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 Introduction to
Customer Relationship
Management (CRM)
Learning Objectives

 Understand the basic concept of CRM

 Identify the four major perspectives on CRM
 Define several common misunderstandings
about CRM
 Understand five generic models of CRM
 Overview of history and development of CRM
Sales Cycle

(1) Identify (2) Estimate

Prospect Sales Potential

(5) Initiate and Maintain

(3) Manage Leads
Customer Relationship

(4) Forecasting
Sales
CRM Stands for?

Customer Relationship Management

OR

Customer Relationship Marketing

OR

Continuous Relationship Marketing

Selected definitions of CRM [1]

 CRM is an information industry term for

methodologies, software, and usually
Internet capabilities that help an
enterprise manage customer relationships
in an organized way
 CRM is the process of managing all aspects
of interaction a company has with its
customers, including prospecting, sales, and
service
 CRM applications attempt to provide insight into
and improve the company/customer relationship by
combining all these views of customer interaction
into one picture
Selected definitions of CRM [2]

CRM is an integrated approach to

identifying, acquiring, and retaining
customers
 By enabling organizations to manage and
coordinate customer interactions across
multiple channels, departments, lines of
business, and geographies, CRM helps
organizations maximize the value of
every customer interaction and drive
superior corporate performance
Selected definitions of CRM [3]
 CRM is an integrated information system
that is used to plan, schedule and control
the pre-sales and post-sales activities in
an organization
 CRM embraces all aspects of dealing with
prospects and customers, including the call
center, sales force, marketing, technical support
and field service
 The primary goal of CRM is to improve long-
term growth and profitability through a better
understanding of customer behaviour
 CRM aims to provide more effective feedback
and improved integration to better gauge the
return on investment (ROI) in these areas
Selected definitions of CRM [4]

CRM is a business strategy that

maximizes profitability, revenue
and customer satisfaction by
organizing around customer
segments, fostering behaviour that
satisfies customers, and
implementing customer-centric
processes
Core 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
Who is the Customer?

Individual customer
Business Customer
CRM is Founded on Four Tenets

1. Customers should be managed as

important assets
2. Not all customers are equally desirable
3. Customers vary in their needs,
preferences, and buying behavior
4. By better understanding their customers,
companies can tailor their offerings to
maximize their overall value
The CRM Advantages

Better Increases
Customer Market
Knowledge Share

Creates Up
Quicker Cash Flow and Cross-Selling
Opportunities

Increased
Product
Acceptance
Why CRM Systems are Being Used ?

Identifying prospects
Acquiring customers
Cross-selling and up-selling
Servicing
Retaining
Increasing loyalty
CRM’s Benefits for Retail Banks (Ex.)

 Increase in average products sold per

customer over one year from 4.6 to 6.2
 3-5 percent decrease in administrative
costs
 200 percent return on technology
investment through cost reduction over
one year
 96 percent reduction in average time for a
CCC agent to refer a customer to a branch
loan office
 83 percent decrease in average customer
info retrieval time
 15 percent increase in product revenue in
one year
Lowell Alcorn and Anton Wiryawan, Mortgage Banking (Feb 2004): 74-78
Customer Retention and Profits

 Increase retention 5 percent and improve

profitability in net present value from 20-85
percent
 It costs five to ten times more to obtain
a new customer than it does to keep an
existing one
The Objectives of CRM
 ID potential customers
 Understand needs
 Differentiate dollars and
cents
 Decrease attrition
 Increase usage
 Increase cross usage
 Increase usage of more
prestigious items
 Increase satisfaction
 Integrate marketing and
sales throughout
channels
 Improve campaign
management
 Increase referrals
 Win back lost customers
 Move customers up
relationship hierarchy
 Strangers
 Acquaintances
 Friends
 Partners
Which Companies Benefit Most from CRM?

 Companies sell services

 Companies serving large numbers of
customers through complex and frequent
interactions:
 Communications companies
 Retail banks
 Insurance companies
 Healthcare organizations
 Utilities
 Companies with a steep skew
 Companies in “lost for good” markets
 Which Companies Benefit the Least from CRM
Today?

 Companies that engage in minimal interactions

with each customer
 Auto dealers
 Government agencies

 Companies with simple transaction

 Movie theater
 Retail stores
Types of CRM

Type of CRM Dominant characteristic

a core customer-centric business strategy
Strategic that aims at winning and keeping
profitable customers
focuses on the automation of customer-
Operational facing processes such as selling,
marketing and customer service
focuses on the intelligent mining of
Analytical customer-related data for strategic or
tactical purposes
applies technology across organizational
Collaborative boundaries with a view to optimizing
company, partner and customer value
Strategic CRM

Focus upon the development of a

customer-centric business culture that is
dedicated to winning and keeping the
customers
Customer-centricity competes with other
business logics
 E.g. Philip Kotler identifies three other
major business orientations: product,
production and selling
Customer Centricity & Other Business
Logics [1]

1. Product-oriented businesses believe that

customers choose products with the best
quality, performance, design or features
2. Production-oriented businesses believe that
customers choose low-price products
3. Sales-oriented businesses make the
assumption that if they invest enough in
advertising, selling, public relations (PR)
and sales promotion, customers will be
persuaded to buy
 Customer Centricity & Other Business
Logics [2]

4. A customer or market-oriented
company shares a set of beliefs
about putting the customer first
 It collects, disseminates and uses customer
and competitive information to develop better
value propositions for customers
 A customer-centric firm is a learning firm that
constantly adapts to customer requirements
and competitive conditions
Operational CRM
Marketing automation
Market segmentation
Campaign management
Event-based (trigger) marketing
Sales force automation
Account management
Lead management
Opportunity management
Pipeline management
Contact management
Quotation and proposal generation
Product configuration
Service automation
Case (incident or issue) management
Inbound communications management
Queuing and routing
Service level management
Marketing Automation
 Applies technology to marketing processes
 Market segmentation
 Campaign management
• Allow marketers to use customer-related data in order to develop,
execute and evaluate targeted communications and offers
• Example of Campaign:
– Promotional brochures and emails, trade fair, TV advertising, sales
representatives, product demonstration
• Campaign Management Process
– Define product groups
– Find target groups
– Decide for communication channel (e.g. mail, email, phone, direct
contact)
– Resource planning (e.g. employees responsible, budget per campaign
element, timelines)
 Event-based (trigger) marketing
• Describe messaging and offer presentation to customers at
particular points in time
• Event-based campaigns can be initiated by customer behaviours or
contextual conditions
• Ex. A call to contact center is an example of a customer-initiated
event
Sales-force Automation
 The original form of operational CRM
 Applies technology to the management of a company’s selling activities
 Improve and standardize the selling process
 Consist of:
 Account management
 Lead management:
• A Lead is a specific person or organization that has a basic interest in a special
product or service
• Lead Management is the process of collecting, updating and managing the interest
of a business partner over time
• Enable users to qualify leads and assign them to the appropriate salesperson

 Opportunity management
 Pipeline management
 Contact management: manage their communications programme with
customers
 Quotation and proposal generation: allow the salesperson to automate
the production of prices and proposals for customers
 Product configuration: enable salespeople or the customer themselves,
automatically to design and price customized products, services or solutions
to problems
Service Automation

Allow companies to manage their

service operations, whether delivered
through call centre, contact centre, web
or face-to-face
Consists of:
 Case (incident or issue) management
 Inbound communications management
 Queuing and routing
 Service level management
 Sources of Customer-related Data for Analytical
CRM
 Internal sources
● Sales data (purchase history), financial data (payment
history, credit score), marketing data (campaign
response, loyalty scheme data) and service data.
 External sources
● Geo-demographic and life-style data from business
intelligence organisations, for example.
Beneficiaries of Analytical CRM
Customer
● Analytical CRM can deliver timely,
customized, solutions to the customer’s
problems, thereby enhancing customer
satisfaction.
Company
● Analytical CRM offers the prospect of more
powerful cross-selling and up-selling
programs, and more effective customer
retention and customer acquisition
programs.
Misunderstandings about CRM

1. CRM is database marketing

2. CRM is a marketing process
3. CRM is an IT issue
4. CRM is about loyalty schemes
5. CRM can be implemented by any
company
CRM Constituencies

1. Companies implementing CRM

2. Customers and partners of those companies
3. Vendors of CRM software
4. CRM application service providers (ASPs)
5. Vendors of CRM hardware and infrastructure
6. Management consultants
The IDIC Model of CRM

 Developed by Peppers and Rogers

 Identify who your customers are and build a deep
understanding of them
 Differentiate your customers to identify which
customers have most value now and which offer
most for the future.
 Interact with customers to ensure that you
understand customer expectations and their
relationships with other suppliers or brands
 Customize the offer and communications to
ensure that the expectations of customers are met.
The QCi Model of CRM

• Depict a series of activities that companies need to

perform in order to require and retain customers
The CRM Value Chain

The CRM Value Chain

Customer Customer Network Value Manage

Portfolio Intimacy Development Proposition The
Primary Analysis (SCOPE) Development Customer
stages Lifecycle

Leadership and culture

Supporting Data and information technology

conditions
People

Processes
 Payne’s 5-process Model of CRM
CRM Strategic Framework
Gartner’s Competency Model of CRM

1. CRM Vision: Leadership, Social Worth, Value Proposition

2. CRM Strategy: Objectives, Segments, Effective Interaction

3. Valued Customer Experience 4. Organizational Collaboration

Culture and Structure
Understand Requirements Customer Understanding
Monitor Expectations People: Skills,Competencies
Satisfaction vs.Competition Incentives and Compensation
Collaboration and Feedback Employee Communications
Partners and Suppliers

5. CRM Processes: Customer Life Cycle, Knowledge Management

6. CRM Information: Data, Analysis, One View Across Channels
7. CRM Technology: Applications, Architecture, Infrastructure
8. CRM Metrics: Cost to Serve, Satisfaction, Loyalty, Social Costs

• The model suggests that companies need competencies in

eight areas for CRM to be successful
References

Francis Buttle, Customer Relationship

Management: Concepts and
Technologies, 2e, Elsevier Ltd., 2009
Baran, Galka and Strunk, Principles of
Customer Relationship Management,
South-Western, 2008
Adrian Payne, Handbook of CRM,
Elsevier Ltd., 2008
1st Assignment

 Create a group of 2-3 students

 Compare three open source CRM softwares for
the following criteria:
 Profile (vendor, database, programming language,
maximum users, architecture)
 Detailed functionality (min. 3 functionalities)
 Write an exhaustive and comprehensive paper
regarding this topic (max. length is 8 pages)
 Format IEEE paper
 Write in English/Bahasa
 Do not forget to put references
 Deadline: 17 September 2012 (13.00 PM),
submit via scele