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CUSTOMER RELATIONSHIP MANAGEMENT

(Code : BM 301)

MBA(2008-10) Term 3

S. Suresh

Session 1 to 4

INTRODUCTION

CRM Definition 1 the automation of horizontally integrated business processes involving front office customer contact points (marketing, sales, service and support) via multiple, interconnected delivery channels.

CRM Definition 2 a process that addresses all aspects of identifying customers, creating customer knowledge, building customer relationships, and shaping their perceptions of the organisation and its products

CRM Definition 3 Building and sustaining customer and infrastructure relationships. It is the integration of customers in the companys design, development, manufacturing and sales processes. All employees need to be in the business of building CRM

CRM marketing elements


Relationship strategy 5.1

Communication 4.9

Business strategy 6.7

Customer knowledge 4.6

Individual value proposition 6.7

Contents
Strategy and organisation of CRM (I) CRM Marketing aspects (II) Analytical CRM (III) Operational CRM (IV) CRM Systems and their implementation (V)

STRATEGY AND ORGANISATION OF CRM

The relationship orientation


Interactions must take place between at least two parties; activities of one of the parties influence those of the other and vice versa. A degree of continuity; interactions from the past influence present and future interactions; extend over a longer period of time. The effects of interactions are dependent upon the actual events and the subjective approach to these events.

Figure 2.1 Pyramid of relationships

Table 2.2 Profile of close and weak relationships


Source: Peelen et al, 1996.

Figure 2.2 Objects of exchange

Commitment

Table 2.3 Characteristics of three forms of commitment


Source: Johnson (1991).

Loyalty
Loyalty is a deeply held commitment to rebuy or repatronise a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behaviour.

Source: Oliver (1996).

Figure 2.3 Relationship life cycle


Source: Peelen et al, (1996).

Figure 2.4 Profile of social structures


Source: Merton (1957); De Jager and Mok (1994).

Value disciplines
Customer intimacy Leading edge Performance of market leaders

Minimum expectation

Product leadership Best/newest product

Operational excellence Cost leader

Figure 3.1 Offensive versus defensive strategies

Figure 4.1 The Ashridge mission model

The relationship-oriented culture


People dare to show their true selves. People with well-developed right brain hemispheres are deployed. Overtures are made in the proper manner; a sufficient level of empathy is shown in the other. People come across as sincere.

Structure: organising around customers

Figure 4.2 The customer pyramid

People
Social competencies: the capacity for empathy; the ability to create congruence; the ability to use an unconditionally positive approach to the other person.

Figure 4.4 From strategy to critical success factors

Figure 4.5 Balanced scorecard for a Japanese restaurant

THANK YOU

Session 5 to 8

CRM MARKETING ASPECTS

High costs are associated with owning data, and Gartner believes that having bad data can increase these costs by a factor of 10 when one considers costs arising from bad business decisions and poor CRM based on such data.
Gartner Research, Customer Data Quality and Integration: The Foundation of Succesful CRM, 26 November 2001

Figure 5.2 Growth stages in database management

Figure 5.3 The use of different sources of information to create a complete customer profile

Privacy
The right of objection and the various channels of communication Addressed e-mail: opt-out Telephone (voice): opt-out Fax: opt-in Automatic telephone calls without human intervention opt-in Unaddressed e-mail opt-out E-mail: customers soft-opt-in prospects opt-in

opt-out: right to block by data subject him/herself opt-in: prior permission needed from data subject to send messages

Figure 6.1 Communication continuum

Figure 6.2 Dimensions in which channels may be scored

Figure 6.3 Use of the channels by various consumer types in different phases of the relationship
Source: Peelen et al (2000).

Figure 6.4 One-stop shopping


Source: Jupiter Media Metrix.

Figure 6.5 Contact processes through different channels per segment

Channel management
Advice
High Advice
High Margins

Face Face

Lower Advice
Medium Margins

Call

Commodities
Low Margins

Click

Leads and sales


Low Margins

Mail

Margins

Subtly moving the client to the most efficient and most effective channel combination.

Figure 7.1 Delivering value to the customer

Figure 7.3 How far is the individual customer order integrated in the supply chain?
Source: Lampel and Mintzberg (1996).

Figure 7.4 Revenue management with a fixed capacity

Figure 7.5 Step-by-step plan for revenue management

Figure 8.1 Relationship planning and customer profitability


Source: Wang (1998).

Figure 8.2 Relationship planning: communication and service profile per segment
Source: Bgel (2002).

Figure 8.2 continued


Source: Bgel (2002).

Figure 8.3 Relationship policy per phase


Source: Peelen (1999).

Figure 8.4 Relationship policy by segment


Source: Peelen (1999).

Incentives and loyalty programmes Savings programme


Rewarding transactions; operant conditioning; stamps

Club programme
Subscribe; increasing involvement; providing information and eventually discounts and service; cognitive processes; Fox Kids

Relationship marketing programme


Minimal purchase level; aimed at user situation; complementary goods and services; frequent flyer programmes

Figure 8.5 Relationship management


Source: Alberts and Buitendijk (1995).

THANK YOU

Session 9 to 14

ANALYTICAL CRM

Figure III.1 Sub-aspects of analytical CRM

Data quality operationalised


Complete Within the record Within the universe Current Up-to-date Correct Form Content Valid vs. correct Integrity Unique No duplicates?

Identification
Term Definition Measurement 95% x

Accessibility Percentage of customers identified in call centre in less than 30 seconds Complete Percentage of customers with complete file Correct NA, phone, e-mail transaction history Data quality call centre

40% x 48% = 18%

Identification
Term

call center call center strategy/objectives strategy/objectivesin Accessibility % customers identified Costs to correct mistakes Costs to correct mistakes
% customers with complete file Customer satisfaction Customer satisfaction NA, phone, e-mail call center < 30 sec

Consequences for Definition Consequences for

Measurement 95% x 40% x 48% = 18%

Complete Correct Data quality call center

Employee satisfaction and Employee satisfaction and transaction history retention retention Missed turnover Missed turnover

Data quality identification


the business case The value of data quality The costs of a lack of quality Returned . . . Billing Irritation Waste Conversion The added value of quality Cross-selling Retention, etc.

Figure 9.1 Socioconsult compass


Source: Motivaction International B.V. 1999 www.motivaction.nl

Figure 9.2 Social environments in Europe


Source: Motivaction International B.V. 1999 www.motivaction.nl

Types of analysis questions


Segmentation and selections Acquisition analyses and selections Customer analyses and selections Retention analysis Relationship development analysis Cross, deep and up-selling analysis Analyses to determine the effectiveness of the way that the customer is approached

Figure 10.1 Phases in the analysis process

Datamining
The automated discovery of interesting, nonobvious patterns hidden in a database that have a high potential for contributing to the bottom line versus The discovery of knowledge in databases.

Datamining techniques
Neural networks Evolutionary computation Association rules Decision trees Case-based reasoning

Choose one card and concentrate hard on that Card. Please do not click on the card! I will try to read your mind ... When you have memorized your card, go to the next screen. Click on the mouse ...

Whisper the name of your card. Please do this. It is important. Click on the mouse when you are ready

I have read your mind. I left out the card that you selected.

Figure 11.1 Cluster solution

Table 11.1 Classification results


Source : Drozdenko and Drake (2002).

RFM analysis
Recency Frequency Monetary value

Figure 11.2 CHAID analysis

Figure 11.3 CART analysis


Source: Thrasher (1991).

Table 11.3 Response gain chart


Source : Drozdenko and Drake (2002) (modified).

Figure 12.1 Outflow analysis

Figure 12.2 Origin and destination matrix

Figure 12.3 Information gain chart


Source: Eiben et al. (1995a).

Figure 12.4 An analysis outcome


Source: Eiben et al. (1995b).

Cross-selling
Definition of cross-selling Cross-selling over time Customer buys more than one of the same product during a contact (two life insurance policies) Customer buys two or more different products during a contact (home contents and liability insurance policies) Customer buys a second or third product at a later time

Cross-selling
Definition of cross-selling (contd) Cross-selling within product category Upgrade of the same product (deep selling) Customer buys another product within the same category Customer buys product from another category Within the household (not account number)

Cross-selling

Figure 12.5 Contribution to turnover made by customers purchasing one or more insurance products in the past year

Figure 12.5 continued

Figure 12.5 continued

Figure 12.6 Cross-selling; the time between two purchase moments

Figure 12.7 Pareto optimal business rules

Figure 13.1 Sales process analysis


Source: Mertens and Heilijgers (2002).

Figure 13.2 Allocation of resources

Experiments and validity


Internal validity
The degree to which the manipulation requirements are being satisfied. The degree to which a time sequence may be recognised. The distinguishing capacity and the stability of the measuring instruments.

External validity
The reality content of the experimental situation;and the degree of representativeness of the random sample, the stimuli and the response variables.

Learning organisation
Know-... Know-how: a specific skill or procedure Know-who: the ability to point out an individual who can aid in the execution of a specific task Know-what: structured patterns and knowledge Know-why: a deeper insight into the underlying reasons and motives Know-when: a feeling for timing and rhythm Know-where: a feeling for location

Source: Zuiderduin, 2002.

Figure 13.3 Knowledge management


Source: Tissen et al. (1998).

Table 14.1 Allocation of income and expenses to one customer


Source : Roberts and Berger (1989).

Figure 14.1 Bilateral customer value determination

Figure 14.2 Strategic map


Source: Beltman et al. (2000). ICSB, Marketing en Strategie, Rotterdam (2001).

Figure 14.3 Example of measurement criteria

Figure 14.4 Benchmarking in the financial sector


Source: Beltman et al. (2000).

THANK YOU

Session 15 to 17

Organisational CRM

Figure IV.1 The contact cycle


Source: QCi Assessment Ltd 2004.

Figure 15.2 Elements of a call centre


Source: Belloni Business Consultancy Contact Centers.

Figure 15.3 Impact of quality on satisfaction


Source: Call Centre Magazine, no. 5 (1999).

Table 15.1 Analysis of the increasing marginal return


Source : Cleveland and Mayben (1999).

Figure 15.4 Capacity planning


Source : Cleveland and Mayben (1999).

Contact satisfaction
Agents are evaluated on the basis of the following aspects: The result of the conversation: is the customer satisfied? The use of guidelines. Telephone conduct. Executing cross- and up-sell activities. Structure and content of the conversation. Attitude towards the customer. Providing the correct information.

Application of outbound e-mail


Promotion Newsletter Product introduction Advertisement Alerts/reminders Market research Other

Figure 16.1 The contact cycle on the Internet


Source: Cap Gemini.

Traffic building Online traffic building


Cybermediaries
portals, affiliate marketing programs, virtual communities, integrators/malls, comparison sites, mobile agents and consumer aggregated buying sites.

Online marketing tools


Advertising banners and buttons, search engines

Offline traffic building

Figure 16.2 Site functionality and visitors expectations


Source: Bgel, 2002.

Figure 16.3 Internet payment systems

Table 16.1 Example of cost structures in the food sector


Source : Cost/profit Analysis Marketing and Logistics (2000).

Figure 16.4 Functionality of transactional websites in the stages of one-to-one marketing


Source : Peppers and Rogers Group.

Old direct marketing culture


Continue doing what works; creativity is not a must Behaviour is the best predictor Testing testing testing

Accountable

Target group 5 2 2 1 Offer Timing Message

Figure 17.1 The DM process


Source: Zuiderduin (2003).

Figure 17.2 Stages of reading


Source: Lumley (1986).

THANK YOU

Session 18 to 20

CRM SYSTEMS AND THEIR IMPLEMENTATION

Figure 18.2 Call centre development cycle


Source: Gartner Research (2003).

Figure 18.3 The levels of e-commerce infrastructure

Figure 18.4 Four types of data warehouses


Source: Jonker (1997).

Table 19.1 Satisfaction among companies with CRM results (in percentages)
Source : Berger (2002).

Figure 19.1 CRM quick scan plot

Figure 19.2 Overview of CRM projects

Figure 19.3 Relevance of CRM projects in the context of an operational excellence strategy

CRM Roadmap
Phase 1 Operations Focus Process orientation Strategy It should work Operational excellence Organization Undifferentiated (orientation) market approach Phase 2 Sales Marketing optimisation More smart marketing/sales Phase 3 Relations Partnership building Selective mutually beneficial relations

Differentiated/ segmented market approach Mature processes Campaign management

customer focus Human approach

Processes and Process definitions technology and efficiency SAP implementation

Portal, call centre

CRM Roadmap (continued)


Phase 1 Operations Focus Process orientation Phase 2 Sales Marketing optimisation Contact agent skills (service, professionalism) Phase 3 Relation Partnership building In communication transition from transaction to relation orientation

Communication Efficient conversion Fixed multi-step approach Relationship Penetration management

Differentiated cross- one-to-one for key and up-selling, relations retention

CRM Roadmap (continued)


Phase 1 Operations Focus Process orientation Phase 2 Sales Marketing optimisation Marketing intelligence Customer groups Customer profiling Phase 3 Relation Partnership building MIS, CIS, Real time

Customer Defining data and knowledge managing for data quality Identification, communication and transaction history Metrics Focus on efficiency, reliability, market share

Focus also on retention, share of wallet

Focus also on commitment

Process definitions
External validation

Number of days

14

42 - 56

70 - 90

Trial unit order 0

Unit delivered 1

Mailing 1 2

Phone call 1 3 Script 1

Office education 6

Decision point

Phone call 3 Trouble shoot 7 Script 3

Customer Dispenser or Recommender 8

Unpack card

Decision point

Drop out Decision point

Mailing 2 4

Phone call 2 TBM Script 2 Marketing 5

Decision point

DSS

CRM: step by step


Or ga nis ati on
Inf tr ras tur uc e

Capabilities

The future
Building and sustaining customer and infrastructure relationships. It is the integration of customers in the companys design, development, manufacturing and sales processes All employees need to be in the business of building CRM
Real-time marketing Real-time marketing
New processes New processes

Source: McKenna (1995).

The future . . . ?
Open, equal access Real-time information Specialist information Convenient access Information portability Logistics transparency Pricing transparency Fair, global pricing The ability to set prices Choice of distribution channels Control over their information

The Digital Eleven

THANK YOU

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