Customer Relationship Management (CRM)

Learning Objectives

Understand the importance of customer relationships Identify the components of CRM

Describe the factors that can cause CRM to fail

Learning Objectives
Understand the different ways that you as an employee can affect CRM Use the material presented to develop a customer centered approach to your role Identify types of customer and recognize their potential impact on the business of your organization
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What is CRM?

What is CRM?
Lets break it down into its components: Customer - a person or organization who uses the product or service we provide Relationship - a working together towards shared goals in an open and trusting manner delivering mutual benefit Management - organization and utilization of resources to achieve a set target
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Focus on Relationship
Successful organizations use three steps to build relationships:
Determine mutually satisfying goals Establish and maintain rapport

Produce positive feelings in both the organization and the customer

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Focus on Relationship
Information from the PIMS database at the Strategic Planning Institute shows that:
Organizations rated in the top third in perceived product quality - they think of their customers goals as their own average a return on investment of 30% The organizations in the bottom third return only 5% Success goes to those organizations who think of their customers goals as their own

Conditions
The organization and the customer both have sets of conditions to consider when building the relationship, such as:
Wants Acceptable actions Evidence that the action has been successful The context in which they both operate The consequences of any action or inaction on the overall relationship
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How Does CRM Impact the Organization? CRM can have a major impact on an organization through: Shifting the focus from product to customer Streamlining the offer to what the customer requires, not want the organization can make

Highlighting competencies required for an effective CRM process

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Does the Organization Need CRM?

The bottom line is:

To increase profitability through providing a better service to the customer

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CRM as a Product
CRM can be regarded as a product which has Identifiable inputs Identifiable components Identifiable characteristics which define CRM for your organization and customer base Capacity for improvement and evolution over time
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CRM as a Process
CRM can be regarded as a process which has Identifiable inputs Identifiable outputs Identifiable components that transform in the inputs and generate the outputs Critical points which must be managed
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Customer Service as a Process

The customer service process blends together
Information Products Service People Communication

End Result = Customer Focused Solution

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Customer Service as a Process

Key point to remember

Customers do not get service from the organization, nor from its systems no matter how high tech and elaborate - customers get service from people
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Customer Service as a Process

There is a growing trend for organizations to implement software designed for CRM These e-CRM solutions are certainly useful, but represent only part of the solution to delivery of excellent CRM There is a need for h-CRM to be implemented alongside and supported by e-CRM solutions, where h-CRM stands for Human - Customer Relationship Management
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Constraints
Customer service is delivered in an environment where there may be several constraints:
Resource availability Knowledge of the customer People skills Aggressive competitors Supply chain issues Legal and political requirements Accessibility
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Customer Service
Customer service is regarded in many organizations as a
Cost centre Non value-adding Non-central activity Organizations who have a strong customer service culture regard customer service as
Central Of strategic importance Delivering competitive advantage

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Customer Relationship Management

Take a new perspective, consider the following:
Customer service is done to the customer Customer relationship management is done with the customer The second statement is based on the link with the customer not being a transitory issue, but a relationship built for the longer term

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Looking At Customers

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Identifying Your Customers

Customers are defined as:
People or organizations who are the users of the product or service generated and provided by ourselves

Customers are present both inside and outside of the organization

Internal Customers External Customers
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Internal Customers
Internal customers are the people in our own organization who are dependent on us for
Materials Information Instruction Participation Assistance

Without which they cannot perform their tasks to maximum efficiency

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External Customers
External customers are what can be considered traditional customers
They take our products and services and pay for them They exist outside the confines of our own organization They are open to approach from our competitors They may not always be dependent upon us for products and services and may switch away to our competitors

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Why Do We Need Customers?

Customers have needs and wants
These create demand Demand generates orders Orders generate production Production allows supply Supply satisfies demand Customers pay for this satisfaction

Basic line is that without customers there is no money and without money there is no business
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What Do Customers Want?

Customers want to have their needs satisfied Customers therefore want our products or services to deliver benefits to them

Benefits are what our products or service can do for the customer
The same feature of our product or service may deliver different benefits to different customers

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Customer Expectations
Rule No 1
You cannot assume that you know what a customers expectations are You must ask

Rule No 2
Customer expectations will constantly change so they must be determined on an on-going basis
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Customer Expectations
Customer expectations for the same product or service will vary according to:
Social and demographic factors Economic situation Educational standards Competitor products Experience

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Customer Expectations
Do customers do business with you because you meet their expectations on:
Quality Price Product Location Customer service What will keep them as your customer?

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Integrating the Customer

This new way of looking at the business involves integrating the customer into our business and vice versa Benefits of Integration
Reduced costs because the right things are being done Increased customer satisfaction because they are getting exactly what they want Increases the external focus of the organization Long term profitability
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A Customer Focused Solution

The old viewpoint in industry was:
Heres what we can make - who wants to buy our product

The new viewpoint in industry is becoming:

What exactly do our customers want and need what do we need to be able to produce and deliver it to our customers This is a quantum leap in terms of how we look at our business activity
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A Customer Focused Solution

So what do we need to take this quantum leap: A New Way Of Thinking
Change in mindset Change in the messages sent and received Change in the overall culture

A New Way Of Doing

Processes that are capable Structures that support a customer centered business Connectivity both internally and externally

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Managing The Customer

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Why Manage Customers ?

Customers are an exceptional source of information required to make a business succeed
Knowing what they want and need
Allows us to focus our production efforts

Knowing which ones have most growth potential

Allows us to focus on developing highest potential

Knowing which ones are most or least profitable

Allows us to focus on maximizing profit

Knowing which ones will be advocates

Allows us to provide references and safely test new products

Managements job is to utilize resources

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Paretos Law
Paretos Law is commonly known as the 80:20 rule
20% of customers give 80% of the problems 20% of customers account for 80% of profits

20% of customers give 80% of your business

The key thing is to know which customers fit into which category and then deal with them accordingly

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Customer Value
Customer value can be measured on three scales
Market Share
How many high value customers from the potential market does the company actually have?

Customer Share
How much of the spend of the high value customers do we actually have?

Customer Lifetime Value

How long with the customer stay with us and how much are they worth to us over that time

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Customer Value
Lets add two more metrics that can be used to assess customer value Most Valuable Customer - MVC Most Growable Customer - MGC Once we have identified these then we can act towards them in a manner that suits their importance to our organization
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Customer Value
Once we have customers we need to ask the following questions:
How do we identify our customers?

How do we plan to retain them in the future?

How do we intend to develop them in the future?
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Customer Value
When looking at customer profiles set against relative satisfaction and perceived value once can identify two main categories that must be managed
High Satisfaction/High Perceived Value
These are customers who would make excellent advocates for the organization They need to be nurtured and given special treatment

Low Satisfaction/Low Perceived Value

These are customers who can be classified as saboteurs as they will have little or no loyalty and may actively evangelize against the organization

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Hierarchy of Service
Link Service level, Loyalty and Profitability together
Customers are dependent on you because your service level has allowed them to integrate you into their business
High loyalty, high profitability

Customers switch easily due to poor service form you

Low loyalty, low profitability

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Hierarchy of Service
Dependent on you because of your service Loyalty & PROFITS Increase With Service Level Uses you in Preference because of your service Satisfactory Service

Unsatisfactory Service

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Information v Knowledge
There is a crucial distinction between Customer Information

Customer Knowledge
Businesses need to know their customers so Customer Knowledge is more important

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Information and Knowledge

The different sources of:
Customer Information
Surveys Panels Literature

Customer Knowledge
Direct links with customers Tuned in staff Knowledge Management Systems Accessibility to information
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Customers and The Culture

Continued success of an organization is heavily dependent upon the alignment of:
People

Technology
Strategy In a way that consistently delivers customer satisfaction
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Customers and The Culture

Impact of Technology
Aids work flow
Allows measurement of what actually matters Facilitates customer demands Facilitates knowledge building Saves time
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Customers and The Culture

Impact of Strategy
High value is placed on the customer
Focus is on building relationships Focus is on developing key competencies

All efforts in the organization are aligned

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Customers and The Culture

People impact on the culture through
Customers seen, and treated, as partners
Relationship building is valued Service is seen as a value-adding activity Customer focus is rewarded There is corporate support for service activity
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Measuring CRM

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Excellent CRM
Customers remember only two types of service experience:
Those that represent truly excellent service Those that represent truly terrible customer service This means that if your organization is delivering average customer service then it is not going top be remembered

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Measuring Customer Service

Traditional Metrics
Number of complaints Turnaround time Right first time Point of contact experience Satisfaction rating Systems capability to meet customer demands Innovation rate Customer growth rate Customer integration Customer loyalty
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Customer Relationship Management Metrics

Measuring CRM
CRM-based metrics tend to have perspectives which are:
Forward Looking Strategic

Traditional metrics tend to have a perspective which is:

Backward Looking Snap Shot
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Excellent CRM
The following characteristics are associated with delivery of excellent service
Reliability Responsiveness Accessibility Safety Courtesy Consideration Communication Recognizing the customer Competence Responsiveness
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Problems in CRM
To deal effectively with problems in Customer Service that influence CRM it is important to have prioritization criteria to allow you to focus on the most important issues It is equally important to focus on what you can actually do something about, through assessing span of control for issues
Criteria may include:
People Quality Efficiency Safety
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Process Analysis in CRM

Process analysis has value in CRM in that it allows:
A common understanding of what exactly is involved in the CRM process An understanding of where potential problems may arise, thereby allowing preventative measures to be taken An understanding of the linkages between the various components of the process

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Moments of Truth
Prioritization can be helped by examining the cycle of service for moments of truth A moment of truth is any encounter with a customer that allows them to form a view of your company based on their expectations Expectations can be met, disappointed or exceeded So moments of truth can be either positive or negative

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Moments of Truth
Analysis of the moments of truth allows the company to focus on areas where the moments of truth are negative experiences for the customer A continuous improvement approach should be taken to ensure that all the moments of truth are positive experiences
Define the cycle of service Identify negative moments of truth Define solutions and look at the solutions in terms of
Ease of implementation Impact on the cycle of service

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Moments of Truth
Negative moments of truth carry a lot of weight with the customer and may adversely affect the relationship Negative moments of truth need to be analyzed in terms of
Impact on the customer relationship Identification of the exact problem Prioritization as to which problem to tackle first -- usually based on impact and resource availability
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Standards, Continuous Improvement & CRM

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Standards in CRM
Standards allow the organization to deliver excellent service in a consistent manner Standards make expectations explicit for people involved in dealing with the customers Standards can be set using SMARTS criteria
Specific Measurable Achievable Relevant Time Bound Supported by the organization
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Reality Check!
As with any other business activity, CRM initiatives have to be grounded in reality Reality can be viewed in terms of
Resource availability
People, time, money, materials

Capabilities
Skills, competencies, systems

Other / conflicting demands

Production, quality, administration etc
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The QCT Link in CRM

There is a need to be aware of the linkage between

Quality

Time

Cost
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The QCT Link in CRM

There are constraints that are at play in all organizations when we look at Quality
A reduction in cost plus a reduction in the time available will usually lead to a reduction in quality An increase in cost plus an increase in time will lead to improved quality Thus the availability of resources will impact on the overall quality of the CRM activities

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The QCT Link in CRM

The interdependency of the three components needs to be taken into consideration when looking at:
Standards Commitments Objectives

A change in any one of the constraining factors will impact on the others

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Continuous Improvement in CRM

For high priority issues follow the route identified below
Find the cause Design and implement a solution Check if the cause has been eliminated If yes - continue with the implementation If no - go back and check the cause

It is important that the cause of the problems that occur in customer service are removed

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Continuous Improvement in CRM

Requirement to look at the cause and not just the symptoms
Cause - when removed the problem disappears Symptom - when removed the problem will recur

Looking for the cause of problems in CRM

Check three areas where causes can lie:
People Process Product
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Continuous Improvement in CRM

Once the root cause has been identified there are two questions that must be asked - before designing a solution Question 1 - How did the root cause come about? Question 2 - How did it escape detection Design the solution to cover both of these questions

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Continuous Improvement in CRM

Designing the solution
What exactly needs to be fixed? How is the solution fixing it? What is needed for the implementation? How will people know about the solution? Is the solution acceptable to the customer ? How will we know if it is working? Can we make the solution better?

By asking these questions we design a better solution that will have long term value
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Continuous Improvement in CRM

Process mapping will show the linkages between the CRM activities Discussion with customers to obtain real feedback will show where improvements need to be made Customer expectations and organizational goals will allow the improvements to be prioritised for implementation
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Continuous Improvement in CRM

Use the Plan-Do-Check-Act (PDCA) cycle
Plan - identify what needs to be improved, how, by whom and by when Do -- Implement the plan Check - analyze the results using defined metrics that have been set at the outset Act - if the metrics show that the plan is delivering as expected, continue with implementation The results show problems then act to correct them and re-plan

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CRM As A Business Process

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CRM As A Business Process

Undertake a Process Analysis of CRM activity to:
Understand relationships / interdependency with other functions Identify any problem areas or bottlenecks

Present clear image of the overall process and remove any unnecessary steps or actions
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CRM As A Business Process

For strengths identified in the Process Analysis
Leverage strengths to maximize benefits from them for the customers and the organization Use the strengths as models for building new process steps by transferring best practice Use Process Analysis information to drive continuous improvement

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CRM As A Business Process

For any weaknesses identified in the Process Analysis:
Build solutions designed whilst taking into account the constraints that the CRM process must work within
Remove weaknesses through application of continuous improvement Obtain feedback from customers as to the effect of the weakness and react accordingly
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CRM, Communication & People

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Communication - A CRM Activity

Communication is central to any successful relationship In terms of CRM - communication needs to be consistent and high quality as determined by:
On Time Focused Relevant Reliable Coherent
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Communication in CRM
The information contained in a CRM system allows communication to be directed at the correct audience

The communication system must facilitate honest and actionable feedback

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People and CRM

As with any other business process - the people involved have a great impact on the success of the system For CRM, key characteristics would be:
Positive attitude People orientation Organizational skills Analytical skills Customer focus
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Commitments
When a commitment is made to a customer then it must be carried out - otherwise the relationship is damaged Therefore it is important to ensure that any commitment made is actionable The commitment must be considered in terms of
Its impact on the organization Its impact on the customer relationship

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CRM Failure

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Organizational Impact
Failure of the CRM system can lead to problems within the organization
Loss of customers Poor communication with customers leading to loss of opportunity

Focus on wrong activities thereby wasting resources

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Organizational Impact
Loss of safe testers for new products and services Reduced profitability Reduction in access to a source of market and competitor information

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Factors That Cause CRM Failure

There are several factors which can cause CRM failure, such as:
Lack of prioritization of customer issues Culture which is either apathetic towards or pitted against customers Poor systems in place for managing customers Lack of understanding of customer value
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Preventing Failure
CRM failure can be prevented by:
Ensuring customers are valued Prioritizing in favor of the customer Having a CRM system which is suitable and functional within the organizations constraints

Integrating the customer into the business and vice versa

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Summary
CRM is a basic requirement for any business People are the most important component of any CRM system Customers must be seen as crucial to the business

Managing the customer relationship improves overall business performance and profitability
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Summary
CRM activity needs to have clear objectives and to be measured against them on a continuous basis CRM systems evolve with the organization and the customer- continuous improvement principles apply CRM systems fail - there is a need to maintain a strategic focus on CRM and to resource it appropriately

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