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Customer Relationship Management

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Presentation on theme: "Customer Relationship Management"— Presentation transcript:

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

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