ERP Enterprise Resources Planning

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ERP Enterprise Resources Planning
Customer Relationship Management
Ahmad Tahir Rahim
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CRM

• Used to maximize the benefits of a companys
  customer assets.
• Used as a technology and business discipline.
• Seeks to optimize revenue, profitability,
  customer satisfaction, and customer retention.

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CRM System

• CRM system provides integrated approach to all
  aspects of company-customer interaction
• Marketing
• Sales
• Support / Service

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CRM Phases

1. Technology
2. Integration
3. Process
4. Customer-driven

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CRM Applications

• Partner relationship management (PRM)
• Employee relationship management (ERM)

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CRM Software Capabilities

• Sales force automation (SFA)
• Customer service
• Marketing

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CRM Software Capabilities Example
(Laudon and Laudon 2006)
Customer Data
Sales
Marketing
Service
Account Mgmt
Campaign Mgmt
Service Delivery
Lead Mgmt
Channel Promotions Mgmt
Customer Satisfaction Mgmt
Order Mgmt
Events Mgmt
Returns Mgmt
Sales Planning
Market Planning
Service Planning
Field Sales
Marketing Operations
Call Center Help Desk
Sales Analytics
Marketing Analytics
Service Analytics
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Aspects of CRM

• Operational CRM
• Includes customer-facing applications
• Analytical CRM
• Includes applications that analyze customer data
  generated by operational CRM applications

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Operational vs. Analytical CRM Examples (Laudon
and Laudon 2006)
Operational CRM Analytical CRM
Campaign mgmt Develop customer segmentation strategies
E-marketing Develop customer profiles
Account and contact mgmt Analyze customer profitability
Lead mgmt Analyze product profitability
Telemarketing Identify cross-selling/up-selling opportunities
Teleselling Select the best marketing, service, and sales channels for each customer group
E-selling Identify trends in sales cycle length, win rate, and average deal size
Field sales Analyze service resolution times, service levels based on communication channel, and service activity by product line and account
Field service dispatch Analyze leads generated and conversion rates
Customer care and help desk Analyze sales representative and customer service representative productivity
Contract mgmt Identify churn problems
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Analytical CRM Data Warehouse
Customer Data

• Channels
• Call center
• Web site
• Wireless
• Field sales
• Direct mail
• E-mail
• Retail store
• Partner
• Other sources
• Legacy systems
• Demographic data
• Third-party data
• Marketing campaign data

Customer data warehouse

• Profitable customers
• Market segments
• Customer profiles
• Churn rates

• OLAP
• Data mining
• Other data analysis tools

(Laudon and Laudon 2006)
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CRM Market Segments

• Traditional out-of-the-box CRM
• Traditional CRM with templates for specific
  vertical industries
• Traditional out-of-the-box CRM with application
  development hooks
• Industry-specific vertical CRM packages
• Custom solutions from vertical systems integrators

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CRM Systems Business Value

• Increased customer satisfaction
• Reduced direct marketing costs
• More effective marketing
• Lower costs for customer acquisition and
  retention
• Increased sales revenue
• Reduced churn rate

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CRM Performance Metrics

• Cost per lead
• Cost per sale
• Number of repeat customers
• Reduction of churn
• Sales closing rate
• Customer lifetime value (CLTV)

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Cost Cutters and Revenue Enhancers from a CRM
System

• Cost Cutters
• Decrease cost of sales
• More time to sell less time on administration
• Decrease cost of service
• Cost per service interaction
• Transition to more self-service

• Revenue Enhancers
• Increase sales effectiveness
• Add new customers at a higher rate
• Offer new products/services
• Provide a better customer experience
• Increase revenue per customer
• Sell more of current products/services
• Improve customer retention

Haag et al. 2005
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CRM Success Stories

• Best Buy
• Launched a customer-centricity effort
• Trained store-level employees to recognize five
  types of highly valued customers
• American Cancer Society
• Used CRM system to better target members in its
  donor base

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CRM System Challenges

• Broad company goals
• Generic strategies
• Software-centric implementations

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Integrating CRM with ERP and SCM Systems

• CRMs goal to find the best customers and
  concentrate efforts on serving them better
• CRM and ERP integration
• CRM and SCM integration

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Facts about customer relations

• Cost of selling to a new customer is six times as
  high as to existing customer
• Odds of selling to a new customer 1/7 to an
  existing customer 1/2
• Each dissatisfied customer tells 8 to 10 people
• 70 of dissatisfied customers will do business
  again if they feel their complains are handled
  well
• 1 extra of customer retention can boost
  turnover by as much as 15
• Many companies dont have proper customer support
• CRM doing things right actively seeking new
  business

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retention
Industry Increase in Customer NPV
Advertising Agency 95
Life Insurance 90
Bank 85
Insurance 84
Car Service 81
Credit Card 75
Laundry 45
Software 35
Impact of a 5 Increase in Retention Rate on
Customer Net Present Value
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CRM definition

• customer centric approach
• Business philosophy which places the customer at
  the heart of organisations processes, activities
  and culture
• IT is the tool to implement this
• a sales and service business strategy where the
  organisation wraps itself around the customer
  such that whenever there is interaction, the
  message is appropriate for that customer
• Curley, B. (1999) Profiting from the
  relationship Insurance and Technology, 24 (3),
  pp. 34-38.

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Why CRM?

• Customers dont care about their suppliers
  internal difficulties
• They want to be able to access product and
  services at the least cost
• They want a single point of entry
• Existing loyalty programmes are a start but dont
  go far enough
• Variations in the cost of selling to different
  customers gt CPA

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A bit of history

• In the 50s mass marketing
• In the 1970s market segmentation
• In the 1990s personalised marketing
• Since relationship marketing
• acquiring customers is far more expensive than
  keeping them
• knowledge about individual customers is required
  to guide highly focused marketing strategies
• More intense, global competition
• more fragmentation of markets
• high level of product quality
• The Internet reduced switching costs in many
  industries
• Shift in power from the seller to the consumer

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The 3 phases of CRM

• Acquiring new customers
• Promotion / Advertising
• Better products and superior service
• Enhancing profitability of existing customers
• cross-selling and up-selling (one stop shopping)
• Provision of additional services
• Generally re introducing switching costs
• Retaining most profitable customers
• best customer list
• customer profitability analysis
• make best offer to best customer - personalisation

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Novelty of the CRM Approach

• Complete and integrated solution - breaks down
  the walls of conventional functional areas
• Most companies are good at one of the 3
  activities - CRM concentrates on all 3
• Overall corporate objective of providing customer
  satisfaction
• Data collection aspects
• Data mining aspects
• Dissemination aspects
• Offer single point of entry for customer queries

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Survey of CRM initiatives

• 80 of CRM initiatives are quick win projects
• Important to have clearly define goals
• Reduce call numbers
• Produce more finely tuned products
• Sell more unit per deal
• CRM must be profit making
• 50 of top 500 firms said lack of internal
  collaboration is an obstacle
• Only 30 of companies have metrics in place

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Clear obstacles

• Lack of collaboration
• Outright conflict between departmental needs
• Fragmentation of existing customer facing
  processes
• Most unstructured in most firms
• Idiosyncrasy of processes will lead to scope
  creep
• Customer frustration may lead to excessive
  demands

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Develop common goals centred on the customer

• CRM project is as multi-disciplinary as ERP
  project
• Data also comes from disparate systems
• Using key scenarios is supposed to help
• Potential for conflicts must be removed
• Involve trusted customers when applicable
• Do genuine fact finding on how customers are
  dealt with today
• Process mapping
• rules and procedures
• Case studies

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Mapping process change

• Integration of customer content
• integration of customer contact
• integration of end-to-end CRM business processes
• Integration with ERP
• Integration of activities never computerised
  before

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ABC of data mining in CRM

• Affinity analysis odd / unexpected patterns in
  customer behaviour.
• Clustering sorting customers into similar groups
  based on certain attributes or behaviours.
• Predictive modelling uses historical purchase
  data plus information about promotions to predict
  future behaviour.
• Segmentation like clustering but used to support
  the development of tailored offerings
• Tapscott help to perform surgical strikes
  instead of carpet bombing

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Data Issues

• As with ERP Bad data quality will be a problem
• Data stewards
• Building up to a DQM strategy
• Dynamic process of tidying up live data
• Interface into existing systems
• Front and back office
• Multiple communication channels with outside
• 360 view
• New data collection mechanisms gt increased cost

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Metrics

• Sales analysis
• Returns
• Warrant service requests
• Calls / complaints
• Time to closure
• New contacts generation
• Sales conversion
• Customers retention
• Campaign tracking
• Pricing strategy changes

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Staff buy in

• Even more so than for ERP, CRM requires staff buy
  in.
• One bad experience is enough
• Communicate on what is being sought
• And have clear performance measurements
• Create programmes to show that it matters
• Monitor performance and overall effect over the
  long time
• Measure returns regularly

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Integration of customer content

• Transactional data
• Human data (obtained in conversation)
• Try to minimise the cost of collecting such data
• Web services are now a mainstream channel
• Intranet / CRM systems provide a platform for
  distribution on a wide basis

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Integration of business processes

• Sales and Services primarily
• Accounting
• Logistics / shipping
• all intermediaries downstream
• Distributors
• Experts in position to prescribe or recommend
• Contractors supporting the provision of services
• Eg BGE

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Integration of customer contact information

• All channels
• 24 / 7
• Available to all CCP (customer Contact Personnel)

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Infrastructure for CRM
Customers
Telephony Internet Face-to-Face Mail Fax
Customer Interface Infrastructure
Front Office CRM Processes
Marketing
Services
Sales
Legal HR Finance RD Servers Storage
Data Mining and Analysis
Back Offices and External Systems
Data Warehousing
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Business Intelligence

• Making sense
• Identifying problems
• Understanding cause and effect relationships
• Anticipating future changes
• EIS / OLAP / dashboards of info
• datawarehouses and data mining

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Customer contact point

• Call centre (70 of all contact points) evolving
  into a selling channel
• Goals of the contact point
• Listening to the customer
• creating higher levels of loyalty
• providing a better experience
• CTI
• Hidden cost gt increased in-coming calls
• But automation means complete framework for
  measuring performance
• Counter measures can be derived from findings
• Email management provides further automation

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The Internet

• Better economics
• Average cost of banking transaction 1 / 54
  cents with call centre and 13 cents on web site.
• Unlimited connectivity (in theory)
• Seamless data collection
• Integration with SCM
• Event driven built into services / automated
• click-for-help
• Significant risk in integrating with back end

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Building the case for ROI

• Will crm improve our ablity to generate revenues?
• Will it improve decision making?
• Will crm improve customer satisfaction?
• Will it improve quality of service?
• Will it improve quality of products?
• Will it reduce operational costs?
• Will it improve employee satisfaction?
• At least will it not decrease it?

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Paradox of productivity gains
Amongst other things, this shows the need for
METRICS
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Key decisions for ROI

• What costs must be absorbed? see lecture on TCO
  for ERP
• Eg infrastructure costs
• Hardware costs
• What benefits must be measured?
• What is the true impact of the software?
• Choices sales growth, customer growth and how
  they will be weighted (so they can be converted
  into figures)
• Also consider tradeoffs (things that could not be
  done without the software)

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Knowledge management

• Tacit knowledge
• Explicit knowledge
• Sales area dominated by the former
• CRM is an attempt to codify knowledge and store
  it for easy access
• CRM is also an attempt to create new knowledge
• Finally CRM is an attempt to built knowledge into
  the business processes of the firm
• Event driven marketing / cross selling / up
  selling

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Discussion