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1 Information Systems: the Foundation of E-Business (CIS 108) Customer Relationship Management, (CRM) Lecture SEVEN (28 th February 2005) Amare Michael.

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Presentation on theme: "1 Information Systems: the Foundation of E-Business (CIS 108) Customer Relationship Management, (CRM) Lecture SEVEN (28 th February 2005) Amare Michael."— Presentation transcript:


2 1 Information Systems: the Foundation of E-Business (CIS 108) Customer Relationship Management, (CRM) Lecture SEVEN (28 th February 2005) Amare Michael Desta

3 2 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,

4 3 Outline Benefits of a CRM program Cultural changes The four phases of implementation Research & Best practices Casino case ITs role in CRM CRMs relation to the supply chain

5 4 Benefits of CRM Improved customer retention Greater retention results in a larger future customer base


7 6 Benefits of CRM (contd) 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

8 7 Benefits of CRM (contd) 2-way communications Improves customer satisfaction Impact on the grey markets Often harmful to profits Frequently used to level inventories

9 8 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

10 9 Pre-implementation Classify customers based on diversity of value and needs Determine who the customers are

11 10 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

12 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 & Boyett The gurus guide to the knowledge economy

13 12 Phase I: The Privacy policy Means to gather information Interviews Surveys Loyalty cards

14 13 Casino CRM Program Pre-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

15 14 Casino CRM Program Pre-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

16 15 Casino CRM Program Building 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

17 16 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

18 17 Phase II (contd) 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. a reasonable middle ground Cheapest method Convenient for the customer

19 18 Phase II (contd) 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 gurus guide to the knowledge economy

20 19 Casino CRM Program Customer 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

21 20 Casino CRM Program Customer 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

22 21 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

23 22 Rules of engagement for customer interactions (Contd..) Dont initiate an interaction with a customer without a clear objective Dont ask a customer the same thing more than once Interact in the medium of the customers 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

24 23 Rules of engagement for customer interactions (Contd..) Protect the customers 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 customers time. Dont try to learn everything about a customer at once. Source: The Gurus guide to the knowledge economy, p. 216

25 24 Casino CRM Program Maintaining 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 address included on all correspondence

26 25 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

27 26 Phase IV (contd) 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

28 27 Phase IV (contd) Combinations can be used Beware of TOO much satisfaction

29 28 Phase IV (contd) Change call center operations to service top customers Eliminate discounts and promotions My loyalty cannot be bought!

30 29 Casino CRM Program Customization 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)

31 30 Casino CRM Program Customization 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

32 31 ITs 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

33 32 ITs role in CRM (contd) eCRM package types: Customer Service Automation systems Augments call center personnel Some can respond to s on their own Ties-in to existing company software, including other eCRM packages (generally…)

34 33 ITs role in CRM (contd) 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

35 34 ITs role in CRM (contd) Source: The CRM Solutions guide

36 35 ITs role in CRM (contd) CRM and ERP Determine if a package can be tied-in to the enterprises 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

37 36 ITs role in CRM (contd) Data mining tools Market basket analysis and automatic cluster generation Decision trees and memory-based reasoning Neural net systems

38 37 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

39 38 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

40 39 Customer Relationship Management Wrap-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

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