Definition CRM CRM is a core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit grounded on high-quality customer-related data and enabled by information technology (book) Types of CRM Strategic CRM: customer-centric business strategy Dedicated to winning and keeping customers by creating and developing better value than competitors. Reduce oriented: customer choose products with best quality, performance, design destruction oriented: low price products Sales oriented: customers are persuaded by advertisement and sales promotions Customer – market oriented: uses customer and competitive information to develop better value propositions. – is a learning firm that constantly adapts to customer requirements and competitive conditions.
Operational CRM: automation of customer-facing processes Automates and improves customer facing and customer supporting business processes. Market automation: applies technology to marketing purposes. Sales force automation: applies the technology to the management of a company’s selling activities (provides a standardized view of the sales cycle and a common language for concussion of sales issues). Service automation: allows companies to manage their service operations: call centers, contact center’s, web or face-to-face.
Enables efficiency of users Reducing service costs Partner relationship management: Allows partners to communicate with suppliers through a portal to: manage leads, sales orders, information, incentives Analytical CRM: intelligent mining of customer-related data Focuses on the intelligent mining of customer-related data for strategic or tactical purposes. Build on the foundation of customer related information Essential part of CRM implementations
Helps makes decisions like: Which customer to target Focus of sales effort Relative priority for customers and what level of service to offer. Collaborative CRM: application of technology across organizational boundaries Strategic and tactical alignment of normally separate enterprises in the supply chain for the more profitable identification of customers. Enables separate organizations to align their effort to service customers more effectively.
Service: The non-material equivalent of a good Economic activity that does not result in ownership The product is the act of delivery Special attributes that characterize services: Intangible (Services which cannot be seen), variable (mechanically reproduced to exact specifications an tolerances, services cannot), perishable (Services cannot be held in inventory for sale at a later time), inseparable (service are produced at the same time and place ), difficult to evaluate, based on experience and credence Traditional customer service = do to the customer vs..
Modern CRM = done with the customer Ongoing, cooperative and built for the long term 5 phases of CRM implementation CRM models DIG methodologies that companies should take four actions in order to build closer en-to-one relationships with customers. 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. CRM Value Chain by Francis Butte’s mode primary stages and 4 conditions which lead to the end goal of enhanced customer profitability. Settler’s 8-step Change Model : Create Urgency change to happen, it helps if the whole company really wants it. Develop a sense of urgency around the need for change. This may help you spark the initial motivation to get things moving. : Form a Powerful Coalitionist’s people that change is necessary. 3: Create a Vision for Changed you first start thinking about change, there will probably be many great ideas and solutions floating around. Link these concepts to an overall vision that people can grasp easily and remember. 4: Communicate the Visitation you do with your vision after you create it will determine your success. Your message will probably have strong competition from other day-to-day communications within the company, so you need to communicate it frequently and powerfully, and embed it within everything that you do. : Remove Obstacles in place the structure for change, and continually check for barriers to it. Removing obstacles can empower the people you need to execute your vision, and it can help the change move forward. 6: Create Short-term Wins Nothing motivates more than success. Give your company a taste of victory early in the change process. Within a short time frame, you’ll want to have results that your Taft can see. Without this, critics and negative thinkers might hurt your progress. : Build on the Changeover argues that many change projects fail because victory is declared too early. Real change runs deep. Launching one new product using a new system is great. But if you can launch 10 products, that means the new system is working. 8: Anchor the Changes in Corporate Calculatingly, to make any change stick, it should become part of the core of your organization. Identify critical success factors (SF) for CRM projects CIFS are attributes and variables that can significantly impact business outcomes.
SF most strongly association with CRM is an accurate and well developed knowledge management system. Critical success factor People Process Technology 1. Senior management commitment X 2. Creation off multi-disciplinary team XX 3. Objectives definition X 4. Interdepartmental integration XX 5. Communication of the CRM strategy to staff X X 6. Staff commitment X 7. Customer information management X 8. Customer service XX 9. Sales automation XX 10. Marketing automation XX 11. Support for operational management XX 12. Customer contact management X X 13. Information systems integration X
Strategic: encountered at the beginning of the project (clear CRM vision, top management commitment and management expertise) Tactical: becomes important later on (trouble shooting skills, good communication, software configurations) Customer portfolio Management Market segmentation: dividing up the market in homogeneous subleases forecasting: 3 techniques = qualitative methods, time series methods, casual methodically based costing: see which customer are or will be profitability’s value estimation: present day value of all net margins earned from a relationship tit a customer; enables to estimate company’s valued mining: find pattern or relationships in large volumes of data (SEEMS, SPAS) Customer experience Formal: Customer experience is the cognitive and affective outcome of the customer’s exposure to, or interaction with, a company’s people, processes, technologies, products, services and other outputs Informal: If you were to ask your customers, What is it like doing business with us? Their answers would be descriptions of their customer experience.
Methods to understand customer experience Mystery shopping: paid shoppers report their superintendence’s mapping: focus groups, ace-to-face and telephone interviews with sample streptococcus’s mapping: using blueprint (graphical representation of business processes)customer activity cycle: describes the processes customers go through in making and reviewing buying processes. Participant observation: senior management at front line customer service Sources of customer value (3 value disciplines) A value proposition is the explicit or implicit promise made by a company to its customers that it will deliver a particular bundle of value-creating benefits. (page 191, table 7. ) Operational excellence: A philosophy of the workplace where problem-solving, marrow, and leadership results in the ongoing improvement in an organization. The process involves focusing on the customers’ needs, keeping the employees positive and empowered, and continually improving the current activities in the workplace. Product leadership: Product leaders are companies that dominate their markets because they continuously offer the best and most innovative products or services in their industry. These companies display the ability and determination to make products that customers consider superior, products that deliver more benefits than others.
Customer intimacy: A marketing strategy where a service supplier or product retailer gets close to their clients. The benefits of greater customer intimacy for a business might include improved highly tailored problem solving capabilities and greater adaptation of products to customer needs, as well as higher customer loyalty levels. Value from Service SURVIVAL model of service quality 5 core components of service qualitatively offers managers a systematic approach to measuring and managing service quality. It emphasizes the importance of understanding customer expectations, and of developing internal procedures that align company processes to customer expectations.
Reliability Ability to perform the promised service dependably and accurately Assurance Knowledge and courtesy of employees and their ability to convey trust and confidence Tangibles Appearance of physical facilities, equipment, personnel and communication materials Empathy Provision of caring, individualized attention to customers Responsiveness Willingness to help customers and to provide prompt service 3 stages of customer life cycle ; Key customer acquisition Acquiring new customers New customers: new-to-category (identified a new need or found new category of elution for existing need ; new-to-company (are won from competitors) Conversion model by Jan Hypertrophied customers Entrenched customers unlikely to switch in future Average customers unlikely to change in short but maybe in medium Uncommitted customers Shallow customers lower commitment than average; some already consider alternatives Convertible customers most likely to defect Prospecting Searching for opportunities that might generate additional value for the company.
BOB Satisfied customers (Referrals from satisfied customers), Networking (Personal contacts with well-connected and co-operative people), Promotional activities (Exhibitions, seminars, trademarks and conferences, Delegate and attendee lists, Advertising response inquiries, Publicity), Web-sites, Lists and directories (SIC listings, telephone directories), Canvassing, Tell-marketing, E-mail BBC Advertising, Message, Media, Sales promotion, buzz or WOMB, Merchandising Retaining existing customers Keeping your customers to buy your productive measures of customer retention Raw customer retention rate: This is the number of customers doing business with a firm at the end of a training period expressed as percentage of those who were active customers a the beginning of the period Sales-adjustment retention rate: this is the value of sales achieved from the retained customer, expressed as a percentage of the sales achieved from all customers who were active at the beginning of the period Profit-adjusted retention rate: This is the profit earned from the retained customers, expresses as a percentage of the profit earned from all customers who were active at the beginning of the period. Retention issues Not beneficial to maintain all relationships -; some are too costly to serve, others are strategic switchers in search of a better deal. Which customer to retain (strategic significant customers)? L . High future lifetime value: These customers will contribute significantly to the company’s profitability in the future. 2.
High volume: These customers might not generate much profit, but they are strategically significant because of their absorption of fixed costs, and the economies of scale they generate to keep unit cost low. 3. Benchmark customers: These are customers that other customers follow. 4. Inspirations: These are customers who bring about improvement in the business. They may identify new applications for a product, product improvement, or opportunities for cost reduction. They may complain loudly and make unreasonable demands, but in doing so, force change for the better 5. Door openers: These are customers that allow the business to gain access to a new market. This may be done for no initial profit, but with a view to proving credentials for further expansion. This may be particularly important for crossing cultural boundaries.
Strategies for Customer Retention Positive: delight customers, create customer-perceived added value, create social and structural bonds, create customer engagement Negative: create exit barriers, enforce the contract, extract switching penalties Development customer value 3 ways to create customer-perceived added value loyalty schemes: rewarding customers for their potentiometers clubs: offers value-adding benefits exclusively to embarrasses promotions: in-pack or on-pack voucher, rebate or cash back, patronage awards, free premium for continuous purchase, collection schemes, Self-liquidation premium Two main strategies for customer development’s-selling is selling additional products and services to an existing customer. Up-selling is selling higher priced or higher margin products and arrives to an existing customer. Of CRM technologies that are useful for customer development overcompensating management, Event-based marketing, Data mining, Customization, Channel integration, Integrated customer communications, Marketing optimization Customer related database Is not Just a customer database and consists of all kinds of data related to the customer Secondary data: data have already been collected for other purpose than Criminal data: collected for the first time for CRM or other purpose 6 major steps in developing a customer-related database Define the database functions Databases support the four forms of CRM: Collaborative, Analytical, Operational, Strategic Define the information requirements A direct marketer might need general customer info, a senior manager might need bigger picture data like who are our customers, what do they buy, etc. Indemnify the information sources Internal data: acquired from marketing (market size, segmentation etc. ) sales (purchasing history, buyers names etc. ) Customer service (service histories and requirements, satisfaction levels, etc. ) finance (credit ratings, accounts receivable, etc) and the webmaster may have click-stream data. Eternal data: from the outside world (market research companies) Select the database technology and hardware platform Customer-related data can be stored in a hierarchical, network or relational way. Relational databases are common nowadays Populate the database CRM databases need data that are appropriately accurate: the accuracy level depends on the database’s function. Operational CRM applications need more accurate data than analytical ones. Maintain the database Make sure your database stays up to date . 2 major challenges of multinational CRM Multiple communication technology channels: all the devices that help an organization as well as customers to communicate with each other. Customers expect consistent dialogue. CRM technology lets you create and track a consistent dialogue that reflects the value of the customer.
Multiple organizational touch points: not only the different technology channels of an organization, but also the different people within the organization. (Marketing sends out customer offers, sales reps call to negotiate terms and the customer calls the service desk for assistance. The marketing offer should be visible in order for the customer service agent to treat the customer correctly. Channel partners must be included in the communication loop if channel conflict over pricing, leads, and commissions is to be avoided. A customer portfolio is the collection of mutually customer groups that comprise a business’s entire customer base. It is used because not all customers can or should be managed in the same way. Customers have different needs, preferences and expectations.
Customers have different revenue and cost profiles. The Customer Journey Stage 1 : Suspect Does the potential customer fit your target market profile? Stage 2: Prospect The potential customer does fit your profile and is being approached for the iris time Stage 3: First-time customer The customer made his first purchase Stage 4: Repeat customer Made additional purchases, your offer plays a minor role in the customer portfolio Stage 5: Majority customer Selects your company as supplier of choice Stage 6: Loyal customer Resistant to switching suppliers, shows positive attitude to your company Stage 7: Advocate The customer generates additional referral dollars through positive word-of-mouth.
A company wants to have a relationship with its customers because companies that manage their customer base n order to identify, satisfy and retain profitable customers, enjoy better business performance. Value = Benefits/Sacrifices Sacrifices: Money (price, hidden cost) Search cost (time, effort) Psychic cost (stress, frustration, risk) Perceived risk is a psychic cost. How customers reduce perceived cost: Delay purchase Seek word-of-mouth endorsements Buy with credit-card Negotiate discounts Lifetime Value (L TV) or Customer Lifetime Value (CLC) = The lifetime value is the present day value of all net margins earned from a relationship with a customer, customer segment or cohort. It’s also the measure of profit-generation for a company.
Calculated by computing the present day value of all net margins (gross margins less cost to serve) earned from a relationship with a customer. The positive customer experience describes customer experience as it is. The normative customer experience describes customer experience as management or customers believe it ought to be. Touch point Touch points exist wherever customers come into virtual or concrete contact with a company’s products, services, communications, places, people, processes or technologies. Moment-of-truth Moments of truth occur during customer interactions at touch-points. These are the endorsement customers form evaluative Judgments, positive or negative, about their experience. Engagement A customer’s emotional and rational response to an experience.
Closing the Gaps: Examples Gap 1 – Conduct primary research, learn from front-line staff Gap 2 – Develop a standard documentation process; assess the feasibility of meeting customer expectations Gap 3 – Invest in people, invest in technology, redesign workflow Gap 4 – Train employees not to over-promise, excel at service recovery Gap 5 – If gaps 1-4 are closed, gap 5 will also close! A successful complaints handling recess enables companies to capture customer complaints before customers start spreading negative word-of-mouth or take their business elsewhere. Why don’t unhappy customers complain? They feel the company doesn’t care. Perhaps the company or the industry has a reputation for treating customers poorly It takes too much time and effort They fear retribution.
Many people are reluctant to complain about the police, for example They don’t know how to complain. Three Stages of the Customer Lifestyle 1 . Customer acquisition 2. Customer retention – aims to keep a high proportion of current customers by educing customer defections. 3. Customer development – aims to increase the value of those retained customers to the company. Difference between customer retention and value retention is customer retention looks at the number of customers that stay with a company whereas value retention looks at the value customers bring and may force the company to look at the buying behavior and manage the value adders.
Open non-customers Available non-customers prefer the alternative to their current offer though they have not yet switched, and are ready to switch. Ambivalent non-customers are as attracted to the alternative as they are to their current brand Unavailable non- Weakly unavailable non-customers prefer their current brands Strongly unavailable non-customers have a strong preference for their current brands Cognitive advertising = raising awareness, developing understanding, and generating knowledge. New customers generally need to be made aware of the product and to understand what benefits it can deliver. Affective advertising = developing a liking for the product, and generating preference. Why Focus on Newly Acquired Customers?
New customers may have greater future life-time value potential than longer tenure customers. Evidence suggests that retention rates rise over time, so if defections can be prevented in the early stages of a relationship, there will be a pay-off in future revenue streams. Consumer delight: Perception ; Expectation Three Forms of Commitment Instrumental: customers are convinced that no other offer or company could do a better Job of meeting their needs. Relational: customer develops an emotional tie may be with an individual person, a work group or the generalized company as a whole. Values-based: customers’ values are aligned with those of the company.