Presentation on theme: "Customer Relationship Management"— Presentation transcript:
1Customer Relationship Management Dr Sherif KamelThe American University in Cairo
2Outline Overview Why CRM? CRM basics Defining CRM Managing the customer life cycle5 key drivers of the customer value4 stages of a customer relationshipInteractivity v individualizationChallenges to understanding customersRemarksConclusions
3Bits and bytes CRM – the hottest buzz word in business today Developing a personal and a professional profile about each customerBasic and historical informationPersonal preferencesTrends and habitsDemographical informationBuilding a CRM cultureThe power of integrationUsing emerging technology to get closer to the customer
4Current facts… Today customers are in charge – they make the rules Putting technology at the center stageBusiness intelligence is one of the most growing segment in the marketplaceCustomer loyalty is very difficult to maintain due to competitionCustomers want an excellent service and they want to feel specialMost companies think they are customer-focused however in reality they are product-centricThere is a need to formulate customer-focused firms which needs:CRM strategyOrganizational changeCorporate culture
5Economics 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 & CompanyUnderstanding your customer is key to retention…..
6Market size CRM market grew 66% in 1999 34 Billion US dollars by 2003 and probably around 125 billion US dollars by 200460% of the CRM software license market is controlled by 3 vendorsSiebelTrilogyBaan/Aurum
7Why CRM?It costs 6 times more to sell to a new customer than to sell to an existing oneA 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 customer70% of the customers complaining will do business again with the company if the complaints are quickly addressed90% of existing companies do not have integrated CRM tools and platforms
8Customer Relationships Today BrandingProductPricingDistributionCommunicationCommunityBuilding a customer-centric approach to Internet marketing by focusing on customers
9CRM BasicsCRM 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?
10Age of the never-satisfied customer… CRM becomes a support tool in a time characterized by:Increased competitionGlobalizationGrowing cost of customer acquisitionHigh customer turnoverCRM is all about creating a better value proposition to customersInformation and communication technology is now acting as a catalyst for CRMExtended enterpriseWorld wide web and the Internet
11Defining CRMCRM 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 activitiesExample: tracking customers interactions with the firmCustomer tracking includes steps in the selling and customer service cyclesCRM steps includeTargetingAcquisitionRetentionExpansion
12Defining 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?AcquisitionWhat 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?
13Defining 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?ExpansionHow 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?
14Goals of CRM Using existing relationship to grow revenue Using integrated information for excellent serviceIntroducing consistent, replicable channel processes and procedures
15CRM… 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 needsCRM could be a major support platform for small and medium-sized enterprisesCost of the information and communication technology applications and infrastructure should be calculated as opposed to the return-on-investment
17Managing the customer life cycle Acquiringnew customersEnhancingprofitability of existingcustomersRetainingprofitable customersfor life
18Acquiring new customers Promoting the company’s product and service leadershipRedefine the companies competitive edge and innovationsOffer a superior product backed by an excellent serviceExample: Browsing on the net, submitting a request, receiving a phone callModel for a sales and service strategy
19Enhancing profitability of existing customers Encouraging cross-selling and up-sellingCross 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 customersProviding 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 customers3000 calls a day with more than 50% having computer-based answers and solutions
20Retaining profitable customers for life Retention focused on service adaptabilityDelivering not what the market wants but what the customer wantsProviding a value proposition that offers a proactive relationship that works on the best interest of the customerExample: customer retention is becoming a key competitive strategy for many companies
21Integrated CRM Integrated CRM Applications Acquire Enhance Retain CustomerLife cycleDirect MarketingCross-sell and Up-sellProactive ServicePartialFunctionalSolutionsSales Force AutomationCustomer SupportIntegrated CRM ApplicationsCompleteIntegratedSolutions
23How to build a CRM infrastructure Involve top managementDecide on a vision of an integrated CRMEstablish a CRM strategy and specify its objectivesUnderstand the customerReview cultural changes that will need to occurDevelop a business caseEvaluate current readinessEvaluate appropriate applications to do a better businessIdentify and target quick winsHave one manager to own the end-to-end projectImplement in stagesBe sure to create a close-loop CRM environmentCreate concrete measurement goals
24Relationship depth and profitability Magnitude of Purchases$$$$$$Frequency of PurchasesLong-Term ProfitabilityEvaluating Relationship DepthRelationship depth, as measured by the frequency and magnitude of purchases, is a critical component of customer profitability
25Length of customer tenure and profitability HighLifetime ProfitLowShortLongLifetime
265 key drivers of the customer value Cost of TargetingCost of AcquisitionService and Usage RevenueCost of serviceDuration of relationship
274 stages of a customer relationship CommitmentDissolutionExploration / ExpansionAwarenessCustomer recognizes the firm but has not initiated any transactionsCustomer gathers information about the firm which determines whether repeated transactions will occurCustomer and firm feel a sense of obligation or responsibility to one anotherTotal loss of commitment and relationship
28Interactivity v individualization Interactivity is the occurrence of two-way communication between the firm and the customerRetail store personnel handle Internet customer serviceChat rooms are set up to discuss product-related issuesCustomers subscribe to customized versions of firm newslettersTechnology has made it possible to customize each interaction to the individual userConsumers have privacy concerns about sharing too much informationFor individualization to be attractive, consumers must have unmet needsCosts and complexity for the firm increase with greater personalization while service speeds often decline
29Challenges to understanding customers Identify the customerLearn from customersKnow the customers’ valueDetermine best resourcesAccess complete customer profile and history
30Remarks World is moving rapidly to a customer centric business model It is a prerequisite for survival and growth in the marketplaceIntegration of disparate customer data sources is a primary technical challengeCRM is becoming invaluable as a differentiation toolThe world is becoming extremely customer centric, even cultures that have been customer-averseTechnology is just a platform – an enabler
31ConclusionsA firm is better able to serve customers needs if they understand them wellProvision of the products customers want, at the right time through a consistent service leads to their retentionCRM gives the complete and rich view of the customer, enabling tactical and strategic actions to be taken to meet customer needsCRM enables consistent customer communication regardless of channel, location, time