Enterprise Solutions & Services Management: L04 Introduction To Customer Relationship Management

Enterprise Solutions & Services Management
L04 Introduction to Customer Relationship Management

Temasek Polytechnic • School of Informatics & IT
Introduction to CRM
Customer Relationship Management

Lesson Objectives
• Motivation to CRM
• what is e-CRM
• Life Time Value of a customer
• one-to-one marketing
• Five steps in CRM
• Methods of customer profiling
• Customer Data Analysis

Introduction to CRM / Motivation
Facts and Figures about Customers
Source: Kalakota, R. & Robinson, M., e-Business: Roadmap for Success
 It costs six times more to sell to a new customer than to sell to an

existing one.
 A typical dissatisfied customer will tell eight to ten people about his
or her experience.
 A company can boost its profits by 85% when it increases its annual
customer retention by only 5%.
 The odds of selling a product to a new customer are 15%, whereas
the odds of selling a product to an existing customer are 50%.
 70% of complaining customers will do business with the company

again if it quickly takes care of a service nag.
 More than 90% of existing companies do not have the necessary
sales and service integration to support e-commerce.

Motivation for CRM

 Customer loyalty is a thing of the past …
◦ A customer’s continuing business i.e. customer loyalty
is no longer guaranteed. Today’s customers are more
fickle than those of the past. If you don’t provide what
the customer wants, he will find a competitor who will.
 Your customer is only ‘a click’ or a URL away from your

competitor
 You can lose your customer any time …

Motivation for CRM
 To retain your customers, you must take better care of your

customers than your competitors can
 HOW ?
◦ You need to understand your customers better, and
quickly respond to their wants and needs. You must be
proactive and anticipate what the customer’s needs and
desires. And develop and manage lifelong relationships
with them
Customer Relationship
Management

Introduction to CRM / e-CRM
What is e-CRM ?
 Electronic or online Customer Relationship Management
 Capture rich information about consumers, analyze it and
subsequently use it to deliver personalized products and
services cost effectively through integration across multiple
business systems.
 Steps to strengthen relationship between the company and
its customer to boost sales
 Increase customer retention through improved customer
satisfaction – ‘delight’ the customer

Examples
 Airlines develop frequent flier profiles that are not accessible to
other airlines
 Banks use information about account balances to market various

financial products to their customers
 Grocers, credit card companies, petrol companies create loyalty

card programmes (accumulate points for each purchase to
exchange for some items)

Benefits
 Having a deeper knowledge of customers needs
 Acquire new customers
 Improve customer service and customer satisfaction
 Reduce customer attrition to competitors or increase
customer retention
 Build long term relationship with customer that encourages
customer loyalty/repeat purchases
 More opportunities to up-sell or cross-sell
 Increase sales revenue and thus profitability

Introduction to CRM / One-to-one Marketing
One-to-one marketing
 In the past  mass marketing
◦ All customers are treated equally
 Shift in marketing paradigm

◦ One-to-one marketing [Peppers & Rogers in 1994]
◦ Not all customers are created equal
◦ No two customers are alike
◦ Some customers are more valuable than others
◦ Also called differential marketing
 Focus marketing efforts on customers with high potential

lifetime value, and give them premium treatment

Marketing Pyramid Adapted from Silverstein
Loyal Life Value Management

customers
Non-committed Customer Retention

customers
Customer Acquisition
Qualified prospects
Customer Attraction
Visitors

Who are your most valuable customers?

• Who are your customers ?
• What do they buy ?
• What are their needs and expectations ?
• How much should you invest in a customer ?

• Invest more in more ‘valuable’ customer
How much customers would spend with your
company, or most profitable customers
• How to measure value of a customer ?

• Life Time Value (LTV)

Life Time Value of Customer

Without marketing With marketing
Current Lifetime Potential Potential Treatment

Value Value Current Lifetime
Value
Value
Low / High Low / High Gold

High High
Low / Low Low / High Gold
High High
Low / Low Low / Low Bronze
High High

Introduction to CRM / Steps in CRM
Five Steps in CRM

1. Capture rich info about customers, e.g. customer profiling
2. Analyze info to identify:

 Your most valuable/profitable customer
 Their needs and preferences, through Data warehousing & Data
mining
3. Tailor products, services and communications to customer’s

individual preferences, also called personalization
4. Provide good customer service
5. Strong branding

Methods of Customer profiling …

Online Registration / Order forms
◦ Registration form requires customer to provide personal
particulars, info about products and services interested in,
needs and wants
◦ Highly effective method
◦ Provide incentives to motivate customer to fill form up
◦ Form must
 Be logically organized
 Provide simple data entry
 Provide simple navigation

Online customer survey – market research

◦ Cheaper, faster & more efficient than traditional offline
surveys
 No need to print hardcopy survey forms
 No need to involve field interviewers
 Survey respondents invited to participate via E-Mail
 Able to reach geographically diverse audience
 Survey form info fed real-time to database the moment respondents
submit their survey form
◦ To gather feedback about customer opinions, satisfaction
with company
◦ The larger the sample size, the more accurate and greater
predictive capability of the results
◦ Not suitable for every product

Issues in implementing online customer surveys

• Need to offer Incentive/Rewards
• e.g. respondent can play a game, win prizes, download some free
software after filling up the online survey
• Customers may refuse to answer certain questions
 survey result not so accurate
• Customers may not complete survey if
• Encounter technical problems
• Survey is too long
• Computers too slow e.g. long download time
• Can’t verify identities of respondents
• Respondent may project a false online image
• Don’t give honest responses
• But anonymity usually elicits more honest responses


Online focus groups
◦ Commonly held in Internet chat rooms, conducted by a
moderator who prompts questions and stimulates dialogue
regarding a particular product, service or issue.
◦ To find out needs, opinions and issues of a particular

consumer group rather than individual customer
◦ Cost effective data collection method

Cookies
◦ a text file containing information about the behavior of a person
visiting a web site.
◦ It is created by software on the web site server but stored on the

computer hard drive of the web site visitor.
◦ It contains the domain, path, lifetime and value of a variable that a

web site sets.
◦ If lifetime of this variable is longer than time user spends at the site,
then this string is saved to file on visitor’s computer.
◦ During a subsequent visit to the web site, the contents of the

"cookie" can be retrieved by the web site.

Example of cookie in Firefox browser


Cookies – to track user online movements by providing useful info such
as:
◦ How the visitor navigates the web site – pages visited
◦ How visitor search product catalog using keywords
◦ Point of entry into the site and point of exit
◦ Products selected and placed in shopping basket, but not purchased
during that session
◦ Visitor’s name and email address – for basic personalization e.g.
Welcome message
◦ Which advertising or promotional pages visitor has seen
Concerns about invasion of customer privacy - Always inform customer

upfront that you are using cookies.

Introduction to CRM / Customer Data Analysis
Customer Data Analysis
 Customer database
Info about past purchases made by customers e.g. products bought,
buying frequency, recency of purchases, time or occasion of purchase.
 Data Mining
Statistical analysis techniques to look for hidden patterns and
relationships in customer database to search for valuable business
information, to determine new opportunities
 Data Warehouse
A structure for organizing information systems using all possible data
available in the enterprise to create one integrated view of the entire
business.

A typical data warehouse
Information is Staging system Central

Data marts are Tools to analyze
collected in is used to database –
systems designed data, generate
operational cleanse and data
for a particular reports, mine the
databases/ integrate data warehouse
line of business. data for hidden
systems at from many patterns
various contact sources
points
Importing data into a data warehouse
Staging
Web server log files System
Data
Warehouse
Product catalog Campaign data
User profile data Transaction data

Objective : To analyze data captured to determine the most

profitable customers
 Automated prediction used in targeted marketing.
◦ Data mining can use data on past promotional mailings to identify
targets most likely to favorably respond to future mailings.
 Automated discovery of previously unknown patterns
◦ Analysis of retail sales data to identify seemingly unrelated products
that are often purchased together, such as baby diapers and beer …
cross-selling.
 Identify new business opportunities
◦ Airlines capture data on where customers are flying and the final
destination of passengers who change carriers in mid-flight. Thus,
airlines can identify popular locations that they do not service and check
the feasibility of adding routes to capture lost business.

Introduction to CRM
Summary: Don’t lose customer trust

After capturing info about customers from so many sources,
should never:
◦ Reveal customer personal info to public through
insecure systems, or
◦ Sell it to third parties for profit
Lose customer trust

Lose customer

Exercise
Activity: Mini Case Study on CRM:
Please refer to the Task 1 in practical04.
Note: you need to self-read the supplementary material “L04 Supp

CRM(Supplement)” about e-CRM in order to complete the exercise.
Selected teams will share their findings in the class

Exercise
Some additional readings which discuss the CRM solutions and software
• Salesforce.com’s CRM Demo Center

1. Find Customer Service Management under
http://www.salesforce.com/demos/?d=70130000000Cp3Q
2. click and view demo video
• Curious to explore more?

CRM Magazine:
http://www.nxtbook.com/nxtbooks/crmmedia/crm0908/index.php#/0

References:
• Global E-Commerce by Farhoomand & Lovelock

Chap 7 Internet Marketing
• E-Business: A Jargon-Free Practical Guide

J.A. Matthewson
Chap 9 Online Customer Relationship Management


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Enterprise Solutions & Services Management

L04 Introduction to Customer Relationship Management

Customer Relationship Management

Temasek Polytechnic • School of Informatics & IT

 It costs six times more to sell to a new customer than to sell to an

 70% of complaining customers will do business with the company

Temasek Polytechnic • School of Informatics & IT

Motivation for CRM

 Your customer is only ‘a click’ or a URL away from your

 You can lose your customer any time …

Temasek Polytechnic • School of Informatics & IT

Motivation for CRM

 To retain your customers, you must take better care of your

Temasek Polytechnic • School of Informatics & IT

Temasek Polytechnic • School of Informatics & IT

 Banks use information about account balances to market various

 Grocers, credit card companies, petrol companies create loyalty

Temasek Polytechnic • School of Informatics & IT

Temasek Polytechnic • School of Informatics & IT

 Shift in marketing paradigm

 Focus marketing efforts on customers with high potential

Temasek Polytechnic • School of Informatics & IT

Marketing Pyramid Adapted from Silverstein

Loyal Life Value Management

Non-committed Customer Retention

Temasek Polytechnic • School of Informatics & IT

Who are your most valuable customers?

• How much should you invest in a customer ?

• How to measure value of a customer ?

Temasek Polytechnic • School of Informatics & IT

Life Time Value of Customer

Current Lifetime Potential Potential Treatment

Low / High Low / High Gold

Temasek Polytechnic • School of Informatics & IT

Five Steps in CRM

2. Analyze info to identify:

3. Tailor products, services and communications to customer’s

4. Provide good customer service

Temasek Polytechnic • School of Informatics & IT

Methods of Customer profiling …

Temasek Polytechnic • School of Informatics & IT

Online customer survey – market research

Temasek Polytechnic • School of Informatics & IT

Issues in implementing online customer surveys

Temasek Polytechnic • School of Informatics & IT

Methods of Customer profiling …

◦ To find out needs, opinions and issues of a particular

◦ Cost effective data collection method

Temasek Polytechnic • School of Informatics & IT

◦ It is created by software on the web site server but stored on the

◦ It contains the domain, path, lifetime and value of a variable that a

◦ During a subsequent visit to the web site, the contents of the

Temasek Polytechnic • School of Informatics & IT

Temasek Polytechnic • School of Informatics & IT

Methods of Customer profiling …

Concerns about invasion of customer privacy - Always inform customer

Temasek Polytechnic • School of Informatics & IT

Temasek Polytechnic • School of Informatics & IT

A typical data warehouse

Information is Staging system Central

Importing data into a data warehouse

Product catalog Campaign data