Customer Relationship Management

Maya Sari Dewi

Department of Health Administration and Policy
FPH – Universitas Airlangga
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…..

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

Pricing
Distribution

Communication
Building a customer-centric Community
approach to Internet
marketing by focusing on
customers
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 company’s
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
 CRM steps include
 Targeting
 Acquisition
 Retention
 Expansion
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?
 Acquisition
 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?
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?
 Expansion
 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?
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 Enhancing Retaining

new customers profitability of existing profitable customers
customers for life
Acquiring new customers
 Promoting the company’s 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 up-
selling 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 Cross-sell and Up-sell Proactive Service

Partial
Functional
Solutions Sales Force Automation Customer Support

Complete
Integrated
Solutions
Integrated CRM Applications
Core CRM process competencies
Marketing and
Fulfillment
Customer
Fax Service and
Sales eMail Billing
Cross-sell Prospect
Up-sell Or
Customer
Telesales WWW
Phone Loyalty
and Retention
Field Sales Programs
and Service

Content Management

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

Evaluating Relationship Depth

$$$
Long-Term
Profitability

Magnitude of
Purchases $$

Relationship depth,
as measured by the
$ frequency and
magnitude of
purchases, is a
critical component
Frequency of of customer
Purchases
profitability
Length of customer tenure and
profitability

High

Lifetime
Profit

Low
Short Long
Lifetime
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
Exploration /
Awareness Commitment Dissolution
Expansion

 Customer  Customer  Customer  Totalloss of

recognizes gathers and firm feel commitment
the firm but information a sense of and
has not about the obligation or relationship
initiated any firm which responsibility
transactions determines to one
whether another
repeated
transactions
will occur
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