Customer Relationship Management

Dr Sherif Kamel The American University in Cairo

Outline

Overview Why CRM? CRM basics Defining CRM Managing the customer life cycle 5 key drivers of the customer value 4 stages of a customer relationship Interactivity v individualization Challenges to understanding customers Remarks Conclusions

Bits and bytes

CRM the hottest buzz word in business today Developing a personal and a professional profile about each customer

Basic and historical information Personal preferences Trends and habits Demographical information

Building a CRM culture The power of integration Using emerging technology to get closer to the customer

Current facts

Today customers are in charge they make the rules Putting technology at the center stage Business intelligence is one of the most growing segment in the marketplace Customer loyalty is very difficult to maintain due to competition Customers want an excellent service and they want to feel special Most companies think they are customer-focused however in reality they are product-centric There is a need to formulate customer-focused firms which needs:

CRM strategy Organizational change Corporate culture

Economics of customer retention

Winning back a lost customer can cost up to 50-100 times as much as keeping a current one satisfied. Rob Yanker, Partner, McKinsey & Company

Understanding your customer is key to retention..

Market size

CRM market grew 66% in 1999 34 Billion US dollars by 2003 and probably around 125 billion US dollars by 2004 60% of the CRM software license market is controlled by 3 vendors

Siebel Trilogy Baan/Aurum

Why CRM?

It costs 6 times more to sell to a new customer than to sell to an existing one A typically dissatisfied customer will tell 8 to 10 people about his/her experience (mainly related to poor customer service) The odds of selling to a new customer is 15% versus 50% to an existing customer 70% of the customers complaining will do business again with the company if the complaints are quickly addressed 90% of existing companies do not have integrated CRM tools and platforms

Customer Relationships Today

Customer Relationships Branding Product

Distribution

Pricing

Building a customer-centric approach to Internet marketing by focusing on customers

Community

Communication

CRM Basics

CRM is the timely delivery of excellent service customer relationship management CRM is a combination of business process and technology that seeks to understand a companys customers from a number of perspectives including:

Who they are? What they do? What do they like?

Age of the never-satisfied customer

CRM becomes a support tool in a time characterized by:

Increased competition Globalization Growing cost of customer acquisition High customer turnover

CRM is all about creating a better value proposition to customers Information and communication technology is now acting as a catalyst for CRM

Extended enterprise World wide web and the Internet

Defining CRM

CRM is an integrated sales, marketing and service strategy that is based on a timely and accurate information infrastructure and that depends on coordinated enterprise-wide activities

Example: tracking customers interactions with the firm Customer tracking includes steps in the selling and customer service cycles Targeting Acquisition Retention Expansion

CRM steps include

Defining CRM

Targeting

Who do we target? What segments are most profitable? What segments match our value proposition? What is the best segmentation strategy for us/our industry? What is the best channel for each segment? What is the acquisition cost for a channel/segment? Do certain channels deliver certain types of customers? Cost effective acquisition?

Acquisition

Defining CRM

Retention

How can we improve retention? What is our average customer relationship length? How can we hold customer for as long as possible? What is the most cost effective method of retention? How many products does our average customer buy? How can we induce our current base to buy more products? Who are the prime targets for expansion? What is the cost of expansion?

Expansion

Goals of CRM

Using existing relationship to grow revenue Using integrated information for excellent service Introducing consistent, replicable channel processes and procedures

CRM

CRM is a business strategy and not a product Putting CRM into practice requires developing a set of integrated applications to address all aspects related to the front-office needs CRM could be a major support platform for small and medium-sized enterprises Cost of the information and communication technology applications and infrastructure should be calculated as opposed to the return-on-investment

Evolution of information requirements

Materials requirements planning (MRP) Manufacturing resource planning (MRP II) Enterprise resource planning (ERP) Supply chain management (SCM) Customer relationship management (CRM)

Managing the customer life cycle

Acquiring
new customers

Enhancing
profitability of existing customers

Retaining
profitable customers for life

Acquiring new customers

Promoting the companys product and service leadership Redefine the companies competitive edge and innovations Offer a superior product backed by an excellent service

Example: Browsing on the net, submitting a request, receiving a phone call

Model for a sales and service strategy

Enhancing profitability of existing customers

Encouraging cross-selling and up-selling

Cross selling is used by suggesting alternative products or upselling by rendering the customer more informed with the new products and services.

Broadening the relationship between the company and the customers Providing a value proposition represented by offering a greater convenience at low cost (one-stop-shopping)

Example: Best Buy an electronic retailer with more than 300 stores capitalizes on committed relationships with customers

3000 calls a day with more than 50% having computer-based answers and solutions

Retaining profitable customers for life

Retention focused on service adaptability Delivering not what the market wants but what the customer wants Providing a value proposition that offers a proactive relationship that works on the best interest of the customer

Example: customer retention is becoming a key competitive strategy for many companies

Integrated CRM
Customer Life cycle Acquire Enhance Retain

Direct Marketing Partial Functional Solutions

Cross-sell and Up-sell

Proactive Service

Sales Force Automation

Customer Support

Complete Integrated Solutions

Integrated CRM Applications

Core CRM process competencies

Marketing and Fulfillment Customer Service and Billing eMail

Sales Cross-sell Up-sell Telesales

Fax

Prospect Or Customer
Phone

WWW

Field Sales and Service

Loyalty and Retention Programs

Content Management Technical Infrastructure

How to build a CRM infrastructure

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Involve top management Decide on a vision of an integrated CRM Establish a CRM strategy and specify its objectives Understand the customer Review cultural changes that will need to occur Develop a business case Evaluate current readiness Evaluate appropriate applications to do a better business Identify and target quick wins Have one manager to own the end-to-end project Implement in stages Be sure to create a close-loop CRM environment Create concrete measurement goals

Relationship depth and profitability

Evaluating Relationship Depth

$$$

Long-Term Profitability

Magnitude of Purchases

$$

Frequency of Purchases

Relationship depth, as measured by the frequency and magnitude of purchases, is a critical component of customer profitability

Length of customer tenure and profitability

High

Lifetime Profit

Low Short Lifetime Long

5 key drivers of the customer value

Cost of Targeting Cost of Acquisition Service and Usage Revenue Cost of service Duration of relationship

4 stages of a customer relationship

Awareness Exploration / Expansion Commitment Dissolution

Customer

Customer

Customer

Total

recognizes the firm but has not initiated any transactions

gathers information about the firm which determines whether repeated transactions will occur

and firm feel a sense of obligation or responsibility to one another

loss of commitment and relationship

Interactivity v individualization

Interactivity is the occurrence of two-way communication between the firm and the customer

Retail store personnel handle Internet customer service Chat rooms are set up to discuss product-related issues Customers subscribe to customized versions of firm newsletters

Technology has made it possible to customize each interaction to the individual user

Consumers have privacy concerns about sharing too much information For individualization to be attractive, consumers must have unmet needs Costs and complexity for the firm increase with greater personalization while service speeds often decline

Challenges to understanding customers

Identify the customer Learn from customers Know the customers value Determine best resources Access complete customer profile and history

Remarks

World is moving rapidly to a customer centric business model It is a prerequisite for survival and growth in the marketplace Integration of disparate customer data sources is a primary technical challenge CRM is becoming invaluable as a differentiation tool The world is becoming extremely customer centric, even cultures that have been customer-averse Technology is just a platform an enabler

Conclusions

A firm is better able to serve customers needs if they understand them well Provision of the products customers want, at the right time through a consistent service leads to their retention CRM gives the complete and rich view of the customer, enabling tactical and strategic actions to be taken to meet customer needs CRM enables consistent customer communication regardless of channel, location, time