CUSTOMER RELATIONSHIP

MANAGEMENT
MM 3123

IMPLEMENTING THE CRM STRATEGY

Thilini Gamage
 LEARNING OUTCOMES

• Elements of a CRM System

• CRM Applications

• CRM Costs

• Stages of ROI Estimation

• CRM Implementation
 ELEMENTS OF A CRM SYSTEM

Web based
Contacts
Customer Sales • Direct
• Telesales
Person mail
Interface/ • Kiosks
Contacts • Email • Coupons
Touch Points
• Websites

Customer
CRM Marketing Functions Service
Sales • Campaign Management Functions
Application Management • Segmentation • Helpdesk
Functions • Personalization and
s • Customer
Customization
Care
 CRM APPLICATIONS
• Sales and Sales Management Function
– Contact and quote management

– Account management (i.e. order entry, proposal

generation etc.)

– Pipeline analysis (i.e. forecasting, sales cycle

analysis, win/lose analysis, roll-up and drill-down
reporting etc.)

– Interaction of sales force with prospect, turning

prospect into customer, maintaining mutually
profitable relationship
ROLL-UP AND DRILL-DOWN
REPORTING
 CRM APPLICATIONS (CONTD….)

• Marketing Function

– Multi-channel campaign management, opportunity

management, web-based encyclopedia, market
segmentation, and lead generations / enhancement
/ tracking

– Personalization

– Content management : is the set of processes and

technologies that support the collection, managing,
and publishing of information in any form or
medium
 CRM APPLICATIONS (CONTD….)

• Customer Service Function:

– Incident assignment, escalation, field

personnel tracking, reporting, problem
management, resolution, order management,
and warranty/contract management

– Key to a company’s ability to maintain

proactive relations with customers and hence
retain satisfied loyal customers

– CRM systems assist in managing help desk and

providing customer care
ROI (RETURN ON INVESTMENT) OF
CRM
• Formula: Profits/Investment X 100% = ROI (%)

• Questions on what can be counted as investment

in CRM?
– How much will consulting for the project cost
(i.e. business case, strategy, IT engineering,
implementation, training etc.)?
– To what degree is business process re-design
necessary?
– What new software and hardware must be
purchased to accommodate the new system?
– Does the system need to be customized or will
it work “out of the box”?
 ROI OF CRM (CONTD….)

– How much customization is required and at

what cost?

– Can the system be easily configured and

maintained by internal IT staff or is continuous
external assistance required?
– What is the cost of training the company’s staff
to use the CRM system?
– What is the timeframe for implementation and
what will happen to the current system
processes during that time?
–
 CRM COSTS

• IT Costs

• People Costs

• Process Costs
 IT COSTS

• Includes investment in IT infrastructure, database

development and software
• One-fifth to one-third of total cost (might remain an
accurate prediction, because falling costs of HW
and SW are offset by the rising cost of hiring IT
professionals)
• Software components

– Sales force automation: contact management,

account management, order processing,
proposal generation

– Sales management automation: pipeline

analysis, territory design, sales reporting
 IT COSTS (CONTD….)
– Call-center automation: auto-dialing, scripting,
Automated Voice Recognition (AVR)

– Marketing automation: campaign management,

opportunity management, market segmentation,
lead generation

– Customer-service automation: Incident analysis

and escalation, problem resolution, warranty
management

– Operations management: customization, product

control, quality assurance
– Knowledge management: customer service,
resolving complaints
 PEOPLE AND PROCESS COSTS

• People Costs
– Recruitment, redeployment and training costs
• Implementation – statisticians, operations researchers
• Analysis – expertise in segmentation analysis,
migration modeling, lifetime value estimations,
customer churn analysis

Note: churn rate = No. of existing customers who have left

end of the given period
No. of existing customers at the beginning of the
respective period

• Process Costs
– Market segmentation process, selling process
and campaign management process
 WHAT SHOULD BE CONSIDERED
TO DETERMINE THE ROI OF CRM

• To compute the gain associated with a CRM

initiative requires that all other variables
impacting the profit equation are held constant

• Some CRM investments are necessarily costs

which enable the functionality of CRM (i.e.
investment in DB development & market
segmentation)

• Since it is hard to compute concrete CRM profits,

companies likely to count indirect future returns
on CRM implementation (i.e. lower acquisition
cost, higher average transaction margin etc.)
 WHAT SHOULD BE CONSIDERED
TO DETERMINE THE ROI OF CRM
(CONTD….)
• Companies in different industries face different
CRM problems and emphasize different returns
on CRM
(i.e. telecom industry – customer churn rate
financial industry – reduce transaction costs etc.)

• CRM is a business strategy – therefore strategic

ROI on CRM should focus on entire cycle of
developing, implementing & continuously
improving the CRM strategy
STAGES OF ROI ESTIMATION

Setting the target

Reaching the target

Building consensus and commitment

 SETTING THE TARGET

Determine ROI goal of CRM project based on

benchmarking, similar projects, external and
internal knowledge

Questions to raise

• Is the goal sufficient?

• Is this goal achievable?

 REACHING THE TARGET

Generate ideas of how to reach target through

internal bottom-up participation, external views,
consultants, benchmarks, etc

Questions to raise
•What factors have to change and by how much to
achieve the goal?
•Does it work from a technical perspective?
•Are the proposed benefits clear/ unclear?
•Will customers and/or staff accept these measures?
 BUILDING CONSENSUS AND
COMMITMENT

Have executives and line staff agree on proposed

ROI goals
and ensure commitment on both sides

Questions to raise

• Are we collectively prepared to sign them off?

 CRM IMPLEMENTATION
• Is a process of developing and executing a series
of small CRM projects

• Aimed at the business needs and value

propositions identified when the strategy is
defined

• Three categories
– Operational CRM – enables the company to meet the
technical and functional requirements of the CRM
strategy
– Analytical CRM – enable to obtain a good understanding
of the customers’ needs, expectations & behaviors
– Implementation projects – deploy the operational &
analytical CRM to improve marketing decision and
customer relationships
CRM IMPLEMENTATION (CONTD….)

Implementation Projects

Operational Projects Analytical Projects

 OPERATIONAL PROJECTS

Objectives:
– Construct infrastructure meeting technical and
functional requirements of CRM

– Examples: call center automation, developing

an online transaction website, setting up
customer DB/DW etc.

– Do not create revenue directly, but

successfully developed and completed provide
the necessary resources to provide value
added CRM projects

– Conceive with the objective to maximize

 COMPONENTS OF CRM
INFRASTRUCTURE
Component Description
1. Information Capability to display and
Delivery/Online list company's products
Catalogs and services online
2. Customer Database Capture, organize,
present, and analyze
customer-specific data
3. Personalization and Utilizing results of data
Content Management analysis to create an
individualized experience
for customers
Enhance/modify service
delivery vehicles to
 COMPONENTS OF CRM
INFRASTRUCTURE (CONTD….)

Deployment and use of tools

4. Sales force and services designed to
Automation
automate sales and
marketing lifecycle
For integration of a
5. Partner Channel company's service vehicles
Automation with those of its provider and
third-party partners
Use of technology and
6. Customer Services business processes to
successfully support a
 ANALYTICAL PROJECTS

Also Called Data Analytics

• Leverages resources created by operational projects

• Adds value by enabling firms to understand their

customers

• Helps determine customer strategy and

development of on-going CRM strategy

• Major activities:
• Customer data transformation- data
 ANALYTICAL CRM
• Capturing all relevant customer information

– Data integration and standardization

– Real-time updating of customer information

– Incorporation of external sources of information

– Evaluation of customer-related back office data

(i.e. billing & shipment etc.)
 ANALYTICAL CRM (CONTD….)

• Customer demographic analysis and customer

behavior modeling
– Define customer segments to form basis for
differential marketing decisions
– Analysis of customer transaction history:
recency,frequency & monitory value
– Analysis of customer service records: attitudes &
feedbacks
– Prediction of future purchase behavior

• Customer value assessment

DEPLOYING OPERATIONAL AND ANALYTICAL
OUTPUTS
• Goal is to increase revenue & profit by improving
relationships with customers

• Issues

– Resistance from employees

– Motivation and Training

– Availability of information
 RESISTANCE FROM EMPLOYEES
• People resist change; but there are two ways to
work with
– Think of resistance as an energy: channel the
energy to positive commitment & behavior
– Resistance is information that tells
management what is and is not working in the
change process

• Some tips:
• Think through the impact of change
• Hold regular communication meetings
• Manage the stages of confusion by providing lots of
information & clarity
 MOTIVATION AND TRAINING
• Motivate employees to utilize the new system and
analytical information

– Internal marketing campaign for information users

• Requires employees to change their work habits

– User training on how to utilize information

 AVAILABILITY OF INFORMATION
• Should have an information system that makes
the results of the analysis available to all relevant
employees to support real time decision making
 SUMMARY

• The key elements of CRM are touch points and

CRM applications that span sales, marketing and
service functions

• Once the elements of CRM are identified it is

important to calculate the ROI of CRM to see
whether investment in CRM is worthwhile

• Building a complete customer database

incorporating all the relevant customer information
from different departments and external sources is
very crucial for a successful analytical CRM project