Customer Relationship Management (CRM)

What is CRM?
CRM is a business strategy that aims to understand, anticipate and manage the needs of an organisations 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)

Definition of CRM
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?

Todays businesses compete with multiproduct 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 1980s 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

The Logical Next Step..

Having differentiated within the customer spectrum, where should the spotlight veer to ?
Market segments and their behaviour What can the marketer do to cause / promote consumption of its product ? Following the market orientation concept, should not the marketer..

Understanding and Identifying Customer Needs

Considering the customers desires will pull product development into better direction and amplify success Technologists Problem product development undertaken with no basis for market acceptance. Very common in engineering community. Akia Morita (1986), founder of Sony Corp., our plan is to lead the public to new products rather than ask them what they want. The public does not know what is possible, we do

Customer expectations increase over time, it is very important to stay in touch with customers and to understand their preferences. The more customer expects, the harder it is to keep delighting the customer. Example: Cup holder in cars.

Customer Expectations

Customer Population
The customer is a statistical concept. The design team should define the customer population using the product. Example: Bicycle

Types of Customer Needs

General categories based on how easy the customer can express them and how rapidly they change. Example: Digital Camera

Direct Needs customers have no trouble

declaring those needs they are concerned about. Cost, good pictures, ease of operation

Latent Needs not directly expressed by the

customer without probing. Obtaining prints, easy viewing on PC

Types of Customer Needs

Constant Needs these needs are intrinsic to the
task of the product and always will be. When product is used, this need is always there. Nighttime picture taking, number of digital images.

Special needs apply only to a smaller market

segment within the entire population. Under water application

The Process
Collecting raw data from customers Interpreting the raw data Grouping the needs into primary, secondary, needs Establishing the relative importance of the needs Documenting the results for the entire design team

The Goals of the Process

Ensure that the product is focused on customer needs Identify all needs, explicit and hidden Make sure that no critical need is missed Creating a comprehensive list of the needs for the design team
The idea is to create a high-quality information channel between the customers in the target market and the developers of the product.

Interviews Discuss the needs with a single

customer, one at a time in the customers environment where the customer uses the product. Guideline for interviewing
Introduce yourself and state the purpose of the interview. When and why do you use this product? Walk us through a typical session using the product. What do you like about the existing product? What do you dislike about the existing product? What issues do you consider when buying this product? What improvements would you make to the product? What would be a reasonable price tag for the product?

Gathering Customers needs

Guideline for interviewing

Go with the flow Wherever the customer

takes you, follow along, and ask why and how questions

Use visual stimuli and props Bring

models of new product, competitors products.

Suppress preconceived notions about the product technology do not bias the
customer with any concept or technology. Uncovering a need that is independent from the solution used helps in concept engineering.

Guidelines for interviewing

Have the customer demonstrate dont just

ask about the product, observing the customer in action provides helpful information.

Be alert for surprises and latent needs

pursue any surprise answer with a question.

Watch for nonverbal information look for

facial and body language.

Gathering Customers needs

Questionnaires use the same guideline as
for the interview to develop a list of questions. Prepare the questions carefully. Then organize the responses provided. Make the list short.

Focus groups a moderator facilitates a

session with a group of customers in the product developers environment. The design team may observe the session behind a two-way mirror. Very common in food industry. Look for facial and body expressions.

Comments on Gathering Customers needs

Questionnaires provide the lowest quality information. The responses only pertain to the questions asked, not necessarily what the customer wants to tell the design team. Low percentage of returns. Focus groups are more costly to attain the same amount of information.

Conducting interviews is the most efficient way of gathering quality information. Hauser (1993), reports that interviewing nine customers for one hour each will obtain over 90% of the customer needs that would be uncovered when interviewing 60 customers in a focus group.

Example: Electric Wok

An electric wok redesign is desired. Current electric woks are inadequate and do not satisfy the demands of customers to conveniently cook authentic Chinese food. The original wok is a six-quart electric wok. A competitive wok is a traditional wok, used over a gas flame.

Interview Data Template Elect. Wok

Product feel Industrial Design

In addition to the activities of a product, it is also important to capture the desired feel of a product. Industrial designers emphasizes the important human qualities of comfort, safety , and aesthetic appeal. Semantic Inquiry

Organizing Customer Needs

The design team reviews the interpreted needs and sort them into a list - Affinity Diagram Method

Determining Need Importance

Interview Data Method the subjective

importance ratings (good, must, ) are converted into numerical equivalents. Then the importance is calculated using the average equation.

Questionnaire Method a questionnaire is sent

to customers asking for the importance of each need. Costly but more accurate.

Determining Need Importance Interv. Data Method

Must 9 Good 7 Should 5 Nice 3

Determining Need Importance Quest. Method

Cluster Analysis Method

In previous method the importance ranking of each customer need resulted in a constant weight. It may be desirable to obtain a correlation between needs.

Construct a preference structure over the values. For example, noise generated by a product and price (decibels vs. dollar). Construct a preference structure not over the values of the needs but rather over the the different product configurations. Show customers different prototypes and include customer needs in the design.