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UNITUNIT--22
CONCEPTUAL FRAMEWORK OF CRMCONCEPTUAL FRAMEWORK OF CRM
MBMB--543543
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Discussion Outline
What is CRM
Key CRM Principles
Evolution of CRM practice
Relevance of CRM for todays business
Current Status of CRM in Indian business
Software Solution for CRM.
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What is CRM?What is CRM?
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Customer Relationship Management
TheThe customercustomer isis thethe mostmost importantimportant partpart ofof thethe productionproduction lineline..
WithoutWithout someone someone toto purchasepurchase ourour productproduct wewe mightmight asas wellwell shutshutdowndown thethe wholewhole plantplant..
W . Edwards Deming
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Customer Relationship Management
Jagdish N Sheth and Atul Parvatiyar have defined Customer
Relationship Management (CRM) as :
CRM is a comprehensive strategy and process of acquiring,
retaining and partnering with selective customers to create
superior value for the company and the customer.
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Customer Relationship Management
It is a process or methodology used to learn more about
customers' needs and behaviors in order to develop stronger
relationships with them.
It is a process that will help bring together lots of pieces of
information about customers, sales, marketing effectiveness,
responsiveness and market trends.
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Customer Relationship Management
CRM deals with long term mutually beneficial relationship among consumers,companies and other stake holder.
It is a well defined series of functions, skills, processes and technologies whichtogether will allow companies to more profitable manage customer as Tangibleassets.
CRM is a new technology enabled way to do business that revives a simple, oldfashioned notice; keep pleasing customers and they will keep coming back.
CRM technology can be summed up in the following four simple steps:
1. Customer identification through referrals;
2. Customer relationship development
3. Customer satisfaction through cross selling
4. Customer retention and increasing their loyalty
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Customer Relationship Management
It is a process or methodology used to learn more about
customers' needs and behaviors in order to develop stronger
relationships with them.
It is a process that will help bring together lots of pieces of
information about customers, sales, marketing effectiveness,
responsiveness and market trends.
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CRM Stands For Relationship marketing is a means for attracting, developing andretaining customers to build strong customer loyalty.
CRM- a strategic imperative helps serve customers unspokenneeds
B2C Space
CRM means keeping pace with a savvy and increasingly impatient
consumer base that is closer than ever to finding your maincompetitor and more willing than ever to share their bad experienceswith your prospects
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4Cs ofCRM4Cs ofCRM
CONNECT
COMBINE
COGNIZE
CORRELATE
The insight gainedthrough capture andanalysis of detailed
information is to createcontinuous learning
(customers, production,channels, market,
competition from thedata warehouse
The application ofinsight to create relevant
interaction orcommunication withconsumer channels,
suppliers and partnersthat build value
relationships
Series of transactionand interaction that
make a dialoguebetween customer
channel/end user andorganization
Mapping andmanagement of
interaction pointsbetween a
customer/channels/end user and an
organization
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KEY CRM PRINCIPLESKEY CRM PRINCIPLES
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Principles of Relationship Marketing
INTENTION
INTERACTION INTEGRATION
INFORMATION INVESTMENTS INDIVIDUALITY
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Key Principles ofCRM
MostMost ofof thethe customercustomer relationshiprelationship programsprograms areare developeddeveloped ononthethe basisbasis ofof certaincertain principles,principles, whichwhich enunciateenunciate thatthat itit isis necessarynecessary forfororganizationsorganizations toto maintainmaintain mutuallymutually beneficialbeneficial relationshipsrelationships withwith theirtheir
customerscustomers forfor thethe longlong--termterm benefitsbenefits ofof bothboth.. TheThe basicbasic underlyingunderlyingprinciplesprinciples areare::
11.. PrinciplePrinciple ofof CustomerCustomer lifelife--timetime valuevalue
22.. PrinciplePrinciple ofof 'Customer'Customer satisfaction'satisfaction'
33.. PrinciplePrinciple ofof 'Customer'Customer loyalty'loyalty'
44.. PrinciplePrinciple ofof 'Share'Share ofof customer'customer'
55.. PrinciplePrinciple ofof 'Cross'Cross--sellingselling andand upup--selling'selling'
6. Principle of 'Customer profitability'6. Principle of 'Customer profitability'
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Principle of 'Customer Life-time Value
This principle states that the value of the entire stream of purchasesthat the customer would make over a lifetime of patronage is far
higher than the value of a single sale.
In view of this fact organizations should seek to establish good
relationships with the customers for conducting repeated business withthem
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Principle of 'Customer Satisfaction
Customer satisfaction is defined as the extent to which a product's
actual performance matches a buyer's expectations.
A customer might experience various degrees of satisfaction. If the
product's performance falls short of expectations, the customer is
dissatisfied.
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Principle of 'Customer Loyalty
This principle states that highly satisfied customers produce several
benefits to the company.
They are less price sensitive, spread good word-of- mouth and
remain loyal to the company's products and services for a longerperiod.
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Principle of 'Share of Customer
This principle means that if any company goes beyond the idea ofattracting and retaining good customers, it can capture a greater share
of the customer's purchasing in their product/service categories,
either by becoming the sole supplier of the products, the customer is
currently buying or by motivating the customer to purchase
additional company products.
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Principle of 'Cross-Selling and Up-Selling
Cross-selling means getting more business from the current customeof one product or service by selling them the additional offerings.
Encouraging a customer to purchase products that are higher in valu
and more profitable is treated as up selling
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Principle of 'Customer Profitability
This principle states that while implementing a relationship programit is not wise to maintain similar relationships of high value with all
the customers.
The principle advocates attracting, keeping and maintaining
profitable customers.
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The 10 Principles ofCRM
1.1. ValueValue segmentationsegmentation::
BasedBased onon thethe customercustomer needs,needs, preferences, preferences, behaviors behaviors andand economiceconomic potential, potential, whichwhichprovidesprovides thethe basisbasis forfor resourceresource allocationallocation decisiondecision inin marketing,marketing, salessales andand serviceservice..
22.. CollaborationCollaboration::TheThe customercustomer isis involvedinvolved inin thethe specification,specification, designdesign and/orand/or deliverydelivery ofof aa descrieddescried resultresult..
33.. InstitutionalInstitutional MemoryMemory::
WhenWhen aa customercustomer interactsinteracts withwith youryour company,company, everyoneeveryone isis thethe enterpriseenterprise isis awareaware ofof priorpriorinteractions,interactions, outstandingoutstanding issuesissues andand pendingpending opportunitiesopportunities..
44.. TouchTouch--pointpoint AlignmentAlignment::CustomersCustomers areare ableable toto dodo businessbusiness withwith youyou throughthrough multiplemultiple channelschannels whichwhich areare alignedaligned totocustomercustomer needneed andand valuevalue..
5. Real-time information management:
EmployeesEmployees havehave realreal--timetime accessaccess toto thethe rightright informationinformation inin orderorder toto makemake customercustomer basedbaseddecisionsdecisions andand resolveresolve issueissue immediatelyimmediately
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66.. Closed-loop processes:
Integrated front and back office systems, logical conclusions, closing the customer loopand enabling continuous knowledge capture.
7 Customer scorecard:Employee performance requirements and measures are designed drive specific customerbehavior.
8. Listening posts:
Forums to facilitate information sharing and learning about your customers that helpsyou to do business with them learn from each other and provide valuable customer input
to your business.
9. One and done:
Solving customer needs first time.
10. Total experience management:
Mapping all of the touch-points between you and your customers and attempting to
deliver a consistent quality experience as perceived by the customer.
The 10 Principles ofCRMcontd..
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Evolution of CRM practiceEvolution of CRM practice
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Evolution ofCRM
The genesis of CRM (Customer Relationship Management) lies in Sales Force
Automation (SFA) tools.
Companies like Siebel and Vantive (now part of PeopleSoft) took the early lead by
introducing tools to help the sales personnel become more efficient in tracking theircustomers. There were also a few problem-tracking tools for help desk such as
Remedy.
Companies focused more on customer relationships, additional applications
emerged in areas of customer support, field support, and marketing automation.
There are currently over 200 CRM software vendors and the number continues to
grow. Companies are trying to manage relationships with their customers, partners, and
suppliers in a personalized and automated manner.
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Evolution ofCRM
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Relevance of CRM for todays businessRelevance of CRM for todays business
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Relevance ofCRMRelevance ofCRM
Enables the companies to quantify their return.Enables the companies to quantify their return.
Helps retailers to understand the lifetime value of a customer.Helps retailers to understand the lifetime value of a customer.
Ability to capture, use and manage customer information.Ability to capture, use and manage customer information. Reducing costs.Reducing costs.
Improving efficiencyImproving efficiency
Increase customer revenues
Discover new customers Cross sell/Up Sell products effectively
Help sales staff close deals faster
Simplify marketing and sales processes
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Improved customer retentionImproved customer retention
Greater retention results in a larger future customer baseGreater retention results in a larger future customer base
Purchase amount increases over timePurchase amount increases over time
Average of 8%/year in the insurance industryAverage of 8%/year in the insurance industryReduction in costsReduction in costs
Order processingOrder processing
ShortShort--term acquisition coststerm acquisition costs
Customer referralsCustomer referrals
22--way communicationsway communications Improves customer satisfactionImproves customer satisfaction
Impact on the grey marketsImpact on the grey markets
Often harmful to profitsOften harmful to profits
Frequently used to level inventoriesFrequently used to level inventories
Relevance ofCRM.contd.Relevance ofCRM.contd.
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Current status of CRM in Indian BusinessCurrent status of CRM in Indian Business
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The Current Status ofCRM of Market in
India Across the world industries like insurance, pharmaceuticals, real estate and evenoffbeat ones like the advertising field are fast learning the fact that CRM can belucrative.
CRM spending is estimated to increase to an astounding $17.7 billion in 2006.
The annual rate of growth in the CRM industry is 6.7 percent.
Revenue from hosted CRM solutions alone is expected to reach an all time high of$2.8 billion.
However the perpetual license model has evidenced a sharp decline hitting almost$ 2 billion resulting in a decline of 18%.
In 2005, IT-spend ranged from $16,500 for two to 19 employee companies to$821,000 for mid-market enterprises with 500 to 1,000 employees.
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The Current Status ofCRM of Market in
India.cont..CRM Market Growth
The pace of CRM Software New License Revenues Worldwide has slowed fromthe frenzied spending pace of 2001, when $3.74 billion was spent in comparison to $3.03billion this year, revealing that companies are now taking a more thoughtful and planned
approach.
CRM Vendor Trends
"..The 17 leading SMB (CRM Vendor) companies all declared they were doingmore implementations now than the previous years, with eight of them handling at least 60percent of customer implementations Of the winning enterprise vendors all but one does70 percent or more of its implementations in house He notes that CRM implementation byvendors is a trend that he predicts will eventually reach 90 percent..".
Small Business CRM Growth
The CRM market for small and midsize businesses is projected to grow at nearlythree times the pace of the overall market. This represents a 17.2 percent compounded annualgrowth rate between now and 2008, compared to 6.5 percent for the entire CRM industry.That growth will see SMB share of CRM business expand from less than 17 percent in 2005,to more than 27 percent in 2010.
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Software Solution for CRMSoftware Solution for CRM
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There is a need to integrate cross functional activity in an organization to provide
technology driven effective CRM solution.
There is a need to look at which data model and data structures will be needed in
providing an effective and efficient e-CRM solution.
To make the technology driven CRM to be most effective, use the most talented
employees, the best expert, opinion makers, influencers and change agents. The
CRM implementation must make attractive for all concerned to participate.
Business Intelligence and Analytical capabilities:
Information needs to be leveraged and analyzed by decision makers so that they can
make more informed and timely business divisions. An optional business intelligence
solution should work across CRM and ERP system so that organizations can directly
tie their profit making activities to cost.
Software solutions forCRM:
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Unified channels of customer interaction:
Integrating the functional components of a CRM solution is just as important as integrating these
components across multiple channels.
Whether a customer interacts with an organization via the web, with a sales person carrying an SFA
application on her laptop, or with a call center agent, the interaction with the customer needs to be
seamless, consistent and efficient.
Support for web-based functionality :
Web based functionality is essential for applications such as web self survive and unassisted sales.
Although the web is critical as a channel for e-Business, the web is also important from an
infrastructure perspective.
The cost savings associated with deploying web or internet based applications can also be significant.
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Centralized Repository for customer information:
CRM solutions should work from a centralized repository so that current customer
information is available in real time to all customer facing employees.
A centralized repository of customer information also provides date consistency
across business functions and functional applications.
Integrated workflow
Workflow refers to the automatic routing (i.e. not requiring human intervention)
of documents and work items to the users responsible for executing specific steps in a
discrete business process.
CRM solutions should have a strong workflow engine to ensure that cross functional
tasks can be accomplished as dynamically and seamlessly as possible
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Integration with ERP applications :
CRM applications cannot live in a vacuum.
They need to integrate seamlessly with ERP applications such as
finance, manufacturing, inventory, distribution, logistics and human
resources to be truly effective (i.e.) provide a closed loop customer
interaction cycle)