1. Ch. 10 Customer Relationship Management (CRM)
Rev: Apr., 2015
Euiho (David) Suh, Ph.D.
POSTECH Strategic Management of Information and Technology Laboratory
(POSMIT:
Dept. of Industrial & Management Engineering POSTECH

2. Evolution of Marketing
Marketing Age
Techniques
Technology
The Dark Ages
Artistry and Alchemy
Cross-talk , Mass-talk
The Renaissance
Craftsmanship
Focus groups, interviews
The Industrial Revolution
Mass Marketing
Files/Computer mailing lists
The Information Age
Database Marketing
Databases/Segmentation
This figuere says that rather than a revolution, these changes can be seen as evolving over time.
The Age of Optimization
Customer Relationship Management
Data Warehousing, Data Mining, Analysis Tools (OLAP)

3. Managing the customers
What is CRM? (1/2)
Managing the customers
Customer relationship management (CRM) is a system for managing a company’s interactions with current and future customers. It often involves using technology to organize, automate, and synchronize sales, marketing, customer service, and technical support.[1]

4. What is CRM? (2/2)

5. Source: The Loyalty Effect (Harvard Business School Press)
Why CRM?
It is easier to retain a customer than to gain a new customer
It is 6-7 times more expensive to gain a new customer than retain an existing customer (Harvard Business Review)
It is far more expensive to win back a customer after they left than it is to keep them satisfied in the first place.
It is far easier to sell a new product to an existing customer than it is to a new customer
Customers become more precarious
A 5% increase in customer retention can increase profits % proved customer retention
Source: The Loyalty Effect (Harvard Business School Press)
By Frederick Reichhek

6. Database Marketing
A form of direct marketing using databases of customers or potential customers to generate personalized communications in order to promote a product or service for marketing purposes. The method of communication can be any addressable medium, as in direct marketing.
Distinction between direct and database marketing: Attention level paid to the analysis of data.
Database marketing emphasizes the use of statistical techniques to develop models of customer behavior, which are then used to select customers for communications. As a consequence, database marketers also tend to be heavy users of data warehouses, because having a greater amount of data about customers increases the likelihood that a more accurate model can be built.
Two Types of Marketing databases,
1) Consumer Databases: primarily geared towards companies that sell to consumers, often abbreviated as [business-to-consumer] (B2C) or BtoC.
2) Business Databases: Much more advanced in the information that they can provide. This is mainly because business databases aren't restricted by the same privacy laws as consumer databases.

7. Relationship Marketing
Explanation of CRM
Origin of CRM
Create a Database
DBM  DW  OLAP  Call Center  Service Center  CRM
Analysis
Various Types of CRM
Customer Selection
Direct s
Call Center
Mass customization or developing products that fit individual customer’s needs
Operational CRM
Customer Targeting
Relationship Marketing
Key Point to Succeed
Main concept of CRM: managing valuable customer in a long-term view
 Company should focuses on value of customer, instead of short-term profit
Privacy Issues
Metrics
CRM Framework

8. Identify and target the best customers
Benefits of CRM
Benefits of CRM
Identify and target the best customers
Real-time customization and personalization of products and services
Track when and how a customer contacts the company
Provide a consistent customer experience
Provide superior service and support across all customer contact points

9. Three Phases of CRM

10. Entire CRM Framework Operational CRM Analytical CRM Collaborative CRM
The automation of horizontally integrated business processes, including customer touch-points, channels, and front-back office integration
Analytical CRM
The analysis of data created by the Operational CRM
Collaborative CRM
Application of collaborative services including , personalized publishing, e-communities, and similar vehicles designed to facilitate interactions between customers and organizations
Touchpoint: where you have the opportunity to interact and “touch” your customers or they touch your company, are called “touchpoints”

11. Business Rules and Metadata Management
CRM Architecture
Business Rules and Metadata Management
Workflow Management
Marketing
Data mart
Campaign
management
Analytics Data
Mart
Reporting Data
Data Mining/
Analytics
Ad Hoc Query and
Reporting
Direct Mail
Contact
Management
Call Centers
Sales Force
Customer Service
Centers
Internet
Other
History
Transaction
Customer
Profile and
Account
Data
Warehouse
External data
ETL Tools
Data Source
Marketing Data Source
Decision Support Applications
Communication Channels
In this architechture, you can see a number of customer touch points and delivery channels that produce and consume information. This information needs to be integrated and analyzed in order to obtain a complete and accurate picture of the customers – their preferences, needs, complaints, and attributes that can make them life-long members of the organizational “network” of products and services. As a result, all major components of the data warehouseing environment are being deployed to perform a number of critical functions related to the integration and analysis. Among these components are not just data warehouses and data marts, but also data mining, reporting, OLAP engines, and the metadata management repository.
ETL : Extract Transform Load
Data mart : An implementation of the data warehouse, where its data scope is somewhat limited compared to the enterprise-wide data warehouse. A data mart may contain lightly summarized departmental data and can be customized to suit the needs of a particluar department that owns the data. In a large enterprise, data markts tend to be a way to build a data warehouse in a sequential, phased approach. A collection of data marts composes an enterprise-wide data warehouse; conversel, a data warehouse may be construed as a collection of subset data marts. More on data marts can be found in Part II of this book (pp.27)

12. Application Clusters in CRM

13. Contact and Account Management
CRM helps sales, marketing, and service professionals capture and track relevant data about
Every past and planned contact with prospects and customers
Other customer business & life-cycle events
Data are captured through touch points
Telephone, fax, , Websites
Retail stores, kiosks, personal contact

14. Sales
A CRM system provides sales reps with the tools and data resources they need to
Support and manage sales activities
Optimize cross- and up-selling
Up-selling & Cross-selling
CRM also provides the means to check on a customer’s account status and history before scheduling sales calls

15. Marketing and Fulfillment
CRM systems help with direct marketing campaigns by automating tasks
Qualifying leads for targeted marketing
Scheduling and tracking mailings
Capturing and managing responses
Analyzing the business value of a campaign
Fulfilling responses & requests

16. Customer Service and Support
CRM helps customer service managers create, assign and manage customers’ requests for service
Call center software
Help desk software
Web-based self-service

17. Retention and Loyalty Programs (1/2)
The odds of selling to an existing customer are 50%; a new one 15%
70% of complaining customers will do business with the company again if it quickly fixes a problem
It costs 6 times more to sell to a new customer
An unhappy customer will tell 8-10 others
Boosting customer retention 5% can boost profits 85%

18. Retention and Loyalty Programs (2/2)
Enhancing and optimizing customer retention and loyalty is a primary objective of CRM
Identify, reward, and market to the most loyal and profitable customers
Evaluate targeted marketing and relationship programs

19. Domestic CRM Market Transition (license)
Limitation of CRM
CRM Failure
Domestic CRM Market Transition (license)
unit: billion won
75% of CRM projects that do not deliver measurable ROI will have failed because of poor business executive decision-making
½ of the companies got worse performance tasks, ¼ of companies which implement CRM system didn’t get improvement of tasks
20% damaged customer relationships
CAGR:13.5%
Source: Gartner Group, Insight Technology Group report
CRM Failure Reasons
Source :
Sin One : Failing to Plan
Sin Two : Failing To Establish Outcomes
Sin Three : Excluding the Human Factor
Sin Four : Automating Flawed Processes
Sin Five : Ignoring Constraints
Sin Six : Disregarding Politics
Sin Seven : Choosing the Wrong Vendor
 CRM Market is getting bigger but, companies should pay too much cost and time to implement CRM.
Also, the CRM system does not guarantee higher performance
Source: interview of Gartner Research’s Beth Eisenfeld with CRMDaily

20. Microsoft Dynamics CRM
Market Leaders
Vendor
2013 Revenue
2013 Share (%)
2012 Revenue
2012 Share (%)
2008 Revenue
2008 Share (%)
2007 Revenue
2007 Share (%)
2006 Revenue
2006 Share (%)
Salesforce.com CRM
3,292
16.1
2,525.6
14.0
965
10.6
676.5
8.3
451.7
6.9
SAP AG
2,622
12.8
2,327.1
12.9
2,055
22.5
2,050.8
25.3
1,681.7
25.6
Oracle
2,097
10.2
2,015.2
11.1
1,475
1,319.8
16.3
1,016.8
15.5
Microsoft Dynamics CRM
1,392
6.8
1,135.3
6.3
581
6.4
332.1
4.1
176.1
2.7
Others
11,076
54.1
10,086.8
55.7
3,620
39.6
3,289.1
40.6
2,881.6
43.8
Total
20,476
100
18,090
9,147
7,674
6,214

21. Trends Cloud Computing Issue Social Media Customer /SNS Customer
VRM (Vendor Relationship Management)
ERM(Extended Relationship Management)
Customer Transparency
Sales Effectiveness