Post on 28-Mar-2015
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Information Systems: the Foundation of E-Business (CIS 108)
Customer Relationship Management, (CRM)
Lecture SEVEN (28th February 2005)
Amare Michael Desta
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What is CRM? “Customer relationship management is a
business strategy to select and manage the most valuable customer relationships. CRM requires a customer-centric business philosophy and culture to support effective marketing, sales, and service processes.
CRM applications can enable effective customer relationship management, provided that an enterprise has the right leadership, strategy, and culture.” -The CRM Primer, www.crmguru.com
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Outline Benefits of a CRM program
Cultural changes The four phases of implementation
Research & Best practices Casino case
IT’s role in CRM CRM’s relation to the supply chain
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Benefits of CRM Improved customer retention
Greater retention results in a larger future customer base
The impact of a 5% increase in retention rates
Industry Increase in profitsAdvertising Agency 95%life-insurance company 90%branck bank deposits 85%publishing 85%auto service 81%auto/home insurance 80%credit card 75%industrial distribution 45%industrial laundry 45%office-building management 40%
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Benefits of CRM (cont’d) Improved customer retention Purchase amount increases over
time Average of 8%/year in the insurance
industry Reduction in costs
Order processing Short-term acquisition costs Customer referrals
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Benefits of CRM (cont’d) 2-way communications
Improves customer satisfaction Impact on the “grey markets”
Often harmful to profits Frequently used to level inventories
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Cultural changes Top executives must drive the initiative
Shift from product orientation to customer Shift in marketing type
Away from mass, towards personal “1:1” Change in attitude at all levels
Compensation system must change to reinforce new behaviors
New positions or teams should be formed
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Pre-implementation Classify customers based on
diversity of value and needs Determine who the customers are
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Phase 1 Consolidate customer information
Existing computer and hard copy records into one large database
Minimum information categories: Biographical information Total spent/year on that good/service Total sales/year from that customer Customer share ratio Allocatable costs Profit ROI of marketing and sales expenses
Consumer categories Identification Customer Rating Background Presale
Communication Purchase behavior Post-purchase
behavior Predicted behavior Creditworthiness Attitudes and
perceptions
Business categories Identification Customer Rating Background Presale
Communication Decision makers Decision making Influences Post-purchase
behavior Channels Pricing Predicted Behavior Creditworthiness Relevant
information
Source: Boyett & BoyettThe guru’s guide to the knowledge economy
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Phase I: The Privacy policy Means to gather information
Interviews Surveys “Loyalty” cards
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Casino CRM ProgramPre-Implementation
1999 – Recognized need for CRM program, but unwilling to commit fully
Began implementation of “Epic” program – requiring manual log-in and log-out of players Cost measured in thousands rather than millions Worked well with table games, but highly
inconvenient to slot players No outside marketing to encourage participation
Effectiveness of program dependent on employees
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Casino CRM ProgramPre-Implementation
Spring 2001 – management convinced to fund automated players club program
Pre-launch focus on previous card-holders Updating database and explaining new
system to old customers Program launch complemented with
marketing campaign, including incentives to register and to use card
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Casino CRM ProgramBuilding a Database
Upon sign-up: Name Contact
Information “Interests”
Over time: Money spent
(coin-in) Per day Per trip
Win/Loss Per day Per trip
Jackpots won Playing habits
Rate of play Time of play Frequency of trips Machines played
Denomination Type
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Phase II Classify the customers according to
sales volume Focus on the top 20% of the customer
base Two basic types of customer needs
Community: shared needs/preferences for a grouping of individuals
Individual: unique needs specific to a single person
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Phase II (cont’d) Information gathering
Focused on top 20%: less effort required Interviews considered the best method
Personal Additional information Evaluation of future potential Not as cost prohibitive as believed
Surveys are functional… But they are often ignored.
E-mail: a reasonable middle ground Cheapest method Convenient for the customer
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Phase II (cont’d) Suggested questions
Satisfaction with products/services Cross-selling/up-selling opportunities Gaps in the value proposition-satisfaction Loyalty indicators: preferred supplier, future
purchases, referrals Budgets for your product/service Identification of competitors Customer contact preferences
Create a profile for distribution
Source: The guru’s guide to the knowledge economy
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Casino CRM ProgramCustomer Classification
Casino customer classification generally dependent on coin-in and total losses These tend to coincide
Also looking at place of residence and frequency of visits
Marketing department uses CRM program to distinguish customer groups - find “high-rollers” and target them for special events
Special “Top 1%” segment
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Casino CRM ProgramCustomer Classification
The program can be used to find undesirable customers as well as desirable ones
People who abused Epic system easily spotted
Customers who present a net loss to casino discouraged from returning
Machines that show lack of profitability removed or altered
Middle-range customers encouraged but within reasonable expense level
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Phase III Maintain communications with
current customers Should be through the medium
desired by the customer Make contact at the “appropriate
time” Excessive attempts will annoy the
customer
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Rules of engagement for customer interactions (Contd..)
Don’t initiate an interaction with a customer without a clear objective
Don’t ask a customer the same thing more than once
Interact in the medium of the customer’s choice When engaging in an interaction, start with the
customer, not the product Make the interactions personal and personalized Ensure that your interactions with customers are
always welcomed Ensure that they are immediately identified and
treated appropriately
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Rules of engagement for customer interactions (Contd..)
Protect the customer’s privacy Invite dialogue by printing toll-free numbers
and web-site URLs on everything Ensure that the customer can see the value
from each interaction. Deliver information or value that reflects what has been learned
Be sensitive to the customer’s time. Don’t try to learn everything about a customer at once.
Source: The Guru’s guide to the knowledge economy, p. 216
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Casino CRM ProgramMaintaining Communication
Mailers sent to certain customer groups on regular basis Invitations to special events or for free gifts
Non-intrusive communication Customer chooses which ones to respond to
Toll-free phone number and email address included on all correspondence
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Phase IV Adjusting the firm to fit customer needs Four types of customization
Collaborative (mass) customization Devise a metric to determine customer needs Match needs with products/services Not very personal, but relatively inexpensive
Adaptive customization Allow customer to specify certain characteristics Very personal, but often expensive May not be possible in all industries, or cost
efficient
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Phase IV (cont’d) Customization:
Cosmetic customization Inexpensive, easy to implement in virtually
any industry Easy to replicate No actual change to the product/service may
not justify charging a substantial premium Transparent customization
The “nice little details” Very personal, but oftentimes invisible Frequently inexpensive relative to others Difficult for competitors to replicate
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Phase IV (cont’d) Combinations can be used Beware of TOO much satisfaction
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Phase IV (cont’d) Change call center operations to
service top customers Eliminate discounts and
promotions “My loyalty cannot be bought!”
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Casino CRM ProgramCustomization
As previously stated, special promotions and events aimed at “preferred” players Invitation-only events Segmented mailers, with increased
bonuses for better customers More personalized customer service Improved access to casino comps
(including non-gaming comps)
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Casino CRM ProgramCustomization
In a casino, very little product customization is possible – a slot machine is a slot machine
Focus is on cosmetics Customer service tends to distinguish
one casino from another Gift baskets, wine, and champagne
for hotel/restaurant guests
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IT’s role in CRM Three general types of eCRM
packages Marketing Automation Systems (MAS)
Customer database creation Analysis of customer attributes Automate several marketing functions
Sales Force Automation (SFA) Intended to automate many functions
performed by salespeople If completely successful, it will eliminate
the “personal touch”
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IT’s role in CRM (cont’d) eCRM package types:
Customer Service Automation systems
Augments call center personnel Some can respond to e-mails on their
own Ties-in to existing company software,
including other eCRM packages (generally…)
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IT’s role in CRM (cont’d) Selecting the right CRM packages
Step 1: size the package to your firm Step 2: gather as much information
on every package sized appropriately Step 3: using a standard formula,
evaluate the packages and make a choice
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IT’s role in CRM (cont’d)
Source: The CRM Solutions guide. 2001. www.crmguru.com
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IT’s role in CRM (cont’d) CRM and ERP
Determine if a package can be tied-in to the enterprise’s ERP system before making a purchase decision
Inventory, order processing, and accounts receivable features can be used to augment the CRM program
Goal: establish a closed-loop eCRM solution
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IT’s role in CRM (cont’d) Data mining tools
Market basket analysis and automatic cluster generation
Decision trees and memory-based reasoning
Neural net systems
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CRM in the Supply Chain Goals of Supply Chain Management:
Reduce uncertainty and risks in supply chain
Positively affect inventory levels, cycle time, processes, and end-customer service levels
Customer Relationship Management Useful for forecasting and planning Improves customer service levels
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CRM across Company Functions Marketing – Account management
expertise Research & Development – Specifications
that define requirements Logistics – Knowledge of customer
service requirements Production – Manufacturing strategy Purchasing – Sourcing strategy Finance – Customer Profitability Reports
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Customer Relationship ManagementWrap-Up
Knowing your customers improves profits
Focus on the best, treat mid-range as group, and discourage bottom-feeders
Customize product and service to retain good customers
Give CRM time to pay off; a good CRM program will be worth the investment