40471722 CRM a Database Approach Kumar Reinartz Ch02[1]

8/3/2019 40471722 CRM a Database Approach Kumar Reinartz Ch02[1]

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Customer Relationship

ManagementA Databased Approach

V. KumarWerner J. Reinartz

Instructors Presentation Slides


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Chapter Two

CRM Industry Landscape

CRM


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Topics Discussed

Evolution and Growth of CRM

Strategic CRM vs. Functional CRM

Components of the CRM Project

CRM Implementation Options

CRM Software and Applications

Future of CRM


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Evolution and Growth of CRM

>1990 >1996 >2002

Customer Service Support

Integrated customer facing Strategic CRM

ERP IntegrationCustomer analyticsComplete Web integration

Scope:

Service function

Goals:

Improve service operationsIncrease sales efficiency

Marketing function

Service functionSales function

Reduce cost of interaction

Increase customer retentionImprove customer experience

Competitive Advantage

Sales force Automation

1st generation 2nd generation 3rd generation

Call Center Management

Front-end ( marketing, sales, service)

Campaign Management

Sales function

Entire organization

Cost reduction & Revenue growth


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Time-line of CRM Evolution

1 st Generation (functional CRM approach)

Sales force Automation (SFA)

Pre-sales functions

Customer Service and Support (CSS)

Post-sales functions

Combined SFA/CSS market niche small

Market for ERP growing


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CRM Evolution (contd.)

2nd

Generation (customer facing front-end approach) Similar to ERP - integration of a number of independent sub-systems into

one package

Customer expectations exceeded realized benefits of CRM technology

3rd Generation ( Strategic CRM)

Integration of customer-facing front-end with back-end systems as wellas partners and suppliers


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Third Generation CRM

C U

S T O M E R

Service &Support

OrderProcessing

Sales

Marketing

F I N A N C E

Distribution

Manufacturing

R&D

ERP

CRM

C U

S T O M E R

Service &Support

OrderProcessing

Sales

Marketing

F I N A N C E

Distribution

Manufacturing

R&D

ERP

CRM


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Growth of the CRM Industry

Approximate Worldwide CRM Investments (applications, hardware, and services)

13.5

20.0

23.7 25.9

29.7

34.6

40.0

47.5

0

10

20

30

40

50

1999 2000 2001 2002 2003 2004 2005 2006

S p e n

d i n g s

i n $ m i

l l i o n

0%

10%

20%

30%

40%

50%

60%

Y e a r -

t o - Y e a r

G r o w

t h

Spendings Year-to-Year Growth %

Mean estimates as of 2002 and 2003 across various providers CRM outsourcing services not included

Sources: IDC, Aberdeen, Gartner, Forrester


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What Drives CRM Industry Forward?

Shift from transactional to relationship based markets

Growing proof of value in targeted customer relationships

Improved effectiveness of marketing communication tools

IT vendors and associated change management consultancies

Reducing costs of data storage and capture

Developments in Customer Value measurement


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Components of the CRM Project

Strategic component

Designed to optimize profitability and customer satisfaction

Foster behaviors and implement processes and technologies that

support coordinated customer interactions throughout all customerchannels

Functional component

Integrate various databases and applications that exist in the enterprise


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Components of the CRM Project (contd.)

CRM should allow companies to address two key issues:

Ability to analyze and understand customer data through sophisticatedbut easy-to-use reporting tools

Act on the knowledge obtained to customize services and products andanticipate and fulfill customer needs


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Options for Implementing CRM

In-house development

Buy licensed CRM software

Outsource a managed service


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In-house Development

Advantages:

Can have a tailor-made solution adapted to

companys needs and structure

Develop internal resources and skills

that permit development of the system each time change is required

Avoid dependence on CRM vendors or new software developments

Disadvantages: Most expensive option-company has to maintain, operate and improve

the system on its own Difficult to attract and retain skills to solve and develop data warehousing

challenges

Longer time commitment(1-2 years) comparatively


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Buy Licensed CRM Software

Advantages:

Usually have proven record of success

IT concept and developments implemented with help of CRM vendor,company only needs to adapt its IT structure to integrate the new solution

Disadvantages:

Expensive-initial fees and license costs, license renewal charges usually

high, maintenance costs over life of software, payments for newer versions

High consulting fees charged to customize solution to companys needs

Integration of new software with existing applications usually tough,expensive and time consuming(1-3 years)


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Outsource A Managed Service

Advantages: Upfront costs lower- dont need to pay for software licenses

and hardware systems

Can adopt a pay -as-you- go approach, with visible results

Disadvantages: Needs to contact outsourcing company for every new requirement and

pay for developments

Risk of losing CRM solution investments if the outsourcing companygoes out of business


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Implementing CRM: The Decision Process

Purchase and install acomplete CRM solutionfrom a vendor

NO

YES

Entirely outsource theCRM application

process

Implement anenterprise-wide CRM

program

Stage-wiseimplementation

DecisionTo

ImplementCRM


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Stage-wise Implementation vs.an Enterprise-wide CRM Solution

Best-of-breed approach ( Stage-wise)

CRM software is offered in different,

independent modules, adapted to a specific

departments needs

Company buys sales automation software andcontact management module from different providers

Enterprise wide CRM solution

Composed of different modules from the same provider

Implemented as a whole by connecting different modules and existing

databases

Individual modules usually customized according to company needs


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Future of CRM

Worldwide increased spending on CRM

Next generation CRM-focus on building sustainable competitive advantagethat cannot be easily imitated by competitors

Integration of HR function into strategic CRM efforts

Creation of a single-view of customer

Continuous fine-tuning and micro-segmentation of customer database

Growing ability of firms to handle deep customer analytics


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Summary

CRM has evolved from first generation Functional CRM to Strategic CRM

Transformation by integrating customer facing front-end with back-endsystems and partners and suppliers

Growth of CRM facilitated by growth of IT

CRM solution providers are now developing specialized solutions forindividual industries

Increasing pressure to reduce CRM costs is leading firms to shift to new

systems that can be further developed and integrated internally

Short-term projects and implementing CRM in different stages provides alow-risk approach

40471722 CRM a Database Approach Kumar Reinartz Ch02[1]

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