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ERP

Enterprise
Resources Planning
Customer Relationship Management

Ahmad Tahir Rahim

CRM
Used to maximize the benefits of a
companys customer assets.
Used as a technology and business
discipline.
Seeks to optimize revenue,
profitability, customer satisfaction, and
customer retention.

CRM System

CRM system provides integrated approach to all


aspects of company-customer interaction

Marketing

Sales

Support / Service

CRM Phases
1.
2.
3.
4.

Technology
Integration
Process
Customer-driven

CRM Applications
Partner relationship management
(PRM)
Employee relationship management
(ERM)

CRM Software Capabilities


Sales force automation (SFA)

Customer service
Marketing

CRM Software Capabilities Example


(Laudon and Laudon 2006)

Customer Data

Sales

Marketing

Service

Account Mgmt

Campaign Mgmt

Service Delivery

Lead Mgmt

Channel Promotions
Mgmt

Customer Satisfaction
Mgmt

Order Mgmt

Events Mgmt

Returns Mgmt

Sales Planning

Market Planning

Service Planning

Field Sales

Marketing Operations

Call Center & Help


Desk

Sales Analytics

Marketing Analytics

Service Analytics

Aspects of CRM
Operational CRM
Includes customer-facing applications

Analytical CRM
Includes applications that analyze
customer data generated by operational
CRM applications

Operational vs. Analytical CRM Examples


(Laudon and Laudon 2006)

Operational CRM

Analytical CRM

Campaign mgmt

Develop customer segmentation strategies

E-marketing

Develop customer profiles

Account and contact


mgmt

Analyze customer profitability

Lead mgmt

Analyze product profitability

Telemarketing

Identify cross-selling/up-selling opportunities

Teleselling

Select the best marketing, service, and sales channels for each
customer group

E-selling

Identify trends in sales cycle length, win rate, and average deal
size

Field sales

Analyze service resolution times, service levels based on


communication channel, and service activity by product line and
account

Field service dispatch

Analyze leads generated and conversion rates

Customer care and help


desk

Analyze sales representative and customer service


representative productivity

Analytical CRM Data Warehouse


Customer Data

Channels
Call center
Web site
Wireless
Field sales
Direct mail
E-mail
Retail store
Partner
Other sources
Legacy systems
Demographic data
Third-party data
Marketing
campaign data

Customer
data
warehouse

Profitable customers
Market segments
Customer profiles
Churn rates

OLAP
Data mining
Other data
analysis tools
(Laudon and Laudon 2006)

CRM Market Segments

Traditional out-of-the-box CRM

Traditional CRM with templates for specific vertical


industries

Traditional out-of-the-box CRM with application


development hooks

Industry-specific vertical CRM packages

Custom solutions from vertical systems integrators

CRM Systems Business Value

Increased customer satisfaction


Reduced direct marketing costs
More effective marketing
Lower costs for customer acquisition
and retention
Increased sales revenue
Reduced churn rate

CRM Performance Metrics

Cost per lead


Cost per sale
Number of repeat customers
Reduction of churn
Sales closing rate
Customer lifetime value (CLTV)

Cost Cutters and Revenue Enhancers


from a CRM System
Cost Cutters
Decrease cost of
sales
More time to sell;
less time on
administration
Decrease cost of
service
Cost per service
interaction
Transition to more
self-service

Revenue Enhancers
Increase sales
effectiveness
Add new customers at a
higher rate
Offer new
products/services
Provide a better
customer experience
Increase revenue per
customer
Sell more of current
products/services
Haag et al. 2005
Improve customer

CRM Success Stories


Best Buy
Launched a customer-centricity effort
Trained store-level employees to
recognize five types of highly valued
customers

American Cancer Society


Used CRM system to better target
members in its donor base

CRM System Challenges


Broad company goals

Generic strategies
Software-centric implementations

Integrating CRM with ERP and SCM


Systems
CRMs goal: to find the best
customers and concentrate efforts on
serving them better
CRM and ERP integration
CRM and SCM integration

Facts about customer relations


Cost of selling to a new customer is six times as high
as to existing customer
Odds of selling to a new customer = 1/7 to an existing
customer = 1/2
Each dissatisfied customer tells 8 to 10 people
70% of dissatisfied customers will do business again if
they feel their complains are handled well
1 extra % of customer retention can boost turnover by
as much as 15%
Many companies dont have proper customer support
CRM = doing things right + actively seeking new
business

retention

Industry

% Increase in
Customer NPV

Advertising Agency

95

Life Insurance

90

Bank

85

Insurance

84

Car Service

81

Credit Card

75

Laundry

45

Software

35

Impact of a 5% Increase in Retention Rate on Customer Net Present Value

CRM definition
customer centric approach
Business philosophy which places the
customer at the heart of organisations
processes, activities and culture
IT is the tool to implement this

a sales and service business strategy where


the organisation wraps itself around the
customer [such that] whenever there is
interaction, the message is appropriate for
that customer
Curley, B. (1999) Profiting from the relationship Insurance and Technology, 24 (3), pp. 3438.

Why CRM?
Customers dont care about their
suppliers internal difficulties
They want to be able to access
product and services at the least cost
They want a single point of entry
Existing loyalty programmes are a
start but dont go far enough
Variations in the cost of selling to
different customers => CPA

A bit of history

In the 50s mass marketing


In the 1970s market segmentation
In the 1990s personalised marketing
Since: relationship marketing
acquiring customers is far more expensive than keeping
them

knowledge about individual customers is required


to guide highly focused marketing strategies
More intense, global competition
more fragmentation of markets
high level of product quality

The Internet reduced switching costs in many


industries
Shift in power from the seller to the consumer

The 3 phases of CRM


Acquiring new customers
Promotion / Advertising
Better products and superior service

Enhancing profitability of existing


customers
cross-selling and up-selling (one stop
shopping)
Provision of additional services
Generally re introducing switching costs

Retaining most profitable customers


best customer list
customer profitability analysis

Novelty of the CRM Approach


Complete and integrated solution - breaks
down the walls of conventional functional
areas
Most companies are good at one of the 3
activities - CRM concentrates on all 3
Overall corporate objective of providing
customer satisfaction
Data collection aspects
Data mining aspects
Dissemination aspects

Offer single point of entry for customer


queries

Survey of CRM initiatives


80% of CRM initiatives are quick win
projects
Important to have clearly define goals

Reduce call numbers


Produce more finely tuned products
Sell more unit per deal

CRM must be profit making


50% of top 500 firms said lack of internal
collaboration is an obstacle
Only 30% of companies have metrics in
place

Clear obstacles
Lack of collaboration
Outright conflict between
departmental needs
Fragmentation of existing customer
facing processes
Most unstructured in most firms

Idiosyncrasy of processes will lead to


scope creep
Customer frustration may lead to
excessive demands

Develop common goals centred on the


customer

CRM project is as multi-disciplinary as ERP project


Data also comes from disparate systems
Using key scenarios is supposed to help
Potential for conflicts must be removed
Involve trusted customers when applicable
Do genuine fact finding on how customers are dealt
with today
Process mapping
rules and procedures
Case studies

Mapping process change


Integration of customer content
integration of customer contact
integration of end-to-end CRM
business processes
Integration with ERP
Integration of activities never
computerised before

ABC of data mining in CRM


Affinity analysis: odd / unexpected patterns in
customer behaviour.
Clustering sorting customers into similar groups
based on certain attributes or behaviours.
Predictive modelling uses historical purchase
data plus information about promotions to predict
future behaviour.
Segmentation like clustering; but used to support
the development of tailored offerings
Tapscott: help to perform surgical strikes instead
of carpet bombing

Data Issues
As with ERP Bad data quality will be a
problem
Data stewards
Building up to a DQM strategy
Dynamic process of tidying up live data

Interface into existing systems


Front and back office
Multiple communication channels with outside
360 view

New data collection mechanisms =>


increased cost

Metrics

Sales analysis
Returns
Warrant service requests
Calls / complaints
Time to closure
New contacts generation
Sales conversion
Customers retention
Campaign tracking
Pricing strategy changes

Staff buy in
Even more so than for ERP, CRM requires
staff buy in.
One bad experience is enough
Communicate on what is being sought
And have clear performance
measurements
Create programmes to show that it matters
Monitor performance and overall effect
over the long time
Measure returns regularly

Integration of customer content


Transactional data
Human data (obtained in
conversation)
Try to minimise the cost of collecting
such data
Web services are now a mainstream
channel
Intranet / CRM systems provide a
platform for distribution on a wide
basis

Integration of business processes

Sales and Services primarily


Accounting
Logistics / shipping
+ all intermediaries downstream
Distributors
Experts in position to prescribe or
recommend
Contractors supporting the provision of
services
Eg: BGE

Integration of customer contact information


All channels
24 / 7
Available to all CCP (customer
Contact Personnel)

Infrastructure for CRM

Customers

Telephony
Internet
Face-to-Face
Mail
Fax

Customer Interface
Infrastructure

Front Office CRM Processes

Sales

Marketing

Data Mining and Analysis

Data Warehousing

Services
Legal
HR
Finance
R&D
Servers
Storage
Back Offices and External
Systems

Business Intelligence
Making sense
Identifying problems
Understanding cause and effect
relationships
Anticipating future changes
EIS / OLAP / dashboards of info
+ datawarehouses and data mining

Customer contact point


Call centre (70% of all contact points) evolving into a
selling channel
Goals of the contact point
Listening to the customer
creating higher levels of loyalty
providing a better experience

CTI
Hidden cost => increased in-coming calls
But automation means complete framework for
measuring performance
Counter measures can be derived from findings
Email management provides further automation

The Internet
Better economics
Average cost of banking transaction = 1 / 54
cents with call centre and 13 cents on web
site.

Unlimited connectivity (in theory)


Seamless data collection
Integration with SCM
Event driven built into services / automated
click-for-help
Significant risk in integrating with back end

Building the case for ROI


Will crm improve our ablity to
generate revenues?
Will it improve decision making?

Will crm improve customer


satisfaction?
Will it improve quality of service?
Will it improve quality of products?

Will it reduce operational costs?


Will it improve employee satisfaction?
At least will it not decrease it?

Paradox of productivity gains

Amongst other
things, this shows
the need for
METRICS

Key decisions for ROI


What costs must be absorbed? see lecture on
TCO for ERP

Eg: infrastructure costs


Hardware costs

What benefits must be measured?


What is the true impact of the software?

Choices: sales growth, customer growth


and how they will be weighted (so they can
be converted into figures)
Also consider tradeoffs (things that could
not be done without the software)

Knowledge management

Tacit knowledge
Explicit knowledge
Sales area dominated by the former
CRM is an attempt to codify knowledge
and store it for easy access
CRM is also an attempt to create new
knowledge
Finally CRM is an attempt to built
knowledge into the business processes of
the firm
Event driven marketing / cross selling / up
selling

Discussion