Transcript Learning Objectives

Information Systems: the
Foundation of E-Business
(CIS 108)
Customer Relationship Management, (CRM)
Lecture SEVEN (28th February 2005)
Amare Michael Desta
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What is CRM?
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“Customer relationship management is a business
strategy to select and manage the most valuable
customer relationships. CRM requires a customercentric 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, www.crmguru.com
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Outline
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Benefits of a CRM program
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The four phases of implementation
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Cultural changes
Research & Best practices
Casino case
IT’s role in CRM
CRM’s relation to the supply chain
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Benefits of CRM
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Improved customer retention
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Greater retention results in a larger future
customer base
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The impact of a 5% increase in retention rates
Industry
Increase in profits
Advertising Agency
95%
life-insurance company
90%
branck bank deposits
85%
publishing
85%
auto service
81%
auto/home insurance
80%
credit card
75%
industrial distribution
45%
industrial laundry
45%
office-building management
40%
Benefits of CRM (cont’d)
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Improved customer retention
Purchase amount increases over time
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Average of 8%/year in the insurance
industry
Reduction in costs
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Order processing
Short-term acquisition costs
Customer referrals
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Benefits of CRM (cont’d)
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2-way communications
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Improves customer satisfaction
Impact on the “grey markets”
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Often harmful to profits
Frequently used to level inventories
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Cultural changes
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Top executives must drive the initiative
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Shift in marketing type
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Away from mass, towards personal “1:1”
Change in attitude at all levels
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Shift from product orientation to customer
Compensation system must change to reinforce
new behaviors
New positions or teams should be formed
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Pre-implementation
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Classify customers based on diversity of
value and needs
Determine who the customers are
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Phase 1
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Consolidate customer information
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Existing computer and hard copy records into one
large database
Minimum information categories:
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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
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Consumer categories
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Identification
Customer Rating
Background
Presale Communication
Purchase behavior
Post-purchase behavior
Predicted behavior
Creditworthiness
Attitudes and
perceptions
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Business categories
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Source: Boyett & Boyett
The guru’s guide to the knowledge
economy
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Identification
Customer Rating
Background
Presale
Communication
Decision makers
Decision making
Influences
Post-purchase
behavior
Channels
Pricing
Predicted Behavior
Creditworthiness
Relevant information
Phase I: The Privacy policy
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Means to gather information
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Interviews
Surveys
“Loyalty” cards
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Casino CRM Program
Pre-Implementation
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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
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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
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Casino CRM Program
Pre-Implementation
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Spring 2001 – management convinced to
fund automated players club program
Pre-launch focus on previous card-holders
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Updating database and explaining new system to
old customers
Program launch complemented with
marketing campaign, including incentives to
register and to use card
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Casino CRM Program
Building a Database
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Upon sign-up:
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Name
Contact Information
“Interests”
Over time:
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Money spent (coinin)
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Per day
Per trip
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Win/Loss
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Per day
Per trip
Jackpots won
Playing habits
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Rate of play
Time of play
Frequency of trips
Machines played
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Denomination
Type
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Phase II
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Classify the customers according to
sales volume
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Focus on the top 20% of the customer
base
Two basic types of customer needs
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Community: shared needs/preferences for
a grouping of individuals
Individual: unique needs specific to a
single person
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Phase II (cont’d)
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Information gathering
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Focused on top 20%: less effort required
Interviews considered the best method
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Surveys are functional…
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Personal
Additional information
Evaluation of future potential
Not as cost prohibitive as believed
But they are often ignored.
E-mail: a reasonable middle ground
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Cheapest method
Convenient for the customer
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Phase II (cont’d)
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Suggested questions
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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 guru’s guide to the knowledge economy
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Casino CRM Program
Customer Classification
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Casino customer classification generally
dependent on coin-in and total losses
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These tend to coincide
Also looking at place of residence and
frequency of visits
Marketing department uses CRM program to
distinguish customer groups - find “highrollers” and target them for special events
Special “Top 1%” segment
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Casino CRM Program
Customer Classification
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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
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Phase III
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Maintain communications with current
customers
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Should be through the medium desired by
the customer
Make contact at the “appropriate time”
Excessive attempts will annoy the customer
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Rules of engagement for
customer interactions (Contd..)
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Don’t initiate an interaction with a customer without
a clear objective
Don’t ask a customer the same thing more than once
Interact in the medium of the customer’s 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
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Rules of engagement for
customer interactions (Contd..)
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Protect the customer’s 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 customer’s time. Don’t try to
learn everything about a customer at once.
Source: The Guru’s guide to the knowledge economy, p. 216
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Casino CRM Program
Maintaining Communication
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Mailers sent to certain customer groups on
regular basis
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Non-intrusive communication
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Invitations to special events or for free gifts
Customer chooses which ones to respond to
Toll-free phone number and email address
included on all correspondence
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Phase IV
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Adjusting the firm to fit customer needs
Four types of customization
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Collaborative (mass) customization
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Devise a metric to determine customer needs
Match needs with products/services
Not very personal, but relatively inexpensive
Adaptive customization
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Allow customer to specify certain characteristics
Very personal, but often expensive
May not be possible in all industries, or cost efficient
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Phase IV (cont’d)
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Customization:
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Cosmetic customization
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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
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The “nice little details”
Very personal, but oftentimes invisible
Frequently inexpensive relative to others
Difficult for competitors to replicate
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Phase IV (cont’d)
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Combinations can be used
Beware of TOO much satisfaction
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Phase IV (cont’d)
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Change call center operations to service
top customers
Eliminate discounts and promotions
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“My loyalty cannot be bought!”
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Casino CRM Program
Customization
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As previously stated, special promotions
and events aimed at “preferred” players
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Invitation-only events
Segmented mailers, with increased
bonuses for better customers
More personalized customer service
Improved access to casino comps
(including non-gaming comps)
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Casino CRM Program
Customization
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In a casino, very little product
customization is possible – a slot
machine is a slot machine
Focus is on cosmetics
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Customer service tends to distinguish one
casino from another
Gift baskets, wine, and champagne for
hotel/restaurant guests
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IT’s role in CRM
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Three general types of eCRM packages
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Marketing Automation Systems (MAS)
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Customer database creation
Analysis of customer attributes
Automate several marketing functions
Sales Force Automation (SFA)
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Intended to automate many functions
performed by salespeople
If completely successful, it will eliminate the
“personal touch”
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IT’s role in CRM (cont’d)
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eCRM package types:
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Customer Service Automation systems
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Augments call center personnel
Some can respond to e-mails on their own
Ties-in to existing company software, including
other eCRM packages (generally…)
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IT’s role in CRM (cont’d)
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Selecting the right CRM packages
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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
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IT’s role in CRM (cont’d)
Source: The CRM Solutions guide. 2001. www.crmguru.com34
IT’s role in CRM (cont’d)
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CRM and ERP
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Determine if a package can be tied-in to
the enterprise’s 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
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IT’s role in CRM (cont’d)
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Data mining tools
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Market basket analysis and automatic
cluster generation
Decision trees and memory-based
reasoning
Neural net systems
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CRM in the Supply Chain
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Goals of Supply Chain Management:
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Reduce uncertainty and risks in supply
chain
Positively affect inventory levels, cycle
time, processes, and end-customer service
levels
Customer Relationship Management
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Useful for forecasting and planning
Improves customer service levels
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CRM across Company
Functions
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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
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Customer Relationship
Management
Wrap-Up
Knowing your
customers
improves profits
Focus on the best, treat midrange as group, and
discourage bottomfeeders
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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