Customer Relationship Management
Dr Sherif Kamel
The American University in Cairo
Outline
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Overview
Why CRM?
CRM basics
Defining CRM
Managing the customer life cycle
5 key drivers of the customer value
4 stages of a customer relationship
Interactivity v individualization
Challenges to understanding customers
Remarks
Conclusions
Bits and bytes
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CRM – the hottest buzz word in business today
Developing a personal and a professional profile about
each customer
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Basic and historical information
Personal preferences
Trends and habits
Demographical information
Building a CRM culture
The power of integration
Using emerging technology to get closer to the
customer
Current facts…
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Today customers are in charge – they make the rules
Putting technology at the center stage
Business intelligence is one of the most growing segment in the
marketplace
Customer loyalty is very difficult to maintain due to competition
Customers want an excellent service and they want to feel special
Most companies think they are customer-focused however in reality
they are product-centric
There is a need to formulate customer-focused firms which needs:
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CRM strategy
Organizational change
Corporate culture
Economics of customer retention
“Winning back a lost customer can cost up to 50-100 times as much as keeping a
current one satisfied.”
Rob Yanker, Partner, McKinsey & Company
Understanding your customer is key to retention…..
Market size
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CRM market grew 66% in 1999
34 Billion US dollars by 2003 and probably around 125
billion US dollars by 2004
60% of the CRM software license market is controlled
by 3 vendors
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Siebel
Trilogy
Baan/Aurum
Why CRM?
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It costs 6 times more to sell to a new customer than to
sell to an existing one
A typically dissatisfied customer will tell 8 to 10 people
about his/her experience (mainly related to poor
customer service)
The odds of selling to a new customer is 15% versus
50% to an existing customer
70% of the customers complaining will do business
again with the company if the complaints are quickly
addressed
90% of existing companies do not have integrated CRM
tools and platforms
Customer Relationships Today
Customer
Relationships
Branding
Product
Pricing
Distribution
Building a customer-centric
approach to Internet
marketing by focusing on
customers
Community
Communication
CRM Basics
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CRM is the timely delivery of excellent service
“customer relationship management”
CRM is a combination of business process and
technology that seeks to understand a company’s
customers from a number of perspectives including:
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Who they are?
What they do?
What do they like?
Age of the never-satisfied customer…
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CRM becomes a support tool in a time characterized
by:
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Increased competition
Globalization
Growing cost of customer acquisition
High customer turnover
CRM is all about creating a better value proposition to
customers
Information and communication technology is now
acting as a catalyst for CRM
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Extended enterprise
World wide web and the Internet
Defining CRM
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CRM is an integrated sales, marketing and service
strategy that is based on a timely and accurate
information infrastructure and that depends on
coordinated enterprise-wide activities
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Example: tracking customers interactions with the firm
Customer tracking includes steps in the selling and customer
service cycles
CRM steps include
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Targeting
Acquisition
Retention
Expansion
Defining CRM
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Targeting
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Who do we target?
What segments are most profitable?
What segments match our value proposition?
What is the best segmentation strategy for us/our industry?
Acquisition
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What is the best channel for each segment?
What is the acquisition cost for a channel/segment?
Do certain channels deliver certain types of customers?
Cost effective acquisition?
Defining CRM
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Retention
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How can we improve retention?
What is our average customer relationship length?
How can we hold customer for as long as possible?
What is the most cost effective method of retention?
Expansion
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How many products does our average customer buy?
How can we induce our current base to buy more products?
Who are the prime targets for expansion?
What is the cost of expansion?
Goals of CRM
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Using existing relationship to grow revenue
Using integrated information for excellent service
Introducing consistent, replicable channel processes
and procedures
CRM…
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CRM is a business strategy and not a product
Putting CRM into practice requires developing a set of
integrated applications to address all aspects related to
the front-office needs
CRM could be a major support platform for small and
medium-sized enterprises
Cost of the information and communication technology
applications and infrastructure should be calculated as
opposed to the return-on-investment
Evolution of information requirements
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Materials requirements planning (MRP)
Manufacturing resource planning (MRP II)
Enterprise resource planning (ERP)
Supply chain management (SCM)
Customer relationship management (CRM)
Managing the customer life cycle
Acquiring
Enhancing
Retaining
new customers
profitability of existing
customers
profitable customers
for life
Acquiring new customers
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Promoting the company’s product and service
leadership
Redefine the companies competitive edge and
innovations
Offer a superior product backed by an excellent service
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Example: Browsing on the net, submitting a request, receiving
a phone call
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Model for a sales and service strategy
Enhancing profitability of existing
customers
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Encouraging cross-selling and up-selling
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Cross selling is used by suggesting alternative products or upselling by rendering the customer more informed with the new
products and services.
Broadening the relationship between the company and
the customers
Providing a value proposition represented by offering a
greater convenience at low cost (one-stop-shopping)
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Example: “Best Buy” an electronic retailer with more than 300
stores capitalizes on committed relationships with customers
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3000 calls a day with more than 50% having computer-based
answers and solutions
Retaining profitable customers for life
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Retention focused on service adaptability
Delivering not what the market wants but what the
customer wants
Providing a value proposition that offers a proactive
relationship that works on the best interest of the
customer
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Example: customer retention is becoming a key competitive
strategy for many companies
Integrated CRM
Customer
Life cycle
Acquire
Enhance
Direct Marketing
Partial
Functional
Solutions
Complete
Integrated
Solutions
Cross-sell and Up-sell
Sales Force Automation
Retain
Proactive Service
Customer Support
Integrated CRM Applications
Core CRM process competencies
Marketing and
Fulfillment
Sales
Cross-sell
Up-sell
Telesales
Fax
Prospect
Or
Customer
Phone
Field Sales
and Service
Customer
Service and
Billing
eMail
WWW
Loyalty
and Retention
Programs
Content Management
Technical Infrastructure
How to build a CRM infrastructure
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Involve top management
Decide on a vision of an integrated CRM
Establish a CRM strategy and specify its objectives
Understand the customer
Review cultural changes that will need to occur
Develop a business case
Evaluate current readiness
Evaluate appropriate applications to do a better business
Identify and target quick wins
Have one manager to own the end-to-end project
Implement in stages
Be sure to create a close-loop CRM environment
Create concrete measurement goals
Relationship depth and profitability
Evaluating Relationship Depth
$$$
Magnitude of
Purchases
Long-Term
Profitability
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$
Frequency of
Purchases
Relationship depth,
as measured by the
frequency and
magnitude of
purchases, is a
critical component
of customer
profitability
Length of customer tenure and
profitability
High
Lifetime
Profit
Low
Short
Long
Lifetime
5 key drivers of the customer value
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Cost of Targeting
Cost of Acquisition
Service and Usage Revenue
Cost of service
Duration of relationship
4 stages of a customer relationship
Awareness
 Customer
recognizes
the firm but
has not
initiated any
transactions
Exploration /
Expansion
Commitment
 Customer
 Customer
gathers
information
about the
firm which
determines
whether
repeated
transactions
will occur
and firm feel
a sense of
obligation or
responsibility
to one
another
Dissolution
 Total
loss of
commitment
and
relationship
Interactivity v individualization
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Interactivity is the occurrence of two-way communication between
the firm and the customer
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Retail store personnel handle Internet customer service
Chat rooms are set up to discuss product-related issues
Customers subscribe to customized versions of firm newsletters
Technology has made it possible to customize each interaction to
the individual user
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Consumers have privacy concerns about sharing too much
information
For individualization to be attractive, consumers must have unmet
needs
Costs and complexity for the firm increase with greater personalization
while service speeds often decline
Challenges to understanding customers
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Identify the customer
Learn from customers
Know the customers’ value
Determine best resources
Access complete customer profile and history
Remarks
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World is moving rapidly to a customer centric business
model
It is a prerequisite for survival and growth in the
marketplace
Integration of disparate customer data sources is a
primary technical challenge
CRM is becoming invaluable as a differentiation tool
The world is becoming extremely customer centric,
even cultures that have been customer-averse
Technology is just a platform – an enabler
Conclusions
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A firm is better able to serve customers needs if they
understand them well
Provision of the products customers want, at the right
time through a consistent service leads to their retention
CRM gives the complete and rich view of the customer,
enabling tactical and strategic actions to be taken to
meet customer needs
CRM enables consistent customer communication
regardless of channel, location, time