Customer Relationship Management (Crm)
Content
CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
WHAT IS CRM?
• CRM is a business strategy that aims to understand, anticipate and manage the needs of an organisation’s current and potential customers. • It is a comprehensive approach which provides seamless integration of every area of business that touches the customer- namely marketing, sales, customer services and field support through the integration of people, process and technology. • CRM is a shift from traditional marketing as it focuses on the retention of customers in addition to the acquisition of new customers. • The expression Customer Relationship Management (CRM) is becoming standard terminology, replacing what is widely perceived to be a misleadingly narrow term, relationship marketing (RM).
• CRM is concerned with the creation, development and enhancement of individualised customer relationships with carefully targeted customers and customer groups resulting in maximizing their total customer life-time value.
The purpose of CRM
• The focus of CRM is on creating value for the customer and the company over the longer term. • When customers value the customer service that they receive from suppliers, they are less likely to look to alternative suppliers for their needs. • CRM enables organisations to gain ‘competitive advantage’ over competitors that supply similar products or services.
Why is CRM important?
• Today’s businesses compete with multi-product offerings created and delivered by networks, alliances and partnerships of many kinds. Both retaining customers and building relationships with other value-adding allies is critical to corporate performance. • The adoption of C.R.M. is being fuelled by a recognition that long-term relationships with customers are one of the most important assets of an organisation.
Why did CRM develop?
CRM developed for a number of reasons: • The 1980’s onwards saw rapid shifts in business that changed customer power. • Supply exceeded demands for most products. • Sellers had little pricing power. • The only protection available to suppliers of goods and services was in their relationships with customers.
What does CRM involve?
CRM involves the following: • Organisations must become customer focused • Organisations must be prepared to adapt so that it take customer needs into account and delivers them • Market research must be undertaken to assess customer needs and satisfaction
“Strategically significant customers”
• • • Customer relationship management focuses on strategically significant markets. Not all customers are equally important. Therefore, relationships should be built with customers that are likely to provide value for services. Building relationships with customers that will provide little value could result in a loss of time, staff and financial resources.
Markers of strategically significant customers
• Strategically significant customers need to satisfy at least one of three conditions : 1. Customers with high life-time values (i.e. customers that will repeatedly use the service in the long-term e.g. Nurses in a hospital library) 2. Customers who serve as benchmarks for other customers e.g. In a hospital library consultants who teach on academic courses 3. Customers who inspire change in the supplier
CUSTOMER LIFE CYCLE
• Customer equity management recognizes that customer-firm relationships, like all relationships, evolve over time. Prospects, new buyers, and long-time customers do not have the same needs, and as their relationships with a company change, so do their expectations and behavior. The concept of the customer life cycle provides a framework for understanding and managing these differences.
Stage 1: Prospects
• Prospects are not yet customers, but they represent potential value. (Highly qualified prospects are particularly important.) Firms need to manage them as they would initial customers. That said, prospects pose unique problems: Should they be offered prices below those given to existing customers? What level of sales effort should they receive? What type of communication should be offered to them regarding the quality and the value of the firm's offerings? These questions are very important, often in ways that firms do not expect. For example, marketing communications that create overly high expectations among prospects adversely affect retention once these customers have made a few purchases and been disappointed. A firm that makes this mistake ends up with high acquisition rates but low retention rates. Too few firms recognize that the marketing tactics used during the prospect stage have repercussions throughout the customer-firm relationship.
Stage 2: First-Time Buyers
• Customers move into this stage after making one purchase. These newly acquired customers usually have the lowest retention rates within a firm's customer base. Although they have signaled that the firm's products meet their specifications, they are still in the evaluation stage. They need to learn whether the products and customer service levels meet their expectations. • If the product meets expectations and remains above the quality cutoff, the customer will continue to purchase and be retained as long as the product's value is maintained. If the product does not meet expectations, the customer will stop purchasing and defect. During these early repeat purchases, just one product failure (in which the product falls below the customer's quality cutoff) generally will cause defection.
Stage 3: Early Repeat Buyers
• Customers advance to this stage after making one repeat purchase. These customers are more likely to buy again than first-time buyers, and sales per customer increase as they gain confidence with the firm. However, although two to three repeat purchases indicate satisfaction with the product, these early repeat buyers are still evaluating the relationship. If the firm provides poor service or the product does not meet expectations, they may defect. • Firms rarely identify this stage in the customer life cycle. Early repeat buyers may not be as vulnerable as first-time buyers, but they still have lower retention rates than core customers who have repeat-purchased many times, and must be managed accordingly.
Stage 4: Core Customers
• Customers enter the core customer stage after they begin to repeatpurchase regularly. The firm's product or service meets their required specifications and value. Unless a major problem arises with the purchasing process, these customers rarely reevaluate the firm's product. An occasional product failure will not automatically cause defection; numerous positive experiences serve as a basis for the customer's expectations and carry him or her through the disappointing experience. In fact, at this stage, expectations change only slightly each time the customer uses the product. Only in bid businesses or at contract renewals do these customers evaluate their decisions systematically. • The core customer stage has the highest retention rates and the highest sales per customer. These customers are special and should be treated as such. Ironically, some firms de-emphasize their core customers because of these high retention rates. Management does not see these customers as problems and so pays less attention to them.
Creating and Managing Customer Relationships
• Setting up and managing individual customer relationships can be broken up into four interrelated implementation tasks. These implementation tasks are based on the unique, customer-specific and iterative character of such relationships. • 1. Identify customers. Relationships are only possible with individuals, not with markets, segments, or populations. Therefore, the first task in setting up a relationship is to identify, individually, the party at the other end of the relationship. Many companies don't really know the identities of many of their customers, so for them this first step is absolutely crucial. But for all companies, what the identify task also entails is organizing the Organisation's various information resources so that the company can take a customerspecific view of its business.
• It means ensuring that the company has a mechanism for tagging individual customers, not just with a product code that identifies what's been sold, but also with a customer code that identifies the party that the Organisation is doing business with—the party at the other end of the mutual relationship. An Organisation must be able to recognize a customer when he comes back, in person, by phone, online, or wherever. Moreover, Organisations need to "know" each customer in as much detail as possible— including the habits, preferences, and other characteristics that make each customer unique. For example, when you call the toll-free number at Speigel, the representative knows about your last catalog order.
• 2. Differentiate customers. Knowing how customers are different allows a company (1) to focus its resources on those customers who will bring in the most value for the Organisation, and (2) to devise and implement customer-specific strategies designed to satisfy individually different customer needs. Customers represent different levels of value to the Organisation and they have different needs from the Organisation. Although not a new concept, customer grouping—the process by which customers are clustered into categories based on a specified variable—is a critical step in understanding and profitably serving customers.
• The customer differentiation task will involve an Organisation in categorizing its customers by both their value to the firm and by what needs they have. Some call centers constantly change the order-to-serve of the customers on hold based on the different values of the waiting customers. Although it would be ideal to answer every call on the second ring, when that's not possible, it would be better to vault the customers keeping you in business ahead of the customers of dubious value. In many call centers, this reshuffling is not at all apparent to customers
• 3. Interact with customers. Organisations must improve the effectiveness of their interactions with customers. Each successive interaction with a customer should take place in the context of all previous interactions with that customer. A bank may ask one question in each month's electronic statement, and next month's question may depend on last month's answer. A conversation with a customer should pick up where the last one left off. Effective customer interactions provide better insight into a customer's needs.
• 4. Customize treatment. The Organisation should adapt some aspect of its behavior toward a customer, based on that individual's needs and value. To engage a customer in an ongoing Learning Relationship, an Organisation needs to adapt its behavior to satisfy the customer's expressed needs. This might entail masscustomizing a product or tailoring some aspect of its service. This customization could involve the way an invoice is rendered or how a product is packaged.
Information Technology and CRM
• Technology plays a vital role in CRM. • Technological approaches involving the use of databases, data mining and one-to-one marketing can assist organisations to increase customer value and their own profitability. • This type of technology can be used to keep a record of customers names and contact details in addition to their history of buying products or using services. • This information can be used to target customers in a personalised way and offer them services to meet their specific needs. • This personalised communication provides value for the customer and increases customers loyalty to the provider.
Information Technology and CRM: Examples
Here are examples of how technology can be used to create personalised services to increase loyalty in customers: • Phone calls, emails, mobile phone text messages, or WAP services: Having access to customers contact details and their service or purchase preferences through databases etc can enable organisations to alert customers to new, similar or alternative services or products - Illustration: When tickets are purchased online via Lastminute.com, the website retains the customers details and their purchase history. The website regularly send emails to previous customers to inform them of similar upcoming events or special discounts. This helps to ensure that customers will continue to purchase tickets from Lastminute.com in the future.
Information Technology and CRM: Examples
• Cookies A cookie is a parcel of text sent by a server to a web browser and then sent back unchanged by the browser each time it accesses that server. HTTP cookies are used for authenticating, tracking, and maintaining specific information about users, such as site preferences and the contents of their electronic shopping carts.
- Illustration: The online store, Amazon, uses “cookies” to provide a personalised service for its customers. Amazon requires customers to register with the service when they purchase items. When registered customers log in to Amazon at a later time, they are ‘greeted’ with a welcome message which uses their name (for e.g. “Hello John”). In addition, their previous purchases are highlighted and a list of similar items that the customer may wish to purchase are also highlighted.
Information Technology and CRM: Examples
• Loyalty cards The primary role of a retailer loyalty card is to gather data about customers. This in turn leads to customer comprehension and cost insights (e.g. customer retention rates at different spending levels, response rates to offers, new customer conversion rates, and where money is being wasted on circulars), followed by appropriate marketing action and followup analysis. • Illustration: The supermarket chain, Uchumi, offers loyalty cards to its customers. When customers use the loyalty cards during pay transactions for goods, details of the purchases are stored in a database which enables Uchumi to keep track of all the purchases that their customers make. Whenever a purchase is made, for every 100/= spent, Uchumi adds a point to its customers, which can be redeemed for a later purchase or discount . The aim of this is to encourage customers to continually return to Uchumi to do their shopping.
• CRM software- “Front office” solutions - Many call centres use CRM software to store all of their customer's details. When a customer calls, the system can be used to retrieve and store information relevant to the customer. By serving the customer quickly and efficiently, and also keeping all information on a customer in one place, a company aims to make cost savings, and also encourage new customers.
Face-to-face CRM
• CRM can also be carried out in face-to-face interactions without the use of technology. • Staff members often remember the names and favourite services/products of regular customers and use this information to create a personalised service for them. • For example, in a hospital, you will know the name of nurses that come in often and probably remember the area that they work in. • However, face-to-face CRM could prove less useful when organisations have a large number of customers as it would be more difficult to remember details about each of them.
Benefits of CRM
Benefits of CRM include: • reduced costs, because the right things are being done (ie., effective and efficient operation) • increased customer satisfaction, because they are getting exactly what they want (ie. meeting and exceeding expectations) • ensuring that the focus of the organisation is external • growth in numbers of customers • maximisation of opportunities (eg. increased services, referrals, etc.) • increased access to a source of market and competitor information • highlighting poor operational processes • long term profitability and sustainability
Implementing CRM
• • 1. 2. 3. 4. When introducing or developing CRM, a strategic review of the organisation’s current position should be undertaken. Organisations need to address four issues: What is our core business and how will it evolve in the future? What form of CRM is appropriate for our business now and in the future? What IT infrastructure do we have and what do we need to support the future organisation needs? What vendors and partners do we need to choose?
WHAT IS CRM?
• CRM is a business strategy that aims to understand, anticipate and manage the needs of an organisation’s current and potential customers. • It is a comprehensive approach which provides seamless integration of every area of business that touches the customer- namely marketing, sales, customer services and field support through the integration of people, process and technology. • CRM is a shift from traditional marketing as it focuses on the retention of customers in addition to the acquisition of new customers. • The expression Customer Relationship Management (CRM) is becoming standard terminology, replacing what is widely perceived to be a misleadingly narrow term, relationship marketing (RM).
• CRM is concerned with the creation, development and enhancement of individualised customer relationships with carefully targeted customers and customer groups resulting in maximizing their total customer life-time value.
The purpose of CRM
• The focus of CRM is on creating value for the customer and the company over the longer term. • When customers value the customer service that they receive from suppliers, they are less likely to look to alternative suppliers for their needs. • CRM enables organisations to gain ‘competitive advantage’ over competitors that supply similar products or services.
Why is CRM important?
• Today’s businesses compete with multi-product offerings created and delivered by networks, alliances and partnerships of many kinds. Both retaining customers and building relationships with other value-adding allies is critical to corporate performance. • The adoption of C.R.M. is being fuelled by a recognition that long-term relationships with customers are one of the most important assets of an organisation.
Why did CRM develop?
CRM developed for a number of reasons: • The 1980’s onwards saw rapid shifts in business that changed customer power. • Supply exceeded demands for most products. • Sellers had little pricing power. • The only protection available to suppliers of goods and services was in their relationships with customers.
What does CRM involve?
CRM involves the following: • Organisations must become customer focused • Organisations must be prepared to adapt so that it take customer needs into account and delivers them • Market research must be undertaken to assess customer needs and satisfaction
“Strategically significant customers”
• • • Customer relationship management focuses on strategically significant markets. Not all customers are equally important. Therefore, relationships should be built with customers that are likely to provide value for services. Building relationships with customers that will provide little value could result in a loss of time, staff and financial resources.
Markers of strategically significant customers
• Strategically significant customers need to satisfy at least one of three conditions : 1. Customers with high life-time values (i.e. customers that will repeatedly use the service in the long-term e.g. Nurses in a hospital library) 2. Customers who serve as benchmarks for other customers e.g. In a hospital library consultants who teach on academic courses 3. Customers who inspire change in the supplier
CUSTOMER LIFE CYCLE
• Customer equity management recognizes that customer-firm relationships, like all relationships, evolve over time. Prospects, new buyers, and long-time customers do not have the same needs, and as their relationships with a company change, so do their expectations and behavior. The concept of the customer life cycle provides a framework for understanding and managing these differences.
Stage 1: Prospects
• Prospects are not yet customers, but they represent potential value. (Highly qualified prospects are particularly important.) Firms need to manage them as they would initial customers. That said, prospects pose unique problems: Should they be offered prices below those given to existing customers? What level of sales effort should they receive? What type of communication should be offered to them regarding the quality and the value of the firm's offerings? These questions are very important, often in ways that firms do not expect. For example, marketing communications that create overly high expectations among prospects adversely affect retention once these customers have made a few purchases and been disappointed. A firm that makes this mistake ends up with high acquisition rates but low retention rates. Too few firms recognize that the marketing tactics used during the prospect stage have repercussions throughout the customer-firm relationship.
Stage 2: First-Time Buyers
• Customers move into this stage after making one purchase. These newly acquired customers usually have the lowest retention rates within a firm's customer base. Although they have signaled that the firm's products meet their specifications, they are still in the evaluation stage. They need to learn whether the products and customer service levels meet their expectations. • If the product meets expectations and remains above the quality cutoff, the customer will continue to purchase and be retained as long as the product's value is maintained. If the product does not meet expectations, the customer will stop purchasing and defect. During these early repeat purchases, just one product failure (in which the product falls below the customer's quality cutoff) generally will cause defection.
Stage 3: Early Repeat Buyers
• Customers advance to this stage after making one repeat purchase. These customers are more likely to buy again than first-time buyers, and sales per customer increase as they gain confidence with the firm. However, although two to three repeat purchases indicate satisfaction with the product, these early repeat buyers are still evaluating the relationship. If the firm provides poor service or the product does not meet expectations, they may defect. • Firms rarely identify this stage in the customer life cycle. Early repeat buyers may not be as vulnerable as first-time buyers, but they still have lower retention rates than core customers who have repeat-purchased many times, and must be managed accordingly.
Stage 4: Core Customers
• Customers enter the core customer stage after they begin to repeatpurchase regularly. The firm's product or service meets their required specifications and value. Unless a major problem arises with the purchasing process, these customers rarely reevaluate the firm's product. An occasional product failure will not automatically cause defection; numerous positive experiences serve as a basis for the customer's expectations and carry him or her through the disappointing experience. In fact, at this stage, expectations change only slightly each time the customer uses the product. Only in bid businesses or at contract renewals do these customers evaluate their decisions systematically. • The core customer stage has the highest retention rates and the highest sales per customer. These customers are special and should be treated as such. Ironically, some firms de-emphasize their core customers because of these high retention rates. Management does not see these customers as problems and so pays less attention to them.
Creating and Managing Customer Relationships
• Setting up and managing individual customer relationships can be broken up into four interrelated implementation tasks. These implementation tasks are based on the unique, customer-specific and iterative character of such relationships. • 1. Identify customers. Relationships are only possible with individuals, not with markets, segments, or populations. Therefore, the first task in setting up a relationship is to identify, individually, the party at the other end of the relationship. Many companies don't really know the identities of many of their customers, so for them this first step is absolutely crucial. But for all companies, what the identify task also entails is organizing the Organisation's various information resources so that the company can take a customerspecific view of its business.
• It means ensuring that the company has a mechanism for tagging individual customers, not just with a product code that identifies what's been sold, but also with a customer code that identifies the party that the Organisation is doing business with—the party at the other end of the mutual relationship. An Organisation must be able to recognize a customer when he comes back, in person, by phone, online, or wherever. Moreover, Organisations need to "know" each customer in as much detail as possible— including the habits, preferences, and other characteristics that make each customer unique. For example, when you call the toll-free number at Speigel, the representative knows about your last catalog order.
• 2. Differentiate customers. Knowing how customers are different allows a company (1) to focus its resources on those customers who will bring in the most value for the Organisation, and (2) to devise and implement customer-specific strategies designed to satisfy individually different customer needs. Customers represent different levels of value to the Organisation and they have different needs from the Organisation. Although not a new concept, customer grouping—the process by which customers are clustered into categories based on a specified variable—is a critical step in understanding and profitably serving customers.
• The customer differentiation task will involve an Organisation in categorizing its customers by both their value to the firm and by what needs they have. Some call centers constantly change the order-to-serve of the customers on hold based on the different values of the waiting customers. Although it would be ideal to answer every call on the second ring, when that's not possible, it would be better to vault the customers keeping you in business ahead of the customers of dubious value. In many call centers, this reshuffling is not at all apparent to customers
• 3. Interact with customers. Organisations must improve the effectiveness of their interactions with customers. Each successive interaction with a customer should take place in the context of all previous interactions with that customer. A bank may ask one question in each month's electronic statement, and next month's question may depend on last month's answer. A conversation with a customer should pick up where the last one left off. Effective customer interactions provide better insight into a customer's needs.
• 4. Customize treatment. The Organisation should adapt some aspect of its behavior toward a customer, based on that individual's needs and value. To engage a customer in an ongoing Learning Relationship, an Organisation needs to adapt its behavior to satisfy the customer's expressed needs. This might entail masscustomizing a product or tailoring some aspect of its service. This customization could involve the way an invoice is rendered or how a product is packaged.
Information Technology and CRM
• Technology plays a vital role in CRM. • Technological approaches involving the use of databases, data mining and one-to-one marketing can assist organisations to increase customer value and their own profitability. • This type of technology can be used to keep a record of customers names and contact details in addition to their history of buying products or using services. • This information can be used to target customers in a personalised way and offer them services to meet their specific needs. • This personalised communication provides value for the customer and increases customers loyalty to the provider.
Information Technology and CRM: Examples
Here are examples of how technology can be used to create personalised services to increase loyalty in customers: • Phone calls, emails, mobile phone text messages, or WAP services: Having access to customers contact details and their service or purchase preferences through databases etc can enable organisations to alert customers to new, similar or alternative services or products - Illustration: When tickets are purchased online via Lastminute.com, the website retains the customers details and their purchase history. The website regularly send emails to previous customers to inform them of similar upcoming events or special discounts. This helps to ensure that customers will continue to purchase tickets from Lastminute.com in the future.
Information Technology and CRM: Examples
• Cookies A cookie is a parcel of text sent by a server to a web browser and then sent back unchanged by the browser each time it accesses that server. HTTP cookies are used for authenticating, tracking, and maintaining specific information about users, such as site preferences and the contents of their electronic shopping carts.
- Illustration: The online store, Amazon, uses “cookies” to provide a personalised service for its customers. Amazon requires customers to register with the service when they purchase items. When registered customers log in to Amazon at a later time, they are ‘greeted’ with a welcome message which uses their name (for e.g. “Hello John”). In addition, their previous purchases are highlighted and a list of similar items that the customer may wish to purchase are also highlighted.
Information Technology and CRM: Examples
• Loyalty cards The primary role of a retailer loyalty card is to gather data about customers. This in turn leads to customer comprehension and cost insights (e.g. customer retention rates at different spending levels, response rates to offers, new customer conversion rates, and where money is being wasted on circulars), followed by appropriate marketing action and followup analysis. • Illustration: The supermarket chain, Uchumi, offers loyalty cards to its customers. When customers use the loyalty cards during pay transactions for goods, details of the purchases are stored in a database which enables Uchumi to keep track of all the purchases that their customers make. Whenever a purchase is made, for every 100/= spent, Uchumi adds a point to its customers, which can be redeemed for a later purchase or discount . The aim of this is to encourage customers to continually return to Uchumi to do their shopping.
• CRM software- “Front office” solutions - Many call centres use CRM software to store all of their customer's details. When a customer calls, the system can be used to retrieve and store information relevant to the customer. By serving the customer quickly and efficiently, and also keeping all information on a customer in one place, a company aims to make cost savings, and also encourage new customers.
Face-to-face CRM
• CRM can also be carried out in face-to-face interactions without the use of technology. • Staff members often remember the names and favourite services/products of regular customers and use this information to create a personalised service for them. • For example, in a hospital, you will know the name of nurses that come in often and probably remember the area that they work in. • However, face-to-face CRM could prove less useful when organisations have a large number of customers as it would be more difficult to remember details about each of them.
Benefits of CRM
Benefits of CRM include: • reduced costs, because the right things are being done (ie., effective and efficient operation) • increased customer satisfaction, because they are getting exactly what they want (ie. meeting and exceeding expectations) • ensuring that the focus of the organisation is external • growth in numbers of customers • maximisation of opportunities (eg. increased services, referrals, etc.) • increased access to a source of market and competitor information • highlighting poor operational processes • long term profitability and sustainability
Implementing CRM
• • 1. 2. 3. 4. When introducing or developing CRM, a strategic review of the organisation’s current position should be undertaken. Organisations need to address four issues: What is our core business and how will it evolve in the future? What form of CRM is appropriate for our business now and in the future? What IT infrastructure do we have and what do we need to support the future organisation needs? What vendors and partners do we need to choose?
