Chapter 10

1. Chapter 10 CUSTOMER RELATIONSHIP MANAGEMENT

2. Disclaimer • These slides do not replace the prescribed material. All prescribed material need to be studied for assignments and examination purposes • Some of the slide content is based on the 2015 Cengage Learning Instructor resources.

3. Chapter Outline • Introduction • Customer Relationship Management Defined • Key Tools & Components of CRM • Designing & Implementing a Successful CRM Program • Recent Trends in CRM

4. Introduction “Finding a new customer costs five times as much as keeping an old customer” • CRM means focusing on customer requirements, then delivering products and services in a manner resulting in high levels of customer satisfaction • CRM refers to automated transaction and communication applications—a suite of software modules or a portion of the larger enterprise resource planning system • CRM must still include talking to customers, understanding their behavior and their requirements, and then building a system to satisfy those requirements

5. Customer Relationship Management (CRM) Defined “The infrastructure that enables the delineation of and increase in customer value, and the correct means by which to motivate valuable customers to remain loyal—indeed to buy again.” “…managing the relationships among people within an organization and between customers and the company’s customer service representatives in order to improve the bottom line.” “…a core business strategy for managing and optimizing all customer interactions across an organization’s traditional and electronic interfaces.” More simply – Building & maintaining profitable long-term customer relationships

6. Customer Relationship Management (CRM) Defined (Continued) Seven Deadly Sins of CRM Failure • Viewing CRM primarily from a technology perspective • Lack of customer-centric vision • Not understanding the concept of a customer’s lifetime value • Insufficient top management support • Not reengineering business processes • Underestimating the challenges in integrating various sources of data • Underestimating the challenge in effecting change

7. Customer Relationship Management (CRM) Defined (Continued) Successful CRM programs require: • cultural change • effective CRM project management • employee engagement • strategies that cultivate long-term relationships with customers • information gathered from CRM applications • treating customers right & make them feel valued

8. Key Tools & Components of CRM • Segmenting Customers -Grouping customers to create specialized communications about products • Target marketing efforts – addressing specific customer segments avoids becoming a nuisance to other customers • Relationship marketing or permission marketing - customers select the type & time of communication(opt-in or opt-out) • Mobile marketing - placing advertising messages on mobile phones • QR codes - using the camera function on a smartphone and downloading a QR code reader app • Facebook, Web.com, and iPageusers create their own customized Web pages that potential consumers choose to visit

9. Key Tools & Components of CRM (Continued) • Cross selling -Additional products are sold as the result of an initial purchase (e.g., e-mails from Amazon.com describing other books bought by people) • If successful, customers perceive this as individualized attention, and it results in more satisfied and loyal customers • Predicting Customer Behaviors - firms forecast likelihood of customers’ purchases

10. Key Tools & Components of CRM (Continued) • Customer Defection Analysis - finding methods to retain customers • Churn reduction - reducing customer defections • Customer Value Determination - calculating the customer lifetime value for firms • Personalizing Customer Communications - Understanding customer behaviors & preferences, firms customize communications • Clickstream,how a customer navigates a Web site • Event based Marketing - offer the right products & services to customers at the right time

11. Key Tools & Components of CRM (Continued) Automated Sales Force Tools Sales Force Automation (SFA)-Used for documenting field activities, communications with the home office, & retrieving sales history • Sales Activity Management-Tool offering sales reps a guided sequence of sales activities • Sales Territory Management-Sales managers obtain information of each sales rep’s activities (e.g., total sales per sales rep.) • Lead Management-Sales reps can follow prescribed tactics when dealing with prospects to aid closing the deal. • Knowledge Management-Enables quick decision making, better customer service, & a better-equipped & happy sales staff.

12. Key Tools & Components of CRM (Continued) Managing Customer Service Capabilities • What does customer service actually mean? • “Seven Rs Rule” having the rightproduct, in the rightquantity, in the right condition, at the right place, at theright time, for the rightcustomer, at the rightcosts. • Performance measures are often designed around satisfying the seven Rs. These kinds of services can come at a cost.

13. Key Tools & Components of CRM (Continued) Customer Service Elements • Pretransaction elements - precede the sale (e.g., customer service policies, the mission statement, org. structure, & system flexibility) • Transaction elements - occur during the sale & include the order lead time, the order processing capabilities & the distribution system accuracy • Posttransaction elements - occur after the sale & include warranty repair capabilities, complaint resolution, product returns, & operating information

14. Key Tools & Components of CRM (Continued) Call Centers - can categorize calls, determine average resolution time, forecast future demand, improve the overall productivity of the staff, increasing customer satisfaction levels • Virtual queuing allows callers to request a callback from an agent without losing their place in the phone queue • Viewed as a source of revenue - staff are expected to pursue cross-sell and up-sell opportunities

15. Key Tools & Components of CRM (Continued) • Measuring Customer Satisfaction • Customers are frequently given opportunities to provide feedback about a product, service, or organization • Customers communicate through surveys or feedback cards • Website surveys often don’t ask the proper questions

16. Designing & Implementing a Successful CRM Program Step 1. Creating the CRM Plan: • Objectives of the CRM program • CRM’s fit with corporate strategy • New applications to be purchased or developed • Integration or replacement of existing legacy systems • Personnel Requirements- personnel, training, policies, upgrades, & maintenance • Costs & time frame for implementation

17. Designing & Implementing a Successful CRM Program(Continued) Step 2 - Involve CRM users from Outset - Employees should understand how it affects their jobs • Create a project team with members from all affected organizational areas. • The team should be heavily involved in evaluating and selecting the CRM applications. • During implementation, closely monitoring system performance will keep users convinced of the value of the initiative.

18. Designing & Implementing a Successful CRM Program(Continued) Step 3 - Select the Right Application & Provider -Find an appropriate application & determine the extent of customization • Visit trade show, read trade literature, hire consultant, etc. • Use the knowledge of internal IT personnel • Search CRM supplier directories and websites • Consider extent of support available from application provider • Carefully consider cost and contract negotiations

19. Designing & Implementing a Successful CRM Program(Continued) Step 4 - Integrate Existing CRM Applications - CRM is a collection of various applications implemented over time. • Customer contact mechanisms need to be coordinated so that every CRM user in the firm knows about all of the activity associated with each customer. • Centralized database or data warehousecontaining all customer information.

20. Designing & Implementing a Successful CRM Program(Continued) Step 5 - Establish Performance Measures –This allows the firm to monitor progression of the system • Determine if objectives have been met • Identify implementation or usage problems as they occur • Compare actual to planned variance • Metrics should be transparent and easy to measure

21. Designing & Implementing a Successful CRM Program(Continued) Step 6 - Training for CRM Users - • Provide & require training for all of the initial users & then provide training on an ongoing basis as applications are added • Training can also help convince key users like sales, call center, & marketing personnel of the benefits & uses of CRM applications

22. Trends in CRM • Customer Data Privacy • Rules & laws regarding invasion of privacy include Patriot Act in the US and Internet Privacy Law in the EU • Safeguarding customer information is a legal and ethical responsibility for any company dealing with sensitive customer data • Companies must reassure their customers that their information will be protected

23. Trends in CRM (Continued) • Social CRM • Engaging the customer in a collaborative conversation • Leads to customer satisfaction and loyalty • Creating and cultivating virtual communities around product or brand • Some firms create user forums where technical support and other customer questions are answered by other customers

24. Trends in CRM (Continued) • CRM Cloud Applications • Cloud computing & on-demand offerings accessed via web browser • Software as a Service (SaaS) model – providers offering cloud applications • Changing the cost structure of CRM applications • Beneficial for small companies with limited resources