Information Systems

Dr. Anupriya Khan

Information Systems & Business Analytics Area
Indian Institute of Management Ranchi
Customer Relationship Management (CRM)
 CRM
▪ Managing all aspects of a customer’s relationship with an organization
▪ To increase customer loyalty and retention
▪ To augment an organization’s profitability
▪ Migrating from the traditional product-focused organization toward
customer-driven organizations
▪ Customers as experts, not just revenue generators
▪ Customer satisfaction
▪ Is a way to achieve sustainable competitive advantage in the future
 CRM
▪ A customer strategy starts with understanding who the company’s
customers are and how the company can meet strategic goals

▪ The New York Times understands this and has spent almost a decade researching
core customers to find similarities among groups of readers in cities outside
the New York metropolitan area.
▪ Its goal was to understand how to appeal to those groups and make The New York
Times a national newspaper, expanding its circulation and the reach it offers to
advertisers.
▪ The New York Times is growing in a relatively flat publishing market and has
achieved a customer retention rate of 94 percent in an industry that averages
roughly 60 percent.
 CRM Benefits
▪ Provide better customer service
▪ Improve call center efficiency
▪ Cross-sell products more effectively
▪ Help sales staff close deals faster
▪ Simplify marketing and sales processes
▪ Discover new customers
▪ Increase customer revenues
 How to find most valuable customers
▪ A formula that industry insiders call RFM—Recency,
Frequency, and Monetary value
▪ How recently a customer purchased items (recency).
▪ How frequently a customer purchases items (frequency).
▪ How much a customer spends on each purchase (monetary value).
 CRM systems
▪ Barclays Bank
▪ With the new CRM system
▪ Better able to predict the financial behavior of individual customers
▪ Assess whether a customer is likely to payback a loan in full and within the
agreed-upon time period
▪ Decide whether to charge its customers a more appropriate rate of interest
based on the results of the customer’s risk assessment
▪ To identify groups of profitable customers (thru a sophisticated customer
segmentation system) to target for new financial products
▪ Discovered that about 50 percent of its customers were non-profitable and
that less than 30 percent of its customers provided 90 percent of its profits
 CRM systems
▪ Three phases in the evolution of CRM
▪ CRM reporting technologies help organizations identify their customers
across other applications.

▪ CRM analysis technologies help organizations segment their customers

into categories such as best and worst customers.

▪ CRM predicting technologies help organizations make predictions

regarding customer behavior such as which customers are at risk of
leaving.
 Operational CRM and Analytical CRM
▪ Operational CRM
▪ Supports traditional transactional processing for day-to-day front-office
operations or systems that deal directly with the customers.

▪ Analytical CRM
▪ It supports back-office operations and strategic analysis and includes all
systems that do not deal directly with the customers.
▪ The primary difference between operational CRM and analytical CRM is
the direct interaction between the organization and its customers
▪ The California State Automobile Association (CSAA) wanted to promote and cross-sell
CSAA automotive, insurance, and travel services to beat its competition.
▪ Implemented E.piphany’s CRM system.
▪ Integrated information from all of CSAA’s separate databases, making it immediately
available to all employees through a Web-based browser.
▪ Employees could quickly glance at a customer’s profile and
determine which services the customer currently had and which services the customer
might want to purchase based on her or his needs as projected by the software
 Marketing
▪ List Generator consolidates customer information from a variety of sources and
segment the information for different marketing campaigns.
▪ Information sources include Web site visits, Web site questionnaires, online and off-line
surveys, flyers, toll-free numbers, current customer lists, and so on
▪ Helps understand of the type of customer it needs to target for marketing campaigns

▪ Campaign management systems

▪ Guide users through marketing campaigns performing tasks such as campaign definition,
planning, scheduling, segmentation, and success analysis
▪ Calculate quantifiable results for return on investment (ROI) for each campaign and track
the results in order to analyze and understand how the company can fine-tune future
campaigns
 Marketing
▪ Cross-Selling and Up-Selling
▪ Cross-selling: selling additional products or services to a customer
▪ Up-selling: increasing the value of the sale
▪ CRM systems offer marketing departments all kinds of information about their
customers and their products, which can help them identify cross-selling and up-selling
marketing campaigns
 Sales
▪ Sales Management CRM Systems
▪ Calendars to help plan customer meetings, alarm reminders signaling
important tasks, customizable multimedia presentations, and document
generation
▪ Analysis of the sales cycle and performance of sales representative
▪ Contact Management CRM Systems
▪ maintains customer contact information and identifies prospective customers
▪ Maintaining organizational charts, detailed customer notes, and supplemental
sales information
▪ Opportunity Management CRM Systems
▪ determine potential customers and competitors and define selling
efforts including budgets and schedules
 Analytical CRM
▪ Analytical CRM solutions are designed to dig deep into a company’s
historical customer information and expose patterns of behavior on which
a company can capitalize.
▪ Personalization
▪ Which customers are worth investing in
▪ Relies heavily on data warehousing technologies and business intelligence
 Hilton Hotels
▪ Hospitality industry
▪ 3 entities involved in the Hilton case
▪ The owner- who holds the real estate
▪ The brand
▪ The management company- that operates the property and engages in
day-to-day operations
 Hilton Hotel Corporation
▪ Defined itself as a brand management company
▪ In large part, it is a franchisor of hotels
▪ Franchising about 80% of its properties (exhibit 1)
▪ Excellent care of guests
▪ Also catered to the needs of owners
▪ Who invested billions of dollars
 Challenges in global lodging business
▪ Highly competitive
▪ Access to capital
▪ High levels of employee turnover
▪ Difficulty in achieving standardization in service delivery
▪ Characterized by geographic dispersion
▪ A brand can provide values in terms of standardization, quality,
consistent services
 OnQ
▪ A comprehensive, integrated, custom-built enterprise system
▪ Brainchild of CIO Tim Harvey and his team
▪ Cost: $93 million [app dev $40 million + hardware infra $53 million]
▪ 2007 investment: $102 million [$22 m + $40 m + $40 m]
▪ Maintenance: $60 million
▪ Enabled to open more hotels- aggressive expansion strategy
▪ Source of competitive advantage
 OnQ-CRM
▪ An application built on OnQ infrastructure
▪ 2002 deployment: cost $650,000 (build) + $1 million (maintenance)
▪ 2003: integration with Hilton’s property management system (PMS)
[supports check-in, check-out, billing]
▪ 2004 onwards: maintenance mode ($1 million) and remained
unchanged till 2007
▪ To support customers really matter (CRM) initiative
▪ Outstanding service
▪ Why OnQ-CRM?
▪ Barriers to good service at touch points
▪ Information was not integrated and easily available
▪ Longer talk times at call centers
▪ Difficult to maintain continuity to guests that stay with multiple brands
▪ Hard to recognize customers, to know whether they had good or bad
experience in last stay
▪ To enable recognition, personalization, service recovery, and customer
analytics to foster closer relationship
▪ Hilton Hotel Corp. as Franchisor
▪ Managing the brand
▪ The brand guaranteed a constant stream of businesses for franchisees
▪ Central reservation systems and advertisements
▪ Franchisee
▪ Responsible for creating a positive customer experience
▪ Pays loyalty fee (of 5%) to use the brand name and program fee (5%)
to fund the CRM initiative [OnQ-CRM], marketing, distribution systems
▪ Franchise agreement is an instrument enabling a brand to
grow fast with limited capital expenditure
▪ Measurement challenge (ROI)
▪ Difficult to calculated ROI; so, Hilton focused on delivering efficiencies
and cost savings
▪ Whether talk time reduced; whether efficiency was gained
▪ Measured in terms of number of email ID captured ( direct relation
with guests)
▪ How effective are you at the front desk