CUSTOMER RELATIONSHIP

MANAGEMENT

Principles of Supply Chain Management:

A Balanced Approach
 Learning Objectives

You should be able to:

– Discuss the strategic importance of Customer Relationship
Management (CRM).
– Describe the components of a CRM initiative.
– Discuss the implementation procedures used for CRM
programs.
– Describe how information is used to create customer
satisfaction and greater profits for the firm.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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 Chapter Ten Outline
Defining Customer Relationship Management (CRM)
CRM’s Role in Supply Chain Mgmt
Key Tools & Components of CRM
• Segmenting Customers
• Predicting Customer Behaviors
• Customer Profitability Determination
• Personalizing Customer Communications
• Automated Sales Force Tools
• Customer Service Capabilities
Designing and Implementing a Successful CRM Program
Some CRM Application Providers
Future Trends in CRM

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 Introduction
“Finding a new customer costs five times as much as
keeping an old customer”
– Customer relationship
management (CRM) is
associated with automated
transaction and communication
applications.
– Increased automated
interactions will lead more
organizations to find they must
continue to identify and develop
new value for customer
relationships

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 Defining Customer Relationship
Management
Customer Relationship Management (CRM) is defined as:.
• Building and maintaining profitable long-term customer
relationships.
• Successful CRM programs require cultural change in
many organizations, leading to strategies that are
focused on cultivating long-term relationships with
customers, aided by the software capabilities.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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CRM’s Role in Supply Chain Management

The firm seeks position as a value-enhancing supplier to its

customers.
– Firms must create methods for finding and developing good
suppliers
– Firms must create methods for becoming and staying good
suppliers themselves.
– It may be necessary for a firm to certify its intermediate
customers as to their ability to adequately represent their firm’s
products.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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 Key Tools & Components of CRM

Segmenting Customers- Grouping customers in a variety of ways to

create more specialized communications about their products.
– Target marketing efforts- e-mail or direct mail saves labor and
postage, reduces chances of being a nuisance.

Relationship marketing or permission marketing- customers select

the type and time of communication. Requires software and customer
participation

Cross-Selling- Additional products are sold as the result of an initial

purchase (e.g., e-mails from Amazon.com describing other books
bought by people).

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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 Key Tools & Components of CRM- Cont.

Predicting Customer Behaviors- Behaviors can be predicted and

firms forecast likelihood of customers’ purchases.
Customer Defection Analysis- methods to retain customers.
Churn reduction- reducing customer defections.
Personalizing Customer Communications- understanding
customers, their behaviors, and their preferences allows firms to customize
communications aimed at specific groups of customers.
Clickstream, how a customer navigates a Web site can help
tailor a Web site’s images, ads, or discounts.
Event-Based Marketing- Offering individual promotions tied to specific
events to offer the right products & services to customers at the right time.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 Key Tools & Components of CRM- Cont.

Automated Sales Force Tools- Used for documenting

field activities, communications with the home office, &
retrieving sales history.
– Sales Activity Management- Tool offering sales reps a guided
sequence of sales activities
– Sales Territory Management- Sales managers obtain
information of each sales rep’s activities (e.g., total sales per
sales rep.)
– Lead Management- Sales reps can follow prescribed tactics
when dealing with prospects to aid closing the deal.
– Knowledge Management- Enables quick decision making,
better customer service, and a better-equipped and happy sales
staff.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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 Key Tools & Components of CRM- Cont.

Customer Service Capabilities

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

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 Key Tools & Components of CRM- Cont.

Customer service elements can be classified as:

– Pre-transaction elements- Precede the sale (e.g., customer
service policies, the mission statement, organizational structure,
& system flexibility).
– Transaction elements- Occur during the sale & include the order
lead time, the order processing capabilities & the distribution
system accuracy.
– Post transaction elements- Occur after the sale & include
warranty repair capabilities, complaint resolution, product
returns, and operating information.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 Key Tools & Components of CRM- Cont.

Call Centers
Call center systems can now categorize all calls, determine average
resolution time, and forecast future and improve the overall productivity
of the staff, increasing customer satisfaction levels.
Informational Scripting
Scripts to successfully guide service representatives through many
types of customer problems. They do not allow for much “out-of-the-
box” thinking.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 Key Tools & Components of CRM- Cont.

Web Site Self-Service- Web sites act as support mechanisms for call
centers. Customers can access their account information and operating hours,
contact information, etc.
Field Service Management- Customers can communicate directly with
product specialists using wireless devices and the right diagnosis can be made
quickly.
Measuring Customer Satisfaction- Customers are frequently given
opportunities to provide feedback about a product, service, or organization.
Customer Privacy Capabilities- Two important issues are ability to assure
privacy and ability to minimize customer harassment.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 Designing & Implementing a Successful
CRM Program
What will CRM solve?
This question must involve employees from all functions.
Step 1. Creating the CRM Plan- should include:
– Objectives of the CRM program
– CRM’s fit with corporate strategy
– New applications to be purchased or developed
– Integration or replacement of existing methods or legacy systems
– Personnel Requirements- personnel, training, policies, Upgrades, and
maintenance and
– the costs and time frame for implementation.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 Designing & Implementing a Successful
CRM Program- Cont.
Step 2- Involve CRM users from the Outset- To get acceptance of
the CRM initiative, employees should understand how it affects their
jobs.
– Create a project team with members from all affected organizational
areas.
– Test with a pilot application
Step 3- Select the Right Application and Provider- Find an
appropriate application and determine the extent of customization
(adaptation).

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 Designing & Implementing a Successful
CRM Program- Cont.
Step 4- Integrate Existing CRM Applications- CRM is a collection of
various applications implemented over time.
– Customer contact mechanisms need to be coordinated so that every
CRM application user in the firm knows about all of the activity
associated with each customer.
– Centralized database or data warehouse containing all customer
information.
Step 5- Establish Performance Measures- Measuring performance
allows the firm to:
– Determine if objectives have been met
– Compare actual to planned = variance

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
Designing & Implementing a Successful
CRM Program- Cont.
Step 6- Providing CRM Training for All
Users-
– Provide and require training for
all of the initial users and then
provide training on an ongoing
basis as applications are added.
– Training can also help convince
key users like sales, call center,
and marketing personnel of the
benefits and uses of CRM
applications.

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© 2005 Thomson Business and Professional Publishing
 Some CRM
Application Providers
Oracle
• Interaction Center- integrates with service, sales, contracts, and marketing
applications.
• Oracle Sales- processes across all sales and customer interaction
channels.
• Oracle Marketing -provides automation and tools for the entire marketing
process.
Siebel Systems
• Call Center- improve agent productivity by providing critical customer
information.
• Siebel Sales- the means to focus on the right deals at the right time.
• Siebel Marketing- optimizes targeting and improves response rates with
robust segmentation capabilities.

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© 2005 Thomson Business and Professional Publishing
 Future Trends in CRM
New Privacy Regulations- Rules and
laws regarding invasion of privacy are
springing up. Solution: develop a
privacy policy and post it on their Web
site.
Application Service Providers (ASPs)-
Fifty 50 percent of all CRM programs
are now designed and maintained for
clients by ASPs.
Adapting CRM for global uses is
increasing-New Markets out side of
traditional industrialized countries
require adaptation to local needs,
language, and culture

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