1. Customer Relationship Management
Dr Sherif Kamel
The American University in Cairo

2. Outline Overview Why CRM? CRM basics Defining CRM
Managing the customer life cycle
5 key drivers of the customer value
4 stages of a customer relationship
Interactivity v individualization
Challenges to understanding customers
Remarks
Conclusions

3. Bits and bytes CRM – the hottest buzz word in business today
Developing a personal and a professional profile about each customer
Basic and historical information
Personal preferences
Trends and habits
Demographical information
Building a CRM culture
The power of integration
Using emerging technology to get closer to the customer

4. Current facts… Today customers are in charge – they make the rules
Putting technology at the center stage
Business intelligence is one of the most growing segment in the marketplace
Customer loyalty is very difficult to maintain due to competition
Customers want an excellent service and they want to feel special
Most companies think they are customer-focused however in reality they are product-centric
There is a need to formulate customer-focused firms which needs:
CRM strategy
Organizational change
Corporate culture

5. Economics of customer retention
“Winning back a lost customer can cost up to times as much as keeping a current one satisfied.”
Rob Yanker, Partner, McKinsey & Company
Understanding your customer is key to retention…..

6. Market size CRM market grew 66% in 1999
34 Billion US dollars by 2003 and probably around 125 billion US dollars by 2004
60% of the CRM software license market is controlled by 3 vendors
Siebel
Trilogy
Baan/Aurum

7. Why CRM?
It costs 6 times more to sell to a new customer than to sell to an existing one
A typically dissatisfied customer will tell 8 to 10 people about his/her experience (mainly related to poor customer service)
The odds of selling to a new customer is 15% versus 50% to an existing customer
70% of the customers complaining will do business again with the company if the complaints are quickly addressed
90% of existing companies do not have integrated CRM tools and platforms

8. Customer Relationships Today
Branding
Product
Pricing
Distribution
Communication
Community
Building a customer-centric approach to Internet marketing by focusing on customers

9. CRM Basics
CRM is the timely delivery of excellent service “customer relationship management”
CRM is a combination of business process and technology that seeks to understand a company’s customers from a number of perspectives including:
Who they are?
What they do?
What do they like?

10. Age of the never-satisfied customer…
CRM becomes a support tool in a time characterized by:
Increased competition
Globalization
Growing cost of customer acquisition
High customer turnover
CRM is all about creating a better value proposition to customers
Information and communication technology is now acting as a catalyst for CRM
Extended enterprise
World wide web and the Internet

11. Defining CRM
CRM is an integrated sales, marketing and service strategy that is based on a timely and accurate information infrastructure and that depends on coordinated enterprise-wide activities
Example: tracking customers interactions with the firm
Customer tracking includes steps in the selling and customer service cycles
CRM steps include
Targeting
Acquisition
Retention
Expansion

12. Defining CRM Targeting Acquisition Who do we target?
What segments are most profitable?
What segments match our value proposition?
What is the best segmentation strategy for us/our industry?
Acquisition
What is the best channel for each segment?
What is the acquisition cost for a channel/segment?
Do certain channels deliver certain types of customers?
Cost effective acquisition?

13. Defining CRM Retention Expansion How can we improve retention?
What is our average customer relationship length?
How can we hold customer for as long as possible?
What is the most cost effective method of retention?
Expansion
How many products does our average customer buy?
How can we induce our current base to buy more products?
Who are the prime targets for expansion?
What is the cost of expansion?

14. Goals of CRM Using existing relationship to grow revenue
Using integrated information for excellent service
Introducing consistent, replicable channel processes and procedures

15. CRM… CRM is a business strategy and not a product
Putting CRM into practice requires developing a set of integrated applications to address all aspects related to the front-office needs
CRM could be a major support platform for small and medium-sized enterprises
Cost of the information and communication technology applications and infrastructure should be calculated as opposed to the return-on-investment

16. Evolution of information requirements
Materials requirements planning (MRP)
Manufacturing resource planning (MRP II)
Enterprise resource planning (ERP)
Supply chain management (SCM)
Customer relationship management (CRM)

17. Managing the customer life cycle
Acquiring
new customers
Enhancing
profitability of existing
customers
Retaining
profitable customers
for life

18. Acquiring new customers
Promoting the company’s product and service leadership
Redefine the companies competitive edge and innovations
Offer a superior product backed by an excellent service
Example: Browsing on the net, submitting a request, receiving a phone call
Model for a sales and service strategy

19. Enhancing profitability of existing customers
Encouraging cross-selling and up-selling
Cross selling is used by suggesting alternative products or up-selling by rendering the customer more informed with the new products and services.
Broadening the relationship between the company and the customers
Providing a value proposition represented by offering a greater convenience at low cost (one-stop-shopping)
Example: “Best Buy” an electronic retailer with more than 300 stores capitalizes on committed relationships with customers
3000 calls a day with more than 50% having computer-based answers and solutions

20. Retaining profitable customers for life
Retention focused on service adaptability
Delivering not what the market wants but what the customer wants
Providing a value proposition that offers a proactive relationship that works on the best interest of the customer
Example: customer retention is becoming a key competitive strategy for many companies

21. Integrated CRM Integrated CRM Applications Acquire Enhance Retain
Customer
Life cycle
Direct Marketing
Cross-sell and Up-sell
Proactive Service
Partial
Functional
Solutions
Sales Force Automation
Customer Support
Integrated CRM Applications
Complete
Integrated
Solutions

22. Core CRM process competencies
Marketing and
Fulfillment
Customer
Service and
Billing
Fax
Sales
Cross-sell
Up-sell
Telesales
Prospect Or
Customer
WWW
Loyalty
and Retention
Programs
Phone
Field Sales
and Service
Content Management
Technical Infrastructure

23. How to build a CRM infrastructure
Involve top management
Decide on a vision of an integrated CRM
Establish a CRM strategy and specify its objectives
Understand the customer
Review cultural changes that will need to occur
Develop a business case
Evaluate current readiness
Evaluate appropriate applications to do a better business
Identify and target quick wins
Have one manager to own the end-to-end project
Implement in stages
Be sure to create a close-loop CRM environment
Create concrete measurement goals

24. Relationship depth and profitability
Magnitude of Purchases $ $$
$$$
Frequency of Purchases
Long-Term Profitability
Evaluating Relationship Depth
Relationship depth, as measured by the frequency and magnitude of purchases, is a critical component of customer profitability

25. Length of customer tenure and profitability
High
Lifetime Profit
Low
Short
Long
Lifetime

26. 5 key drivers of the customer value
Cost of Targeting
Cost of Acquisition
Service and Usage Revenue
Cost of service
Duration of relationship

27. 4 stages of a customer relationship
Commitment
Dissolution
Exploration / Expansion
Awareness
Customer recognizes the firm but has not initiated any transactions
Customer gathers information about the firm which determines whether repeated transactions will occur
Customer and firm feel a sense of obligation or responsibility to one another
Total loss of commitment and relationship

28. Interactivity v individualization
Interactivity is the occurrence of two-way communication between the firm and the customer
Retail store personnel handle Internet customer service
Chat rooms are set up to discuss product-related issues
Customers subscribe to customized versions of firm newsletters
Technology has made it possible to customize each interaction to the individual user
Consumers have privacy concerns about sharing too much information
For individualization to be attractive, consumers must have unmet needs
Costs and complexity for the firm increase with greater personalization while service speeds often decline

29. Challenges to understanding customers
Identify the customer
Learn from customers
Know the customers’ value
Determine best resources
Access complete customer profile and history

30. Remarks World is moving rapidly to a customer centric business model
It is a prerequisite for survival and growth in the marketplace
Integration of disparate customer data sources is a primary technical challenge
CRM is becoming invaluable as a differentiation tool
The world is becoming extremely customer centric, even cultures that have been customer-averse
Technology is just a platform – an enabler

31. Conclusions
A firm is better able to serve customers needs if they understand them well
Provision of the products customers want, at the right time through a consistent service leads to their retention
CRM gives the complete and rich view of the customer, enabling tactical and strategic actions to be taken to meet customer needs
CRM enables consistent customer communication regardless of channel, location, time