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

Customer Service
Marketing Functions
Sales Functions
CRM • Campaign Management
Management • Helpdesk
• Segmentation
Applications Functions • Personalization and • Customer Care
Customization
 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?
– What are recurrent costs?
 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

– E-commerce functions: extranets, EDI, procurement

 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 profitability,

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

Deployment and use of tools and

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

– Focus resources on most valuable customer relationships
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
• Listen & encourage people to talk
• Allow people to make change and to grieve
 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