CRM and external relationships

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Customer Relationship Management

• CRM and external relationships

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Focus of CRM

• Importance for organisation to focus on needs,
  wants, preferences and values of customer
• Use of IT and Internet to cause major
  transformation in ways organisations interact
  with customers

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Electronic Business Scope
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B2C EC
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KM
SCM
ERP
CRM
Supplier
Customer
BI
B2B EC
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Significance of CRM

• 23b in 2000
• Estimates of 76b in 2005
• Median annual investment 1m, implementation
  over 4 years
• Large companies spend 15m 30m /year, and
  between 60m 130m to full implementation
• (Gartner Group 2001)
• But, 30 CRM projects never get finished
• 55 to 75 fail to deliver anticipated benefits
• 60 of managers view CRM as failures
• (Morphy 2001, Kiely 2001)

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CRM and Its Relationship with EC

• Customer relationship management (CRM) A
  customer service approach that focuses on
  building long-term and sustainable customer
  relationships that add value both for the
  customer and the company

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Who is the BOSS

• There is only one boss. The customer. And he
  can fire everybody in the company, from the
  chairman on down, simply by spending his money
  somewhere else.
• (Sam Walton, WalMart)

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Notions about customers

• Every 5 yrs, av. US organisation lose 50 of
  customers
• Cutting these by 5 double profits
• (Morphy 2001)
• 5 in customer retention av.
  lifetime value of customer of between 35-95
• (Reichheld 1996)

Retaining more customers can have significant
impact on organisational performance.
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Why CRM ?
Twice the normal turnover
50 profit reduction
Profit
Customer segments
Source Manhattan Consulting Group
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Customer focus

• Present a single face
• to the customer

Customer focus win and retain loyal and
profitable customers
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Advantages of customer focus

• Accurate view of internal operations
• Service to customers
• Information
• Across product lines
• Across geographic locations
• Across subsidiaries, business units
• Across multiple channels

Major challenge for most organisations
cross-functional, complex
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Why are loyal customers more profitable?
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Why are loyal customers more profitable?

• Acquisition costs incurred once only
• Benefits accrue from
• Loyal customers referring other new customers
• Loyal customers tend to purchase more over time
• Loyal customers are less price sensitive
• Loyal customers incur fewer administrative costs
  over time
• Note also damage from dissatisfied customers can
  escalate

(Cash 1999)
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Customer dissatisfaction escalates
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Concept of demand chain
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Customer Relationship
Focal Company
Customer
Channel
Focal Company
Customer
Channel
Salesmen
Focal Company
Customer
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Changes in Relationship
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CRM and Its Relationship with EC (cont.)

• Classification of CRM programs
• Loyalty program
• Prospecting
• Save or win back
• Cross-sell/up-sell
• eCRM Customer relationship management conducted
  electronically

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CRM and Its Relationship with EC (cont.)

• Scope of CRM
• Foundation of service
• Customer-centered services
• Value-added services

CRM
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CRM and Its Relationship with EC (cont.)

• Extent of service
• Customer acquisition (prepurchase support)
• Customer support during purchase
• Customer fulfillment (purchase dispatch)
• Customer continuance support (postpurchase)

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Components of CRM

• Customer and Product centric services
• Differential Marketing
• Mass marketing
• Focused marketing
• One-to-one marketing
• Customers are not born equal

Sales Managment
Marketing Management
Customer Management
Database Marketing
Service Management
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CRM and Its Relationship with EC (cont.)

• Benefits of CRM
• Provides
• choices of products and services
• fast problem resolution and response
• easy and quick access to information
• Limitations of CRM
• Requires integration with a companys other
  information systems which is costly
• Difficult to support mobile employees

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CRM and Its Relationship with EC (cont.)

• CRM implementation issues
• Steps in building EC strategy focused on
  customer
• focus on the end customer
• systems and business processes that are designed
  for ease of use and from the end customers point
  of view
• efforts to foster customer loyalty

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CRM and Its Relationship with EC (cont.)

• Five factors required to implement a CRM program
  effectively
• Customer-centric strategy
• Commitments from people
• Improved or redesigned processes
• Software technology
• Infrastructure

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CRM and Its Relationship with EC (cont.)

• Justifying customer service and CRM programs
• Metrics Standards of performance may be
  quantitative or qualitative

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CRM and Its Relationship with EC (cont.)

• Web-related metrics a company uses to determine
  the appropriate level of customer support
• Response time
• Site availability
• Download time
• Timeliness
• Security and privacy
• On-time order fulfillment
• Return policy
• Navigability

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CRM Applications and Tools Delivering Customer
Service in Cyberspace

• CRM applications improve upon traditional
  customer service by means of easier
  communications and speedier resolution of
  customer problems
• Customer service adds value to products and
  services
• It is an integral part of a successful business

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CRM Applications and Tools (cont.)

• Classifications of CRM applications
• Customer-facing applications
• Customer-touching applications
• Customer-centric intelligence applications
• Online networking and other applications

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Formation of CRM
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CRM Applications and Tools (cont.)

• Customer-facing applications
• Customer interaction center (CIC) A
  comprehensive service entity in which EC vendors
  address customer service issues communicated
  through various contact channels
• Intelligent agents in customer service and call
  centers

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Customer Management

• Know your customer
• Problems
• Customer relates to channel/salesmen, not company
• Lost of valuable customer data upon departure of
  sales personnel

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Cases

• Online
• Membership
• One-to-one relationship
• Traditional channel
• Membership
• Data collection and usage
• Closer tie to customer

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CRM Applications and Tools (cont.)

• Autoresponders Automated e-mail reply systems
  (text files returned via e-mail), which provide
  answers to commonly asked questions
• Sales force automation (SFA) Software that
  automates the tasks performed by sales people in
  the field, such as data collection and its
  transmission

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CRM Applications and Tools (cont.)

• Customer-touching applications
• Personalized Web Pages
• E-Commerce Applications
• Campaign Management
• DM Direct Mail
• For traditional market

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CRM Applications and Tools (cont.)

• Web Self-Service
• Activities conducted by users on the Web to
  provide answers to their questions (e.g.,
  tracking) or for product configuration
• Self-tracking
• Self-configuration and customization

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CRM Applications and Tools (cont.)

• Customer-centric applications
• Data reports
• Data warehouse
• A single, server-based data repository that
  allows centralized analysis, security, and
  control over the data

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CRM Applications and Tools (cont.)

• Data analysis and mining
• Analytic applications automate the processing and
  analysis of CRM data
• can be used to analyze the performance,
  efficiency, and effectiveness of an operations
  CRM applications
• Data mining involves sifting through an immense
  amount of data to discover previously unknown
  patterns

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CRM Applications and Tools (cont.)

• Online networking and other applications
• Forums
• Chat rooms
• Usenet groups
• E-mail newsletters
• Discussion lists

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CRM Applications and Tools (cont.)

• Mobile CRM
• the delivery of CRM applications to any user,
  whenever and wherever needed
• Voice communication
• people are more comfortable talking with a
  person, even a virtual one, than they are
  interacting with machines. The smile and the
  clear pronunciation of the agents voice
  increases shoppers confidence and trust

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Business intelligence, data warehousing

• Internal and external data is gathered, stored
  and analysed to provide important information to
  support decision making of executives
• Provide better forecasts of end consumer demand,
  improved understanding of changing consumer
  preferences and wants, and so on

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CRM Applications and Tools (cont.)

• Role of knowledge management and intelligent
  agents in CRM
• Automating inquiry routing and answering queries
  requires knowledge
• Generated from historical data and from human
  expertise and stored in knowledge bases for use
  whenever needed
• Intelligent agents support the mechanics of
  inquiry routing, autoresponders, and so on

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Internet Marketing in B2B

• Organizational buyer behavior
• number of organizational buyers is much smaller
  than the number of individual buyers
• transaction volumes are far larger
• terms of negotiations and purchasing are more
  complex

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Internet Marketing in B2B (cont.)

• Methods for B2B online marketing
• Targeting customers
• contact all of its targeted customers
  individually when they are part of a well-defined
  group
• affiliation service
• advertising
• Electronic wholesalers
• intermediary sells directly to businesses, but
  does so exclusively online

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Internet Marketing in B2B (cont.)

• Affiliate programs
• Placing banners on another vendors Web site
• Content alliance program in which content is
  exchanged so that all can obtain some free
  content
• Infomediaries
• Online data mining services

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One-to-One Marketing and Personalization in EC

• One-to-one marketing Marketing that treats each
  customer in a unique way
• Personalization The matching of services,
  products, and advertising content to individual
  consumers
• User profile The requirements, preferences,
  behaviors, and demographic traits of a particular
  customer

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One-to-One Marketing and Personalization in EC
(cont.)

• Major strategies used to compile user profiles
• Solicit information directly from the user
• Observe what people are doing online
• Build from previous purchase patterns
• Perform marketing research

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One-to-One Marketing and Personalization in EC
(cont.)

• Cookie A data file that is placed on a users
  hard drive by a Web server, frequently without
  disclosure or the users consent, that collects
  information about the users activities at a site

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One-to-One Marketing and Personalization in EC
(cont.)

• Collaborative filtering A personalization method
  that uses customer data to predict, based on
  formulas derived from behavioral sciences, what
  other products or services a customer may enjoy
  predictions can be extended to other customers
  with similar profiles

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One-to-One Marketing and Personalization in EC
(cont.)

• Variations of collaborative filtering
• Rule-based filtering
• Content-based filtering
• Activity-based filtering
• Legal and ethical issues in collaborative
  filtering
• Invasion-of-privacy issues
• Permission-based personalization tools to request
  customer permission

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One-to-One Marketing and Personalization in EC
(cont.)

• Customer loyalty
• Customer loyalty Degree to which a customer will
  stay with a specific vendor or brand
• Increased customer loyalty produces cost savings
  through
• lower marketing costs
• lower transaction costs
• lower customer turnover expenses
• lower failure costs
• E-loyalty Customer loyalty to an e-tailer

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One-to-One Marketing and Personalization in EC
(cont.)

• Trust in EC
• Trust The psychological status of involved
  parties who are willing to pursue further
  interaction to achieve a planned goal
• Trust is influenced by many variables

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One-to-One Marketing and Personalization in EC
(cont.)

• How to increase EC trust
• between buyers and sellers trust is determined
  by
• degree of initial success that each party
  experienced with EC and with each other
• well-defined roles and procedures for all parties
  involved
• realistic expectations as to outcomes from EC

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One-to-One Marketing and Personalization in EC
(cont.)

• Issues in personalization
• brand recognition
• security mechanisms help solidify trust
• disclose and update latest business status and
  practices to potential customers and to build
  transaction integrity into the system
• guarantee information and protection privacy
  through various communication channels