same time reduces load on back office. However, the underlying processes have to be perfectly defined & controlled

• A business strategy whose goal is the development of long term, mutually profitable customer – supplier relationships, places customer in a central position. Who is the customer and what does he or she want? What types of solutions should the organization provide to make the customer more satisfied? How can the organization develop & deliver these , together with the customer?

• As a Business Strategy, CRM’s goal is ‘customer intimacy’. Two parties get to know one another, help trust & make a commitment to one another for the long term.

Elements of CRM (Peelen’s text book)• While ability to create an infrastructure which

makes it possible for customer and supplier to recognize one another and be able to interact in ‘real time’ is an obvious technology underpinning need for CRM, from Business Strategy perspective, the four cornerstones of CRM are:– Customer Knowledge– Relationship Strategy– Communication– The individual value proposition

Customer Knowledge• Customer ( also Prospects) must be identifiable• Customer’s profile must be known – past purchases,

preferred communication mode, preferences• Customer Data base must be current ( relevant for ultimate

goal fulfillment)• Supplement customer characteristics with independent

Market research intelligence

Relationship Strategy

• Long- lasting customer – supplier relationship vs stimulation of transaction

• Relationship strategy has a longer-term horizon – ‘tell’ and ‘listen’ more than seducing to ‘sell’. Interest in individual customers does not end at the moment the transaction is completed.

• On the contrary, the purchase only marks the beginning of the relationship in which trust & commitment must grow.

• The Company has to develop the contours of a policy necessary to develop & deepen the relationship.

Communication

• Supplier’s capability to carry out dialogue with individual customers is crucial- Can only pre-determined information’s be provided , rather than engage in a dialogue?

• A network of communication channels , must be deployed through which it is possible to communicate ‘any where, any time, any place’

• Dialogue should be possible without repetition and reiteration of the identification ritual : who are you and what do you like?

• Shifts can be made between various channels, and the transitions between them should proceed smoothly..

The Individual Value Proposition

• Knowledge of individual customer enables offering the customers an individual proposition customized to their needs ( product, service , price etc).

• Customization / design of the product or service can be done together with the customer . ( might be assembled from standard modules)

• Pricing of the proposition can also be tuned• One of the pitfalls involved in the development of the

customized propositions is that companies create a complexity which may be too large. Combining large scale aspect with flexibility is practical using technology.

• The development of these four cornerstones / competencies must occur in a step-by-step , balanced manner

• It is not desirable for one of the four to move much ahead of the others in its development.

• If too much is invested in one of the sub-elements, the expected benefit of CRM will not be encouraging & might cause disappointments for sustained commitment of top management.

CRM processes and systems

• In many situations, the achievement of the four competencies is to a great extent dependent on IT.

• The system must make it possible for customer knowledge to be developed in an efficient manner, for the relationship strategy to be implemented, for a dialogue to be conducted , and for customization to be supplied.

• Old day craftsmanship approach – only possible with small customer base where each customer represent sufficient value to justify an individual approach to CRM.

• With large customer base, a portion of which is of low value to supplier, use of IT becomes inevitable. Many customers prefer electronic communication.

• The construction of appropriate IT system presents a real challenge. Many companies find themselves confronted with ‘legacy’ systems which are outdated, difficult to integrate -difficult to ‘real time querying’ necessary for implementing CRM strategy.

• Most often, the creation of CRM strategy involve the Internet as a channel, the call centre and sales information systems for account managers and sales person. Often these systems are developed independently & linking them together for conducting ‘ongoing dialogue’ with customer is a challenge.

• Effective linkage of front office with back office systems is a ‘moment of truth’ for many companies.

• Customer asking a question which deviates from the standard is a challenge when system integration reduces role of human element.

• CRM is a strategy that affects the entire company.• Product oriented organizations will have to translate

themselves into a customer oriented ones.• Investments have to be made in infrastructure to

communicate with customers through variety of channels• Organizations have to learn how to conduct a dialogue with

the customers• Formulate marketing strategy which targets relationship

building instead of stimulating transactions.• CRM is much more than just some of a number of innovative

IT projects.

• Patience is a prerequisite.

History of CRM• In marketing theory & practice – there has been a long

standing & clear tendency to focus on sale , the single event of a transaction.

• After transaction – salesman ‘looks elsewhere for next sale’ & the buyer feels –’ You don’t care’

• Within transaction marketing, the process between two or more transactions is neither analysed nor influenced.

• The attention for the relationship and investments in relationship is lacking

• Marketing defined as ‘an exchange process between buyer and seller’ and thereby formed the basis for subsequent conceptualization of Relationship marketing..

• Relationship marketing was first conceptualized in B 2B market – interaction & networking between buyers and sellers.

• Mostly in the shape of voluntary, long term, binding commitments among the organizations involved. Transactions were planned & administered instead of being conducted in an ad-hoc basis.

• An after-effect of analysis & research studies led to importance of customer retention and ‘ customer lifetime value’ concept (Reichheld 1995).

• Relationship marketing with its origin in business to business markets & the Service industry was then applied to the consumer markets for branded goods.

•

Customer Supplier Relationships• Relationship

– Interaction must take place between at least two parties; activities of one of the parties influence those of the other & vice-versa

– A certain degree of continuity must be present in a relationship– The effects of interactions are dependent upon the actual events

• Psychologists classify relationships between :– Primary relationships- long term interpersonal relationship based on

emotional bonds & feelings of mutual obligation; like mother & daughter, man & women

– Secondary relationships – such as between customer & supplier, are by contrast relatively short relationships with fairly clear rules of etiquette & reasonably well defined social roles. Deep emotional involvement rarely occurs; the various players may be more easily replaced in general

• The transitional area between secondary & primary relationship is rather large.

Relationship Marketing

• Relationship marketing is not about having a "buddy-buddy" relationship with your customers. 

• Customers do not want that. 

• Relationship Marketing uses the event-driven approach of customer retention marketing, but treats marketing as a process over time rather than single unconnected events

• Is a long-term process

• There are a number of identifiable stages in long term customer relationship

• This can be explained through the Relationship Ladder constituting of six different phases of relationship

Customer – Supplier Relationship ladder

Phases of Relationship

• At the foot is the ‘prospect’ or target market• The traditional or classical marketing emphasizes

on means of converting prospects into customers• In relationship marketing customer is

– Someone who has done business with us only once or occasionally

• The next is ‘client’ who is someone who will do business with us on a repeat basis but may be neutral or negative about company

• The client when converted into a ‘supporter’, strength of relationship becomes apparent

• These people like being associated us and may also be persuaded to become advocates

• The final step is when customers become partners in which mutual advantage can be gained from relationship

Scope of Marketing in Relationship Marketing

• Emphasis in relationship marketing is on– Finding appropriate means to move customers up the

ladder and to keep them there

• Conventional marketing focuses on– Winning of customers and building market share without

emphasizing more on customer retention

• There is wider view of marketing rather than simply focusing on end user

• For building and sustaining real customer value – Relationships need to be built with numerous constituents– This is known as ‘Six Markets’ model

• Internal markets– Individuals and groups within organization who

determine the style and ethos of business

• Referral markets– From sources of professional advice (doctors,

lawyers, bank managers etc)

– Building relationships with these sources of word-of-mouth should be integral part

• Influence markets– Entities, individuals and organizations having the

ability positively or negatively to influence the marketing environment in which the company competes

• Employee markets– There is need to recruit and retain employees who

will further the aims of the company in the marketplace

• Supplier markets– Refers to network of organizations that provide material,

products and services to the organization

– Results in improved quality, faster time-to-market, more innovative products and lower levels of inventory

• Customer markets– All people and organizations that buy goods or services from us

– Can be either end users or intermediaries

– Customer service is the most important tool

Is CRM New?

No!• Simply an extension of

relationship marketing• Builds on customer

service and satisfaction concepts

• Just the latest buzzword for creating customer orientation

• Bottom-line is still the same

Yes!• A shift in corporate

philosophy concerning the approach to value delivery

• Customer-centric approach to value chain

• New and technology-enhanced processes

• Focus is not just on bottom-line, but on top-line

• Goal is to create satisfying experiences across all customer contact points

CRM Programs Can Potentially Improve

• Analytical CRM– Customer Segmentation– Trend Analysis

• Operational CRM– Campaign Management– Tele-Marketing/Tele-Sales– Activity and Time Management– Quotation and Order Processing– Delivery and Order Fulfillment– Customer Service and Support– Remote Access

• Collaborative CRM– Enterprise Portals– Customer Access– Supplier Access– Personalization

Areas of CRM Activity

• Sales Force Automation (SFA)• Customer Service and Support (CSS)• Help Desk• Field Service• Marketing Automation

Areas of CRM Activity:Sales Force Automation

• 35-40% of all CRM activity• Manages lead generation, tracks movement of

leads through the pipeline, allows better usage of customer data, integrates activities across sales channels, simplifies relationship management, forecasts for opportunities (SWOT)

• Goldmine and SalesLogix are examples of prepackaged SFA solutions.

• Ex. Staples used SFA to integrate catalog, online, in-store sales efforts directed at its best customers

Areas of CRM Activity: Customer Service and Support (CSS)

• 20-25% of CRM• Assign, escalate, and track trouble tickets, inquiries,

solution attempts through resolution• Provides information to support customer call

center activity• Gleans customer data from those interactions and

records it in SFA for later use• Remedy, Siebel, Vantive, and Clarify are major

vendors• Ex., 3M Adhesive Products division

Areas of CRM Activity: Help Desk

• 15-20% of all CRM• Allows individuals to access network database to

solve their own problems or find information. • Can be internal or external• Offers many bottom-line savings• Human Click, Tivoli, LivePerson, are providers• Ex., Land’s End Live allows customers browse FAQ’s

but also click a link to talk directly with live representative.

Areas of CRM Activity:Field Service CRM

• 3-5% of all CRM activity• Mobile service technicians can log information about

work orders and service calls, as well as access information from the remote site.

• Can feed information from customer problems into SFA for salesperson leads.

• Market information can be gathered and logged into central database.

• Ensures appropriate resource allocation by matching available resources to job requirements

• Major vendors are RTS, Metrix, eDispatch

Areas of CRM Activity:Marketing Automation

• 3-5% of CRM, but growing 5X faster than all others• Interfaces with data warehouses and data mining

activities to tailor page views, products, and promotions, so that the right offer goes to the right person at the right time.

• Can interact with SFA to support field sales efforts• Provides customized customer interactions critical to

segment of one marketing, mass customization, customerization, etc.

• www.webgroove.com, Epiphany, Oracle, Siebel, and Personify are leaders

Core elements of a customer-supplier relationship (Peelen’s book)• Interaction & reciprocity – without a

reciprocal basis, there is no relationship. • Commitment – is defined as ‘an enduring

desire to maintain a valued relationship’. Within this framework of commitment, the objective is to continue the relationship, producing outcomes which are as beneficial as possible for both parties. The exchange of resources will influence the level of commitment present in the relationship.

• Trust – is a basic condition necessary in order for a relationship to grow and has been defined as ‘a willingness to rely on an exchange partner in whom one has confidence’. It can be ‘the perception of confidence in the exchange partner’s reliabilty and integrity. Trust also originates in the competency of the organization , protecting customer’s interest.

The relationship orientation

• Interactions must take place between at least two parties; activities of one of the parties influence those of the other and vice versa.

• A degree of continuity; interactions from the past influence present and future interactions; – extend over a longer period of time.

• The effects of interactions are dependent upon the actual events and the subjective approach to these events.

Figure 2.1 Pyramid of relationships

Table 2.2 Profile of close and weak relationshipsSource: Peelen et al, 1996.

Loyalty

Loyalty is a deeply held commitment to rebuy or repatronise a preferred product/service consistently in the future, thereby causing repetitive same-brand

or same brand-set purchasing, despite situational influences and marketing efforts having the potential

to cause switching behaviour.

Source: Oliver (1996).

Three Value Disciplines

• Treacy and Wiersema in their study identified, what they call, three value disciplines of the successful market leaders.

• Each of the value disciplines addresses how companies can define a value proposition in relation to the customers

• An analysis of the environmental context will show which of the value disciplines is most appropriate for a specific organisation in a specific market.

• Attention will also be focused on the results which may be obtained by implementing a CRM strategy

• The Orange Line case describes an operator of cruise ships and ferries. The organisation brings three product offerings to the market, i.e. ferries, luxury cruises and short cruises.

• Each of the activities contributes to the success in a different degree and their success asks for a different value discipline.

• The challenge is to make product portfolio decisions and to choose between one or two value disciplines that can be realised within the organisation.

• Under which market circumstances is it unwise to aim for a customer intimacy strategy?

• When the chance of repeat purchases is low.• In situations where the minimum required

level of operational excellence is not realised (logistics problems, product quality problems; there are other priorities).

• In situations customers do not expect suppliers to build a relationship with them.

• Why does the combination of the product leadership, customer intimacy and operational excellence strategies lead to problems?

• Partly, because conflicting competencies and ambitions stand as the basis of each of the disciplines.

• Characteristics for product leadership are technology focus, product innovation and short lead times to market. It requires product managers to play a dominant role. Customer intimacy, on the other hand, demands customer managers to be in the lead. They can select the ‘right customers’, read their needs and wants and translate them to ‘new product development’.

Value disciplines

Customer intimacy

Operational excellenceCost leaderProduct leadership

Best/newest product

Minimum expectation

Leading edgePerformance of market leaders

• Operational excellence also asks for a organisation model that is hard to combine with product leadership and customer intimacy.

• The process focus forms the core; the organisation is more internally oriented

Figure 3.1 Offensive versus defensive strategies

• Why is a customer intimacy strategy considered to be a defensive strategy? Explain your answer.

• It is a defensive strategy as its aim is to retain and to build relationships with existing customers. The objective of the strategy is to create entry barriers that should stop or hinder competitors from approaching their customers.

• Is it possible for the manufacturer of a low-involvement product such as biscuits or crackers to implement a customer intimacy strategy?

• Most ‘low involvement’ products can be transformed into ‘high involvement solutions’. Biscuits are ‘low involvement’, but a celebration breakfast is not. An analysis of the market should indicate what the demand is for the intimate solution.

• Furthermore the organisation should explore if the business is related to its current activities and if its customers are willing to pay for the services or experience.

• The choice of a customer for a software supplier is heavily influenced by product innovations and the software standard.

• As such many customers have switched from Wordperfect to Microsoft Word and the Microsoft browser has attracted many Netscape users.

• In the life insurance market, customers close a transaction with a long term horizon. Trust plays a major role; will the company still exist over twenty years and will it keep its promises?

• To what extent is the organisation of a supermarket equipped to implement a customer intimacy strategy?

• Supermarkets basically have an operational excellence value discipline. It is self service!

• A customer intimacy discipline is therefore not likely to be the most appropriate. CRM systems can be used to increase the scores on customer intimacy to some degree, if the value proposition and market circumstances allow for it.

Figure 4.4 From strategy to critical success factors

‘High costs are associated with owning data, and Gartner believes that having bad data can increase these costs by a factor of 10

when one considers costs arising from bad business decisions and poor CRM based on such data.’

Gartner Research, Customer Data Quality and Integration: The Foundation of Succesful CRM, 26 November 2001

Figure 5.2 Growth stages in database management

Figure 6.1 Communication continuum

Figure 6.2 Dimensions in which channels may be scored

Figure 7.3 How far is the individual customer order integrated in the supply chain?Source: Lampel and Mintzberg (1996).

Figure 7.5 Step-by-step plan for revenue management

Figure 8.3 Relationship policy per phase Source: Peelen (1999).

Figure 8.4 Relationship policy by segmentSource: Peelen (1999).

Incentives and loyalty programmes• Savings programme

– Rewarding transactions; operant conditioning; stamps

• Club programme– Subscribe; increasing involvement; providing information

and eventually discounts and service; cognitive processes; Fox Kids

• Relationship marketing programme– Minimal purchase level; aimed at user situation;

complementary goods and services; frequent flyer programmes

Figure 8.5 Relationship managementSource: Alberts and Buitendijk (1995).

Figure III.1 Sub-aspects of analytical CRM

Data quality operationalised• Complete

–Within the record–Within the universe

• Current–Up-to-date

• Correct –Form–Content

• Valid vs. correct• Integrity

• Unique–No duplicates?

Identification Term Definition Measurement

Accessibility Percentage of customers identified in call centre in less than 30 seconds

95% x

Complete Percentage of customers with complete file

40% x

Correct NA, phone, e-mail transaction history

48% =

Data quality call centre 18%

Identification Term Definition Measure-

ment

Accessibility % customers identified in call center < 30 sec

95% x

Complete % customers with complete file

40% x

Correct NA, phone, e-mail transaction history

48% =

Data quality

call center

18%

Consequences for call center

strategy/objectives

Costs to correct mistakes

Customer satisfaction

Employee satisfaction and retention

Missed turnover

Consequences for call center

strategy/objectives

Costs to correct mistakes

Customer satisfaction

Employee satisfaction and retention

Missed turnover

Data quality – identificationthe business case

The value of data quality

The costs of a lack of quality

Returned . . .

Waste

Billing

Irritation

The added valueof quality

Conversion

Retention, etc.

Cross-selling

Types of analysis questions• Segmentation and selections• Acquisition analyses and selections• Customer analyses and selections

– Retention analysis– Relationship development analysis

• Cross, deep and up-selling analysis• Analyses to determine the effectiveness of the way

that the customer is approached

Figure 10.1 Phases in the analysis process

Datamining• The automated discovery of interesting, non-obvious

patterns hidden in a database that have a high potential for contributing to the bottom line

versus

• The discovery of knowledge in databases.

Datamining techniques• Neural networks• Evolutionary computation• Association rules• Decision trees• Case-based reasoning

Cross-selling• Definition of cross-selling• Cross-selling over time

Customer buys more than one of the same product during a contact (two life insurance policies)

Customer buys two or more different products during a contact (home contents and liability insurance policies)

Customer buys a second or third product at a later time

Figure 14.3 Example of measurement criteria

Figure 14.4 Benchmarking in the financial sectorSource: Beltman et al. (2000).

Marketing Aspects of CRM

91

Key Customers

• Are the customers whose needs and wants can be satisfied by the company

92

Types of Customers

• Loyal customers: – Perceive the company’s product as much superior

to a competitor’s product

• Competitive customers:– Perceive company’s product as slightly superior to

competitor’s product

93

Cont:

• Switchable customers:– Perceive competitor's product as slightly superior

to the company’s product

• Competitor loyal customers:– Perceive competitor’s product much superior to

the company’s product

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Loyalty defined

• Loyalty is a deeply held commitment to rebuy or repatronise a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behaviour.

Strategies for deciding key customers

• Nature of need fulfillment

• Role of product in need fulfillment

• Position vis-à-vis competitors

• Length of relationship

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Strategies for key customers

• Develop personal trust

• Create entry barriers

• Reinforce exit barriers

97

Factors for Segmentation

• Long term objectives

• Customer profile (demographics, psychographics, user status etc)

• Type of usage

• Purchase

98

Customer Value

• According to Kotler: Customer value is the difference between total customer value and total customer cost

• Total customer value include:

– Product value

– Service value

– Personnel value

– Image value

99

Contd.

• Total customer cost include:– Monetary cost

– Time cost

– Energy cost

– Psychic cost

100

How marketers ensure value

• Customer intimacy ( senior executives Spending time with customers)

• Interpreting Needs (Creation of Walkman)

• Co-creating value ( product configuration-Dell)

• Suitable Branding

• Training and empowering personnel

• Research techniques

• Value based pricing

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Enhancing Customer Value

• Innovative feature (Samsung ,Gillette)

• Complete Solutions

• Value at lesser cost (Air Deccan, Nano)

• Removing pain points ( internet Banking)

• Use of new technology (iPod)

102

Customer Lifetime Value (CLV)

• “ The present value of the stream of future profits expected over the customer’s lifetime purchases. The company must subtract from the expected revenues, the expected cost of attracting, selling and servicing that customer”

Kotler and Keller

103

Contd.

• Customer Lifetime Value is defined as the total value, in monetary terms, of your average customers spanning the entire period that these customers are likely to do business with you.

• It's the potential contribution of your customers to your business over a period of time

• Required when company plans for long-term relationships

• Lifetime value refers to ‘lifetime profitability’ when cost data is readily available

• In absence of cost data, it refers to the lifetime revenue stream

104

LIFETIME AVERAGE YEARLY CUSTOMERVALUE = TRANSACTION X FREQUENCY X ‘LIFE

VALUE OF PURCHASE EXPECTANCY’

LIFETIME VALUELIFETIME VALUE

105

Calculating CLV

• Let's say you've 2,000 steady customers and these customers remain with you for an average of two years; for the past two years, your net profit was $700,000.

• The Customer Lifetime Value can be calculated as: $700,000/2,000 = $350.

• What this means is that over an average customer lifespan of two years, each new customer you could acquire and keep is worth $350 to you in profits.

106

Importance of CLV

• Knowing the Lifetime Value of your customers is crucial to you and your business as it serves as a benchmark without which you'll be groping in the dark.

• When you know the Lifetime Value of your customers, you can determine how much time, effort and money you can afford to invest to acquire that customer in the first instance.

107

Contd.

• you can invest more today to reap a much larger profits later down the road as long as your cash flow is healthy and can support it.

• When you realize that customers are actually an ongoing stream of revenue as opposed to a one-shot sale, you can re-focus your marketing efforts.

108

Customer Equity

• Total of the discounted lifetime values of all the firm’s customers

• There has been shift from brand equity to customer equity

• ROI Indicates how well the firm creates value from its investment, ROC quantifies how well the firm creates value from its customers

109

Contd.

• ROC is:– Current period’s cash flow from its customers

plus any changes in the customer equity should be divided by the total customer equity at the beginning of the period

• Final figure of customer equity is:– The customer lifetime values of all the current and

future customers added together

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Cost of acquiring customers include

• Cost of sales

• Promotions

• Branding

• Customer trials etc

111

Lifetime Value of Customers

112

CLV depends on:

• The length of an average ‘lifetime’• The average revenues generated per relevant

time period (mostly yearly) over the lifetime• Sales of additional products and services

during that time• Referrals generated by the customer over the

lifetime

113

Activity-Based costing for CRM

• ABC is a budgeting and analysis process that evaluates overhead and operating expenses by linking costs to customers, services, products and orders

• Allows managers to see which products, customers or services are profitable or losing money

• Measures the cost and performance of activities, resources and cost objects

• Resources are assigned to activities, then activities are assigned to cost objects based on their use

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Customer Defection Curve

115

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Categories of Customer Defectors

• Price defectors

• Product defectors

• Service defectors

• Market defectors

• Technology defectors

• Organizational defectors

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Customer Life Cycle

• Pre Purchase stage

• Purchase stage

• Usage stage

• Re-purchase stage

• Lost customer stage

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CRM in Pre-Purchase Stage

• Easy access to right information

• Non interruptive campaigns

• Multiple channels

• Comprehensive information in right format

• Product demonstrations

• Risk-free trials

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CRM in Purchase Stage

• Purchase options

• Easy procedures

• Access to hire purchase

• Complete solution

• Installation and training at customer’s convenience

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CRM in Usage Stage

• Easy access to after-sales service

• Quick trouble shooting

• Spare parts-easy availability and affordability

• Updated features

• Engaging customers

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CRM in Re-purchase stage

• Easy disposal of old product

• Loyalty bonus

• New products with useful value additions

• Keeping track of churn

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CRM in winning back lost customers

• Analyze the cause of departure

• Make relevant offers

• Follow up

123

Customer Lifecycle Management (CLM)

• CLM is simply the measurement of your CRM program’s success over time – providing you have

CLM metrics from before and after your CRM implementation.

• Your entire customer lifecycle must be properly measured throughout its duration, and can be

examined on an individual customer or against a mean average.

124

Aspects included in CLM

• Purchase history, which includes recency, frequency and quantity;

• Gross amount of money spent on acquiring and retaining the customer through marketing dollars,

• Resources spent generating each sale, as well as post sales service and support;

• And the duration or longevity of that customer’s relationship with your business.

125

CRM Vs CLM

• CRM is the overall corporate philosophy of managing your relationship with each customer in order to provide a better overall customer experience.

• CRM, however, can wane in and out and be selective, practicing on some customers but not others.

• It can also be a practice of one department but not others, fluctuating at all the contact points within the organization.

• Perhaps you’re practicing CRM with a few of your biggest clients, because they are worth exponentially more than all your other customers combined.

• CRM can be selective and not at all static, as it’s more of a practice than a measurement.

126

Contd.• CLM however is a static entity, and is more based upon a

single measurement which incorporates multiple metrics than a philosophy.

• Without practicing CRM , a company can take various measurements of its customer lifecycles and find ways to improve, or ‘manage’ them better.

• CLM is also non-departmental, in that it by definition incorporates all interactions with the customer throughout that customer’s life.

• The other key facet of differentiation between CRM and CLM is the element of time.

• CLM is always a measurement over time, whereas CRM can be an act at one particular contact point with the customer.

127

Measuring CLM Success

• First, we need to segment our customer database into as many variables as we want to measure.

• The most important thing to remember when determining how to segment your customer database is that time is the most crucial factor in CLM measurements – so none of your segmentations should be one-time transactions, other than as a starting point to measure positive CLM success from.

• Customer database can be put into various groups such as – repeat purchasers over time, – frequency of those repeating purchasers, – overall lifespan of each customer (first transaction to most recent) etc

128

Results of CLM

• Did your customers purchase more frequently, more recently?

• Did they have larger overall transactions?• Were they less costly to your business in terms of

service and support? • Did they respond better to marketing initiatives? • Has your Total cost of Acquisition per customer

shrunk, or grown?

129

Classification of customers

• High cost-to-serve-customers– Order custom products– Small order quantities– Unpredictable order arrivals– Customized delivery– Change delivery requirements– Manual processing– Large pre-sales and post-sales

support– Require company to hold

inventory– Pay slowly (high A/c receivable)

• Low cost-to-serve customers– Order standard products– High order quantities– Predictable order arrivals– Standard delivery– No changes in delivery requirements– Electronic processing– Little or no pre-sales or post-sales

support– Replenish as produced– Pay on time (low A/c receivable)

130

131

Classification of Customers

• Profitable customers fall in different quadrants

• Best ones are in the upper left-hand quadrant

• These are rare, but if present should be cherished and protected as they are prime target for competitors

• They need to be retained through bonding strategies

132

Contd.

• Customers who are price sensitive but have few special demands help reduce the cost to serve

• The high cost- high margin customers are also profitable

• They value unique functionality, features and extensive support and service and pay for them

133

Contd.

• The most challenging customers are the low margin-high cost to serve customers that include:– Convertibles: by negotiating improved ordering and delivery

relationships, reducing discounts, establishing menu-based pricing for special services and features

– New Customers: may not be profitable initially but can be monitored for long term benefit

– Strategic Customers: customers who give prestige and reputation or help the supplier learn and improve internal processes. E.g. Infosys, Wipro and Birlasoft worked with GE in spite of low billing rates

134

Why Why CRM?CRM? Profitability – driving business Profitability – driving businessWhy Why CRM?CRM? Profitability – driving business Profitability – driving business

Customers life time valueCustomers life time value Customers life time valueCustomers life time value

Time

Profit

Acquisition Phase out

Profit generation

135

Profitability – the CRM answerProfitability – the CRM answer

Customers life time valueCustomers life time value

Time

Profit

Reduce(Acquisition)Costs

Cross-sell & up-sell

Churn analysis

136

The Path to Strategic Customer Care

CRM

The Marriage

The Relationship

The Courtship

Strategic Customer Care

Customer Retention

Customer Acquisition

Customer’s Lifetime Value

Cu

stom

er S

a ti s

fac t

ion

/ Lo y

a lt y

137

Measuring Loyalty in the CRM Measuring Loyalty in the CRM ProcessProcess

Measuring Loyalty in the CRM Measuring Loyalty in the CRM ProcessProcess

Customer’s Lifetime Value

Cus

tom

er S

atis

fact

ion/

Loy

alty

CRM

Share of Life

Dia

ling

Share of WalletR

elat

ion

Product

Tra

nsac

tio

n

Customer Retention

Strategic Customer Care

Customer Acquisition

138

From Customer Acquisition to Strategic From Customer Acquisition to Strategic CRMCRM

From Customer Acquisition to Strategic From Customer Acquisition to Strategic CRMCRM

The RelationshipThe Relationship

(Customer (Customer Retention)Retention)

The MarriageThe Marriage

(Strategic CRM)(Strategic CRM)

The CourtshipThe Courtship

(Customer (Customer Acquisition) Acquisition)

The RelationshipThe Relationship

(Customer (Customer Retention)Retention)

- 0 +

Degree of Profitability

Deg

ree

of L

oyal

ty

- 0

+

139

Customer Life CyclesCustomer Life Cycles

Business: size or maturity of the business

140

Customer Life CycleCustomer Life Cycle• Five Major “Life” Phases

•Prospects•Responders•New Customers•Established Customers•Former Customers

141

Business ProcessesBusiness Processes Organized around the Cust. Life CycleOrganized around the Cust. Life Cycle

142

Business Processes - AcquisitionBusiness Processes - Acquisition

Acquisition is the process of attracting Acquisition is the process of attracting prospects & turning them into customersprospects & turning them into customers

Who are the prospects?Who are the prospects? Geographic expansionGeographic expansion Product, service, pricing changesProduct, service, pricing changes Competition changesCompetition changes

Data Mining helps ID prospectsData Mining helps ID prospects

143

Business Processes - ActivationBusiness Processes - Activation

Filling out registration form (simple)Filling out registration form (simple) Include credit check, reference checks, Include credit check, reference checks,

transcripts, notary service, etc. (more involved)transcripts, notary service, etc. (more involved) Include physical exams (most involved)Include physical exams (most involved)

144

Business Processes - ActivationBusiness Processes - Activation

Activation steps (generalization)Activation steps (generalization)

The Sale (Leads)The Sale (Leads)

The OrderThe Order

The SubscriptionThe Subscription

The Paid SubscriptionThe Paid Subscription

145

Business Processes – Relationship ManagementBusiness Processes – Relationship Management

Goal: Increase customer’s value to usGoal: Increase customer’s value to us

Up-Selling – premium products & servicesUp-Selling – premium products & services

Cross-Selling – other products & servicesCross-Selling – other products & services

Usage Stimulation – come back for more!!!Usage Stimulation – come back for more!!!

Be careful with thisBe careful with this

Web-based communication (spam)Web-based communication (spam)

146

Business Processes - RetentionBusiness Processes - Retention

Survival Analysis Survival Analysis Churn AnalysisChurn Analysis

147

Traditional vs. Personalized or (1:1) Marketing

Data Warehousing and DataminingData Warehousing and DataminingBuy targeted mailing listsBuy targeted mailing lists

Customer Care CentersCustomer Care CentersIntegrated Internet & Telephony Systems Integrated Internet & Telephony Systems with with

personalized offers and information personalized offers and information

Centralized “Call Centers”Centralized “Call Centers”Out-bound Telemarketing with really Out-bound Telemarketing with really bad bad

musicmusic

Integrated MarketingIntegrated Marketing One-to-one mediaOne-to-one media

Undifferentiated PromotionsUndifferentiated Promotions““Occupant” Direct mailOccupant” Direct mail

Individually AddressableIndividually Addressable((On-line Chat and Networks)On-line Chat and Networks)

Non-addressableNon-addressable

Two-way DialogueTwo-way Dialogue ((24/7 Availability)24/7 Availability)

One-Way MessagesOne-Way MessagesLimited Hours and CapacityLimited Hours and Capacity

Relational Model (CRM) Relational Model (CRM) “Permission “Permission

Marketing”Marketing”

Transactional Model Transactional Model “Target “Target

Marketing”Marketing”

148

Enterprise CRM

• Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers

• Analytical CRM – supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers

Components of CRM Technologies

• Collaborative CRM- the various departments of a company, such as sales, technical support, and marketing, share any information they collect from interactions with customers

• Companies need to – Analyze the performance of the relationships with the

customers,

– Uncover trends in customer behavior, and

– Understand the true value of their customers to the company.

• This is taken care of by Analytical CRM which is “Back-Office” CRM

• Involves understanding the customer activities that occurred in the front office.

Analytical CRM

• “Back-Office” CRM– Requires technology to compile and process

customer data and

– New business processes to refine customer-facing practices to increase loyalty and profitability.

• Analytical CRM is a consistent suite of analytical applications that help you measure, predict, and optimize customer relationships

Cont.

1. Typically, CRM Analytics are … Automated ‘alerts’ Automated scripts to assist Customer Service or Sales Automated data mining templates, very restrictive and inflexible

CRM and Analytics… 2. What’s Missing?

Who, what, why Robust qualitative: Hearing the “Consumer/Client Voice” Primary research customized to client’s real marketing and sales need True 360 degree analytic view of client General lack of understanding of client’s business and negligible insight delivery No way to do standard market driver protocols: tests, market measurement, satisfaction & loyalty assessment No guidance on what to do with all the data3. This leads to three areas of need…

• Deliver full faceted analytics• Enrich customer understanding• Optimize ‘CRM’ strategy and customer intelligence (data, customer understanding, and marketing driven solutions)

Full-Faceted CRM Analytics Are NeededFull-Faceted CRM Analytics Are NeededFull-Faceted CRM Analytics Are NeededFull-Faceted CRM Analytics Are Needed

Market Research CRM Analytics and Data Mining

ConsumerInsight

1. Attitudes & Perception 2. Customer Satisfaction3. Customer Propensity4. Branding & Awareness5. Segmentation (Values) Models

1. Automated Research 2. Behavioral Data3. Prediction & Classification4. Rules /Flags/Scores5. Enriched database

Attitudinal Behavioral

• Segmentation studies,

• Customer migration analysis,

• Cross-sell/up-sell analysis,

• New customer models,

• Customer contact optimization,

• Merchandising analysis,

• Customer attrition and churn models,

• Credit risk scoring,

• Lifetime value (LTV) modeling and much more.

CRM Analytics Include

• Segment your customers by business value. – Next, model them to predict their migration into a

spectrum of value segments.

– Then, simulate and predict customer buying behavior based on a variety of promotion strategies.

• Perform a marketing-influencers analysis – To identify which customers can be influenced in their

value migration

– Then communicate to them in ways that move them in the right direction.

Use of CRM Analytics

• Make accurate assessments of each customer's affinity to a message, product or service.

• Learn how frequently you should contact each customer and which channel you should use for specific messages.

Cont.

• Perform very detailed analyses – Market- basket analysis,

– Product structure analysis,

– Cross-product correlation analysis,

– Multiple campaign response models,

– Customer growth models,

– Churn and attrition models, and customer lifetime value models to spot profit opportunities.

Cont.

• Capturing all relevant customer information like

– Your customers' response to your marketing campaigns

– Your customers' priorities in your web shop

– The requests for information addressed to your customer interaction center

Scope of Analytical CRM

• Some external information that can be included are:– Market data on your customers

– Enterprise data on competitors dealing with your customers

– Web surveys to supplement your customer information with details about customer satisfaction and customer preferences

– Data from communities or clubs with a common interest

Contd.

The Customer Knowledge Base: a 360 Degree View

Customer behavior modeling

• You can understand who your customers are by observing their behavior and identifying relevant patterns via profiling and scoring.

• This information can then be used to create predictive models that help you acquire, grow, and retain attractive and profitable customers

• Define homogeneous customer segments and use them as the basis for your decisions in marketing, sales, and service.– Tools used are: Analytical methods, such as clustering,

customer scoring, and proven techniques like recency, frequency, monetary (RFM) analysis

• Acquire the best customers using profiles of your existing top customers. – Analytical tools used are customer scoring and decision trees

Use of Customer behavior modeling

• Most integral part of analytical CRM

• It helps you focus limited resources most efficiently on the best and most valuable customer relationships.

• This typically involves considering– Customer profitability,

– Customer lifetime value, and

– Customer ratings.

Customer value assessment

• It is the difference between revenues and costs per customer

• Sound profitability analysis requires an integrated business model for contribution margin analysis that combines – Various types of revenue,

– Product costs, and

– Sales costs to produce a coherent picture of your customer profitability.

Customer Profitability

Customer Profitability

Customer Lifetime Value

• Customer lifetime value is an appropriate measurement of how much you would or should be willing to invest to acquire a customer.

• It is the net present value of the profit that a company could realize with the average new customer within a given customer segment during a given number of years.

• Customer profiles, such as ABC analysis, provide insights into customer structures.

• Customer scores, such as the assessment of the overall attractiveness or satisfaction of a customer, are used for this purpose

• In this way, you can weight different aspects to perform integral customer assessments.

• You can use the results of this assessment to allocate your resources in marketing, sales, and service to the right customers.

Customer Profiling and Scoring

• Is a key tool for analyzing and optimizing the composition of your customer base.

• By using key figures, such as customer lifetime value, customer ratings, or strength of the customer relationship, – We can assess customers or customer groups more

effectively and

– Determine the most appropriate policy for winning over customers,

– Providing them with the right kind of service and retaining their business.

Customer portfolio optimization

Customer Portfolio

Fundamental Steps in Analytical CRM

Use of IT in Analytical CRM

• Personalization – when a Web site knows enough about a persons likes and dislikes that it can fashion offers that are more likely to appeal to that person

• Analytical CRM relies heavily on – Data Mining technologies– Data Warehousing technologies and – Business Intelligence (BI) to give insights into customer

behavior

• These systems quickly aggregate, analyze, and disseminate customer information throughout an organization

Example of use of BI

Data MiningData Mining Data mining – process of analyzing data to extract

information Data-mining tools – use a variety of techniques to

find patterns and relationships in large volumes of information

◦ Classification ◦ Estimation ◦ Affinity grouping ◦ Clustering

Contd.Contd.

Common forms of data-mining analysis capabilities include:

◦ Cluster analysis◦ Association detection◦ Statistical analysis

Operational CRM

• Operational CRM means supporting the "front office" business processes, which include all customer contact (sales, marketing and service).

• Tasks resulting from these processes are forwarded to employees responsible for them, as well as the information necessary for carrying them out.

• Interfaces to back-end applications are provided and activities with customers are documented for further reference.

Benefits of Operational CRM

• Delivers personalised and efficient marketing, sales, and service through multi-channel collaboration

• Enables a 360-degree view of your customer while you are interacting with them

• Sales people and service engineers can access complete history of all customer interaction with your company, regardless of the touch point

• Sales force automation (SFA)  

• Customer service and support (CSS)  

• Enterprise marketing automation (EMA) 

Parts of Operational CRM

• Document Management: Develop and retrieve standard and customizable management reports and presentation documents

• Sales Analysis: Analyze sales data

• Product Configuration: Assemble alternate product specifications and pricing

• Marketing Encyclopedia: Provide updated information about products, prices, promotions, as well as soft information about individuals (e.g., influence on buying decisions) and information about competitors

Cont.

• CSS automates some service requests, complaints, product returns, and information requests.

• Traditional internal help desk and traditional inbound call-centre support for customer inquiries are now evolved into the "customer interaction centre" (CIC), using multiple channels (Web, phone/fax, face-to-face, kiosk, etc).

• Key infrastructure requirements of CSS include computer telephony integration (CTI) which provides high volume processing capability, and reliability.

Customer Service and Support

• Call Center Management:– Provide automated, end-to-end call routing and tracking

– Capture customer feedback information for performance measurement, quality control, and product development

• Field Service Management– Allocate, schedule, and dispatch the right people, with the right parts, at

the right time

– Log materials, expenses, and time associated with service orders– View customer history

– Search for proven solutions

• Help Desk Management– Solve the problem by searching the existing knowledge base

– Initiate, modify, and track problem reports

– Provide updates, patches, and new versions

Customer Services Capabilities

• EMA provides information about the business environment, including competitors, industry trends, and macro-environmental variables.

• It is the execution side of campaign and lead management.

• The intent of EMA applications is to improve marketing campaign efficiencies.

• Functions include demographic analysis, variable segmentation, and predictive modeling on the analytical (Business Intelligence) side.

Enterprise Marketing Automation

Technologies Used in Operational CRM

Marketing and Operational CRM

Three marketing operational CRM technologies:1. List generator – compiles customer information from

a variety of sources and segment the information for different marketing campaigns

2. Campaign management system – guides users through marketing campaigns

3. Cross-selling and up-selling Cross-selling – selling additional products or services Up-selling – increasing the value of the sale

Sales and Operational CRM

The sales department was the first to begin developing CRM systems with sales force automation – a system that automatically tracks all of the steps in the sales process

Sales and Operational CRMSales and Operational CRM

Sales and operational CRM technologies1. Sales management CRM system – automates each phase of the

sales process, helping individual sales representatives coordinate and organize all of their accounts

2. Contact management CRM system – maintains customer contact information and identifies prospective customers for future sales

3. Opportunity management CRM system – targets sales opportunities by finding new customers or companies for future sales

Customer Service and Operational CRMCustomer Service and Operational CRM

Three customer service operational CRM technologies:

1. Contact center (call center) 2. Web-based self-service system

Click-to-talk3. Call scripting system

Operational CRM: Customer ServiceOperational CRM: Customer Service

1. Contact Center (call center)

Operational CRM: Customer ServiceOperational CRM: Customer Service

2. Web-based self-service system - allows customers to use the Web to find answers to their questions or solutions to their problems

◦ Click-to-talk –customers click on a button and talk with a CSR via the Internet

Operational CRM: Customer ServiceOperational CRM: Customer Service

3. Call scripting system - accesses organizational databases that track similar issues or questions and automatically generate the details to the CSR who can then relay them to the customer

CRM MetricsCRM Metrics

Sales Metrics◦ Number of prospective customers◦ Number of new customers◦ Number of retained customers◦ Number of open leads◦ Number of sales calls◦ Amount of new revenue◦ Amount of recurring revenue◦ Number of proposals given

CRM MetricsCRM Metrics

Service Metrics◦ Cases closed same day◦ Number of cases handled by agent◦ Number of service calls◦ Average number of service requests by type◦ Average time to resolution◦ Average number of service calls per day

CRM MetricsCRM Metrics

Marketing Metrics◦ Number of marketing campaigns◦ New customer retention rates◦ Number responses by marketing campaign◦ Number of purchases by marketing campaign◦ Revenue generated by marketing campaign◦ Customer retention rate

The CRM functionality history

1990 1995 20011998

eBusiness

CSS

SFA

Marketing Automation

Internet

CRM

Decision support systems Data Warehousing Artificial Intelligence

CRM functionality basic

Branding andAwareness

Customer LoyaltyPrograms

EventsManagement

CampaignManagement

Marketing, Planning and Budgeting Segmentation

Segmentation and Coverage Planning

TerritoryManagement

PipelineManagement

Order Management

ForecastingSalesCompensation

Cancel Orders OrderManagement

Contract Management

Invoice to Cash

Fulfill Service Service RequestManagement

Sales

Marketing

Service

CRM - the channel concept - Siebel

Customers CustomerCustomerInformationInformation

Back OfficePartners

Web and Email

Field

Call Center

Marketing

Analytics

CRM functionality

ProspectsProspects

Customers CustomerCustomerInformationInformation

Partners

Web and Email

Field

Call Center

Marketing

Analytics

Back Office

Customer hierarchy

Customer contact

ER

P

Data Warehouse

Customization of Marketing Mix

Management of Intermediaries

ProductPlanning

Targeted Promotions

Sales ForceProductivity

Customized Services

RelationshipMarketing

Benefits of data warehousing in CRM

Technology used in CRM

• One of the key inputs in CRM is the use of technology for data mining and also for responding to the customer in real time.

• Some commonly used technological tools are the telephone, the internet, computers, fax and electronic data interchange.

• The Three W’s to technology-web, work flow management and data warehousing has led to the creation of electronic customer relationship management (ECRM) the process by which companies can understand customers in a seamless manner.

Contd. • The web has been compared to the eyes, ears, and mouth of

the CRM process as it collects and presents the information to the user

• The data warehouse servers are like a brain and central nervous system.

• Principle task is to assimilate the information passed to it by the web and then to formulate the response based on current external and historical information.

• Work flow management systems automate the procedure by which documents, information and all relevant tasks are distributed among participants.

• It follows the normal rules of the division of labour and sequencing of activities

Contd. • The web has been compared to the eyes, ears, and mouth of

the CRM process as it collects and presents the information to the user

• The data warehouse servers are like a brain and central nervous system.

• Principle task is to assimilate the information passed to it by the web and then to formulate the response based on current external and historical information.

• Work flow management systems automate the procedure by which documents, information and all relevant tasks are distributed among participants.

• It follows the normal rules of the division of labour and sequencing of activities

Data Mining Tools

– Market basket analysis and automatic cluster generation

– Decision trees and memory-based reasoning

– Neural net systems

Chapter 15: Customer Relationship Management (CRM)

Summary

CRM is a new business philosophy based on trust and value;

The core function of CRM is the value creation process;

Customer relationships develop over time;

The role of global salespeople in the process is that of both relationship builders and relationship promoters; and

The basic premise of CRM is to offer superior value to customers in an effort to turn prospects into customers, customers into loyal customers, and loyal customers into partners.