Customer Relationship Management

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Customer Relationship Management

• Dr Sherif Kamel
• The American University in Cairo

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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

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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

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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

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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..
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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

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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

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Customer Relationships Today
Customer Relationships
Branding
Product
Pricing
Distribution
Communication
Community
Building a customer-centric approach to Internet
marketing by focusing on customers
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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?

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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

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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

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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?

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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?

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Goals of CRM

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

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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

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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)

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Managing the customer life cycle
Acquiring new customers
Enhancing profitability of existing customers
Retaining profitable customers for life
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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

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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

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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

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Integrated CRM
Acquire
Enhance
Retain
Customer Life cycle
Direct Marketing
Cross-sell and Up-sell
Proactive Service
Partial Functional Solutions
Sales Force Automation
Customer Support
Integrated CRM Applications
Complete Integrated Solutions
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Core CRM process competencies
Marketing and Fulfillment
Customer Service and Billing
Fax
Sales Cross-sell Up-sell Telesales
eMail
Prospect Or Customer
WWW
Loyalty and Retention Programs
Phone
Field Sales and Service
Content Management
Technical Infrastructure
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How to build a CRM infrastructure

• 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

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Relationship depth and profitability
Relationship depth, as measured by the frequency
and magnitude of purchases, is a critical
component of customer profitability
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Length of customer tenure and profitability
High
Lifetime Profit
Low
Short
Long
Lifetime
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5 key drivers of the customer value

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

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4 stages of a customer relationship

• Customer recognizes the firm but has not
  initiated any transactions

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

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

• Total loss of commitment and relationship

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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

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Challenges to understanding customers

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

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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

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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