Customer Relationship Management(CRM)

1. Customer Relationship Management(CRM) Presented by: MortezaNazemi RoohollahDehghan April 23, 2009

2. Highlights • Evolution • Definition of CRM • Goals & Benefits • Architecture of CRM • Basic Steps in CRM • Customer Loyalty & Lifetime Cycle • Competition Advantages • Conclusion

3. Evolution • Initially, there were Door-to-Door sales forces to approach the customers. • Then,Mass marketing replaced the intimacy of a direct sales force. • Later,Targeted marketing evolved. Use of direct mail and telemarketing. • Latest is Customer Relationship Management (CRM), the next step in Evolution. A concept supported by latest technologies.

4. OLD VS. NEW MARKETING • OLD MARKETING • Transaction oriented • Market share oriented • All customers are equal • Marketers sell • 4P marketing • Mass marketing • Sell to the customer • Focus on new customers • Broadcast oriented • Transaction profit • NEW MARKETING • Relationship oriented • Share of wallet oriented • All customers are not equal • Marketers manage demand • Relationship marketing • Individual marketing • Manage customer experience • Focus on existing customers • Dialogue oriented • Customer lifetime value

5. Most organizations -even the largestand the most prestigious firms-cannot answer the following critical questions: • Do all customers represent equal opportunities for profitability? • Which ones are more service sensitive and less price sensitive? • How are they different or similar in product preferences and needs? • Which customers are profitable today? • Which one has the greatest opportunity for long term value? • Of those customers who are of high value, how much longer will they stay with you? • What channels does each customer respond to more favorably? • What is the next product you should offer each customer?

6. Changing the Paradigm From To

7. The concept of CRM is: CRM is about « Keeping the old-time spirit of customer connection even when you can not shake every hand ». • Customer relationship management (CRM) is a business strategy to select and manage the most valuable customer relationships. • CRM requires a customer-centric business philosophy and culture to support effective marketing, sales, and service processes.

8. Definitions of CRM • Customer Relationship Management (CRM) is an enterprise approach to understanding and influencing customer acquisition, customer retention, and customer value-current and lifetime-through interactive, relevant information exchange (Marketing Science Institute).

9. CRM is … Any application or initiative designed to help an organization optimize interactions with customers, suppliers, or prospects via one or more touch points for the purpose of acquiring, retaining, or cross-selling customers.

10. What is CRM? “Customer Relationship Management is the initiation, enhancement, and maintenance of mutually beneficial customer and partner long-term relationships through business intelligence-generated strategies based on the capture, storing, and analysis of information gathered from all customer and partner touch points and transaction processing systems.”

11. General Statistics The average business never hears from 96% of its unhappy customers, • 91% never come back • Those people will tell a minimum of 4 other people, • Getting a repeat customer from this group is 1 in 11, • Dissatisfied customers may tell 9-10 people about their experience, • For every positive they tell 4-5 people, • For every complaint received the average business in fact has 26 customers with the similar concern,

12. Drivers of CRM • Pareto’s principle: 80/20 rule • 8 to 10 calls to make a sale to new customers, 2 to 3 to existing customers • 5-10 x more expensive to sell to new rather than repeat customers • Increase retention 5 percent and improve profitability in net present value from 20-85 percent.

13. Goals of CRM • Retention rate: CRM, relationship building, increases customer loyalty which increase revenue per customer and frequency of purchases. • Referrals: CRM can turn customers into advocates. Referrals typically have higher retention rates and spending rates than other newly acquired customers. • Increased sales: CRM leads to increased cross-selling, upgrades, or simply more products by existing customers. • Reduced costs: CRM can lead to more cost effective marketing; avoids expenses of mass marketing, free-up sales professionals, reduces direct mailings.

14. Goal Of CRM With an effective CRM strategy, a business can increase revenues by: • Improve the ability to retain (acquire) customers • Maximize the “lifetime” of customers • Improve service while keeping costs low • providing services and products that are exactly what your customers want • offering better customer service • cross selling products more effectively • helping sales staff close deals faster • retaining existing customers and discovering new ones

15. The ultimate goal of CRM : The goal is to encourage the customer to make its future purchases from you and reduce the share of purchases being made from the competition DUE TO THE FACT customer knowledge has been accumulated and therefore it will be more difficult for the competition to offer a similar package

16. CRM is Founded on Four Tenets • Customers should be managed as important assets. • Not all customers are equally desirable. • Customers vary in their needs, preferences, and buying behavior. • By better understanding their customers, companies can tailor their offerings to maximize their overall value.

17. Principles of CRM • Treat customers individually • Acquire and retain customer loyalty • Select good customers How do we accomplish these goals?

18. Architecture of CRM • There are three parts of application architecture of CRM: • Operational CRM: means supporting the so-called "front office" business processes, which include customer contact (sales, marketing and service) • Analytical CRM: Data gathered within operational CRM are analyzed to segment customers or to identify cross- and up-selling potential. • Collaborative CRM: facilitates interactions with customers through all channels (personal, letter, fax, phone, web, e-mail) and supports co-ordination of employee teams and channel.

19. Four Basic Steps in CRM • ID your customers in detail. • Differentiate the most and least profitable. • Interact. • Customize your offerings to fit each customer’s needs.

20. Collect Customer Information • Information should be collected on: • Customer transactions-purchase histories, prices paid, delivery dates, return histories • Customer contacts-sales calls, service requests, company-initiated contacts • Descriptive information-demographic info • Response to marketing stimuli-how customers responded to company-initiated contacts • Information to be collected from many sources • Centralization of customer data is an important issue • Retailers, banks collect data more easily

21. Build Customer Profile • Demographics – age, income, gender,education • Product Affinity – Product A, Product B, etc. • Recency– most recent purchase date • Frequency – total number of times customer has made a purchase in a given time period • Monetary – total amount spent on products/services during a given time period

22. Segment Customers • Segmenting customers by niche • Psychographics: customer life-style choices or personalities • Neighborhood marketing: based on geography. • Income segmentation

23. Segment Customers • Segmenting customers individually • Individual marketing / one-to-one marketing: understanding each customer's needs, characteristics, and profitability. • Importance also for business-to-business markets: building a relationship with and successfully serving one customer can mean millions of dollars.

24. Target Customer Segments The market segmentation process can be broken down into a number of steps: 1- identify the business you are in 2- identify relevant segmentation variables 3- analyse the market using these variables 4- assess the value of the market segments 5- select target market(s) to serve.

25. Customer Loyalty Customer Loyalty: • Repeat customers costs lesser to service • Word of Mouth Advertising increases customer base • Branded experience leads to emotional attachment • Willingness to pay higher price for good customer service

26. Lifetime customer value management is critical to gain strategic advantage Product Offerings Responds to Offer AccountOpened BalanceBuilding Re-Activation BalanceBuilding Payoff/Paydown BalanceBuilding BalanceBuilding CreditApproved AccountActivated Paydown/Payoff Utilization CustomerService Re-Activation Product Inquiry(Home Equity) Pay0ff/Paydown CustomerEntry NewJob Marriage CompetitorPromotion NewHome Children CompetitorPromotion NewHome Children GoTo College CompetitorPromotion Retirement Lifecycle Events

27. Lifetime Value (LTV) of a Customer Lifetime value is the net present value of the profit that you will realize on the average new customer during a given number of years. – Hughes ‘00 This definition allows us to compare groups of customers with other groups of customers….

28. Customer Lifetime Value R = annual revenue received from a loyal customer i = the relevant interest rate or opportunity cost of money per period N = the number of periods in which a customer makes purchases

29. Customer Relationship Management CRM Model

30. Strategy before technology • CRM depends more on strategy than on the amount spent on technology • Strategy is about the way you allocate your resources to create a competitive advantage and superior performance • Technology is not a marketing strategy

31. Identify Competitive Strategies • Three strategies for competitive advantage: • Differentiation: any special features (e.g., design, cost, quality, ease of use, convenient location, warranty) that cause a product or service to be perceived by the buyer as more suitable than a competitor’s product or service. • Low-cost: low-cost leadership strategy. • Response: quick, reliable, and/or flexible response to customer demand. • CRM implementations must support or advance the firm’s strategies

32. CRM Strategies Customer Acquisition • Gain the greatest number of new “Best” customers as early in their “lifespan” as possible. Customer Retention • Retain and expand your business and relationships with your customers through up-selling, cross-selling and servicing. Customer Loyalty • Offer programs to ensure that your customers happily buy what you offer only from you. Customer Evangelism Enable loyal customers to become a volunteer sales force. Cost Reduction • Reduce costs related to marketing, sales, customer service and support. Improve Productivity Enhance your e-business strategies.

33. Phases of Implementing CRM • Choosing a Customer-centric business strategy • Changing the Rules & processes • Business Process Reengineering • Designing the Roles & responsibilities

34. Vital Factors For Successful Implementing CRM • Teaching Personnel • Process Reengineering • Modern Technology

35. To be successful A CRM program must be strategy driven CRM DRIVERS CRM STAGE CRM Enterprise Vision and Strategic Priorities • Corporate strategy and objectives • Customer vision • CRM objectives & strategy Customer Strategy • Customer marketing strategy • Value proposition design • Salesforce strategy • Channel strategy • Dynamic pricing • Delivery stream/supply chain strategy Value Creation and Value Capture Adaptable Value Proposition Design and Delivery Capabilities • CFO Organization • Information systems • Interface design • Customer interaction process design • Organization structure • Incentive systems Enabling Capabilities Customer Aligned Organization, Infrastructure, and Business Processes

36. CRM in Action A customer orders 10 new servers through sales. When the salesperson enters the order into the CRM software, the CRM database is updated with his information. Using CRM analytics software the company can track customer trends from call center data and act to fix problems or anticipate new ones. 10 servers Order Customer Sales 23% of customers can’t find the “on” switch. If there’s a problem, the customer can call a support line and enter his customer identification number. This prompts the CRM software to bring up the customer’s record and route the call to an appropriate agent, who can make sales pitches to the customer based on purchasing history. Update Customer Data CRMSoftware Data Where’s the %#&@! switch ? Customer ID CRMDatabase Sales Ideas Call CenterSupport Customer History If a customer decides to buy additional products online, the CRM database will recognize the customer and make unique purchase suggestions or offers based on purchasing history. Redesign Sales Ideas Customer History Send me20 new servers. Customer ID Latest version of server? Upgrade memory for old server? CompanyWebsite

37. CRM Summary • CRM is the strategic use of information, processes, technology and people to manage the customer’s relationship with a company’s (marketing, sales, services and support) across the entire customer cycle. • The Plan and Practice of managing the lifetime relationship with your customer

38. CRM Summary • CRM focuses on strategic impact rather than operational impact • CRM is a total discipline • CRM includes all functions that directly touch the customer throughout their entire lifetime with a company

39. References 1- Richard Brock .(2003) Inside the Minds: Profitable Customer Relationships: The Keys to Maximizing Acquisition, Retention, and Loyalty.Aspatore, Inc. 2- Frederick Newell  .(2003). Why CRM Doesn't Work: How to Win by Letting Customers Manage the Relationship. Bloomberg Press. 3- Francis Buttle. (2004). Customer Relationship Management. Elsevier Butterworth-Heinemann. 4- Bryan Foss & Merlin Stone.(2002). CRM in financial Services .Kogan Page. 5- Simon Knox & Adrian Payne. (2003). Customer Relationship Management(perspectives From the Marketplace). Butterworth-Heinemann. 6- Kristin Anderson & Carol Kerr.( 2008). Customer Relationship Management. McGraw-Hill.

40. THANK YOU