Information Systems: the Foundation of EBusiness CIS 108

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Information Systems the Foundation of E-Business
(CIS 108)

• Customer Relationship Management, (CRM)
• Lecture SEVEN (28th February 2005)
• Amare Michael Desta

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What is CRM?

• Customer relationship management is a business
  strategy to select and manage the most valuable
  customer relationships. CRM requires a
  customer-centric business philosophy and culture
  to support effective marketing, sales, and
  service processes.
• CRM applications can enable effective customer
  relationship management, provided that an
  enterprise has the right leadership, strategy,
  and culture. -The CRM Primer, www.crmguru.com

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Outline

• Benefits of a CRM program
• Cultural changes
• The four phases of implementation
• Research Best practices
• Casino case
• ITs role in CRM
• CRMs relation to the supply chain

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Benefits of CRM

• Improved customer retention
• Greater retention results in a larger future
  customer base

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Benefits of CRM (contd)

• Improved customer retention
• Purchase amount increases over time
• Average of 8/year in the insurance industry
• Reduction in costs
• Order processing
• Short-term acquisition costs
• Customer referrals

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Benefits of CRM (contd)

• 2-way communications
• Improves customer satisfaction
• Impact on the grey markets
• Often harmful to profits
• Frequently used to level inventories

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Cultural changes

• Top executives must drive the initiative
• Shift from product orientation to customer
• Shift in marketing type
• Away from mass, towards personal 11
• Change in attitude at all levels
• Compensation system must change to reinforce new
  behaviors
• New positions or teams should be formed

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Pre-implementation

• Classify customers based on diversity of value
  and needs
• Determine who the customers are

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Phase 1

• Consolidate customer information
• Existing computer and hard copy records into one
  large database
• Minimum information categories
• Biographical information
• Total spent/year on that good/service
• Total sales/year from that customer
• Customer share ratio
• Allocatable costs
• Profit
• ROI of marketing and sales expenses

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• Consumer categories
• Identification
• Customer Rating
• Background
• Presale Communication
• Purchase behavior
• Post-purchase behavior
• Predicted behavior
• Creditworthiness
• Attitudes and perceptions

• Business categories
• Identification
• Customer Rating
• Background
• Presale Communication
• Decision makers
• Decision making
• Influences
• Post-purchase behavior
• Channels
• Pricing
• Predicted Behavior
• Creditworthiness
• Relevant information

Source Boyett Boyett The gurus guide to the
knowledge economy
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Phase I The Privacy policy

• Means to gather information
• Interviews
• Surveys
• Loyalty cards

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Casino CRM ProgramPre-Implementation

• 1999 Recognized need for CRM program, but
  unwilling to commit fully
• Began implementation of Epic program
  requiring manual log-in and log-out of players
• Cost measured in thousands rather than millions
• Worked well with table games, but highly
  inconvenient to slot players
• No outside marketing to encourage participation
• Effectiveness of program dependent on employees

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Casino CRM ProgramPre-Implementation

• Spring 2001 management convinced to fund
  automated players club program
• Pre-launch focus on previous card-holders
• Updating database and explaining new system to
  old customers
• Program launch complemented with marketing
  campaign, including incentives to register and to
  use card

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Casino CRM ProgramBuilding a Database

• Upon sign-up
• Name
• Contact Information
• Interests
• Over time
• Money spent (coin-in)
• Per day
• Per trip

• Win/Loss
• Per day
• Per trip
• Jackpots won
• Playing habits
• Rate of play
• Time of play
• Frequency of trips
• Machines played
• Denomination
• Type

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Phase II

• Classify the customers according to sales volume
• Focus on the top 20 of the customer base
• Two basic types of customer needs
• Community shared needs/preferences for a
  grouping of individuals
• Individual unique needs specific to a single
  person

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Phase II (contd)

• Information gathering
• Focused on top 20 less effort required
• Interviews considered the best method
• Personal
• Additional information
• Evaluation of future potential
• Not as cost prohibitive as believed
• Surveys are functional
• But they are often ignored.
• E-mail a reasonable middle ground
• Cheapest method
• Convenient for the customer

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Phase II (contd)

• Suggested questions
• Satisfaction with products/services
• Cross-selling/up-selling opportunities
• Gaps in the value proposition-satisfaction
• Loyalty indicators preferred supplier, future
  purchases, referrals
• Budgets for your product/service
• Identification of competitors
• Customer contact preferences
• Create a profile for distribution

Source The gurus guide to the knowledge economy
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Casino CRM ProgramCustomer Classification

• Casino customer classification generally
  dependent on coin-in and total losses
• These tend to coincide
• Also looking at place of residence and frequency
  of visits
• Marketing department uses CRM program to
  distinguish customer groups - find high-rollers
  and target them for special events
• Special Top 1 segment

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Casino CRM ProgramCustomer Classification

• The program can be used to find undesirable
  customers as well as desirable ones
• People who abused Epic system easily spotted
• Customers who present a net loss to casino
  discouraged from returning
• Machines that show lack of profitability removed
  or altered
• Middle-range customers encouraged but within
  reasonable expense level

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Phase III

• Maintain communications with current customers
• Should be through the medium desired by the
  customer
• Make contact at the appropriate time
• Excessive attempts will annoy the customer

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Rules of engagement for customer interactions
(Contd..)

• Dont initiate an interaction with a customer
  without a clear objective
• Dont ask a customer the same thing more than
  once
• Interact in the medium of the customers choice
• When engaging in an interaction, start with the
  customer, not the product
• Make the interactions personal and personalized
• Ensure that your interactions with customers are
  always welcomed
• Ensure that they are immediately identified and
  treated appropriately

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Rules of engagement for customer interactions
(Contd..)

• Protect the customers privacy
• Invite dialogue by printing toll-free numbers and
  web-site URLs on everything
• Ensure that the customer can see the value from
  each interaction. Deliver information or value
  that reflects what has been learned
• Be sensitive to the customers time. Dont try
  to learn everything about a customer at once.
• Source The Gurus guide to the knowledge
  economy, p. 216

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Casino CRM ProgramMaintaining Communication

• Mailers sent to certain customer groups on
  regular basis
• Invitations to special events or for free gifts
• Non-intrusive communication
• Customer chooses which ones to respond to
• Toll-free phone number and email address included
  on all correspondence

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Phase IV

• Adjusting the firm to fit customer needs
• Four types of customization
• Collaborative (mass) customization
• Devise a metric to determine customer needs
• Match needs with products/services
• Not very personal, but relatively inexpensive
• Adaptive customization
• Allow customer to specify certain characteristics
• Very personal, but often expensive
• May not be possible in all industries, or cost
  efficient

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Phase IV (contd)

• Customization
• Cosmetic customization
• Inexpensive, easy to implement in virtually any
  industry
• Easy to replicate
• No actual change to the product/service may not
  justify charging a substantial premium
• Transparent customization
• The nice little details
• Very personal, but oftentimes invisible
• Frequently inexpensive relative to others
• Difficult for competitors to replicate

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Phase IV (contd)

• Combinations can be used
• Beware of TOO much satisfaction

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Phase IV (contd)

• Change call center operations to service top
  customers
• Eliminate discounts and promotions
• My loyalty cannot be bought!

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Casino CRM ProgramCustomization

• As previously stated, special promotions and
  events aimed at preferred players
• Invitation-only events
• Segmented mailers, with increased bonuses for
  better customers
• More personalized customer service
• Improved access to casino comps (including
  non-gaming comps)

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Casino CRM ProgramCustomization

• In a casino, very little product customization is
  possible a slot machine is a slot machine
• Focus is on cosmetics
• Customer service tends to distinguish one casino
  from another
• Gift baskets, wine, and champagne for
  hotel/restaurant guests

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ITs role in CRM

• Three general types of eCRM packages
• Marketing Automation Systems (MAS)
• Customer database creation
• Analysis of customer attributes
• Automate several marketing functions
• Sales Force Automation (SFA)
• Intended to automate many functions performed by
  salespeople
• If completely successful, it will eliminate the
  personal touch

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ITs role in CRM (contd)

• eCRM package types
• Customer Service Automation systems
• Augments call center personnel
• Some can respond to e-mails on their own
• Ties-in to existing company software, including
  other eCRM packages (generally)

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ITs role in CRM (contd)

• Selecting the right CRM packages
• Step 1 size the package to your firm
• Step 2 gather as much information on every
  package sized appropriately
• Step 3 using a standard formula, evaluate the
  packages and make a choice

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ITs role in CRM (contd)
Source The CRM Solutions guide. 2001.
www.crmguru.com
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ITs role in CRM (contd)

• CRM and ERP
• Determine if a package can be tied-in to the
  enterprises ERP system before making a purchase
  decision
• Inventory, order processing, and accounts
  receivable features can be used to augment the
  CRM program
• Goal establish a closed-loop eCRM solution

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ITs role in CRM (contd)

• Data mining tools
• Market basket analysis and automatic cluster
  generation
• Decision trees and memory-based reasoning
• Neural net systems

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CRM in the Supply Chain

• Goals of Supply Chain Management
• Reduce uncertainty and risks in supply chain
• Positively affect inventory levels, cycle time,
  processes, and end-customer service levels
• Customer Relationship Management
• Useful for forecasting and planning
• Improves customer service levels

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CRM across Company Functions

• Marketing Account management expertise
• Research Development Specifications that
  define requirements
• Logistics Knowledge of customer service
  requirements
• Production Manufacturing strategy
• Purchasing Sourcing strategy
• Finance Customer Profitability Reports

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Customer Relationship ManagementWrap-Up

• Knowing your customers improves profits
• Focus on the best, treat mid-range as group, and
  discourage bottom-feeders
• Customize product and service to retain good
  customers
• Give CRM time to pay off a good CRM program will
  be worth the investment