Introduction to

Customer Relationship Management

(CRM)
Lecture 2
(BA 1028)

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 History of CRM

B&S RM CIMS CRM e-CRM

Time line

Late 80’s Early 90’s Mid 90’s 2002 - Future

• B&S – Buying & Selling

• RM – Relationship Marketing
• CIMS – Customer Information Management Systems
• CRM – Customer Relationship Management
• e-CRM- A subset of CRM that focuses on enabling customer
interactions via e-channels (The web, email and wireless)
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 What is CRM?
CRM is a strategy:
• used to learn more about customers' needs and behaviors
in order to develop stronger relationships with them.

CRM is a business strategy with outcomes:

• that optimise profitability, revenue and customer
satisfaction by organizing around customer segments,
• fostering customer-satisfying behaviors and implementing
customer-centric processes.”

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 Definition of CRM

• CRM is the core business strategy that integrates

internal processes and functions, and external
networks, to create and deliver value to targeted
customers at a profit. It is grounded on high quality
customer related data and enabled by information
technology.

• CRM is a technology-enabled approach to

management of the customer interface

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 Underpinning Theory

• Customers have many points of contact with an

organization
• Retaining customers is far most cost effective than
recruiting new ones
• Some customers are more profitable than others
– The “80/20” rule
– For most firms, 80 percent of profit comes from 20 percent
of customers

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 Potential Benefits Of CRM
• Customer retention
• Share of customer or share of wallet
• Cross-selling
• Up-selling

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 Retention vs. Acquisition
• Retention of customers gives greater benefit over acquisition
of new customers
– Builds trust and loyalty
– Up-sell and cross sell opportunities

• Move customers through the lifecycle

– Acquisition, Growth and Retention
– Movement will maximize their value and increase profits

• Studies indicate that increasing the number of customers a

company retains each year by just 5% can increase
contribution to shareholder value by 40% to 95% 7
 Retention vs. Acquisition

• Average U.S. companies

lose 20% of customers
every year – not
knowing why
• Costs 6 to 7 times more
to attain a new
customer than to retain
current customers

http://www.crmtrends.com/crm.html; last accessed October 28, 2004.

Bleicher, Paul. “An Imposing Change.” Pharmaceutical Executive. Jun 2004. p.p. 26-30.
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 Potential Costs Of CRM
• IT infrastructure
• Process change

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 Importance of CRM to GM’s
• CRM can….
– Increase customer service levels
– Improve efficiency of call centers
– Cross-sell products more effectively
– Help sales staff close deals quickly
– Simplify marketing processes
– Increase ROI

http://guide.darwinmag.com/technology/enterprise/crm/index.html?; last accessed September 27, 2004. 10

 Importance of CRM to GM’s
“Research has
shown that
companies that
create satisfied, loyal
customers have
more repeat
business, lower
customer-acquisition
costs, and stronger
brand value—all of
which translates into
better financial
performance”

http://siebel.com; last accessed October 17, 2004.

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 Three phases of CRM
• Acquiring New Relationships
– You acquire new customers by promoting your company’s
product and service leadership.
• Enhancing Existing Relationships
– You enhance the relationship by encouraging excellence in
cross-selling and up-selling, thereby deepening and
broadening the relationship.
• Retaining Customer Relationships
– Retention focuses on service adaptability – delivering not
what the market wants but what customers want.

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Type of CRM

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 Strategic CRM
• Strategic CRM is focused upon the development of a
customer-centric business culture.
• This culture is dedicated to acquiring and keeping customers
by creating and delivering value better than competitors.
• Similarly, strategic CRM is to identify target customers and
what to offer them

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 Operational CRM
• Operational CRM automates and improves customer-facing
and customer supporting business processes.
• CRM software applications enable the, selling and service
functions to be automated and integrated.
• Similarly, operational CRM is to monitor daily business
activities/ transactions. Examples of major applications
within operational CRM;

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 Analytical CRM
• Analytical CRM is concerned with capturing, storing,
extracting, integrating, processing, interpreting, distributing,
and using customer-related data to enhance both customer
and company value.
• Analytical CRM builds on the foundation of customer-related
information, i.e. sales data (purchasing history), financial data
(payment history) and marketing data (campaign response)
• Analytical CRM can lead companies to decide that selling
approaches should differ between customer groups. Higher
potential value customers may be offered face-to-face selling;
lower value customers may be contacted by telesales.

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 Collaborative CRM
• Collaborative CRM is the term used to describe the strategic
and tactical alignment of normally separate enterprises in the
supply chain for the more profitable identification, attraction,
retention and development of customers.
• Collaborative CRM uses CRM technologies to communicate
and transact across organizational boundaries (partners)
• Collaborative CRM enables separate organizations to align
their efforts to service customers more effectively. It allows
valuable information to be shared along the supply chain.

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 Misunderstandings about CRM

Misunderstanding 1: CRM is database marketing

• Database marketing is concerned with building and

exploiting high quality customer databases for
marketing purposes.
• CRM is much wider in scope than database
marketing.
• Database marketing is less evident in strategic,
operational and collaborative CRM.

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 Misunderstandings about CRM
Misunderstanding 2: CRM is a marketing process
• CRM software applications are used for many marketing activities: market
segmentation, customer acquisition, customer retention and customer
development (cross-selling and up-selling)
• Operational CRM extends into selling and service functions as well like …
1. Operations management can use customer-related data to produce
customized products and services.
2. People management (Human Resources) can use customer
preference data to help recruit and train staff for the front-line jobs
that interface with customers.
3. Research and development management can use customer-related
data to focus new product development.

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 Misunderstandings about CRM
Misunderstanding 2: CRM is a marketing process (continue)

• Customer data NOT only be used to integrate various internal

departments, but can also be shared across the extended
enterprise with outside suppliers and partners.
• For example, Tesco partners with Royal Bank of Scotland to
offer financial services to Tesco customers. Both these
activities require the sharing of information about Tesco
customers with supplier and partner.
• There is more to CRM than marketing process.

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 Misunderstandings about CRM
Misunderstanding 3: CRM is an IT issue
• Successful CRM implementations involve people designing
and implementing processes that deliver customer and
company value. Often, these processes are IT-enabled. IT is
therefore a part of most CRM strategies.
• Not all CRM initiatives involve IT investments.
• The goal of many CRM projects are the development of
relationships and retention of highly valued customers. This
may involve behavioural changes in store employees,
education of call centre staff, and a focus on empathy and
reliability from salespeople.

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 Misunderstandings about CRM

Misunderstanding 4: CRM is about loyalty schemes

• Some CRM implementations are linked to loyalty
schemes but not all are.
• Loyalty schemes may play two roles in CRM
implementations.
1. First, they generate data that can be used to guide
customer acquisition, retention and development.
2. Secondly, loyalty schemes may serve as an exit barrier.
Customers who have accumulated credits in a scheme
maybe reluctant to exit the relationship.

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 Misunderstandings about CRM
Misunderstanding 5: CRM can be implemented by any company
• Strategic CRM can be implemented by any company as long as the Chief
executives can establish a vision, mission and set of values that bring the
customer into the heart of the business.
• Similarly, operational CRM can be implemented as long as the company
has a sales force that can be automate its selling, lead management and
contact management processes.
• However, in order for a company to implement analytical CRM, the
company must have data to identify which customers are likely to
generate most value in the future, and to identify within the customer
base segments that have different requirements. If these data are missing
then analytical CRM cannot be implemented.

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 CRM stakeholders
1. Companies implementing CRM: early adopters were the
large MNCs
2. Customers and partners of those companies
3. Vendors of CRM software: SAP, Oracle, Microsoft
4. CRM application service providers (ASPs): salesforce.com,
NetSuite
5. Vendors of CRM hardware and infrastructure
6. Management consultants: consultancies offer clients a
diverse range of CRM-related capabilities such as strategy,
business, application and technical consulting. The major
consultancies such as Accenture, McKinsey, Deloitte
Consulting, Cap Gemini, and EY, all offer CRM consultancy
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CRM Applications

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