CUSTOMER RELATIONSHIP MANAGEMENT

CUSTOMER RELATIONSHIP MANAGEMENT

Customer relationship management (CRM) is a widelyimplemented strategy for managing a companys interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes principally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Customer relationship management describes a company-wide business strategy including customerinterface departments as well as other departments.

WHAT IS CRM

An integrated approach to identifying, acquiring and maintaining customers. siebel.com Allows companies to coordinate their approach across channels, departments and also geographically. siebel.com

DEFINITION
CRM is the strategic use of information, processes, technology and people to manage the customers relationship with your company (marketing, sales, services and support) across the whole customer life cycle.

KEY ELEMENTS
CRM

focuses on strategic impact rather than operational impact. Benefits are generally long term rather than immediate(future increased profit rather than immediate cost reduction) CRM is a total discipline. To understand CRM, think of it as having the same components as any manufacturing business. It includes all the functions that directly touch the customer through out his entire lifetime with your company.

COMPONENTS
Information:- Information is the raw material of CRM. These types of information are useful to CRM: Identification Data: Name/address/phone data collected from customers to complete a business transaction Marketing Data: Descriptors/traits/preferences collected from customers during s transaction(either by asking questions or tracking behaviour) List Data: Names/addresses collected by a third party, which can be bought or leased Overlay Data: Customer profile data collected by a third party , which can be leased and appended to existing customer records

COMPONENTS
Process:- Customer centered processes are the product of CRM. Some examples are All current/future processes that directly touch the customers Touch points or means by which we interact with customers, such as phone, e-mail, etc. Identifying and eliminating process disconnects white space Integrating and rationalising processes from the customers point of view

COMPONENTS
Technology:- It is the machinery that enables CRM to work. These are examples of technologies that CRM may find useful: Software products ( process automation tools, analysis tools, web site development and management tools) Networking and integrating applications and database Databases, either purchased solutions or homegrown, central or distributed Security features, such as encryption tools and firewalls

COMPONENTS
People are the power supply of CRM. The energy source must be set to right voltage for the entire system to work. People are reset through various change management tools and support mechanisms, such as:
Training and New

education

tools Measurement and rewards

KEY CONCEPTS
Customer Life Cycle The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC). However, CLC focuses upon the creation of and delivery of lifetime value to the customer i.e. looks at the products or services that customers NEED throughout their lives. It is marketing orientated rather than product orientated, and embodies the marketing concept. Essentially, CLC is a summary of the key stages in a customer's relationship with an organisation. The problem here is that every organisation's product offering is different, which makes it impossible to draw out a single Life Cycle that is the same for every organisation.

KEY CONCEPTS

KEY CONCEPTS
Let's consider an example from the Banking sector. HSBC has a number of products that it aims at its customers throughout their lifetime relationship with the company. Here we apply a CLC. You can start young when you want to save money. 11-15 year olds are targeted with the Livecash Account, and 16-17 year olds with the Right Track Account. Then when (or if) you begin College or University there are Student Loans, and when you qualify there are Recent Graduate Accounts. When you begin work there are many types of current and savings account, and you may wish to buy property, and so take out a mortgage. You could take out a car loan, to buy a vehicle to get you to work. It would also be advisable to take out a pension.

KEY CONCEPTS
As you progress through your career you begin your own family, and save for your own children's education. You embark upon a number of savings plans and schemes, and ultimately HSBC offer you pension planning (you may want to insure yourself for funeral expenses - although HSBC may not offer this!). This is how an organization such as HSBC, which is marketing orientated, can recruit and retain customers, and then extend additional products and services to them - throughout the individual's life. This is an example of a Customer Life Cycle (CLC).

PHASES

The three phases in which CRM support the relationship between a business and its customers are to: Acquire: CRM can help a business acquire new customers through contact management, selling, and fulfillment. Enhance: web-enabled CRM combined with customer service tools offers customers service from a team of sales and service specialists, which offers customers the convenience of one-stop shopping. Retain: CRM software and databases enable a business to identify and reward its loyal customers and further develop its targeted marketing and relationship marketing initiatives.

CHALLENGES
Tools and workflows can be complex, especially for large businesses. Previously these tools were generally limited to contact management: monitoring and recording interactions and communications. Software solutions then expanded to embrace deal tracking, territories, opportunities, and at the sales pipeline itself. Next came the advent of tools for other client-interface business functions, as described below. These tools have been, and still are, offered as on-premises software that companies purchase and run on their own IT infrastructure. Often, implementations are fragmentedisolated initiatives by individual departments to address their own needs. Systems that start disunited usually stay that way: siloed thinking and decision processes frequently lead to separate and incompatible systems, and dysfunctional processes.

CHALLENGES
Business reputation has become a growing challenge. The outcome of internal fragmentation that is observed and commented upon by customers is now visible to the rest of the world in the era of the social customer, where in the past, only employees or partners were aware of it. Addressing the fragmentation requires a shift in philosophy and mindset within an organization so that everyone considers the impact to the customer of policy, decisions and actions. Human response at all levels of the organization can affect the customer experience for good or ill. Even one unhappy customer can deliver a body blow to a business.

CUSTOMER ASSET
The concept of customer being one of your companys asset is just now beginning to be widely accepted. CRM delivers value because it focuses on lengthening the duration of the relationship. CRM makes good business sense because loyal customers buy more products, buy more often, cost less to sell to and often pay a premium. However even the most loyal customer must be willing to pay enough so that there is profit on each sale. A company cant stay in business just by having loyal customers if they lose money on every transaction.

CUSTOMER INFORMATION
Customer information is a tangible company asset that can be inventoried and managed. It is a critical component for building loyalty because its impossible to build strong relationships if you dont know who your customers are and you dont know what their needs and experiences have been. Just raw material in a manufacturing unit , information has a value. That is becoming clearer as customer databases are beginning to be offered for sale as part of a companys assets. Of course, this has raised all kinds of privacy issues, such as in the case where bankrupt retailer Toysmart.com tried to auction off its customer database even though it had promised never to do so.

CUSTOMER KNOWLEDGE MANAGEMENT

In the emphasis on knowledge as a key competitive factor in the global economy, corporations may be overlooking a major element customer knowledge. For example: Old Mutual, the largest insurance company in South Africa has been incorporating the knowledge of patients concerning their own health condition and treatment directly by way of electronic means, instead of relying only on medical doctors to provide this. Customer knowledge is being used by Old Mutual both to screen applicants for medical insurance and more importantly to develop new medical insurance products.

CUSTOMER KNOWLEDGE MANAGEMENT

Research shows that by managing the knowledge of their customers, corporations are more likely to sense emerging market opportunities before their competitors, to constructively challenge the established wisdom of doing things around here, and to more rapidly create economic value for the corporation, its shareholders, and last, but not least, its customers. CKM is the strategic process by which cutting edge companies emancipate their customers from passive recipients of products and services, to empowerment as knowledge partners. CKM is about gaining, sharing, and expanding the knowledge residing in customers, to both customer and corporate benefit.

CUSTOMER KNOWLEDGE MANAGEMENT

It can take the form of prosumerism, mutual innovation, team-based co-learning, communities of practice, and joint intellectual property (IP) management. We have identified these as five styles of CKM, which are distinctively different practices, but not mutually exclusive.

FIVE STYLES OF CKM AND THEIR APPLICATION

Prosumerism:- Alvin Toffler (1980) first used the expression prosumer to denote that the customer could fill the dual roles of producer and consumer. Such co-production is not new, e.g. Bosch develops engine management systems in co-production with TATA Motors, who conceives and assembles Nano. What is new is the way that knowledge co-production with the customer expresses itself in role patterns and codes of interactivity. For example, Quicken enables the customer to learn more about the available resources in financial services, thus creating options and a predisposition within the customer to rapidly tailor-make an offering in the future, also based on creatively suggesting new ideas and benefits.

FIVE STYLES OF CKM AND THEIR APPLICATION

The way IKEA, the living environment furniture retailer, presents itself to customers is all about co-production, about how benefits and activities have been reallocated between producer and customer. The CKM process in IKEA transforms the customer into a co-value creator, endowing him/her with new competencies and benefaction opportunities. It liberates the customer from the platform of only past, accumulated knowledge by stimulating the him with a pattern of open-ended value-creating ideas, thereby effecting co-production and mutual new value evidenced in new IKEA furniture products and services.

FIVE STYLES OF CKM AND THEIR APPLICATION

Team Based Co-learning:- The change process in Xerox Corporation, from being a copying machine company to becoming the document company is based on organizational learning resulting from customer knowledge management. Customer knowledge was the key to reconfigure the entire system of document management and its infrastructure, spanning resources and processes much broader than its own traditional realm of activities. Whereas the Prosumerism CKM style focuses more on co-production of products and services, team-based co-learning focuses on reconfiguring entire organizations and systems of value.

FIVE STYLES OF CKM AND THEIR APPLICATION

Mutual innovation :- In the 1970s, Eric von Hippel found that most product innovations come not from within the company that produces the product but from end-users of the product.For Silicon Graphics, lead customers from the movie industry have become an important source of new ideas and innovation. Silicon Graphics sends its best R&D people to Hollywood to learn firsthand what the most creative users of its products might want in the future. In addition, Silicon Graphics nurtures relationships with lead users from other industries that require massive computation and high-end graphics such as for drug design and aerospace landing gear. Just asking these users about their future needs is unlikely to result in new products (although it can lead to continuous product improvement); the major breakthroughs come from mutual and closely integrated innovation practices.

FIVE STYLES OF CKM AND THEIR

APPLICATION Ryder Systems in the trucking industry is another example of utilizing customer knowledge through mutual innovation. In close collaboration with customers it developed complex and extensive logistics solutions to its customers, probing deeply into the operations and even manufacturing and supply chain strategies of customers. Jointly they developed special knowledge of truck driver requirements, thereby reconfiguring truck personnel management activities. Ryder in effect has become, via mutual customer innovation, a logistics systems solutions expert, transcending its identity as a trucking company.

FIVE STYLES OF CKM AND THEIR APPLICATION

Communities of creation :- Communities of creation as a CKM style is reflected in the putting together of customer groups of expert knowledge that interact not only with the company, but importantly also with each other Similarly to communities of practice, communities of creation are groups of people who first work together over a longer period of time, second they have interest in a common topic and third, want jointly create and share knowledge. Unlike the traditional communities of practice, however, communities of creation span organizational, rather than functional boundaries to create common knowledge and value. In the traditional computer software development process, Netscape and Microsoft make use of free beta versions of its products for use, testing, comments and reporting not only to the company, but also among the user community themselves.

FIVE STYLES OF CKM AND THEIR APPLICATION

They enlist thousands of willing, devoted testers, some just interested in using the free beta product and others intent on looking for bugs to show off and perhaps even collect a prize. Customers appreciate product newsgroups and chat rooms, where they can also learn how the companies are acting on their feedback resulting in loyalty and even a sense of ownership. Sony and Panasonic (US) in the consumer electronics market have set up antenna shops at locations such as shopping centers and airports, where demanding customers frequent and prototype products are featured. Customers can experiment, test, and converse with each other, and development engineers and product managers are available to talk to and watch customers, getting first-hand knowledge of customers reactions and what they would really want.

FIVE STYLES OF CKM AND THEIR APPLICATION

Joint intellectual property :- This style of CRM is probably the most intense involvement between customer and corporation the notion of the corporation being owned by its customers. The Swedish companies Skandia Insurance and Kooperativa Frbundet (KF) increasingly think of themselves as businesses owned by customers, i.e. being in business for and because of its customers. Thus, intellectual property does not reside in the company, but is owned partly by the customers. This formula enabled KF to make remarkable achievements over a long period of time, becoming a pioneer in customer education and the consumer movement through joint knowledge ownership and its continuous development.

FIVE STYLES OF CKM AND THEIR APPLICATION

Instead of just co- producing products and services together, customers and company co-create future business together. For example, the broker, banking and other retail customers of Skandia combine with the companys key strategy decision-makers to review the scope of joint business, possible joint new strategic initiatives, and joint knowledge expansion of e.g. emerging markets. Customer success in fact becomes corporate success, and vice versa.

CUSTOMER PRIVACY
Customer privacy is an important issue in CRM. CRM deals with large amounts of customer data through various touch points and communication channels. The personalization process in CRM requires identification of each individual customer and collections of demographic and behavioral data. Yet, it is the very information that most customers consider personal and private. It is unclear and undetermined what extent of customer privacy should be protected and shouldnt be used, but four basic rules might be considered.

CUSTOMER PRIVACY

The customer should be notified their personal information is collected and will be used for specific purposes. The customer should be able to decline to be tracked. The customer should be allowed to access their information and correct it. Customer data should be protected from unauthorized usage. Some companies provide customer consent form to ask the customer to agree to information collection and usage. Providing personalized service to customer is a way to satisfy customers who provided their personal information. All of these efforts are designed to build trust between the company and its customers.

CUSTOMER TOUCH POINTS

Medium
Broadcast Cost per Touch(low to high)/Impact of Touch(low to high)

Email
Systematic Internet Mail Event

Phone
Personal

CRM PROGRAM
A CRM program is the sum of all the work a company does to improve the customer experience and increase loyalty. The program can be as short or as long as the business model demands.

CRM PROGRAM LIFE CYCLE

1. Develop Strategy (Launch project) 4. Deliver customer offer (evaluate results)

Build Inside

2. Build Infra. (integrate)

Deliver Outside

3. Know your customer (target customer)

CRM PROGRAM
Identification Clean data about Customer Sources of benefits Single Customer View Understand customer Differentiation Interaction Customisation

Customer satisfaction and loyalty

Customer satisfaction and loyalty

Helps sales force

Cost effective marketing Campaign Reduce direct mailing cost

Benefits
Cross selling

Cost effective customer service

Lower cost of acquisition & Retention Maximize share of wallet