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p ment Module 1: Introduction to CRM

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

Introduction

Now that you have some idea of how and why CRM got started, it’s time to define what it is and how CRM can be viewed. In this second unit of Module 1, we’re going to look at various definitions of CRM and the components that should be in place for a CRM initiative to be successful.

We’ll also look at the four types of CRM or different perspectives, which can be classified based on their prominent characteristics. These are strategic, operational, analytical, and collaborative. Different types of CRMs support a company’s business goals from different angles. Choosing the best CRM system for a company requires looking at objectives and determining the main customer management problems that need to be resolved.

Let’s dig deeper into these perspectives.

Sarah Cherres

Four Perspetives of CRM

Strategic CRM

Collaborative CRM

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Modu le 1 I Un it 2: CRM Concepts & Perspectives

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

Four Perspectives of CRM

There are four different ways to view CRM. These have resulted from the various approaches and opinions of CRM and what is expected of it. Some companies focus their CRM initiatives on one perspective; others use a combination of these. A best practice CRM company applies all of these perspectives in some way because they are all interrelated.

• Strategic CRM is a core, customer-centric business strategy that aims at winning

and keeping

profitable customers. It is

focused on a

customer-centric

culture at

the organizational level. Strategic CRM

believes that knowledge

about customers and

their preferences have implications for

the entire organization. All employees are

obsessed about their

customers.

• Collaborative CRM

applies technology

across organizational boundaries and touch

points with a

view to optimizing company, partner,

and customer value.

This type of CRM

system is designed

to improve the customer experience.

• Operational CRM focuses on the automation of customer-facing processes

such as

sales, marketing,

and customer service/support. It is the set of activities that provide a single-view of the customer across all contact channels. It is the customer intelligence

that is available

across all

customer-facing functions.

• Analytical CRM focuses on the intelligent

mining of customer-related data for

strategic or tactical purposes.

You can see from the slide that analytical and operational CRM

work together to

feed into

the collaborative CRM to create meaningful customer experiences which are at the heart

of strategic

CRM: the customer.

In the following slides, we will address each

of these individually, starting

with the first

one: strategic.

Customer-Centric Orientation

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Voice of Customer

Market Research

Competitor Analysis

Customer Requirements

Value Propositions

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Management Systems

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Module 1 I Un it 2: CRM Concepts & Perspectives

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

STRATEGIC: Customer-Centric Orientation

Successful strategic CRM is a complex set of activities that together form the basis for a sustainable and hard-to- imitate competitive advantage. Strategic CRM shapes interactions between companies and customers to allow the maximization of the customer’s lifetime value. It recognizes differences between customers with respect to their economic value to the firm as well as their expectations from the firm.

A strategic or customer-centric orientation is the customer focus that consists of a set of cross-functional processes and activities directed at creating and satisfying customers through continuous needs assessment, or listening to the voice of the customer (VoC). An orientation toward the customer, market research, and the external environment provides the company with a source of new ideas for change and improvements, the foundations for CRM. To sustain a competitive advantage, companies have realized that they need to continuously acquire and use knowledge about their customers, markets, competitors, and partners when developing marketing strategies. The bottom line – a strategic, customer-centric firm is a learning firm that constantly adapts to customer requirements and competitive conditions. It collects, disseminates and uses customer and competitive information to develop better value propositions for customers.

A customer-centric management system consists of the organizational culture, structure and processes focused on customers rather than functional areas. It is defined as the set of organizational values, beliefs, and strategic actions that enable the implementation of customer management principles. Customer-centric management systems help maintain the organization’s attention on customer interactions and ensure that expertise from different functional areas is deployed to promote the quality of the customer experience. A customer-centric management system makes sure that job designs, compensation and reward structures, and performance metrics reflect the quality of the customer experience.

EXAMPLE (Source: Kumar & Reinartz, 2006): Capital One’s business model is based on the premise that every customer carries a specific and unique credit risk and potential revenue profile, which determines the customer’s risk-return profile from the company’s point of view. They believe that the better the company can understand and assess a customer’s specific risk, the better it can manage it. At the same time, the better the company understands individual customers, the more it can tailor its products to their needs. Low risk and high returns for the company, on one hand, and high satisfaction for the customer, on the other hand, can ideally create a win-win situation.

Capital One is committed to a customer-management system by also integrating and aligning the structure and functioning of the organization with this strategy. The goal is to use information to acquire the types of customers Capital One can most profitably serve. They also tie management and employee evaluations to customer retention and customer profitability measures.

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Cl SarahCherres Module 1 I Unit 2: CRM Concept5 & Pers pectives

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

Collaborative CRM

Now let’s look at the collaborative perspective. In today’s environment, customers expect a single, consistent, and dynamic dialogue with all distribution channels. This is not only a technical challenge but a relationship one as well. Customers don’t care who is ultimately responsible for the various activities, like suppliers, partners, or intermediaries. They want transparent service. Collaborative CRM allows separate organizations and business partners to align their efforts to service customers more effectively. It allows for valuable information to be shared across company boundaries and along the supply chain.

Collaborative CRM features streamlined communication for all parties - both between the customer and your company and between various departments and stakeholders.

It enables companies to track and share customer data with everyone from vendors and suppliers to tech support and marketing managers. Making this information available internally not only strengthens the relationships that hold your business together, but also keeps customers happy. It allows you to provide a seamless multi-channel customer experience across all points of contact.

Collaborative technologies allow data and voice communications between companies and customers, based on their preferences and technology usage. For example, manufacturers of consumer goods and retailers can align their people, processes, and technologies to serve shoppers more efficiently and effectively.

Technology software vendors now have partner relationship management (PMR) applications that enable companies to manage complex partner or channel ecosystems and reduce costs of partner or channel management (Buttle, 2009). PMR provides companies with the ability to manage the distribution of campaigns, funds, plan and control promotions and measure outcomes, when there are multiple parties involved.

CRM

Provide support Resolve customer issues

Marketing Au tomat ion Market opti mization

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Campaign management

Event-based marketing

Run campa igns Generate leads

Sales Automation Accou nt & contact management

Lead & opportunity management

Pipeline management Quotation and prop osal generation

Product conf iguration

Assign leads Convert leads into contacts Create opportunities

Service Au t omation Case management

Customer communications management

Queuing and routing Service leve l management

Module 1 I Unit 2: CRM Concepts & Per spectives

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

Operational CRM

CRM can also be viewed from an operational or analytical perspective. The goal, however, is to have a strategy that combines BOTH of these. You could have operational CRM without analytical CRM, but you can’t have analytical CRM without the front-end customer knowledge that you gather in operational CRM. Most companies start their CRM initiatives with an operational focus.

Operational CRM focuses on automating and improving customer facing business processes using software applications in the functions associated with marketing, sales and customer service/support. In this slide, we see the three key areas of operational CRM and the main activities of each. Let me give you an example. In sales, one of the most important steps is to identify potential customers, called leads. A salesperson may have many leads at once, each at different stages of a relationship. SFA or sales force automation software allows salespeople to capture information on each lead, update each with information obtained after every visit, and track the progress of each. This is hard to do manually, especially when you have 50 to 100 leads at any given time.

Let’s look more closely at the characteristics of operational CRM:

• Is known as front-office CRM, focusing on the functional requirements of a company. • Involves departments that have direct customer interaction. • Enables and streamlines communications to and from customers. • Helps companies manage their transactions and processes with customers. It displays and lists the

company’s products and services online. • Results in benefits primarily centered on operational efficiency (doing things right) • Requires technology and collaboration from everyone involved. It captures, organizes, presents and

analyzes customer-specific data, in order to identify sales opportunities and address product development and delivery requirements.

• Requires customer-centric processes. • Enhances customer experiences. Utilizes data to create individualized experiences for the customers.

CRM

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• Campaign Scorecard • Pipeline Analysis Customer Satisfaction C.ampaign Scorecard

• Response Rate ~ Up· cross Sell • Resolution Rate • Response Rate

• loyalty and Attrition ,. lead Conversion • Service Cost Anatysis loyalty and Attrition Campaign ROI Forecasting Service Rep campaign ROI

Martel Segment • Sales Team Effectiveness Mark.et Segment

Analysis Effedivcness Service Trend Anafysis

Module 1 I Unit 2: CRM Concepts & Perspectives

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

Analytical CRM

Analytical CRM is concerned with developing and delivering desirable value propositions to customers. Analytical CRM is concerned with the capturing, storing, extracting, integrating, processing, interpreting, distributing, reporting and using customer related data. This slide shows the different types of analytics that are created and processed with analytical CRM in sales, marketing, social media, customer interactions, and on the web. These are highlighted in blue. Using the right technology tools and processes, companies can generate metrics that show the progress they are making and the insight they are getting about their customers. The different metrics are shown in the green boxes on the slide.

For example, as a marketer, I can learn about a particular market segment and how this segment has responded to a specific campaign. I can even go deeper and learn about each person within that cluster of customers. By analyzing their behaviors, I can enhance my definitions of the personas the company is looking to attract to a specific campaign. The data that are used in analytical CRM can come from a variety of sources: it can come from digital interactions but it can also originate from the company’s internal processes and activities. Examples include sales data, like the leads of a salesperson, or data on the service calls received from customers. External data is obtained from sources outside the company. US census data or data purchased from research companies on the trends in an industry are examples. Let’s look at the characteristics of analytical CRM, in contrast to the ones for operational CRM:

• It is also known as back-office CRM. It happens behind the scenes of the customer and many employees. • It uses customer data to help companies conduct the right transactions at the right time with the right customers. • It involves a clear understanding of front-office activities and requires technology and new business processes for

collecting, analyzing, and facilitating internal and external sources of data. • It involves a data warehouse and data analysis that goes deep into the company’s databases. • Analytical CRM is also called business intelligence. You are using what you learn about customers to make more

intelligent decisions in sales, marketing, and service. • It’s also called data analytics, which is the process of combining data-driven marketing and technology to increase the

company’s knowledge and understanding of customers, products, and transactional data to improve strategic decision- making.

• More focused on effectiveness (means doing the right things)

The customers benefit because analytical CRM can deliver timely, customized, solutions to the customer’s problems, thereby enhancing customer satisfaction. The company also benefits because analytical CRM offers the possibility of more powerful cross-selling and up-selling programs, and more effective and cost-efficient customer retention and customer acquisition programs. It allows managers to make better decisions because of improved customer insight.

& Analytical CRM

- ~ ------i:--r::~I ,__., . ' A telephone customer service The telephone company wants to know

representative needs to access a which customers are signaling an

customer record when she receives a intention to switch to a different

customer request. supplier.

A hotel receptionist needs access to a The hotel company wants to promote a guest's history so that she can reserve weekend getaway to customers who the preferred type of room - smoking or have indicated their complete delight in non-smoking, standard or deluxe. previous customer satisfaction surveys.

A sales rep needs to check a customer's The sales rep wants to compute his payment history to find out whether the customer's profitability, given the level account has reached the maximum of service that is being provided. credit limit.

Cl Sa r ah Cherres Module 1 I Unit 2: CRM Conce pts & Per spective s

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

Operational & Analytical CRM

In this slide, you see three examples of operational CRM compared to analytical CRM applications.

In Operational CRM, a telephone customer service representative needs to access a customer record when a a customer request is received. In Analytical CRM, the telephone company may want to know which customers are signaling an intention to switch to a different supplier. Business intelligence is used to predict purchase or switching intentions.

In Operational CRM, a hotel receptionist needs access to a guest’s history to reserve their preferred type of room – smoking or non-smoking, standard or deluxe. In Analytical CRM, the hotel company wants to promote a weekend getaway to customers who have indicated their complete delight in previous customer satisfaction surveys and have an important event in their lives.

In Operational CRM , a sales rep needs to check a customer’s payment history to find out whether the account has reached the maximum credit limit. In Analytical CRM, the sales rep wants to compute his customer’s profitability, given the level of service that is being provided, to predict future purchases.

is CRM?

• CRM Magazine: CRM, or Customer Relationship Management, is a company-wide business strategy designed to reduce costs and increase profitability by solidifying customer loyalty.

• Pepper & Rogers: Making managerial decisions with the end goal of increasing the value of the customer base through better relationships with customers, usually on an individual basis.

• Francis Buttle: CRM is the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit. Is it grounded on high quality customer-related data and enabled by information technology.

• SearchCRM.com: Customer relationship management refer to practices, strategies, and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle, with the goal of improving business relationships with customers, assisting in customer retention, and driving sales growth.

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

What is CRM?

Let’s begin by defining the term CRM, which stands for customer relationship management. There are hundreds of working definitions for CRM. As a matter of fact, if you Google search ‘definition of CRM’, you can find over 8 million hits. For this course, we will consider CRM to be an on-going marketing strategy and process that maximizes customer value and profitability.

Customer relationship management (CRM) is a term that refers to practices, strategies, and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle, with the goal of improving business relationships with customers, assisting in customer retention, and driving sales growth. We’ll use this as our working definition.

CRM systems are designed to compile information on customers across different channels -- or points of contact between the customer and the company -- which could include the company's website, telephone, live chat, direct mail, marketing materials, and social media. CRM systems can also give customer-facing staff detailed information on customers' personal information, purchase history, buying preferences, and concerns.

Let’s look at the key components of a successful CRM initiative.

CRM Components

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

Key CRM Components In this slide, we see the critical components of CRM done right. The right definition of CRM incorporates these components. Based on research, you will find that companies who are effective in their CRM initiatives have the key components in place. The CRM strategy is at the center because it serves as the compass or the direction for other strategies and actions. There are two-way arrows going to and from each component because these are all related in some way to each other. You must view these components in an integrated fashion; they are interdependent. Let’s briefly review each component:

• CRM is a business strategy and philosophy ~ it is future-oriented. It requires careful planning and clear metrics. Strategy is the compass of CRM.

• CRM is based on quality customer data and information. These are the raw materials of CRM ~ intelligence is applying it.

• CRM requires the design of product & service offerings and interactions that deliver ongoing value and branded customer experiences.

• CRM is a set of processes designed with the customer in mind. Customer-centered processes & experiences are the products of CRM.

• CRM is not technology ~ technology merely enables it. It is the machinery that enables CRM to work.

• CRM requires an organizational orientation based on customer-centricity, learning, the right people, collaboration, and value-based behaviors. The people in the organization are the power supply.

• CRM adoption requires a comprehensive plan to align the organization with the CRM strategy. It requires a solid change management plan, taking into account the changes that people will go through.

• CRM requires clear and integrated project management.

• CRM improves human interactions, both internally and externally, both connected and interdependent on each other. The positive interactions within the company and between employees will create positive interactions with customers.

• CRM creates value for both the company and the customer. It has to be a win-win situation.

Gartner Model

1. Customer Vision

2. Customer-Centric Strategy

5. Customer Processes

6. Customer Information

7. Technology

8. Metrics

Cl SarahCherres Modul e 1 I Unit 2: CRM Concepts & Pers~ ctives

MAR 4860 – Customer Relationship Management MODULE 1 UNIT 2

The Gartner Model

The model shown here represents the Eight Building Blocks of CRM from Gartner, a leader in technology research and consulting. Gartner consultant, Ed Thompson, offers these blocks as required for successful CRM projects:

1 Vision: The board must take leadership in creating a CRM vision for the enterprise. The CRM vision should be used as the guide to the creation of a CRM strategy.

2 Strategy: The CRM strategy is all about how to build and develop a valuable asset: the customer base. It must set objectives and metrics for attaining that goal. It directs the objectives of other operational strategies and the CRM implementation strategy.

3 Customer experience: The customer experience must be designed in line with the CRM vision and must be constantly refined, based on actively sought customer feedback.

4 Organizational collaboration: Changes to organizational structures, processes, metrics, incentives, skills, and even the enterprise culture must be made to deliver the required external customer experience. Ongoing change management will be key.

5 Process: Successful customer process reengineering should create processes that not only meet customers' expectations and support the customer value proposal, but also provide competitive differentiation and contribute to a designed customer experience.

6 Information: Successful CRM demands the creation of a customer-information blood supply that flows around the organization, as well as tight integration between operational and analytical systems.

7 Technology: CRM technologies form a fundamental part of any enterprise's application portfolio and architecture. CRM application needs should be considered as the provision of integrated functionality that supports seamless customer-centric processes across all areas of the enterprise and its partners.

8 Metrics: Enterprises must set measurable CRM objectives and monitor all levels of CRM indicators to turn customers into assets. Without performance management, a CRM implementation will fail. Metrics is the most important of the eight building blocks, yet only a quarter of enterprises measure before implementation. The problems are identifying which metrics are critical in driving CRM benefits, and knowing where to find the information. A performance management framework is required, and without a hierarchy of linked metrics, a CRM strategy is likely to fail.