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CRM _2009

VIEWS: 7 PAGES: 25

									    CRM – Strategy and Tool.
Why do companies need CRM?
                     CRM Definition

Customer Relationship Management
(CRM) is a business strategy to select
and manage customer to optimize
long-term value.
                            CRM Definition

CRM is a comprehensive strategy and
process of acquiring, retaining, and
partnering with selective customers to
create superior value for company and
the customer.
        (Parvitiyar and Sheth, 2001)
                   CRM Definition

Customer Relationship Management
(CRM) is a business strategy to select
and manage customer to optimize
long-term value.
                             CRM: main issues (I)

 CRM is the term to describe the shift from product
  focused marketing to customer focused approach.
 CRM strategy consists of 3 main steps:
    Identify the customer and differentiate them:
      • In term of value
      • In terms of needs.
    Interact with the customer.
    Customize some aspects of the service/products.
                        CRM: main issues (II)

 What techniques underpin CRM?
   Database technology: not only storage capacity but also
    ability to analyze data.
   Interactivity: Web sites, call centers and any other means
    by which company interacts with its customers.
   Mass customized technology, which enable a company to
    break products into modules or templates
                             Is CRM a revolution?
 CRM is a complement to the existing strategy. In addition to
  the recruitment of new customers, CRM is focused on
  existing customers.
 CRM differentiates among existing customers:
    Profitable customers
       • Develop and pamper
       • Customize the offer to retain them.
    Unprofitable customers
       • Harvest or reduce the offered services.
 Segmentation proposed by the CRM techniques continues
  and refine the existing segmentation.
 CRM is not a technology, but uses the IT solutions to collect
  and process the information to get a better segmentation.
 Knowing and evaluating the customers:
                         key indicators

 Consumer level:
    Traditional distinction: big versus small
     consumers is not enough.
    Distinguishing between switchers and
     loyal/captive consumers.
    Distinction between committed and indifferent
     customers.
    Tree key indicators:
      Life time value
      Share of customers
      Share of portfolio.
  Knowing and evaluating the customers:
                          key indicators

 Life time value: estimated value of the customer
  during his/her whole life (expected income from this
  customer minus acquisition and retention cost).
 Customer share:
    Share of our brand/total purchase of the customer
 Strategic value: long term potential value the customer has
  for company. Positive value if:
    Our firm wins a larger share of customer from competitor.
    The customer naturally grows into larger volume
    The customer becomes more profitable by changing his behavior.
                  CRM: financial indicators

 Customer profitability:
    BZ: below zero consumers: cot more to service than will
     ever return in value – switchers, deals hunters, very small
     consumers (low strategic value).
    MCV: most valued customers – clients with the highest
     actual value : most loyal and cooperative, yield the highest
     value, …
    STC: second tier customers – not as valuable as MCV but
     whose share of customers could be increase.
Customer profitability: some figures

 Traditional rule: 20% of customer are responsible for 80% of
  profit (revenue).
 Survey made in Europe among different industrial sectors:
    5 – 15% of customers generate 100% of net profit.
    Around 50% of clients are lost makers.
    25 – 45% of customers generate 1 – 5% of sales value.
    Very small unprofitable consumers spend more recourses
     than all the profitable consumers combined.
    Idem for sale force resources.
 What is the primary driver of CRM
implementation? (by CRM magazine/ June 2004)
                                   other

                                   reduce costs

                                   improve profitability

                       14%         customer
                              7%   satisfaction/retention




                               13%
 66%
CRM: Strategic Approach*
                           Objectives

         CRM Vision
                           Metrics

                           Customer Profitability

         CRM Goals         Behavior Prediction and
                           Segmentation

                           Personalization


                           CRM Technology Selection

     CRM Implementation
                           Fulfillment of CRM
                           Objectives

                           Measure Performance
      CRM Performance
                           Against Metrics
         Database Marketing vs. CRM

 DBM is company-centric: the whole
  purpose of targeting customer segments
  was to help the sell more stuff for less cost.
 CRM is customer-centric: still concerned
  with profit but achieves profit by
  concentrating on customer benefits and
  values…strengthening the relationship.
                                CRM Tasks

1. Identifying those customer values that
   are pertinent to a particular business.
2. Understanding the relative importance
   of those values to each customer
   segment.
3. Determining if delivery of those values
   will affect the bottom line positively.
                    CRM Tasks (cont.):

4. Communicating and delivering the
   appropriate values to each customer
   segment in ways the customer wants to
   receive the information.
5. Measuring results and proving return on
   investment.
                 The Evolution of CRM
 Three phases in the evolution of CRM
  include reporting, analyzing, and predicting
   Operational and Analytical CRM

 Operational CRM – supports traditional
  transactional processing for day-to-day
  front-office operations or systems that deal
  directly with the customers

 Analytical CRM – supports back-office
  operations and strategic analysis and
  includes all systems that do not deal
  directly with the customers
Operational and Analytical CRM
     Marketing and Operational CRM
    Three marketing operational CRM technologies:
    1. List generator – compiles customer information
        from a variety of sources and segment the
        information for different marketing campaigns
    2. Campaign management system – guides users
        through marketing campaigns
    3. Cross-selling and up-selling
       • Cross-selling – selling additional products or
           services
       • Up-selling – increasing the value of the sale
            Sales and Operational CRM
•   The sales department was the first to begin
    developing CRM systems with sales force automation
    – a system that automatically tracks all of the steps
    in the sales process
The lower the customer defection rate, the
      higher the contribution margin

            Customer Defection
                  Rate                                                         80
                                                                      75
                          5%

            Contribution Margin
                                                             50
                                                    45
                                           40
                                  35
                  30
  25




 Retail         Auto-        Utilities   Telcos   Software- Insurance Credit  Depot-
                mobie                              house              Cards Management

Source: EIU, Forrester Research
CRM Is Not Just Software




         Business
         Strategy

          People
           and
         Processes


        Information
        Technology
        Why CRM does not work?           (by CRM Forum)

   Organizational change          29%
   Company politics and inertia   22%
   Lack of CRM understanding      20%
   Poor planning                  12%
   Lack of CRM skills              6%
   Budget problems                 4%
   Software problems               2%
   Bad advice                      1%
   Other                           4%

								
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