tionship. The Business / Customer Rela ~ Management: Focus ar for customers 9 compan T Introduction — day, customers are in charge. It is easier than eve ins shop and, with a click of the mouse, to switch compantes. As a result, customer relationships buce become a company’s mast valued asset. These relationships are weorth more than the com. pany’s products, stores, factories, eb addrese, and even employees. Every company's strategy should addres ‘box> 10 find and retain the mose profitable customers possible (9 The primary business value of customer relationships today is indisputable. That’ why we empha- sized in Chapter 2 that becoming a customer-focused business was one of the top business strategies that ‘can be supported by information technology. Thus, many companies are implementing customer rel tionship management (CRM) business initiatives and information systems as part of a customer-focused ot customer centric strategy to improve their chances for success in today’s competitive business environ- ment, In this section, we will explore basic CRM concepts and technologies, as well as examples of the benefits and challenges faced by companies that have implemented CRM systems as part of their cus- tomer-focused business strategy. Customer relationship management systems are enabling businesses of all sizes and industries to dramatically improve their focus on customer service?What Is CRM? lationship involves two related objec. ? lanaging the full range of the customer relation tives ones to provide the organization and all of its customer-facing employee 1 every touch point and across all or a with a single, complete view of every customer at channels; and, revo, to provide the customer with a single, complete view of the company and its extended channels [26]. Thats why companies are turning to customer relationship management to improve their cus tomer focus. CRM uses information technology to create a cross-functional enterprise system that integrates and automates many of the customer-serving processes in sales, marketing, and customer services that interact with a company’s customers. CRM systems also create an IT framework of Web- enabled software and databases that integrates these processes with the rest of a company’s business operations. CRM systems include a family of software modules that provides the tools that enable a business and its employees to provide fast, convenient, dependable, and consistent service to its cus- tomers. Siebel Systems, Oracle, PeopleSoft, SAP AG, and Epiphany are some of the leading vendors Figure 8.1 illustrates some of the major application components of a CRM sys- of CRM software tem. Let's take“a Took at each of them.FIGURE 8.1 1¢ major application Marketing and clusters in customer Fulfillment relationship management. Contact and ‘Account Retention and Loyalty Programs_ Contact and Account CRM software helps sales, marketing, and service professionals capture nd track relevant data about every past and planned contact with prospects and Management customers, as well as other business and life cycle events of customers. Infor mation is captured from all customer touchpoints, such as telephone, fax, e-mail, the company’ we J contact. CRM systems store the data in a common customer) site, retail stores, kiosks, and personal“database that ae aut integrates all customer ac informati 1d makes it available through company via Internet, intrane ne twin! Labs fatale Ss secs applheatone 2 tranet, or other network links for sales, marketing, service, and other CRA _ Sales A CRM system provides sales reps with the software tools and company data sources they need to support and manage their sales activities, and optimize cross-selling and up-selling,| Examples include sales pr and product information, LE eas( Marketing and CRM systems help marketing professionals accomplish direct marketing Fulfillment campaigns by automating such tasks as qualifying leads for targeted market ing, and scheduling and tracking direct marketing mailings. Then the CRM software helps marketing professionals capture and manage prospect and customer response data in the CRM database, and analyze the customer and business value of a company’s direct marketing ampaigns. CRM also assists in the fulfillment of prospect and customer responses and requests by quickly scheduling sales contacts and providing appropriate information on products and services to 1. while capturing relevant information for the CRM ay) Customer Service A CRM system provides service reps with software tools and real-time — and Support aceess to the common customer database shared by sales and ae professionals. CRM helps customer service managers wes, and marketing iwers create, assign, and) requests or service by Customers. Calley sopra, Sse anChapter 8 / Enterprise Business Systems © 247 sp costomer support agents based on their skills and authority to handle specific kinds of service fequests. Help desk software assists customer service reps in helping customers who are having prob- lens with 2 product or service, by providing relevant service data and suggestions for resolving problems. Web-based self-service enables customers to easly access personalized support informa- ton at the company website, while giving them an option to receive further assistance online or by phone from customer service personnel. } (eteaon and Consider the following: ty Programs . Tt costs six times more to sell to a new customer than to sell to an existing one. A typical dissatisfied customer will tell eight to ten people about his or her experience. © A company can boost its profits 85 percent by increasing its annual customer retention by only 5 percent. © The odds of selling a product to a new customer are 15 percent, whereas the odds of selling a product to an existing customer are 50 percent. @ Seventy percent of complaining customers will do business with the company. again if it quickly takes care of a service problem (7:248 @ Module IU / Business Applications c the customer retention performance of Charles sed report format for evaluating Retention rate by cestomer cohort | csr [Corner | Retention | te Household retention Average customer Retention rate by ceystomer segment Customer loyalty sho are active Web users Comparative retention Comparative customer Percentage of customers Choimerace va e-mall Decline in customer activity Propensity o defect ‘Comparative satisfaction: Gi FIGURE 8.2 Apropos Schwab & Co. Sa Pevformas Gis oes i Percentage ofcustomers Competitor offers Share of portfolio ‘Customer satisfaction by “Task *Touchpoint = Channel partner End-to-end perfor mance by scenario [[eamomer | Sacdon oy ‘Sfeieee| cinmersepment Sastcion by | coher Saison by vith quality of Customer satnfation Information provided Elapsed time for commonly performed tasks ‘Competitors: JJecuney of Web search + Other online brokers rele 5 Other ancl see Percentage of trades ra crccued with price All products and improvement Percentage of e-mails anoweret accurately in one hour % 7 — | Customer | Average revem ‘Revenues per customer | Spending | customer segment | average pra Profits per customer | percuwamer seyment Growth in evstomer | Growth in evseon sets per segment Castomer lifetime value “Total brokerage asset Growth in brokerage aemarker Revenue trades per day Percentage increase in Cost to serve towehpointFigure 84 illustrates another way to think about the customer and business ‘(fre Three M J alte and components of customer relationship management. We can view pases of CRI I" CRM as an integrated system of Web-enabled software tools and databases accomplishing a variety of customer-focused business processes that support the three phases ofthe relationship between a business and its customers [9]. & Acquire. A business relies on CRM software tools and databas customers by doing a superior job of contact management, sales prospecting, selling, direct marketing, and fulfillment. The goal ofthese CRM functions is to help customers perceive the value ofa superior product offered by an outstanding company, Enhance. Web-enabled CRM account management and customer service and support tal help keep customers happy by supporting superior service from a responsive met- worked team of sales and service specialists and business parmers, And CRM sales force automation and direct marketing a nd fulfillment tools help companies cross-sell and up- sell to their customers, thus increa sing their profitability to the business. ‘The value per- ‘shel by customers i the convenience of one-stop shopping at attractive prices, es to help it acquire new250 © Module Il / Business Applications * Retain. CRM analytical software and databases help a company proactively identify and ward its most loyal and profitable customers to retain and expand their business via tar- geted marketing and relationship marketing programs. The value perceived by customers ; of a rewarding personalized business relationship with “their company.”CRM supports the tye pases of te ) The business benefits of customer relationship management are not guaran. teed and, instead, have proven elusive at many companies. Surveys by indus. try research groups include a report that over 50 percent of CRM projects ts that were promised. In another research report, 20 percent of businesses surveyed reported that CRM implementations had actually damaged long-standing customer res. tionships. And in a survey of senior management satisfaction with 25 management tools, CRM ranked near the bottom in user satisfaction, even though 72 percent expected to have CRM systems imple- did not produce the resul mented shortly [21]. [tac the reason for such a high rate of failure or dissatisfaction with CRM initiatives? Research shows that the major reason is a familiar one: lack of understanding and preparation. That is, too often, business managers rely on a major new application of information technology (like CRM) to solve a business problem without first developing the business process changes and change manage- ment programs that are required. For example, in many cases, failed CRM projects were implemented without the participation of the business stakeholders involved. Therefore, employ were not prepared for the new processes or challenges that were part of the new CRM implemen- tation. )We will discuss the topic of failures in information technology management, system imple- mentation, and change management further in later chapters. es and customers suppliers, and customers, squeezing out time and costs while enhancing the cus- Trénds in CRM. Increasingly, enterprises must create tighter collaborative linkages with parters, - ore tomer experience and the total value proposition [22]. Figure 8.4 outlines four types or categories of CRM that are being implemented by many com panies today and summarizes their benefits to a business. Th i ved 38 panies sodey and oom : ese categories may also be viewe! some of the capebilites of CRM chen enbiament CRM applications, and the figure also oui Z . a i ic A tions are implemented using several ansaal nee enters: Then anahtieal CRM appl dita about customers and penance matical marketing tools, such as data mining, to extract Prospects for targeted marketing campaigns. p a are moving to : 9 i it well a5 customers in collaborative ern ooo atee CRM systems, to involve business pares er services. This includes systems for customer self-ser"¥* and feedback, tomer as well as partner relationship management (PRM) systems. PRM applications aP0!