Customer Relationship Management (CRM) Rev: Feb, 2012 Euiho (David) Suh, Ph.D. POSTECH Strategic...

Customer Relationship Management (CRM) Rev: Feb, 2012

Euiho (David) Suh, Ph.D.

POSTECH Strategic Management of Information and Technology Laboratory(POSMIT: http://posmit.postech.ac.kr)

Dept. of Industrial & Management EngineeringPOSTECH

Contents※ Discussion Questions

1 Introductions of CRM

1) Fundamental Introductions of CRM

2) CRM Architecture

3) Application Cluster in CRM

4) Strategy of CRM

5) Executions of CRM

6) Limitation and Future of CRM

2 Case Study

3

Discussion Questions

■ Define CRM by your own words

■ What benefits do you think are there of CRM? Give your own opinion

■ How does CRM help sales and marketing?

■ Develop your own strategy for retaining existing customers

4

Evolution of Marketing

The Dark Ages

The Renaissance

The Industrial Revolu-tion

The Information AgeThe Age of Optimization

Artistry and AlchemyCraftsmanship

Mass Marketing

Database Market-ingCustomer Rela-tionship Manage-ment

None

Focus groups, interviews

Computers store mailing lists

Flat File MCIFs

Data Warehousing, Data Mining, Analysis Tools (OLAP)

Marketing Age

Techniques Technology

1. Introductions of CRM1) Fundamental Introductions of CRM

5

What is CRM? (1/3)

Managing the full range of the customer relationship involves two related objectives

Managing the full range of the customer relationship involves two related objectives

(2) Providing the customer with a single, complete view of the company and

its extended channels

(1) Providing customer-facing employees with a single, complete view of every customer,at every touch point, across all channels

CRM uses IT to create a cross functional enterprise system that integrates and automates customer-serving

processes


6

■ Couldwell ,1998– CRM is a combination of business process and technology that seeks to understand a

company’s customers from the perspective of who they are, what they do, and what they’re like

■ Kutner & Cripps, 1997– CRM is founded on four relationship-based tenets:

• Customers should be managed as important assets• Customer profitability varies; not all customers are equally desirable• Customers vary in their needs, preferences, buying behavior and price sensitivity• By understanding customer drivers and customer profitability, companies can tailor their offer-

ings to maximize the overall value of their customer portfolio

■ Merlin Stone et al., 1996– Relationship marketing – The use of a wide range of marketing, sales, communication, service and customer

care approaches to:• Identify a company’s named individual customers• Create a relationship between the company and its customers that stretches over many transac-

tions• Manage that relationships to the benefit of the customers and the company


Definitions by various authors

7

Characteristics of CRM

■ Key Characteristics of CRM (Lynette Ryals & Simon Knox, 2001)– A customer relationship perspective aimed at the long-term retention of selected

customers– Gathering and integrating information on customers– Use of dedicated software to analyze this information (often in real time)– Segmentation by expected customer lifetime value– Micro-segmentation of markets according to customers’ needs and wants– Customer value creation through process management (Hammer & Champy, 1993;

Hamel & Prahalad,1994)– Customer value delivery through service tailored to micro-segments, facilitated by

detailed, integrated customer profiles– A shift in emphasis from managing product portfolios to managing portfolios of cus-

tomers, necessitating changes to working practices and sometimes to organizational structure


8

Why CRM?

■ It is easier to retain a customer than to gain a new customer

– It is 6-7 times more expensive to gain a new customer than retain an existing customer (Harvard Business Review)

– It is far more expensive to win back a customer after they left than it is to keep them satisfied in the first place.

– It is far easier to sell a new product to an existing customer than it is to a new customer

– Customers become more precarious

– A 5% increase in customer retention can increase profits 60-100% proved customer retention

The impact of a 5% increase in retention rates

Industry Increase in profitsAdvertising Agency 95%life-insurance company 90%branck bank deposits 85%publishing 85%auto service 81%auto/home insurance 80%credit card 75%industrial brokerage 50%industrial distribution 45%industrial laundry 45%office-building management 40%

Source: The Loyalty Effect (Harvard Business School Press)By Frederick Reichhek


9

Explanation of CRM

Create a Database

Analysis

Customer Selection

Customer Targeting

Relationship Marketing

Privacy Issues

Metrics

Direct e-mails Call Center Mass customization or developing

products that fit individual customer’s needs

CRM Framework

Main concept of CRM: managing valuable customer in a long-term view Company should focuses on value of customer, instead of short-term profit

Operational CRM

DBM DW OLAP Call Center Service Center CRM

Various Types of CRM

Origin of CRM

Key Point to Succeed


10

Benefits of CRM

Real-time customization and personalization of products and services

Track when and how a customer contacts the company

Identify and target the best customers

Provide a consistent customer experience

Provide superior service and supportacross all customer contact points

Benefits of CRM


11

Three Phases of CRM 1. Introductions of CRM1) Fundamental Introductions of CRM

12

Entire CRM Framework

■ Operational CRM– The automation of horizontally integrated business processes, including customer

touch-points, channels, and front-back office integration

■ Analytical CRM– The analysis of data created by the Operational CRM

■ Collaborative CRM– Application of collaborative services including e-mail, personalized publishing, e-

communities, and similar vehicles designed to facilitate interactions between cus-tomers and organizations


13

CRM Architecture (1/2)

Business Rules and Metadata Management

Workflow Management

Marketing Data mart

Campaignmanagement

Analytics DataMart

Reporting DataMart

Campaign management

Data Mining/Analytics

Ad Hoc Query andReporting

Direct Mail

ContactManagement

Call Centers

Sales Force

Customer Service Centers

Internet

E-Mail

Other

ContactHistory

TransactionHistory

CustomerProfile and

AccountData

Warehouse

External data

ETL Tools

Data Source

Marketing Data Source

Decision Sup-port Applica-tions

Communication Channels

1. Introductions of CRM2) CRM Architecture

14

CRM Architecture (2/2)

1. Introductions of CRM2) CRM Architecture

Data mining is the architectural blueprint

Customer profitability is the cornerstone

Web applications are the capstone

Data warehousing is the foundation

The customer touch points are the bedrock

CRM system that can execute closed loop marketing to display continuous improvement over time

15

Application Clusters in CRM 1. Introductions of CRM3) Application Cluster in CRM

16

Contact and Account Management

■ CRM helps sales, marketing, and service professionals capture and track relevant data about

– Every past and planned contact with prospects and customers

– Other customer business & life-cycle events

■ Data are captured through touch points– Telephone, fax, e-mail, Websites

– Retail stores, kiosks, personal contact

1. Introductions of CRM3) Application Cluster in CRM

17

Sales

■ A CRM system provides sales reps with the tools and data resources they need to

– Support and manage sales activities

– Optimize cross- and up-selling

Up-selling & Cross-selling

■ CRM also provides the means to check on a customer’s account status and history before scheduling sales calls


18

Marketing and Fulfillment

CRM systems help with direct marketingcampaigns by automating tasks

Qualifying leads for targeted marketing

Scheduling and tracking mailings

Capturing and managing responses

Analyzing the business value of a campaign

Fulfilling responses & requests


19

Customer Service and Support

■ CRM helps customer service managers create, assign and manage cus-tomers’ requests for service

– Call center software

– Help desk software

– Web-based self-service


20

Retention and Loyalty Programs (1/2)

Boosting customer

retention 5% can boost

profits 85%

It costs 6 times more to sell to

a new customer

An unhappy customer will

tell 8-10 others

The odds of selling to an

existing customer are

50%; a new one 15%

70% of complaining

customers will do business with the

company again if it quickly fixes a

problem


21

Retention and Loyalty Programs (2/2)

■ Enhancing and optimizing customer retention and loyalty is a primary ob-jective

of CRM– Identify, reward, and market to the most loyal

and profitable customers

– Evaluate targeted marketing and relationship programs


22

Best-Practice CRM Principles

■ Derive customer patterns by

applying “ETFS” as a lens to drive

sales, service, marketing and

commerce chain process

■ Anchor offer, channel, and busi-ness processes around customer patterns

■ Technology-enable customer re-lationship with CRM eco -system

Customer Life Cycle Management (CLCM) as a Three-Domain Business System

Engage

Service

Customer Life Cycle

Fulfill

TransactCust.Pattern

Channels & “POIs”

Sales

“Offer”

Customer-RelatedBusiness Processes

Mktg. Service

CRM Technology“Ecosystem”

Collaborative Analytical

Operational

CRM is not an IT project — it is an iterative and continual transformation of people, process and technology

Develop a CRM Strategy 1. Introductions of CRM4) Strategy of CRM

23

CRM Implementation Point 1. Introductions of CRM4) Strategy of CRM

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Managing Campaigns

■ Campaign management systems– To help marketing professionals manage and execute campaigns– To require as complete a view of the customer as possible– To manage interactions between the company and the customer

■ Required functions in campaign management systems– Marketing insights from data mining about what new promotions to create– Accommodation of many new touch points besides direct mail – Focus on profitability– Optimization of the sequence of promotion delivery– Tools for constructing experiments that allow the marketing professional to test out

the effectiveness of new promotions and new segmentation techniques– Accommodation by the system of predictive modeling

■ The transition from just defining and deploying a direct mail campaign to sup-porting all customer touch points

■ Customer profitability across all touch points

1. Introductions of CRM5) Executions of CRM

25

Closed Loop Marketing

■ “Close the Loop”– CRM systems can also execute “close the loop” and measure the results of the cam-

paigns– Once marketing’s effectiveness can be measured, it can be improved the next time

around

■ Three basic steps of closed loop marketing– Measure

• Measure the results of the marketing effort, based on customer profitability• Use Web-based tools to access the customer data warehouse and perform enterprise-level

ROI analysis– Predict

• Use data mining technology to predict consumer behavior and learn from past experiments• Use the results of the data mining system to focus and refine future campaign

– Act • Use campaign management systems to be sure that the campaigns are executed in an un-

derstandable and measurable customer data warehouse or data mart

1. Introductions of CRM5) Executions of CRM

Limitation of CRM

35.3 34.9 36.439.9

45.7

58

2002 2003 2004 2005 2006 2007

Domestic CRM Market Transition (license)

Source :http://www.krgweb.com

CAGR:13.5% unit: billion won

Sin One : Failing to Plan Sin Two : Failing To Establish Outcomes Sin Three : Excluding the Human Factor Sin Four : Automating Flawed Processes Sin Five : Ignoring Constraints Sin Six : Disregarding Politics Sin Seven : Choosing the Wrong Vendor

Source: interview of Gartner Research’s Beth Eisenfeld with CRMDaily

CRM Failure

• 75% of CRM projects that do not deliver measurable ROI will have failed because of poor business executive decision-making

• ½ of the companies got worse performance tasks, ¼ of companies which implement CRM system didn’t get improvement of tasks

• 20% damaged customer relationshipsSource: Gartner Group, Insight Technology Group report

CRM Market is getting bigger but, companies should pay too much cost

and time to implement CRM. Also, the CRM system does not guarantee higher performance

CRM Failure Reasons

1. Introductions of CRM6) Limitation and Future of CRM

27

Future CRM

CRM Future CRM

purchasemanu

-facturedelivery sales marketingservicedevelop

-mentpurchase manu

-facturedelivery sales marketing

servicedevelop-ment

customerenterprise customerenterprise

customer

customer

customer

customer

customer

customercustomer

customer

customercustomer

enterprise infrastructure

[Business structure innovation]

Future CRM

Step of introducing Future CRM

investigation set up strategy design implementation/ introduction settlement

[Improvement in reception of customer]

Consulting through investigation and innovation of cultural features is important

enterprise infrastructure


28

Next Generation CRM

■ Continuously expanding in functionality and in scope across the enterprise– Sales Force Automation (SFA)– Enterprise Resource Planning (ERP)

■ The force opposing the fusing of information and technology– Internal difficulties in getting various customer information form different customer

touch points – External difficulties in keeping customer privacy


29

Case Study

http://mis.postech.ac.kr/class/IMEN381_MIS/KoreanCases/16.Duo.ppt

30

References

■ Euiho Suh, “CRM (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)

■ Euiho Suh, “CRM II (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)

■ O’Brien & Marakas, “Introduction to Information Systems – Fifteenth Edition”, McGraw – Hill, Chapter 7, pp. 265~271

■ Euiho Suh, “Customer Relationship Management (CRM) in Financial Services”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)

http://mis.postech.ac.kr/class/IMEN381_MIS/mis_ppt/CRM.ppt








http://mis.postech.ac.kr/class/IMEN381_MIS/mis_ppt/CRMIntro.ppt








http://mis.postech.ac.kr/class/IMEN381_MIS/textbook_ppt/chap007.ppt







http://mis.postech.ac.kr/class/IMEN381_MIS/mis_ppt/crm_financail%20service.ppt







Customer Relationship Management (CRM) Rev: Feb, 2012 Euiho (David) Suh, Ph.D. POSTECH Strategic...

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