CHAPTER 9 Customer Relationship Management and Supply Chain Management 1 Copyright John Wiley & Sons Canada

2 9.1 Defining Customer Relationship Management 9.2 Operational Customer Relationship Management Systems 9.3Analytical Customer Relationship Management Systems 9.4 Other Types of Customer Relationship ManagementSystems 9.5 Supply Chains 9.6 Supply Chain Management 9.7 Information Technology Support for Supply Chain Management Chapter 9: Customer Relationship Management and Supply Chain Management

Copyright John Wiley & Sons Canada3 LEARNING OBJECTIVES 1.Define “customer relationship management” and “collaborative CRM”, and identify the primary functions of both processes. 2.Describe the two major components of operational CRM systems, list three applications used in each component, and provide at least one example of how businesses use each application. 3.Describe “analytical CRM systems”, and describe four purposes for which businesses use these systems.

Copyright John Wiley & Sons Canada4 LEARNING OBJECTIVES (CONTINUED) 4.Define “mobile CRM systems”, “on-demand CRM systems”, and “open-source CRM systems”, and identify one main advantage and one main drawback of each. 5.Define the term, “supply chain”, and describe the three components and the three flows of a supply chain.

Copyright John Wiley & Sons Canada5 LEARNING OBJECTIVES (CONTINUED) 6.Identify two major challenges in setting accurate inventory levels throughout the supply chain, and describe three popular strategies to solve supply chain problems. 7.Define “electronic data interchange (EDI)”, “extranet”, and “portal”, and explain how each of these applications helps support supply chain management.

Copyright John Wiley & Sons Canada6 CASE 9.1 THE NEXT STEP IN CUSTOMER RELATIONSHIP MANAGEMENT Taste profiling is when websites track what you buy or look at and remember your tastes. Persuasion profiling tries to guess what will persuade you to buy something. Persuasion profiling can provide many benefits but also has drawbacks. To prevent advertisers from pouncing on your personal psychological weak spots, you should watch for signs of persuasion profiling and view all marketing arguments with a grain of salt.

Copyright John Wiley & Sons Canada7 CASE 9.1 THE NEXT STEP IN CUSTOMER RELATIONSHIP MANAGEMENT What We Learned From the Case –It provides a specific example of the evolving nature of the business-customer relationship. –As personal technology usage changes, so too must the methods that businesses use to interface with their customers. –Organizations increasingly are emphasizing a customer-centric approach to their business practices.

Copyright John Wiley & Sons Canada8 9.1 DEFINING CUSTOMER RELATIONSHIP MANAGEMENT Customer relationship management (CRM) is a customer-focused and customer-driven organizational strategy. –Returns to personal marketing rather than market to a mass of people or companies, businesses market to each customer individually. –Companies can implement a crm tool that manages distribution, scheduling, billing, and customer information. –Is not a process or a technology per se; rather, it is a customer- centric way of thinking and acting. –Helps companies acquire new customers, retain existing profitable customers, and grow relationships with existing customers.

Copyright John Wiley & Sons Canada9 FROM NEIGHBORHOOD STORES……. Before the supermarket, the mall, and the automobile, people purchased goods at their neighbourhood store. The owners and employees recognized customers by name and knew their preferences and wants. For their part, customers remained loyal to the store and made repeated purchases.

Copyright John Wiley & Sons Canada10 TO TODAY….. Over time personal customer relationship became impersonal as people moved from farms to cities, consumers became mobile, and supermarkets and department stores achieved economies of scale through mass marketing. Although prices were lower and products were more uniform in quality, the relationship with customers became nameless and impersonal.

Copyright John Wiley & Sons Canada11 FIGURE 9.1 THE CRM PROCESS

Copyright John Wiley & Sons Canada IT’S ABOUT BUSINESS AN INSTANTANEOUS CRM EFFORT Social media presented an easy opportunity to make the most of the customer experience and to demonstrate to the organization that there is “gold” in tweets Systematically monitors what customers are saying on social networking sites Makes improvements when patrons have been unhappy Companies ignore social media at their peril

Copyright John Wiley & Sons Canada13 FIGURE 9.2 CUSTOMER TOUCH POINTS

Copyright John Wiley & Sons Canada14 DATA CONSOLIDATION Data Consolidation = 360-Degree View of Customers

Copyright John Wiley & Sons Canada OPERATIONAL CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Two major components of Operational CRM: –Customer-facing applications: an organization’s sales, field service, and customer interaction centre representatives interact directly with customers –Customer-touching or electronic CRM (e-CRM) applications: customers interact directly with these technologies and applications

Copyright John Wiley & Sons Canada16 CUSTOMER-FACING APPLICATIONS Customer service and support Sales force automation Marketing Campaign management

Copyright John Wiley & Sons Canada17 MARKETING Cross selling Up selling Bundling

Copyright John Wiley & Sons Canada18 IT’S ABOUT BUSINESS 9.2 CHINATRUST PHILIPPINES CRM EFFORT Implemented new CRM system to record all customer interactions Sales agents can now access and analyze customers’ transaction history and use appropriate strategies for targeting customers more effectively, including up and cross-selling Call agents have access to customer data at their fingertips Call service levels (calls answered within 10 seconds) were drastically improved from 35 percent to 85 percent

Copyright John Wiley & Sons Canada19 CUSTOMER-TOUCHING APPLICATIONS Search and Comparison Capabilities Technical & Other Information Services Customized Products & Services Personalized Web Pages FAQ’s & Automated Response Loyalty Programs Click on the links to review examplesof customer touching applications

Copyright John Wiley & Sons Canada20 BENEFITS OF OPERATIONAL CRM SYSTEMS Provide efficient, personalized marketing, sales, and service. Get a 360-degree view of each customer. Give sales and service employees access to a complete history of customer interaction with the organization Improve sales and account management

Copyright John Wiley & Sons Canada21 BENEFITS OF OPERATIONAL CRM SYSTEMS (CONTINUED) Form individualized relationships with customers Identify the most profitable customers Provide employees with the information and processes necessary to know their customers. Understand and identify customer needs Effectively build relationships among the company, its customer base, and its distribution partners.

Copyright John Wiley & Sons Canada ANALYTICAL CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Analytical CRM systems analyze customer data for a variety of purposes: designing and executing targeted marketing campaigns increasing customer acquisition, cross selling, and up selling providing input into decisions relating to products and services providing financial forecasting and customer profitability analysis

Copyright John Wiley & Sons Canada23 FIGURE 9.3 THE RELATIONSHIP BETWEEN OPERATIONAL CRM AND ANALYTICAL CRM

Copyright John Wiley & Sons Canada24 IT’S ABOUT BUSINESS 9.3 REFINING THE CALL CENTRE Emotions-driven (30%):forge relationships with agents before getting into the problem. Thoughts-driven (25%): want facts and analysis and are not fond of small talk. Reactions-driven (20%): either love something or hate it. Opinions-driven (10%): customers’ language is full of imperatives, their minds are made up. Reflections-driven (10%): introverts who live in their own worlds, prefer silence to banter, and often skip personal pronouns in their speech. Actions-driven (5%): want movement and progress. ELoyalty ELoyalty software identified six personality types :

Copyright John Wiley & Sons Canada IT’S ABOUT BUSINESS REFINING THE CALL CENTRE Pairing callers with like-minded representatives offers four benefits to companies: –Saves them a great deal of money –Enables company representatives to resolve issues for more customers –Increases customer satisfaction –Reduces customer churn (turnover)

Copyright John Wiley & Sons Canada OTHER TYPES OF CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS On-demand Mobile Open-source Click on the links to examples of customer relationship management vendors

Copyright John Wiley & Sons Canada SUPPLY CHAINS Supply chain is the flow of materials, information, money, and services from raw material suppliers, through factories and warehouses, to the end customers; it includes the organizations and processes that create and deliver products, information, and services to end customers.

Copyright John Wiley & Sons Canada28 FIGURE 9.4 GENERIC SUPPLY CHAIN

Copyright John Wiley & Sons Canada29 FLOWS OF THE SUPPLY CHAIN Material: physical products, raw materials, supplies, etc. that flow along the chain Information: data related to demand, shipments, orders, returns, and schedules, as well as changes in any of these data Financial: money transfers, payments, credit card information and authorization, payment schedules, e- payments, and credit-related data.

Copyright John Wiley & Sons Canada SUPPLY CHAIN MANAGEMENT Supply chain management (SCM) Interorganizational information system (IOS)

Copyright John Wiley & Sons Canada31 INTERORGANIZATIONAL INFORMATION SYSTEM (IOS) Reduces costs of routine business transactions Improves quality of information flow by reducing or eliminating errors Compresses cycle time in fulfilling business transactions Eliminates paper processing and its associated inefficiencies and costs Makes transfer and processing of information easier for users

Copyright John Wiley & Sons Canada32 PUSH MODEL Push model, also known as make-to-stock, the production process begins with a forecast, which is simply an educated guess as to customer demand.

Copyright John Wiley & Sons Canada33 PULL MODEL Pull model, also known as make-to-order, the production process begins with a customer order.

Copyright John Wiley & Sons Canada34 PROBLEMS ALONG THE SUPPLY CHAIN Poor customer service Poor quality product High inventory costs Loss of revenues

Copyright John Wiley & Sons Canada35 FIGURE 9.5 THE BULLWHIP EFFECT

Copyright John Wiley & Sons Canada36 SOLUTIONS TO SUPPLY CHAIN PROBLEMS Vertical Integration Using Inventories –Just-in-time Information Sharing –Vendor-managed inventory (VMI)

Copyright John Wiley & Sons Canada INFORMATION TECHNOLOGY SUPPORT FOR SUPPLY CHAIN MANAGEMENT Electronic Data Interchange (EDI) Extranets Web Services

Copyright John Wiley & Sons Canada38 EDI BENEFITS Minimize data entry errors Length of messages are shorter Messages are secured Reduces cycle time Increases productivity Enhances customer service Minimizes paper usage and storage

Copyright John Wiley & Sons Canada39 EDI LIMITATIONS Sometimes business processes must be restructured EDI is being replaced by XML-based web services Multiple EDI standards exist

Copyright John Wiley & Sons Canada40 FIGURE 9.6 COMPARING PURCHASE ORDER FULFILLMENT WITH AND WITHOUT EDI

Copyright John Wiley & Sons Canada41 EXTRANETS Major benefits: –Faster processes –Information flow –Improved order entry and customer service –Lower costs –Overall improved business effectiveness

Copyright John Wiley & Sons Canada42 FIGURE 9.7 THE STRUCTURE OF AN EXTRANET

Copyright John Wiley & Sons Canada43 EXTRANETS There are 3 basic types of extranets –A single company –An entire industry –Joint ventures and other business partnerships There are 2 corporate portals: –Procurement (sourcing) –Distribution

Copyright John Wiley & Sons Canada44 CHAPTER CLOSING Customer relationship management (CRM) is an organizational strategy that is customer focused and customer driven. Collaborative CRM is an organizational CRM strategy where data consolidation and the 360-degree view of the customer enable the organization’s functional areas to readily share information about customers.

Copyright John Wiley & Sons Canada45 CHAPTER CLOSING (CONTINUED) Two major components of operational CRM systems: customer-facing CRM, customer-touching applications. Analytical CRM systems analyze customer behaviour and perceptions in order to provide business intelligence. Three additional CRM systems: mobile, on-demand, and, open-source

Copyright John Wiley & Sons Canada46 CHAPTER CLOSING (CONTINUED) Supply chain is the flow of materials, information, money, and services from raw material suppliers, through factories and warehouses, to the end customers. –three components: upstream, internal, downstream –three flows: material, information, financial –Two major challenges: demand forecast, bullwhip effect –three popular solutions: building inventories, just-in-time (JIT), vendor-managed inventory (VMI)

Copyright John Wiley & Sons Canada47 CHAPTER CLOSING (CONTINUED) Electronic data interchange (EDI) is a communication standard that enables the electronic transfer of routine documents, such as purchasing orders, between business partners. Extranets are networks that link business partners over the Internet. Corporate Portals offer a single point of access through a web browser to critical business information in an organization.

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