p o s m i s soyoung moon posmis lab. postech chapter 3 customer relationship management sep. 10,...

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Soyoung MoonPOSMIS Lab.POSTECH

Chapter 3Customer Relationship Mana

gementSep. 10, 2002

Advanced MIS

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Why CRM?

Companies must spend far more money to get a new customer than to retain an existing customer.

It is far more expensive to win back a customer after they left than it is to keep them satisfied in the first place.

It is far easier to sell a new product to an existing customer than it is to a new customer.

Some customers are vastly more profitable than other customers. Some customers are unprofitable, and some customers are unprofitable and will never be profitable.

Find the most profitable customer!

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Customer Relationship Management

To extract valid, previously unknown, and comprehensible information from large databases and use it for profit

Capture and integrate both the internal and external(purchased) data into a comprehensive view that encompasses the whole organization

“Mine” the integrated data for information Organize and present the information and knowledge in ways

that expedite complex decision-making

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Entire CRM Framework

Operational CRM The automation of horizontally integrated business processe

s, including customer touch-points, channels, and front-back office integration

Analytical CRM The analysis of data created by the Operational CRM Collaborative CRM

Application of collaborative services including e-mail, personalized publishing, e-communities, and similar vehicles designed to facilitate interactions between customers and organizations

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CRM Architecture

Business Rules and Metadata Management

Workflow Management

Marketing Data mart

Campaignmanagement

Analytics DataMart

Reporting DataMart

Campaign management

Data Mining/Analytics

Ad Hoc Query andReporting

Direct Mail

ContactManagement

Call Centers

Sales Force

Customer Service Centers

Internet

E-Mail

Other

ContactHistory

TransactionHistory

CustomerProfile and

AccountData

Warehouse

External data

ETL Tools

Data Source

Marketing Data Source

Decision Support Applications

Communication Channels

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Managing Campaigns

Campaign management systems To help marketing professionals manage and execute campai

gns To require as complete a view of the customer as possible To manage interactions between the company and the custo

mer

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Managing Campaigns

Required functions in campain management systems Marketing insights from data mining about what new promotio

ns to create Accommodation of many new touchpoints besides direct mail Focus on profitability Optimization of the sequenc of promotion delivery Tools for constructing experiments that allow the marketing pr

ofessional to test out the effectiveness of new promotions and new segmentation techniques

Accommodation by the system of predictive modeling The transition from just defining and deploying a direct mail campaign to supporting all customer touchpoints Customer profitability across all touchpoints

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Evolution of Marketing

The Dark Ages

The Renaissance

The Industrial Revolution

The Information Age

The Age of Optimization

Artistry and Alchemy

Craftmanship

Mass Marketing

Database Marketing

Customer Relationship Management

None

Focus groups, telephone interviews

Computers store mailing lists

Flat File MCIFs

Data Warehousing, Data Mining, Analysis Tools (OLAP)

Marketing Age Techniques Technology

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Closed Loop Marketing

CRM systems not only execute marketing campaigns, but also “close the loop” and mesure the results of the campaigns.

Once marketing’s effectiveness can be measured, it can be improved the next time around.

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Closed Loop Marketing

Three basic steps of closed loop marketing Measure

Measure the results of the marketing effort, based on customer profitability.

Use Web-based tools to access the customer data warehouse and perform enterprise-level ROI analysis.

Predict Use data mining technology to predict consumer behavior and l

earn from past experiments. Use the results of the data mining system to focus and refine fut

ure campaign. Act

Use campaign management systems to be sure that the campaigns are executed in an understandable and measurable customer data warehouse or data mart.

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CRM Architecure

The customer touchpoints are the bedrock. Data warehousing is the foundation. Customer profitability is the cornerstone. Data mining is the architechtural blueprint. Web applications are the capstone.

These technologies are all used together to build a complete CRM system that can execute closed loop marketing to disply continuous improvement over time.

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Next Generation CRM

Continuously expanding in functionality and in scope across the enterprise

Sales Force Automation (SFA) Enterprise Resource Planning (ERP) The force opposing the fusing of information and technology

Internal difficulties in getting various customer information form different customer touchpoints

External difficulties in keeping customer privacy

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Customer Relationship Management (CRM) in Financial Se

rvicesJoe Peppard

European Management Journal Vol 18 pp 312-327, 2000

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The new economics of information

The traditional economics of information Reach

Access, connection Richness

Depth, detail The new economics of information Connectivity

Relative easy and cheap to connect to global networks, resulting in the PC and mobile phone emerging as ubiquitous devices

Convergence Digital technology are converging : wireless application proto

col Interactivity

Human and technical communication Data gathering Collaborative problem-solving Negotiation

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ECRM

Ebusiness The integration of e-business activities within the framewor

k of all existing and future commercial activities Channel management

The channel of greatest impact or economy anytime, anywhere, and anyone

Integrated and interactive channels of access and distribution

Relationships Real commercial relationships built on service excellence,

value and convenience Management of the total enterprise

Total back-office/front-office process integration

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Ebusiness

Ebusiness Internal – use technology to reengineer business processe

s External – use technology in how the organization interfac

es with business partners whether they are customers or suppliers

New business models – innovative products and services

Establishing e-banks with no presence in the physical world

E-billing or electronics bill presentation Banks establishing online purchasing sites Issuing e-bonds Virtual wallets

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Internet banking

Electronic banking – Security First Network bank(1995,10) UK’s Barclays Bank, Germany’s Commerzbank, Bayerische b

anks, Norway’s Christiana bank, Credit suisse Meritanordbanken

Finland’s largest bank Telephone banking (1982) PC banking(1984) Mobile payment service(1992) E business network(1996) Internet banking, e-billing, internet TV(1998) Basic banking, stock trading, investment fund transaction

s, purchase and sales bonds, account opening, credit cards ordering…….

ATM, telephone, GSM mobile, PC, internet TV, WAP

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The new business Ecosystem

Reduce cost of business Transaction cost –In-branch

teller(1.20)>ATM(0.40)>telephone(0.20)>PC banking(0.20)>internet banking (0.01) < source data monitor 1999 >

Increase service levels Reposition existing products and services, devise new offerings,

increasing the quality of service : PC, mobile phone, pay bills, loan

Reduce entry barriers ‘pirates’ can infiltrate the value chain of traditional players

Extend global reach A financial institution with a presence on the internet is a global

player

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The new business Ecosystem

Challenge brands Strong brands instantly convey solid trust and trust is

integral to effective customer relationships Confidentiality and security

Bundling and unbundling products and services Cross-subsidization of products and services – unbundled,

competitive necessity, customer power Dislocation of location

The concept of location is irrelevant Returns power and control back to the customer

Rise in customer power

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Channel Management

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Channels and customer contact points

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Relationship management(1/2)

High levels of customer satisfaction are associated with increased retention of customers

Relationships builds more easily when there is two-way communication

By engaging in an interactive dialogue customer preferences can be determined

Retained customers are inevitably more profitable The challenge for an organization in to move to a

situation where the customer starts buying from you rather than being sold to

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Relationship management(2/2)

Financial services organizations Who best customers are How to keep them How to increase ‘share of wallet’ by knowing what other

service or product they can sell to them Have a customer-centric or one-to-one relationship Increase shareholder value

Require information that can help make the best decisions to create and manage the right relationships, risks, costs, markets

Redesign core product offerings Devise appropriate channel strategies

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Management of the Total enterprise

Imperative to have total-office/back-office integration Customer-facing functions

Sales, marketing, call centers and other on-line support Become organizationally integrated with back-office proce

sses Run on separate mainframes and must be accessed throu

gh widely varying interfaces Move from data centric point solutions to customer-centric

enterprise solutions

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An integrated Perspective of ECRM

Conclusion

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Definitions of CRM

CRM is a combination of business process and technology that seeks to understand a company’s customers from the perspective of who they are, what they do, and what they’re like. (Couldwell ,1998)

CRM is founded on four relationship-based tenets: (Kutner & Cripps, 1997)

Customers should be managed as important assets. Customer profitability varies; not all customers are equally desirable. Customers vary in their needs, preferences, buying behaviour and

price sensitivity. By understanding customer drivers and customer profitability, comp

anies can tailor their offerings to maximise the overall value of their customer portfolio.

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Definitions of CRM

Relationship marketing (Merlin Stone et al., 1996) The use of a wide range of marketing, sales, communication,

sevice and customer care approaches to: Identify a company’s named individual customers; Create a relationship between the company and its customers t

hat stretches over many transactions; Manage that relationships to the benefit of the customers and th

e company.

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Key Characteristics of CRM (Lynette Ryals & Simon Knox, 2001)

A customer relationship perspective aimed at the long-term retention of selected customers. Gathering and integrating information on customers. Use of dedicated software to analyse this information (often in real time). Segmentation by expected customer lifetime value. Micro-segmentation of markets according to customers’ needs and wants. Customer value creation through process management (Hammer & Champy, 1993; Hamel & Prahalad,1994) Customer value delivery through service tailored to micro-segments, facilitated by detailed, integrated customer profiles. A shift in emphasis from managing product protfolios to managing portfolios of customers, necessitating changes to working practices and sometimes to organisational structure.

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CRM in IT fields

www.crmguru.com www.siebel.com www.eaijournal.com

Beyond CRM Seperating CRM myths from Reality