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M.S.University, Baroda BCA Faculty

What is Customer Relationship Management (CRM)?

CRM is an IT enhanced value process, which identifies, develops, integrates and focuses the various competencies of the firm to the voice of the customer in order to deliver long-term superior customer value, at a profit to well identified existing and potential customers.

Meaning Of Customer Relationship Management (CRM)?


Understanding Customer Relationship Management (CRM)? CRM is a business philosophy based on upon individual customers and customised products and services supported by open lines of communication and feedback from the participating firms that mutually benefit both buying and selling organisations. The buying and selling firms enter into a learning relationship, with the customer being willing to collaborate with the seller and grow as a loyal customer. In return,, the seller works to maximize the value of the relationship for the customers benefit. In short, CRM provides selling organisations with the platform to obtain a competitive advantage by embracing customer needs and building value-driven long-term relationships.

Determinants of CRM

Trust The willingness to rely on the ability, integrity, and motivation of one company to serve the needs of the other company as agreed upon implicitly and explicitly. Value The ability of a selling organisation to satisfy the needs of the customer at a comparatively lower cost or higher benefit than that offered by competitors and measured in monetary, temporal, functional and psychological terms.
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Determinants of CRM
In addition to trust and value, salespeople must:

Understand customer needs and problems;


Meet their commitments; Provide superior after sales support; Make sure that the customer is always told the truth (must be honest); and Have a passionate interest in establishing and retaining a longterm relationship (e.g., have long-term perspective).

Stages in the development of Customer Relationship


The Pre-relationship Stage The event that triggers a buyer to seek a new business partner. The Early Stage Experience is accumulated between the buyer and seller although a great degree of uncertainty and distance exists. The Development Stage Increased levels of transactions lead to a higher degree of commitment and the distance is reduced to a social exchange. The Long-term Stage Characterised by the companies mutual importance to each other. The Final Stage The interaction between the companies becomes institutionalized.

Functions of CRM

Direct functions (are the basic requirements of a company that are necessary to survive in the competitive marketplace) Profit; Volume; and Safeguard Indirect functions (are the actions necessary to convince the customer to participate in various marketing activities). Innovation: Market; Scout: and Access.
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Functions of CRM
Value Creation Process
Technology delivery process R&D Technology integration Efficiency, effectiveness learning Value-based Strategies Pricing Communication

Management Decision Process


Customer sensitivity Diversity Information Differentiated offering

Product delivery process Concept to launch Manufacturing process Customer delivery process Supply chain Distribution Infomediation (distribution of information)

The Role of Salespeople

Salespeople by: identifying potential customers and their needs; approaching key decision makers in the buying firm; negotiating and advancing dialogue and mutual trust; coordinating the cooperation between the customers and their company; encouraging the inter-organisational learning process; contributing to constructive resolution of existing conflicts; and leading the customer relationship development team

They are the individuals in any organisation who act both as relationship builders and as relationship promoters.

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Models of CRM
The Evans and Luskin (1994) model for effective Relationship Marketing

Relationship marketing inputs Understanding customer expectations Building service partnerships Empowering employees Total quality management
Relationship marketing outcomes Customer Satisfaction Customer loyalty Quality products Increased profitability Assessment state Customer feedback Integration
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Models of CRM
The Brock and Barcklay (1999) model of selling partner relationship effectiveness

Independence

Mutual trust Cooperation

Selling partner relationship effectiveness

Relative influence
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Managing CRM
The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer.

Initiating the relationship Engage in strategic prospecting and qualifying; Gather and study pre-call information; Identify buying influences; Plan the initial sales call; Demonstrate an understanding of the customers needs; Identify opportunities to build a relationship; and Illustrate the value of a relationship with the customer
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Managing CRM
The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer.

Developing the relationship Select an appropriate offering; Customise the relationship; Link the solutions with the customers needs; Discuss customer concerns; Summarize the solution to confirm benefits; and Secure commitment.
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Managing CRM

The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer.

Enhancing the relationship Assess customer satisfaction; Take action to ensure satisfaction;

Maintain open, two-way communication; and


Work to add value and enhance mutual opportunities.

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Concluding CRM
Process of creating and maintaining relationships with business customers or consumers A holistic process of identifying, attracting, differentiating, and retaining customers Integrating the firms value chain to create enhanced customer value at every step An integrated cross-functional focus on improving customer retention and profitability for the company.

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CRM Objectives
Lifetime Value (LTV)

Refers to the net present value of the potential revenue stream for any particular customer over a # of years Starts with current purchase activity then extrapolates to include potential additions from cross-selling, upgrades, total ownership, etc. Attempts to own the lionshare of customer spending and/or share of mind in a particular product category Building brand equity, maintaining vigilant customer contact, keeping current with the market trends is critical 5% points increase in customer retention=20-125% increase in profit

Customer Ownership

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Is CRM New?
No! Simply an extension of relationship marketing Builds on customer service and satisfaction concepts Just the latest buzzword for creating customer orientation Bottom-line is still the same Yes! A shift in corporate philosophy concerning the approach to value delivery Customer-centric approach to value chain New and technology-enhanced processes Focus is not just on bottom-line, but on top-line Goal is to create satisfying experiences across all customer contact points

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Areas of CRM Activity

Sales Force Automation (SFA) Customer Service and Support (CSS) Help Desk Field Service Marketing Automation

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Areas of CRM Activity: Sales Force Automation


35-40% of all CRM activity Manages lead generation, tracks movement of leads through the pipeline, allows better usage of customer data, integrates activities across sales channels, simplifies relationship management, forecasts for opportunities (SWOT) Goldmine and SalesLogix are examples of prepackaged SFA solutions. Ex. Staples used SFA to integrate catalog, online, in-store sales efforts directed at its best customers

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Areas of CRM Activity:

Customer Service and Support (CSS)


20-25% of CRM Assign, escalate, and track trouble tickets, inquiries, solution attempts through resolution Provides information to support customer call center activity Gleans customer data from those interactions and records it in SFA for later use Remedy, Siebel, Vantive, and Clarify are major vendors Ex., 3M Adhesive Products division

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Areas of CRM Activity:

Help Desk
15-20% of all CRM Allows individuals to access network database to solve their own problems or find information. Can be internal or external Offers many bottom-line savings Human Click, Tivoli, LivePerson, are providers Ex., Lands End Live allows customers browse FAQs but also click a link to talk directly with live representative.

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Areas of CRM Activity: Field Service CRM


3-5% of all CRM activity Mobile service technicians can log information about work orders and service calls, as well as access information from the remote site. Can feed information from customer problems into SFA for salesperson leads. Market information can be gathered and logged into central database. Ensures appropriate resource allocation by matching available resources to job requirements Major vendors are RTS, Metrix, eDispatch

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Areas of CRM Activity: Marketing Automation


3-5% of CRM, but growing 5X faster than all others Interfaces with data warehouses and data mining activities to tailor page views, products, and promotions, so that the right offer goes to the right person at the right time. Can interact with SFA to support field sales efforts Provides customized customer interactions critical to segment of one marketing, mass customization, customerization, etc. www.webgroove.com, Epiphany, Oracle, Siebel, and Personify are leaders

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New Frontiers in CRM Commercial E-Communities


What are people loyal to? Families Football teams Schools Clubs Cultures Countries i.e.: Communities not Corporations

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Commercial E-Communities

Goal is to create an environment where people get meaningful interactions with the company and other users so that they feel part of the enterprise. Adds human component and engages customers. Creates more stickiness and ownership Ex. User Groups for software products (Oracle, Intergraph) Ex. Dell / Sony technical support communities Can be run internally or by an external organization such as Sift

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Components of Commercial E-Communities

Customer-focused transactions
Ex. IKEA Stock Query, Amazon rare book finder

Community Interactions
User product ratings, User alerts/Newswires, Dell technical support

Access to Relevant Information


Dell technical library, Customer chat rooms, Zero-time search facility

Value-added Services Based on Customer Data

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New Frontiers in CRM


Customerization Mass Customization Using flexible processes and organizational structures to produce varied and individualized products and services at the price of standard mass-produced offerings. Personalization Customization of some features of a product or services so that the customer enjoys more convenience, lower costs, or some other benefit. Segment-of-One Marketing Based on the idea of the firm learning individual reactions to marketing strategies, then treating this customer differently than other customers. Customerization Mass customization + personalization + segment-ofone, dependent on a web-based or electronic interaction

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Distinctions in Customerization

Mass Marketing Relationship with customers Customer is passive participant in process

Customerization Customer is active coproducer,

Customer needs
Product and service offering Price Communication Distribution

Researched and articulated


Marketing and R&D drive offering Fixed prices with discounting Advertising and PR Mix of direct and indirect

May not be articulated


Customized based on customer interactions Value based pricing; customer determined Integrated, interactive Direct (online)

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Making CRM Happen


Evaluate products and processes customers terms. Analyze the multiple channels through which the company interacts with customers. Examine how the company understands its customers. Does it keep good data? How does it get that data? Does information flow between functional areas? Provide fingertip access to all information. Analyze human resources and ensure that everyone has an understanding of philosophy of CRM

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