McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved

CHAPTER 9CHAPTER 9

CUSTOMER RELATIONSHIP MANAGEMENT

CUSTOMER RELATIONSHIP MANAGEMENT

9-2

Chapter Nine Overview

• SECTION 9.1 – CUSTOMER RELATIONSHIP MANAGEMENT– Business Benefits of CRM– Using Information Technology to Drive Operational CRM– Using Information Technology to Driver Analytical CRM

• SECTION 9.2 – CUSTOEMR RELATINSHIP MANAGEMENT STRATEGIES– Customer Relationship Management’s Explosive Growth– Customer Relationship Management Success Factors– Current Trends: SRM, PRM, ERM– Future CRM Trends

McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved

SECTION 9.1SECTION 9.1

CUSTOMER RELATIONSHIP MANAGEMENT

CUSTOMER RELATIONSHIP MANAGEMENT

9-4

LEARNING OUTCOMES

1. Compare operational and analytical customer relationship management

2. Explain the formula an organization can use to find its most valuable customers

3. Describe and differentiate the CRM technologies used by sales departments and customer service departments

4. Describe and differentiate the CRM technologies used by marketing departments and sales departments

9-5

BUSINESS BENEFITS OF CRM

• CRM enables an organization to:– Provide better customer service– Make call centers more efficient– Cross sell products more effectively– Help sales staff close deals faster– Simplify marketing and sales processes– Discover new customers– Increase customer revenues

9-6

CRM BASICS

• Organizations can find their most valuable customers through “RFM” - Recency, Frequency, and Monetary value– How recently a customer purchased items

(Recency)– How frequently a customer purchased items

(Frequency)– How much a customer spends on each

purchase (Monetary Value)

9-7

The Evolution of CRM

• CRM reporting technology – help organizations identify their customers across other applications

• CRM analysis technologies – help organization segment their customers into categories such as best and worst customers

• CRM predicting technologies – help organizations make predictions regarding customer behavior such as which customers are at risk of leaving

9-8

The Evolution of CRM

• Three phases in the evolution of CRM include reporting, analyzing, and predicting

9-9

The Evolution of CRM

9-10

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

9-11

Operational and Analytical CRM

9-12

Using IT to Drive Operational CRM

9-13

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

9-14

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

9-15

Sales and Operational CRM

• Sales and operational CRM technologies1. Sales management CRM system –

automates each phase of the sales process, helping individual sales representatives coordinate and organize all of their accounts

2. Contact management CRM system – maintains customer contact information and identifies prospective customers for future sales

3. Opportunity management CRM system – targets sales opportunities by finding new customers or companies for future sales

9-16

Sales and Operational CRM

• CRM Pointers for Gaining Prospective Customer

1. Get their attention

2. Value their time

3. Overdeliver

4. Contact frequently

5. Generate a trustworthy mailing list

6. Follow up

9-17

Customer Service and Operational CRM

• Three customer service operational CRM technologies:

1. Contact center (call center)

2. Web-based self-service system • Click-to-talk

3. Call scripting system

9-18

Customer Service and Operational CRM

9-19

USING IT TO DRIVE ANALYTICAL CRM

• Personalization – when a Web site knows enough about a persons likes and dislikes that it can fashion offers that are more likely to appeal to that person

• Analytical CRM relies heavily on data warehousing technologies and business intelligence to glean insights into customer behavior

• These systems quickly aggregate, analyze, and disseminate customer information throughout an organization

9-20

USING IT TO DRIVE ANALYTICAL CRM

• Analytical CRM information examples1. Give customers more of what they want

2. Value their time

3. Overdeliver

4. Contact frequently

5. Generate a trustworthy mailing list

6. Follow up

9-21

OPENING CASE QUESTIONSCustomer First Awards

1. Summarize the evolution of CRM and provide an example of a reporting, analyzing, and predicting question Progressive might ask its customers

2. How could Progressive’s marketing department use CRM technology to improve its operations?

3. How could Mini’s sales department use CRM technology to improve its operations?

9-22

OPENING CASE QUESTIONSCustomer First Awards

4. How could Progressive and Mini’s customer service departments use CRM technology to improve their operations?

5. Define analytical CRM and its importance to companies like Progressive and Mini

McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved

SECTION 9.2SECTION 9.2

CUSTOMER RELATIONSHIP MANAGEMENTSTRATEGIES

CUSTOMER RELATIONSHIP MANAGEMENTSTRATEGIES

9-24

LEARNING OUTCOMES

5. Identify the primary forces driving the explosive growth of customer relationship management

6. Summarize the best practices for implementing a successful customer relationship management system

7. Compare customer relationship management, supplier relationship management, partner relationship management, and employee relationship management

9-25

CUSTOMER RELATIONSHIP MANAGEMENT’S EXPLOSIVE GROWTH

CRM Business Drivers

9-26

CUSTOMER RELATIONSHIP MANAGEMENT’S EXPLOSIVE GROWTH

Forecasts for CRM Spending (in billions)

9-27

CUSTOMER RELATIONSHIP MANAGEMENT’S SUCCESS FACTORS

• CRM success factors include:1. Clearly communicate the CRM strategy

2. Define information needs and flows

3. Build an integrated view of the customer

4. Implement in iterations

5. Scalability for organizational growth

9-28

CURRENT TRENDS: SRM, PRM, AND ERM

• Current trends include:– Supplier relationship management (SRM) –

focuses on keeping suppliers satisfied by evaluating and categorizing suppliers for different projects, which optimizes supplier selection

– Partner relationship management (PRM) – focuses on keeping vendors satisfied by managing alliance partner and reseller relationship that provide customers with the optimal sales channel

– Employee relationship management (ERM) – provides employees with a subset of CRM applications available through a Web browser

9-29

FUTURE CRM TRENDS

• CRM future trends include:– CRM applications will change from employee-only

tools to tools used by suppliers, partners, and even customers

– CRM will continue to be a major strategic focus for companies

– CRM applications will continue to adapt wireless capabilities supporting mobile sales and mobile customers

– CRM suites will incorporate PRM and SRM modules

9-30

OPENING CASE QUESTIONSCustomer First Awards

6. How might Progressive’s business model change if it decreased its investments in CRM technologies?

7. How might Mini’s business model change if it decreased its investments in CRM technologies?

8. Describe the CRM industry best practices and explain how Progressive is using each

9-31

OPENING CASE QUESTIONSCustomer First Awards

9. Explain SRM and how Mini could use it to improve its business

10.Explain ERM and how Progressive could use it to improve its business

9-32

CLOSING CASE ONEFighting Cancer with Information

1. How could the ACS’s marketing department use operational CRM to strengthen its relationships with its customers?

2. How could the ACS’s customer service department use operational CRM to strengthen its relationships with its customers?

3. Review all of the operational CRM technologies and determine which one would add the greatest value to ACS’s business

9-33

CLOSING CASE ONEFighting Cancer with Information

4. Describe the benefits ACS could gain from using analytical CRM

5. Summarize SRM and describe how ACS could use it to increase efficiency in its business

9-34

CLOSING CASE TWOCalling All Canadians

1. What are the two different types of CRM and how can they be used to help an organization gain a competitive advantage?

2. Explain how a contact center (or call center) can help an organization achieve its CRM goals

3. Describe three ways an organization can perform CRM functions over the Internet

9-35

CLOSING CASE TWOCalling All Canadians

4. How will outsourcing contact centers (call centers) to Canada change as future CRM technologies replace current CRM technologies?

9-36

CLOSING CASE THREEThe Ritz-Carlton

1. What are the two different types of CRM and how has the Ritz-Carlton used them to become a world-class customer-service business?

2. Determine which of Ritz-Carlton’s six steps of customer service is the most important for its business

3. Rank Ritz-Carlton’s six steps of customer service in order of greatest to least importance in a CRM strategy for an online book-selling business such as Amazon.com

9-37

CLOSING CASE THREEThe Ritz-Carlton

4. Describe three ways Ritz-Carlton can extend its customer reach by performing CRM functions over the Internet

5. What benefits could the Ritz-Carlton gain from using analytical CRM?

6. Explain ERM and describe how the Ritz-Carlton could use it to increase efficiency in its business