FURTHER THOUGHTS ON CRM: STRATEGICALLY EMBEDDING CUSTOMER RELATIONSHIP Click to edit Master subtitle style MANAGEMENT IN ORGANIZATIONS

4/29/12

INTRODUCTION

Businesses today are generating more interest in Customer Relationship Management (CRM) Instead of focusing on the acquisition of new customers, marketers are moving their attention to retention of customers and the maximization of the customer lifetime value
4/29/12

INTRODUCTION

The rate of success of CRM projects varies between 30% and 70% Most managers are not aware of the fact that CRM does not always have a positive impact on customer performance and thus are often disappointed with the results
4/29/12

CUSTOMER RELATIONSHIP MANAGEMENT

It is based on three aspects of marketing management:

Customer orientation Relationship marketing Database marketing

Dowling distinguishes between two 4/29/12 types of CRM practices:

CUSTOMER RELATIONSHIP MANAGEMENT

It focuses on satisfying customers and fulfilling customers needs and hence it is expected that the resulting increase in customer loyalty will enhance profits

ii.

Practices that use data-mining techniques to improve targeting, cross selling and market research

4/29/12

It focuses on a more efficient and effective use of marketing tools

STRATEGIC EMBEDDEDNESS OF CRM

CRM implementations differ with respect to their embeddedness in business strategy and organization structure Strategic embeddedness of CRM means that the business strategy determines what type of CRM program is implemented, how this 4/29/12 program is implemented, and what

STRATEGIC EMBEDDEDNESS OF CRM

CRM can be strategically embedded in the following two disciplines:

Operational excellence: Firms aim to have lean and mean processes. The resulting delivered values to customers are low prices and convenience

Customer intimacy: Firms focus on knowing the customer and building 4/29/12

According to the observations of the research, if CRM is embedded in a customer intimacy strategy, CRM is relationship-oriented Firms embedding CRM in a operational excellence strategy focus on cost-reductions and raising the quality of the customer interaction process through process improvements
4/29/12

A Generic Classification Scheme of CRM implementation Strategies

FIGURE 1

4/29/12

CASE 1: OPERATIONAL EXCELLENCE AND CRM

Click to edit Master subtitle style

4/29/12

The insurance provider already had experience with direct customer contacts and direct marketing principles The firm chose a strategy of operational excellence, aims to outperform competitors on the combination of price, convenience and speed
4/29/12

CRM should

reduce marketing costs improve the firms value proposition in the market Improve the interaction process with the customer in such a way that the customers convenience is enhanced

In line with their CRM-approach the management developed a CRM infrastructure

4/29/12

CRM-efforts were driven by the customer database. The database has a number of functions Customer profitability and sales levels, is used as input for the management information system (MIS) Data-mining tools are used to improve the targeting of direct 4/29/12 marketing actions

Analytical CRM mainly concerns customer segmentation. This segmentation is behavioural based and customer needs are not considered For each segment specific marketing strategies have been formulated The database is used to personalize communication in the case of direct 4/29/12 contacts with the customer

The insurance product organization

provider was a management

A major disadvantage of this organization is the absence of coordination between product managers. This led to customer irritation The database-marketing department 4/29/12 became the linking pin between the

Employees felt that they have fewer opportunities to seek creative solutions due to the focus on standardization in the CRM-process to achieve consistency with the strategy of operational excellence Consideration of efficiency and effectiveness of CRMinstruments

4/29/12

Case 2: Customer Intimacy and Click to edit Master subtitle style CRM

4/29/12

Facts

The private investment banker is one of the largest in Europe market share substantially decreased

4/29/12

Challenges Faced:

The firm was product-oriented and functionally organized; All customers were treated in the same way; customer database information was not used; more attention for new customers than for current
4/29/12

assortment of investment products

Transformation Program Steps

4/29/12

Repositioning - strategy of customer intimacy

Shift from traditionally focused on product leadership the development of customer relationships development of an appropriate CRMsystem

4/29/12

Expert

Segmentati Profitability Tiers within

Interview

on

Focus Group Questionnair

For each tiers different service concepts were developed and implemented
.

Analysis

4/29/12 es

segments

4/29/12

Reorganise Structure

For each segment a client team was formed Each client team developed a customer strategy based on customer needs, received its own budget and was made accountable for the resulting profit.

4/29/12

Case 3: Tactical CRM European Holiday Resort Providers

Click to edit Master subtitle style

4/29/12

They assumed customers favour resorts that offer most quality and performance

Hence they Invested heavily for facilities - swimming pools, restaurants, kindergartens and shops

They wanted that resort should be fully occupied in all seasons

4/29/12

In response (to improve efficiency and effectiveness of the direct mailings)

CRM department Loyalty Program

CRM Dept

(1)

Developing and applying data 4/29/12 mining techniques

TACTICAL CRM at the HOLIDAY RESORT PROVIDER

DATA MINING CAMPAIGN MANAGEMEN T
R S ESU LT

SERV ER

CUSTOME R DATABAS E

focus on response optimization of the direct mailings sent to customers to raise occupancy levels

4/29/12

CONTACT MANAGEMEN T

RESULTS for CRM Dept set up:

Achieved a substantial reduction in marketing costs (improved targeting) A reduced waste Higher rates of occupancy
4/29/12

Loyalty Program

It was an expensive affair On evaluation by the management it was found:

Program did not affect customers decisions to return to the holiday resort

4/29/12

Discussion of CRM-strategies
Characteristic Operational Customer intimate Tactical CRM s: excellence CRM CRM Strategic Orientation Process Customer Customer Teams Customer Oriented Relationships Product/Sales Functional TransactionOriented Selling Direct mail, telemarketing

Organization Process Teams Structure And Culture Market-Oriented CRM Focus CRM Tools Repeated transactions

Direct mail, Affinity programs, reward programs, customer contacts Internet Customer perceived value, customer profitability Commitment, customer share customer life-time value

CRM Metrics 4/29/12

Direct mail response (incl. profit)

CRM Implementation Issues

Type of CRM depends on Chosen Strategy CRM embedded strategically / tactically CRM results in New Organization Structure and culture
4/29/12

CRM implementation requires top management support Firms should hold realistic expectations from CRM Myopic focus on s/w should be avoided
4/29/12

4/29/12