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Selling Chain Management and Customer Relationship Management (CRM)

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Presentation on theme: "Selling Chain Management and Customer Relationship Management (CRM)"— Presentation transcript:

1 Selling Chain Management and Customer Relationship Management (CRM)
Marquette University – MBA Program E-Business and Supply Chain Management Selling Chain Management and Customer Relationship Management (CRM)

2 Discussion and Learning Points
What are key issues in selling chain management? Architecture What is customer relationship management (CRM)? Is CRM a fad or what firms should pursue? Benefits and costs Implementation issues

3 Selling Chain Management
Enterprise with Multiple Sales Channels Customers Distributor OEM Reseller Self Service Sales Force Selling Chain Structures Selling Chain Management - An integrated multi-channel order acquisition strategy, focusing on the buying process Drivers - Business Forces Mass customization/personalization, Costs of presale support and order errors, Multi-channels, Product complexity, Deregulation and M&A’s - Technology Forces Limited SFA functionality, Limited process functionality, Limited sales effectiveness (Kalakota & Robinson 2001)

4 Selling Chain Management Architecture
Inquiry/ Prospect Customize Commit Sales Lead Order Life Cycle Core Process & Technology Integrated Selling Chain Applications Integrated Solution Product Catalog Configurator ATP Contract Pricing Proposal/Quote Order Entry Commission (Kalakota & Robinson 2001)

5 Sales Configuration Vendors
Sales Configuration Magic Quadrant Saqqara ResolutionEBS JD Edwards Access Commerce Completeness of Vision Ability to Execute Niche Players Visionaries Leaders Challengers To Be a Leader Cross-vertical-industry experience Functionally complete multiple configuration capabilities Proven tools for knowledge workers to maintain configuration models 20 product references demonstrating multiple configuration capabilities and support for multiple sales channels Strong distribution channels and financial position Configuration technology deployed to multiple interenterprise user types Many ESPs or internal consultants trained in customization and maintenance tools Architecture support for multiple sales channels Ability to generate multiple customized outputs GUI for salespeople or customers Interact Commerce Clarify SAP Cincom Noochee Solutions Cybrant Cerepoint Primus OnLink i Baan Pivotal Siebel Calico Firepond Selectica Trilogy As of 7/2000 Oracle (Source: DeSisto, Gartner Research, 7/2000)

6 Customer Relationship Management (CRM)
An integrated marketing, sales, and service strategy of attracting and retaining customers, using integrated information and consistent channel processes Require coordinated enterprise-wide actions for managing relationships Combine business process and technology Focus on customer lifetime value creation and optimization Customer Lifetime Value = Average transaction value x Purchase frequency x Customer life expectancy Customer Profitability = f(acquisition, enhancement, retention, loyalty) C-CAM (Customer Capital Asset Management) Finding a way to quantify, track and analyze the value of a customer to a company over time and how to ascertain the impact of future decisions on that value (Mei Lin Fung, Why CRM? It costs 7-10 times more to sell to a new customer than to an existing one. The odds of selling to a new (existing) customer are 15% (50%). A 5% increase in the retention of your best customers can result in 25-75% increase in profit A typical distributor loses about one half of its customers within five years. 90% of dissatisfied customers never return. The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems. The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers. A typical dissatisfied customer tells 8-20 people about the experience, mostly related to poor customer service. About 60% (70-95%) of the complainers would stay as customers if their problem was resolved (quickly). A customer who has had a problem resolved by a company will tell about 5 people about their situation. (, Fitzsimmons & Fitzsimmons 2001)

7 Integrated CRM Focus and Architecture
Acquire (new customers) Enhance (purchase value) Retain (existing customers) Direct Marketing Cross-/Up-Selling Proactive Service Sales Force Automation Customer Support, Call Center Telephone, Fax, , Web, VRU (Voice Response Unit) Legacy Systems + Computer/Internet Telephony Integration (CTI/ITI) + Data Warehousing + Decision Support Technology (data model analysis) Customer Life Cycle Core Process Enabling Technology Differentiation Innovation Convenience Bundling Reduce cost Customer service Repeatable process Adaptability Listening New product Loyalty program CRM Key Focus Integrated CRM Applications (Customer content, Customer contact info., End-to-end business processes, Inter-enterprise customer care (partnership relationship mgmt), System/tech integration Integrated Solution (Modified from Kalakota & Robinson 2001)

8 Role of CRM IT Applications
6 Prospect or Customer Web Phone VRU EDI Fax Marketing service and billing Loyalty and retention Field sales and service Sales EFT Qualify prospects Track contacts Event triggers Call scheduling Track order status Cross-sell synergistic products Advertising Fulfilling customer requests (information, samples) Product design & improvement Quote and proposal generation Personalized invitations and letters Field service dispatch management Remote troubleshooting Provide and track detailed information about customers Provide a comprehensive view of customer behavior Service request management Account management Customer surveys Return-material authorizations Detailed service agreements Maintain incident histories Electronic bills Electronic bill payment Real-time balances Inquiry management Source: Kalakota & Robinson 2001

9 Customer Service Customer Service
Manufacturing: “The activity of providing desired goods, quality, and total support to benefit every aspect of product use at a competitive price and in a timely manner” (Gopal & Cahill, 1992) Service: “A task, other than proactive selling, that involves customer interactions” (Lovelock, 1992) Customer Service Elements (LaLonde & Zinszer, 1976) Pre-transaction: Corporate customer policy or program; Accessibility, point of contact; Service management structure, control; System flexibility, information Transaction: Those directly involved in performing physical distribution functions; Order placement, cycle time, fill rate; Order status info; Product delivery reliability, Stock availability Post-transaction: Those supporting the product while in use; Shipment delivery; Product installation; Spare availability, Parts/repair service, Call-out time, first call fix rate; Product tracing/warranty/return, Customer complaint/claim Impact of Web-enabled Technologies Customers demand information on product, order transactions and inventory on a 24 x 7 basis. Customers demand new methods of communications with their suppliers. New channels for order placement and delivery are being created. Information on products, price, and services are available on a global basis. Creation of new barriers to entry has to be implemented in order to maintain brand differentiation. Customers want a consistent service level creating a low acceptance of virtual stock-outs.

10 Customer Value and Order Winning Criteria
The market power is in the services - total experience relationship. The customer value is not just the means to some desired end customers expect to accomplish, but the results, the end itself, associated with the overall performance of the whole system. Order Winning Criteria Today Conformance to Performance & Ease of Use Repair to Prevention Responsiveness to Responsiveness & Speed, Presence, & Joint development Quality & Cost-of-Product to Quality & Cost-of-Use (TCO) Customer Activity Service Paradigm Shift (till 80’s to 90’s & on) Concept: Product-loaded to Service-loaded Strategy: Product-based to Customer-based Focus: Market share to Share of market activity Relationship: Buyer & seller to Strategic Pricing: Product-based to Knowledge-based Delivery: On-time & JIT to Anytime & all the time Management: Sales to Interdisciplinary projects Rewards: Output-based to Outcome-based

11 Developing a Customer Service Strategy
Ensure consistency with e-business/SC objectives and strategies Analyze gaps among customer requirements and expectations, your practices, and best practices Analyze optimal cost-service trade-offs Inventory deployment and IS/IT requirements Develop key performance measures Set customer service priorities Critical Value Analysis: Service Priority = Service profitability rank x Critical value to customers ABC Analysis A Protect Develop B Develop Maintain C Review A B C Customers Products

12 Designing the Solution System Over the Customer Activity Cycle
SAS’s Unbroken Chain of Product-Services book get check board go to ticket ticket in destination look for confirm go to wait collect return info airport luggage office/home Key activity points Customer Activity Cycle personal services special various ticket at hotel lounge activities book facility terminal limousine express speed limousine link desk delivery door to door Product service components Solution System Common Principles in Successful Solution System Strategies Develop a profound understanding of who the end users are, their usage behavior and their objectives Understand the customer activity cycle as a process over time Design a system aimed at maximizing performance of product-service components over the customer activity cycle Deliver the solution system over the activity cycle either their own or in collaboration with suppliers or other firms (Vandermerwe 1991)

13 CRM Project Phases Strategize Evaluate Execute Manage
Form a project steering committee Define the project scope Evaluate Develop a full benefit case Translate strategies into actions Recruit resources Define project structure Evaluate vendors Execute Execute the work plan Implement the pilot and actual solution Fine-tune benefit and metrics Manage Manage the solution life cycle (Kalakota & Robinson 2001)

14 CRM Scorecard (Kalakota & Robinson 2001)

15 Finding the Right CRM Tool
No CRM package currently offers all the major functions Typical features in CRM packages/suites Marketing automation and management Sales force automation Customer service automation Data collection and analysis Typical Product Categories and Vendors Enterprise Space (> 500 employees): Siebel, Vantive, Clarify, Oracle and PeopleSoft Mid-market Space ( employees): ServiceSoft, Onyx, Pivotal, Remedy and Applix Small-business Space (<100 employees): Goldmine, Multiactive, SalesLogix Selection Approach “Best of the breed“ approach Pick the best application in each functional area Integration & vendor maintenance issues “Single vendor package” Easier integration / support Potential trade-off’s in terms of functionality Finding the Right CRM Packages Define the need Build a business case Set priorities, identify business requirements and technology constraints Weigh the alternatives Identify specific vendors Screen vendors by phone Conduct on-site visits Check references Test the software hands on Request pricing proposals Try to tie payment to performance Source: Naras Eechambadi,

16 Customer Service and Support Vendors
CSS Apps Magic Quadrant EGain Key SME focus Utilities only As of 7/2000 Completeness of Vision Ability to Execute Niche Players Visionaries Leaders Challengers To Be a Leader Provide suite with four core areas Integrate with front-office components Integrate with ERP/back-office systems/dB Horizontal solution with vertical suites Support multiple channels 50 referenceable production accounts Business rule workflow Multiple dB support Globalized apps Robust customization, development & administration tools Adequate implementation resources Multiple sales channels Domestic & international sales Onyx Pivotal Telephony vendors Remedy Managed Solution ViryaNet POINT Conranta Hatton Blue SAIC/BSIS Service Plus SAP Royal Blue Symix Oracle E.Phiphany Epicor Chordiant Applix Siebel Clarify Quintus PegaSystems Kana Vantive E-Service Players SCT Utilities (Source: Fluss, Gartner Research, 2/2000)

17 Success Factors for CRM and Potential Pitfalls
CSFs Concrete measurement goals Solid consumer and channel partner relationships, channel partner support Strong brand images, Corporate and product brand alignment Complex product and service bundles Executive marketing councils, Targeted marketing to C-level executives Consumer insights, Integrated customer databases Cultural change (customer awareness, intimacy, collaboration) Project ownership & accountability Pitfalls (Failure Rate as High as 80%) Not adhering to project plan Altering or adding requirements AFTER initial phase Customizations Software vendor will no longer support Not upgradable Architectural Tuning Transaction level output Retirement of legacy systems Do a detailed analysis of legacy systems functionality Solid Customer Relationships - Many companies observe the critical importance of creating strong relationships to drive general market success. Strong Brand Images - To build customer and channel partner relationships, companies create strong brand images to help simplify consumer choice and enhance channel partner performance. Corporate and Product Brand Alignment - Research partners see that corporate and product brand images must be consistent at a given time and refined as customer needs and market changes occur. Thus, companies adopt integrated approach to manage product and corporate brands across marketing groups. Executive Marketing Councils - To align corporate and product brand images, companies create EMCs to ensure brands work in harmony by emphasizing consistency and alignment. Consumer Insights - Findings suggest that top organizations acknowledge that consumer needs are always changing. These companies gather consumer insights and integrate consumer knowledge into marketing plans to drive branding and positioning of offerings. Channel Partner Support - Companies support partners with ongoing consumer research to drive product advertising and promotions. Relevant sales collateral helps partners increase their profitability. With this, partners report better targeting to end users and return on advertising investment. Complex Product and Service Bundles - The essence of a solutions-based business strategy rests on a company’s ability to offer customers complex product and service solutions for their business needs. Complex product and service bundles are enhanced over time and have huge dollar values, thus creating multi-year relationships. Integrated Customer Databases - Companies create views of customers by integrating customer databases. Customer data shows interactions and highlights critical decision-makers in customer organizations. Companies also integrate key customer databases with data obtained from marketers in key customer segments. In turn, marketers share customer insights with R&D and new product developers to improve offerings. Targeted Marketing to C-level Executives - Top solutions companies act on customer insights to target corporate branding to key customer decision makers. Strategic Partnerships - Finally, marketing relies on customer databases and its understanding of customers’ business issues to research potential strategic partnerships that will provide comprehensive solutions for customer organizations. (Source: Best Practices, LLC, Kalakota & Robinson 2001, Gartner Symposium ITxpo 2000,,

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