Chapter 10 CUSTOMER RELATIONSHIP MANAGEMENT

Chapter 10 CUSTOMER RELATIONSHIP MANAGEMENT LEARNING OBJECTIVES You should be able to: Discuss the strategic importance of CRM Describe the components of a CRM initiative Calculate customer lifetime value Discuss the implementation procedures used for CRM programs  Describe how information is used to create customer satisfaction & greater profits for the firm  Describe importance of data security  Describe how social media and cloud computing have impacted CRM     MBA Nguyen Phi Hoang@2015_SCM CHAPTER OUTLINE • • • • • • Introduction Customer Relationship Management Defined CRM’s Role in Supply Chain Management Key Tools & Components of CRM Designing & Implementing a Successful CRM Program Trends in CRM MBA Nguyen Phi Hoang@2015_SCM Introduction “Finding a new customer costs five times as much as keeping an old customer”  CRM means focusing on customer requirements, then delivering products and services in a manner resulting in high levels of customer satisfaction  Also refers to automated transaction and communication applications, however this can cause problems for some firms  CRM must still include talking to customers, understanding their behavior and their requirements, and then building a system to satisfy those requirements MBA Nguyen Phi Hoang@2015_SCM Customer Relationship Management (CRM) Defined “The infrastructure that enables the delineation of and increase in customer value, and the correct means by which to motivate valuable customers to remain loyal—indeed to buy again.” “…managing the relationships among people within an organization and between customers and the company’s customer service representatives in order to improve the bottom line/key issues.” “… to keep track of customers, learning about each one’s likes and dislikes from various sources like transaction records, callcenter logs, web site clicks, and search engine queries.” More simply – Building & maintaining profitable long-term customer relationships MBA Nguyen Phi Hoang@2015_SCM CRM’s Role in Supply Chain Management The firm seeks position as a value-enhancing supplier to its customers  Firms must create methods for finding & developing good suppliers  Firms must create methods for becoming & staying good suppliers themselves  It may be necessary for a firm to certify its intermediate customers as to their ability to adequately represent their firm’s products MBA Nguyen Phi Hoang@2015_SCM Key Tools & Components of CRM  Segmenting Customers –  Grouping customers to create specialized communications about products/service  Analyze the information from such groups of clients which can tell to firm some useful ideas  Firm then can use Target marketing efforts - e-mail or direct mail to response to their clients This way saves labor & postage, reduces chances of being a nuisance to clients  Relationship marketing or permission marketing  customers select the type & time of communication Requires software & customer participation  Cross selling - Additional products are sold as the result of an initial purchase (e.g., e-mails from Amazon.com describing other books bought by people) MBA Nguyen Phi Hoang@2015_SCM Key Tools & Components of CRM (Continued)  Predicting Customer Behaviors - firms forecast likelihood of customers’ purchases  Customer Defection Analysis - finding methods to retain customers  Churn reduction - reducing customer defections  Customer Value Determination - verify the customer lifetime value for individuals or segments  Personalizing Customer Communications Understanding customer behaviors & preferences, firms customize communications  Clickstream, how a customer navigates a Web site  Event based Marketing - offer the right products & services to customers at the right time MBA Nguyen Phi Hoang@2015_SCM Key Tools & Components of CRM (Continued) Automated Sales Force Tools Sales Force Automation (SFA)- Used for documenting field activities, communications with the home office, & retrieving sales history  Sales Activity Management- Tool offering sales reps a guided sequence of sales activities  Sales Territory Management- Sales managers obtain information of each sales rep’s activities (e.g., total sales per sales rep.)  Lead Management- Sales reps can follow prescribed tactics when dealing with prospects to aid closing the deal  Knowledge Management- Enables quick decision making, better customer service, & a better-equipped & happy sales staff MBA Nguyen Phi Hoang@2015_SCM Key Tools & Components of CRM (Continued) Managing Customer Service Capabilities  What does customer service actually mean?  “Seven Rs Rule” having the right product, in the right quantity, in the right condition, at the right place, at the right time, for the right customer, at the right costs  Performance measures are often designed around satisfying the seven Rs These kinds of services can come at a cost MBA Nguyen Phi Hoang@2015_SCM 10 Key Tools & Components of CRM (Continued) Customer Service Elements Pre-transaction elements - precede the sale (e.g., customer service policies, the mission statement, org structure, & system flexibility) Transaction elements - occur during the sale & include the order lead time, the order processing capabilities & the distribution system accuracy Post-transaction elements - occur after the sale & include warranty repair capabilities, complaint resolution, product returns, & operating information MBA Nguyen Phi Hoang@2015_SCM 11 Key Tools & Components of CRM (Continued) Call Centers Can categorize calls, determine average resolution time, forecast future demand, improve the overall productivity of the staff, increasing customer satisfaction levels MBA Nguyen Phi Hoang@2015_SCM 12 Key Tools & Components of CRM (Continued)  Website Self-Service  Web sites act as support mechanisms for call centers Customers can access their account information & operating hours, contact information, etc  Field Service Management  Customers can communicate directly with product specialists using wireless devices & the right diagnosis can be made quickly  Measuring Customer Satisfaction  Customers are frequently given opportunities to provide feedback about a product, service, or organization  Customer Privacy Capabilities  Two important issues are ability to assure privacy & ability to minimize customer harassment MBA Nguyen Phi Hoang@2015_SCM 13 Designing & Implementing a Successful CRM Step Creating the CRM Plan:  Objectives of the CRM program Program  CRM’s fit with corporate strategy  New applications to be purchased or developed  Integration or replacement of existing legacy systems  Personnel Requirements- personnel, training, policies, Upgrades, & maintenance &  The costs & time frame for implementation MBA Nguyen Phi Hoang@2015_SCM 14 Designing & Implementing a Successful CRM Program (Continued) Step - Involve CRM users from Outset/beginning - Employees should understand how it affects their jobs  Create a project team with members from all affected organizational areas  Test with a pilot application Step - Select the Right Application & Provider - Find an appropriate application & determine the extent of customization  Visit trade show, read trade literature, hire consultant, etc  Compare based on performance, security, reporting capabilities, system availability, etc MBA Nguyen Phi Hoang@2015_SCM 15 Designing & Implementing a CRM Step -Successful Integrate Existing CRM Applications CRM is aProgram collection of various applications implemented over time (Continued)  Customer contact mechanisms need to be coordinated so that every CRM user in the firm knows about all of the activity associated with each customer  Centralized database or data warehouse containing all customer information MBA Nguyen Phi Hoang@2015_SCM 16 Designing & Implementing a CRM Step -Successful Establish Performance Measures – This allows theProgram firm to –  (Continued) Determine if objectives have been met  Compare actual to planned variance MBA Nguyen Phi Hoang@2015_SCM 17 Designing & Implementing a CRM Step - Successful Providing CRM Training for All Users - Program (Continued)  Provide & require training for all of the initial users & then provide training on an ongoing basis as applications are added  Training can also help convince key users like sales, call center, & marketing personnel of the benefits & uses of CRM applications MBA Nguyen Phi Hoang@2015_SCM 18 Trends in CRM  Customer data privacy  Rules & laws regarding invasion of privacy include Patriot Act in the US and Internet Privacy Law in the EU  Social Media  Creating and cultivating virtual communities around product or brand is a powerful way to engage consumers  Cloud Computing (Software as a Service)  Ala carte & on demand offerings accessed via web browser  Changing the cost structure of CRM applications MBA Nguyen Phi Hoang@2015_SCM 19 ... impacted CRM     MBA Nguyen Phi Hoang@2015_SCM CHAPTER OUTLINE • • • • • • Introduction Customer Relationship Management Defined CRM s Role in Supply Chain Management Key Tools & Components of CRM. .. Phi Hoang@2015_SCM 13 Designing & Implementing a Successful CRM Step Creating the CRM Plan:  Objectives of the CRM program Program  CRM s fit with corporate strategy  New applications to be... Implementing a Successful CRM Program Trends in CRM MBA Nguyen Phi Hoang@2015_SCM Introduction “Finding a new customer costs five times as much as keeping an old customer”  CRM means focusing on