Chapter- 1 : Introduction to Customer Relationship Management(CRM)

1.1 What is CRM? Why we need CRM? Definition of CRM

1.2 Architecture of CRM
1.3 Technology considerations of CRM
1.4 Technology Components of CRM
1.5 Customer Life Cycle, Customer Lifetime Value computation
1.6 Implications of Globalization on Customer Relationship Management

1.1 What is CRM? Why we need CRM? Definition of CRM

Definition of CRM:Customer relationship management (CRM) is a term that refers to practices,
strategies and technologies that companies use to manage and analyze customer interactions and data
throughout the customer lifecycle, with the goal of improving business relationships with customers,
assisting in customer retention and driving sales growth. CRM systems are designed to compile
information on customers across different channels -- or points of contact between the customer and the
company -- which could include the company's website, telephone, live chat, direct mail, marketing
materials and social media. CRM systems can also give customer-facing staff detailed information on
customers' personal information, purchase history, buying preferences and concerns.

CRM challenges

For all of the advancements in CRM technology, without the proper management, a CRM system can
become little more than a glorified database where customer information is stored. Data sets need to be
connected, distributed and organized so that users can easily access the information they need Companies
also struggle to achieve a "single view of the customer," where many different data sets can be seamlessly
accessed and organized in a single dashboard or interface to create one view of a customer’s account and

sunilkhilari@hotmail.com 9850979655 1
relevant information. Challenges arise when customer data is siloed in several separate systems or when
data is complicated by duplicate or outdated information that slows down and hampers the business
process. These problems can lead to a decline in customer experience due to long wait times during
phone calls, improper handling of technical support cases and other issues

CRM software
CRM software consolidates customer information and documents into a single CRM database so business
users can more easily access and manage it. The other main functions of this software include recording
various customer interactions (over email, phone calls, social media or other channels, depending on
system capabilities), automating various workflow processes such as tasks, calendars and alerts, and
giving managers the ability to track performance and productivity based on information logged within the
system.

Common features of CRM software include:

 Marketing automation: CRM tools with marketing automation capabilities can automate
repetitive tasks to enhance marketing efforts to customers at different points in the lifecycle. For

sunilkhilari@hotmail.com 9850979655 2
 example, as sales prospects come into the system, the system might automatically send them
marketing materials, typically via email or social media, with the goal of turning a sales lead into
a full-fledged customer.
 Sales force automation: Also known as sales force management, sales force automation is meant
to prevent duplicate efforts between a salesperson and a customer. A CRM system can help
achieve this by automatically tracking all contact and follow-ups between both sides.
 Contact center automation: Designed to reduce tedious aspects of a contact center agent's job,
contact center automation might include pre-recorded audio that assists in customer problem-
solving and information dissemination. Various software tools that integrate with the agent's
desktop tools can handle customer requests in order to cut down the time of calls and simplify
customer service processes.
 Geolocation technology, or location-based services: Some CRM systems include technology
that can create geographic marketing campaigns based on customers' physical locations,
sometimes integrating with popular location-based GPS apps. Geolocation technology can also be
used as a networking or contact management tool in order to find sales prospects based on
location.
The CRM technology market
The four main vendors of CRM systems are Salesforce.com, Microsoft, SAP and Oracle. Other providers
are popular among small- to mid-market businesses, but these four tend to be the choice of large
corporations.
Why we need CRM?

Customer Relationship Management (CRM) is the process of tracking and analyzing all of the
interactions you have with your customers and prospects. CRM software is a tool that centralizes,
simplifies, secures, and scales our customer engagement. So what’s in it for you?

Reason #1: A Forward View of Your Business

In the context of your ERP or financial systems, one could consider CRM as a “future view” into your
revenue stream as opposed to a “historical view” of revenue. CRM is also a future view into trends and
events that will be leading indicators of your revenue and profit metrics.

The CEO and CFO will use CRM dashboards to monitor these leading indicators. They may look for
changes to lead generation, opportunity creation, or pipeline value to spot early indicators of future
problems to the top-line. This will enable a pro-active approach to managing the business.

sunilkhilari@hotmail.com 9850979655 3
A Sales leader will have a more granular view. They will need to see the activities of individual
salespeople or teams and trace problems that may be affecting revenue such as territory coverage,
customer calling activity, lead conversion rates, and opportunity close rates.

A Marketing leader will need to trace marketing activities and campaigns and adjust the marketing plan
according to the success or failure of those activities.

A Customer Service leader will need to see which of their people is most efficient at closing cases, be
alerted to cases that exceed the expected time to close, and monitor escalations.

A Product Manager needs to monitor Cases to understand any product defect, support trends, or feature
requests that may lead to improved products and services.

Reason #2: Growing Your Business

Prospecting is not just a salesperson activity – it is a collection of manual and automated activities across
multiple channels that result in a lead or opportunity. You may use CRM to acquire leads from your
website, from email campaigns, bring them in from seminars, webinars, conferences, or trade-shows and
send the leads directly to your salespeople. You can assign leads to reps immediately in order to catch the
customer while your business is still top-of-mind.

You may use the CRM to direct salespeople to cross-selling or up-selling activities. You may use the
CRM to identify new product or market opportunities. You may use CRM to simply improve the calling
efficiency of your Sales organization so that they can increase top-of-funnel opportunity creation.
Increasingly, successful companies have turned to inbound marketing, which is the use of your website
and search optimization combined with a content curriculum to nurture customers from suspects to
qualified prospects.

Reason 3: Replicating Best Practices

You will undoubtedly have some ideas about how you want to engage your customers. You will probably
want to ensure that you are delivering a consistent high-quality customer experience.

CRM systems can be used to embed your best sales or customer service processes that will guide your
people through every customer interaction. Templates can be created and used to guide your people
through complex processes. Workflow automation can be used to automate activities to ensure best
practices are followed while reducing the administrative overhead of managing the CRM.

sunilkhilari@hotmail.com 9850979655 4
Reason #4: Doing More with Less

Frequently, our customers say that a major reason for buying their CRM is that they believe they are
dropping the ball with customers. We had two customers from two entirely different industries this past
week state their problem in exactly the same way: 80% of their customers come from 20% of their
business which they know extremely well. However, they have no clue what the other 80% of their
customers are doing and they think that there are opportunities for growth. Many organizations want to
find efficient ways to access the business in the “long tail” of their markets. Through marketing
automation and CRM can make it possible to prospect in the long tail that would otherwise be too
inefficient for your organization’s resources.

Your people’s ability to juggle an ever-increasing number of tasks, opportunities, cases, communications,
and information is in jeopardy without the right tools. CRM is key to helping them manage their complex
world without dropping the ball.

Reason #5: Risk Management

One customer related a story of a sales rep who left and after the new rep took over, they found numerous
examples of customers who had never been contacted. I’ve seen many situations where sudden account
turnover results in dropped deals that caused missed sales targets and dissatisfied prospects that simply
went elsewhere.

When we have sales rep or customer service turnover, it literally takes a few minutes to use a global edit
reassignment task and territory management functions to shift accounts and opportunities to different
sales or support reps. This enables us to provide seamless transfer of responsibilities without dropping the
ball.

We have another customer that has been to court over a case where a former employee downloaded their
customer list and took it with them. CRM can help track those events and provide an audit trail to make it
easier to control sensitive information.

Reason #6: Customer Intimacy

Customer intimacy is the act of tailoring your products, services, and even your customer engagement
processes to fit a customer’s business or industry. For many companies, particularly small and mid-size
enterprises, this is an effective way to compete in an ever-crowded competitive landscape that is difficult
for larger enterprises to duplicate at scale.

sunilkhilari@hotmail.com 9850979655 5
CRM can capture detailed information about your customers and their behaviors and enable targeted
marketing, product development, and sales activities. It can enable you to create the illusion of the
personal touch with every interaction. Look at it this way: do you really think your dentist remembers
your birthday, or do you think they have software that tells them that? Do you think it’s a co-incidence
that Google’s ads show you things that are related to your interest or do you think they have software that
does that? CRM can provide customers with the impression that you understand their needs and
preferences – in a scalable way to allow you to remember these things for thousands of customers at any
given time.

Why Your Business Needs a CRM

You need CRM to make your business more efficient and increase your revenue per employee. You need
CRM to create repeatable successful processes. You need a CRM because we (and your competitors) are
looking for competitive advantage in a multi-channel customer environment. You need to capture the
interest of customers that are increasingly sophisticated and are ignoring the old methods we used to
market and sell to them. You need a CRM to look into your near future and be predictive of your revenue.
You need CRM to mitigate the risk and costs of staff turnover. You need CRM to engage in a cycle of
continuous improvement. You need CRM for your business to survive.

1.3 Architecture of CRM

The Customer relationship management architecture can be broken down into three categories, and these
are operational, collaborative, and analytical. Each plays an important role in Customer relationship
management, and a company that wants to success must understand the importance of using these three
components successfully.

Operational CRM deals with the automation of certain business processes. An example of business
processes that are connected to operational CRM are marketing and sales. When a connection is made to
a customer, the information related to this interaction will be automatically stored in a database, and the
company can pull up specific information on that customer when it is needed.

Operational CRM can further be broken down into three components. These components are Enterprise
marketing automation, Customer service automation, and Sale force automation. The Enterprise
sunilkhilari@hotmail.com 9850979655 6
marketing automation will give the company information about the business climate, and it will also
provide them with crucial data on their competitors, as will as trends within the industry and other
important variables. As the name implies, Enterprise marketing automation deals with strategies a
company can use to strengthen their marketing tactics. Customer service and support will automate
specific processes that are connected to service. An example of this could be item returns or customer
complaints.
Sales force automation will be responsible for automating some of the company’s sales tasks. An example
of tasks that SFA would automate are demographics, customer needs, and accounting management. A
number of corporations will use call centers to store data on their customers. Once the customer makes a
call, the customer service representative can provide them with relevant information. Many companies
will also automate processes such as allowing customers to access their accounts. The next important part
of CRM architecture is Analytical CRM. As the name suggests, Analytical CRM deals with analyzing
data that is collected by the company. This data will be analyzed so that the company can enhance its
customer service capabilities.

By enhancing its customer service capability, a company will build a stronger relationship with its
customers. There are a number of common ways that Analytical CRM is used to achieve this. A number
of companies will use the data they’ve collected and analyzed to cross-sell products to their customers, as
well as retaining customers that may normally switch to another company. Analytical CRM can also be
used to provide important information to customers within a short period of time. In addition to building
stronger relationships with customers, Analytical CRM can be an important tool for fraud prevention and
detection. It can analyze the patterns of sales, inventory, and profits in order to find any patterns that are
not consistent.

Analytical CRM is also important when it comes to both product development and risk management. It is
important to realize that Analytical CRM is an ongoing process. The company may need to alter its
strategies or methods based on the information that is analyzed through this process. The third important
aspect of CRM architecture is Collaborative CRM. Collaborative CRM is important because it places an
emphasis on the interactions that a company will make with its customers. These interactions could be
personal, or they could come through mediums such as the telephone or the Internet. Collaborative CRM
will give companies a powerful form of communication that will utilize multiple technologies.
It will also be responsible for providing services over the Internet so that the costs of the service can be
reduced. When interactions are made with customers, Collaborative CRM will allow the company to
provide them with useful information. At the highest level, CRM should be an important part of all
interactions that a company makes with its customers.

sunilkhilari@hotmail.com 9850979655 7
When this done, a company can become highly successful. The goal of CRM is to find out what
customers need, and to make sure those needs are filled. Once a company is making interactions with
their customers, they can collect and analyze information. This information can be used to strengthen
interactions.
Customer relationship management can also be used to stop problems before they occur. A number of
companies strive to solve problems once they occur, but CRM can be used to stop potential problems
before they occur. Preventing a problems is much easier than solving it.

In addition to building sales and increasing profits through the gathering of data, CRM systems are also
valuable for maintaining and nurturing a loyal customer base. But how is the architecture of such a
system designed, and how does each part integrate with the others?

CRM categories

CRM system architecture can be broken down into 3 broad categories:

1. Collaborative
2. Operational
3. Analytical
1. Collaborative

All communications between a business and its customers are recorded, organised and processed in the
collaborative section of the software. This means communication by telephone, in person, and by email.

Customer relationships can be nurtured using data already provided by them which demonstrates their
shopping patterns and behaviours, likes and dislikes, the times they are most likely to buy, and how much
they spend on average.

Businesses use this information to provide enhanced customer service, cross-sell products based on
previous buying history, and offer targeted deals to segments of their customer base. Customers can be
segmented by various criteria including geographical location, age, gender, and profession, and can be
targeted via personalised emails or newsletters offering discounts and deals.

2. Operational

This category within a CRM system deals with the automation of business processes including customer
service, data on competitors, industry trends, customer account information and management.

sunilkhilari@hotmail.com 9850979655 8
Data is collected and stored within the database, ready for use in day-to-day operations such as
management of customer accounts, in addition to overall strategic planning. Detailed information about
special customer needs, destined for the sales force, is also stored here. Use of this type of data further
enables a business to personalise its approach to customers.

3. Analytical

Analytical CRM might result in cross-selling certain items to particular customers based on their previous
buying habits, or imparting information relevant only to certain segments of a customer base.

This part of the CRM architecture is also invaluable for identifying changes in the industry as a whole, so
that businesses remain agile and respond quickly to changing market demands. Data can be analysed in a
number of ways, and graphs, reports and diagrams produced to better illustrate the results.

This is the basic architecture of a customer relationship management system, but the rise of social media
and mobile working has brought other, more defined systems to the market. Popular ‘add-ons’ to the
basic structure of a CRM solution might include cloud based systems that are accessible from any device.

The key word in CRM is integration – integration of data so that it can be put to use in a way that
benefits not only the business, but also customers, suppliers and the workforce. Using mobile technology
and social media was the obvious next step in this process, and targets a whole new potential customer
base.

CRM Architecture as a Whole

The underlying aim of a well-structured CRM system is to provide an enhanced customer experience and
enable businesses to gain valuable information as their customers shop. Business owners can use this data
to increase sales and boost their bottom line, analysing marketing campaigns, and offering added value to
existing and potential customers.

sunilkhilari@hotmail.com 9850979655 9
–Application server: Runs either front-end processing or querying data and possibly a Web interface for
the CRM system.
–Database server: Houses the back-end database and possibly retrieves information from other database
systems in the company to present through the application server.
–Web server: Used if the CRM provides an extranet access point for such external users as vendors or
customers and an intranet access point for employees.

1.3 Technology considerations of CRM

CRM technology must include data from firms’ partners, such as fulfilment vendors. From a broader
perspective, CRM can only work if advisors embrace it and are diligent with data entry.
With that in mind, CRM programs can frequently require firms to revamp their sales culture.
Consider the following: Financial advisors are often highly gregarious. They prefer to mingle and
entertain clients and can view time spent conducting data entry as time that could be better spent meeting
face-to-face with prospects and customers.Many advisors also guard their client relationships with a
jealous zeal. Requiring advisors to share client data, therefore, can often be a challenging initiative.
Some advisors may fear that other sales professionals from other departments, such as mortgages or
insurance, may poach their clients or provide poor quality services when cross selling, thereby
jeopardizing existing customer relationships.
In many cases when CRM systems fail, firms neglect to get buy-in from their advisors. Rather, company
leaders may focus on their own priorities when identifying required CRM capabilities. Corporate
executives, for example, may want CRM technology that helps to monitor if advisors are focusing their
distribution efforts on products that have been identified as priorities or are participating in specific
marketing campaigns.

sunilkhilari@hotmail.com 9850979655 10
In a related manner, executives may want to track the number of meetings advisors complete and assess
costs associated with traveling, attending industry conferences, entertaining clients, and holding seminars
for generating leads. In the process, executives may fail to ensure that a proposed CRM system will
adequately link to other technology and provide features that sales reps will need.
With that in mind, the initial planning of a CRM program should start with input from financial advisors.
They should be asked to identify CRM capabilities that will make it easier for them to do their jobs. This
could include capabilities that make it easier to develop sales profiles of prospects. Such profiles can then
be used by advisors to cater their marketing efforts and product pitches to meet the specific needs of
individual clients.
As part of getting buy-in from advisors, executives should illustrate how the new technology and the time
required for entering data can make distribution efforts more efficient. In doing so, firms may want to
have vendors that conduct sales training provide success stories that illustrate how other companies have
used CRM technology to improve their marketing efforts and win large mandates.
In a similar manner, firms should structure their compensation so that advisors have an incentive to
update CRM databases with client information. This strategy could include assessing the quality of data
that advisors add to CRM programs.
In a related manner, advisors should have incentives to encourage cross selling. One obvious approach is
to provide commissions when an advisor helps another department cross sell products. Yet, firms should
go a step further by ensuring that advisors work closely with other product areas to ensure that high-
quality services are being delivered. That way, advisors will be less likely to worry about other
departments jeopardizing relationships by delivering inferior services.

1.4 Technology Components of CRM

The main components of CRM are building and managing customer relationships through marketing,
observing relationships as they mature through distinct phases, managing these relationships at each stage
and recognizing that the distribution of value of a relationship to the firm is not homogenous. When
building and managing customer relationships through marketing, firms might benefit from using a
variety of tools to help organizational design, incentive schemes, customer structures, and more to
optimize the reach of its marketing campaigns. Through the acknowledgement of the distinct phases of
CRM, businesses will be able to benefit from seeing the interaction of multiple relationships as connected
transactions. The final factor of CRM highlights the importance of CRM through accounting for the
profitability of customer relationships. Through studying the particular spending habits of customers, a
firm may be able to dedicate different resources and amounts of attention to different types of consumers

sunilkhilari@hotmail.com 9850979655 11
CRM technology implements a companywide business strategy in an effort to reduce costs and enhance
service by solidifying customer loyalty.
•With the rise of the Internet, data mining and analytics techniques have advanced to where they can be
considered an integral component of CRM.
•True CRM brings together information from all data sources within an organization to give one, holistic
view of each customer in real time.
The CRM technology components are:
1 CRM engine
2 Front-office solutions
3 Enterprise Application Integrations (EAIs) for CRM.
4 CRM Engine

1) The CRM Engine is the customer data repository or the data mart or data warehouse where all data on
the customer is captured and stored.
2) This includes basic stuff such as name, address, phone number and birth date.
3) This could also include more sophisticated information like the number of time you access a particular
website and what you did on the pages you accessed.
4) CRM engine provides a single gathering point for all individual customer information so that a unified
customer view can be created.
5) CRM engine provides personalization
Front-Office Solutions:
The front-office solutions are applications that run on top of the customer data warehouse (CDW).
The applications could be SFA, EMA or service and support and customer interaction applications.
The hallmarks of these front-office solutions are
a. Analytics
b. Reports
c. Instant access to information
In the client server architecture (environment), they provide employees with the information on what to
do next with a customer.
The more specific applications provide an element of self-service for the customer.
sunilkhilari@hotmail.com 9850979655 12
Enterprise Application Integrations (EAIs) for CRM.
These sit between the CRM back office and front office.
They also sit between the newly installed CRM system and the been-around-forever enterprise legacy
systems.They also allow CRM-to-CRM communications. “They” – are pieces of code and connectors and
bridges that as a body are called EAIs, formerly known as middleware.EAIs provide the messaging
services and data mapping services that allows one system to communicate with other system.

1.5 Customer Life Cycle, Customer Lifetime Value computation

The customer life cycle comes from the practice of CRM where it’s traditionally used to map the different
stages a customer goes through from considering a product, service or solution to the actual buy and, at
least as important, the post-purchase stages (where customer retention, loyalty and advocacy come in). It
gets increasingly used in different business functions, including marketing and the
management/optimization of the customer experience.

The Customer Lifetime Value (CLV) is a prediction of the total value (mostly expressed in net profit)
generated by a customer in the future across the entire customer life cycle. CLV also comes from a CRM
and database marketing background. However, it’s used more often in customer-centric and integrated
marketing and in a customer experience context, whereby the focus is on long-term customer
relationships, as is the case in the end-to-end customer experience.

sunilkhilari@hotmail.com 9850979655 13
Using the customer life cycle and customer lifetime value offers several benefits, among others regarding
budgeting, segmentation, prioritization and different circumstances where the “health” of the organization
can be forecasted – and improved. No wonder it’s also high on the agenda of C-level executives and that
the CLV is one of the domains where predictive analytics play an increasing role. Last, but not least, CLV
and the customer life cycle play a role in marketing ROI as you’ll read below.

he customer’s – ever evolving – buyer journey is not linear and funnel models don’t match with an
increasingly complicated behavior, that necessitates a fully connected or integrated marketing 2.0
approach. Certainly with the advent of social media people have more choice and power. Now they are in
the influence sphere of your business, next they are not. Since Sterne and Cutler came up with their
model, many other representations of the customer life cycle were made.
It’s nearly impossible to fully monitor buying journeys and decisions. You don’t know if a new customer
saw your billboard, you don’t know if his friend advised him to buy your products, and you don’t know
all the online and offline channels, he used to inform himself and even interact with you or your agents or
resellers if you have a channel go-to-market model.
He might have been called by your internal sales team and next be visited by an external sales rep or
contacted via a partner, while he told the internal sales rep he was not interested in working with your
company. Sounds familiar? Disconnected systems and processes? Silos? If only you had a more holistic
and customer-centric customer view… With the advent of new ways of interacting, the disconnect only
becomes bigger.
And what about existing customers? Do you know them well enough? Are you sure there isn’t a customer
with an extremely high buying potential that sits there in your small accounts because he only buys from
you when your competitor is out of stock? What about churn? Does the customer come back?

Customer Lifetime Value (CLV): introduction and measurement

Back to the beginning: customers “have” a life cycle. And businesses know it. The question they have
been asking themselves for ages is how you can define the CLV of your customer portfolio and even of
specific customer groups or individual customers. There are many models to do that as well. The
customer lifetime value (CLV) is a financial metric used to look at customer profitability and, when
properly calculated, a potential impact on the different marketing efforts across the customer’s life cycle.
Just like marketing ROI or Return on Marketing Investment it is a financial value. It is advised to use
CLV in order to create value across the customer life cycle.

The value of the customer lifetime looks at the investments we plan to make for the customers (retention,
sales, promotion, customer service, whatever) and the return we expect from them. It’s a forward-looking

sunilkhilari@hotmail.com 9850979655 14
indicator that has everything to do with the present and the future. CLV is the present value (expressed in
your local currency) of the expected future cash flows from the customer.

The problem with calculating the CLV this way is that it happens from a global perspective (customer
base), and it is difficult to use to calculate the value of the CLV on micro levels like a marketing plan.
Furthermore, CLV calculation models often find their origins in rather direct marketing oriented activities
and are less useful for customer investments that are more difficult to calculate (think branding, for
instance).

1.6 Implications of Globalization on Customer Relationship Management

Today’s world is highly connected. In a moment’s time, you can open your Internet browser, see what is
happening around the world, chat with a colleague or friend, and place an order for a product or service
sold in another country – all without leaving the comfort of your own desk. While globalization has
certainly opened up new opportunities for businesses in terms of reaching untapped markets, it has also
further complicated the balancing act known as client relationship management.
In the past, businesses only had to compete with companies who sold or provided similar products and
services in their community. Today, however, they are having to compete with companies all over the
world, whether they be mere cities away or entire continents away. As new stores and suppliers emerge,
companies are having to develop new strategies for winning new clients and retaining existing ones.
While no one can deny that globalization has had a positive impact on the consumer, we must
acknowledge the challenges globalization presents to modern-day businesses, particularly in the area of
client retention.
Globalization and ubiquitous connectivity are forcing companies to re-evaluate how to deliver value to
customers.
•Large and small companies now deliver similar products at low cost with an abundance of options for
customers mainly due to globalization.
•To be successful in this competitive environment, companies have to deliver both quality products and
unique and dynamic experiences for the customer depending on his/her needs.
•CRM is a strategic business solution and not a technical solution.
•CRM should not be implemented as a single system or at one time.
•CRM systems come in a variety of shapes and sizes, but there is no real off-the-shelf solution.
•Even though CRM provides a great solution for one-on-one individualized marketing, it also provides

good mechanisms for privacy and ethical violations.

sunilkhilari@hotmail.com 9850979655 15