2. Managing the Customer Life cycle

Current factsToday customers are in charge they make the rulesPutting technology at the center stageBusiness intelligence is one of the most growing segment in the marketplaceCustomer loyalty is very difficult to maintain due to competitionCustomers want an excellent service and they want to feel specialMost companies think they are customer-focused however in reality they are product-centricThere is a need to formulate customer-focused firms which needs:CRM strategyOrganizational changeCorporate culture

Economics of customer retentionWinning back a lost customer can cost up to 50-100 times as much as keeping a current one satisfied.Rob Yanker, Partner, McKinsey & CompanyUnderstanding your customer is key to retention..

Why CRM?It costs 6 times more to sell to a new customer than to sell to an existing oneA typically dissatisfied customer will tell 8 to 10 people about his/her experience (mainly related to poor customer service)The odds of selling to a new customer is 15% versus 50% to an existing customer70% of the customers complaining will do business again with the company if the complaints are quickly addressed90% of existing companies do not have integrated CRM tools and platforms

Customer Relationships Today

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Pricing

CommunityDistributionCommunication

Branding

Customer Relationships

Building a customer-centric approach to Internet marketing by focusing on customers

CRM BasicsCRM is the timely delivery of excellent service customer relationship managementCRM is a combination of business process and technology that seeks to understand a companys customers from a number of perspectives including:Who they are?What they do?What do they like?

Age of the never-satisfied customerCRM becomes a support tool in a time characterized by:Increased competitionGlobalizationGrowing cost of customer acquisitionHigh customer turnoverCRM is all about creating a better value proposition to customersInformation and communication technology is now acting as a catalyst for CRMExtended enterpriseWorld wide web and the Internet

Defining CRMCRM is an integrated sales, marketing and service strategy that is based on a timely and accurate information infrastructure and that depends on coordinated enterprise-wide activitiesExample: tracking customers interactions with the firmCustomer tracking includes steps in the selling and customer service cyclesCRM steps includeTargetingAcquisitionRetentionExpansion

Defining CRMTargetingWho do we target?What segments are most profitable?What segments match our value proposition?What is the best segmentation strategy for us/our industry?AcquisitionWhat is the best channel for each segment?What is the acquisition cost for a channel/segment?Do certain channels deliver certain types of customers?Cost effective acquisition?

Defining CRMRetentionHow can we improve retention?What is our average customer relationship length?How can we hold customer for as long as possible?What is the most cost effective method of retention?ExpansionHow many products does our average customer buy? How can we induce our current base to buy more products?Who are the prime targets for expansion?What is the cost of expansion?

Goals of CRMUsing existing relationship to grow revenueUsing integrated information for excellent serviceIntroducing consistent, replicable channel processes and procedures

CRMCRM is a business strategy and not a productPutting CRM into practice requires developing a set of integrated applications to address all aspects related to the front-office needsCRM could be a major support platform for small and medium-sized enterprisesCost of the information and communication technology applications and infrastructure should be calculated as opposed to the return-on-investment

Evolution of information requirementsMaterials requirements planning (MRP)Manufacturing resource planning (MRP II)Enterprise resource planning (ERP)Supply chain management (SCM)Customer relationship management (CRM)

Managing the customer life cycleAcquiringnew customers

Enhancingprofitability of existingcustomersRetainingprofitable customersfor life

Acquiring new customersPromoting the companys product and service leadershipRedefine the companies competitive edge and innovationsOffer a superior product backed by an excellent serviceExample: Browsing on the net, submitting a request, receiving a phone callModel for a sales and service strategy

Encouraging cross-selling and up-sellingCross selling is used by suggesting alternative products or up-selling by rendering the customer more informed with the new products and services.Broadening the relationship between the company and the customersProviding a value proposition represented by offering a greater convenience at low cost (one-stop-shopping)Example: Best Buy an electronic retailer with more than 300 stores capitalizes on committed relationships with customers3000 calls a day with more than 50% having computer-based answers and solutionsEnhancing profitability of existing customers

Retaining profitable customers for lifeRetention focused on service adaptabilityDelivering not what the market wants but what the customer wantsProviding a value proposition that offers a proactive relationship that works on the best interest of the customerExample: customer retention is becoming a key competitive strategy for many companies

Integrated CRMIntegrated CRM ApplicationsSales Force AutomationCustomer SupportDirect MarketingCross-sell and Up-sellProactive ServiceAcquireEnhanceRetainCustomerLife cyclePartialFunctionalSolutionsCompleteIntegratedSolutions

Core CRM process competenciesMarketing andFulfillmentSalesCross-sellUp-sellTelesalesField Salesand ServiceLoyalty and RetentionProgramsCustomerService andBillingProspectOrCustomerFaxeMailWWWPhoneContent ManagementTechnical Infrastructure

How to build a CRM infrastructureInvolve top managementDecide on a vision of an integrated CRMEstablish a CRM strategy and specify its objectivesUnderstand the customerReview cultural changes that will need to occurDevelop a business caseEvaluate current readinessEvaluate appropriate applications to do a better businessIdentify and target quick winsHave one manager to own the end-to-end projectImplement in stagesBe sure to create a close-loop CRM environmentCreate concrete measurement goals

5 key drivers of the customer valueCost of TargetingCost of AcquisitionService and Usage RevenueCost of serviceDuration of relationship

4 stages of a customer relationshipCustomer recognizes the firm but has not initiated any transactionsCustomer gathers information about the firm which determines whether repeated transactions will occurCustomer and firm feel a sense of obligation or responsibility to one anotherTotal loss of commitment and relationship

Challenges to understanding customersIdentify the customerLearn from customersKnow the customers valueDetermine best resourcesAccess complete customer profile and history

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