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Chapter 11
- 1. Chapter 11 Building a Customer-Centric Organization – Customer Relationship Management McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved
- 2. Learning Outcomes 11.1 Compare operational and analytical customer relationship management 11.2 Identify the primary forces driving the explosive growth of customer relationship management 11.3 Define the relationship between decision making and analytical customer relationship management 11.4 Summarize the best practices for implementing a successful customer relationship management system 11-2
- 3. Customer Relationship Management (CRM) • CRM enables an organization to: – Provide better customer service – Make call centers more efficient – Cross sell products more effectively – Help sales staff close deals faster – Simplify marketing and sales processes – Discover new customers – Increase customer revenues 11-3
- 4. Recency, Frequency, and Monetary Value • Organizations can find their most valuable customers through “RFM” - Recency, Frequency, and Monetary value – How recently a customer purchased items (Recency) – How frequently a customer purchased items (Frequency) – How much a customer spends on each purchase (Monetary Value) 11-4
- 5. The Evolution of CRM • CRM reporting technology – help organizations identify their customers across other applications • CRM analysis technologies – help organization segment their customers into categories such as best and worst customers • CRM predicting technologies – help organizations make predictions regarding customer behavior such as which customers are at risk of leaving 11-5
- 6. The Evolution of CRM • Three phases in the evolution of CRM include reporting, analyzing, and predicting 11-6
- 7. The Evolution of CRM 11-7
- 8. The Ugly Side of CRM 11-8
- 9. Customer Relationship Management’s Explosive Growth CRM Business Drivers 11-9
- 10. Customer Relationship Management’s Explosive Growth Forecasts for CRM Spending (in billions) 11-10
- 11. Using Analytical CRM to Enhance Decisions • Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers • Analytical CRM – supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers 11-11
- 12. Using Analytical CRM to Enhance Decisions • Operational CRM and analytical CRM 11-12
- 13. Customer Relationship Management Success Factors • CRM success factors include: 1. Clearly communicate the CRM strategy 2. Define information needs and flows 3. Build an integrated view of the customer 4. Implement in iterations 5. Scalability for organizational growth 11-13
- 14. OPENING CASE STUDY QUESTIONS Second Life 1.Why is it important for any company to use CRM strategies to manage customer information? 2.How are CRM strategies in Second Life different from CRM strategies in the real world? 11-14
- 15. OPENING CASE STUDY QUESTIONS Second Life 3. If the virtual world is the first point of contact between a company and its customers, how might that transform the entire shopping experience? 4. How could companies use Second Life to connect with customers that would be difficult or too expensive in the real world? 11-15
- 16. CHAPTER ELEVEN CASE The Ritz-Carlton-Specializing in Customers • Ritz-Carlton is the only service company to have won the prestigious Malcolm Baldrige National Quality Award twice—in 1992 and 1999 • Companies worldwide strive to be “the Ritz- Carlton” of their industries • In 2000, the company launched the Ritz- Carlton Leadership Center, where anyone can study the brand’s cult of customer service for $2,000 11-16
- 17. Chapter Eleven Case Questions 1. What are the two different types of CRM and how has the Ritz-Carlton used them to become a world-class customer-service business? 2. Determine which of Ritz-Carlton’s six steps of customer service is the most important for its business 3. Rank Ritz-Carlton’s six steps of customer service in order of greatest to least importance in a CRM strategy for an online book-selling business such as Amazon.com 11-17
- 18. Chapter Eleven Case Questions 4. Describe three ways Ritz-Carlton can extend its customer reach by performing CRM functions over the Internet 5. The sixth step states to eschew technology— “We will not replace human service with machines.” Do you agree that customer service and satisfaction would decrease at Ritz- Carlton if it used technology such as automatic check-in kiosks? Why or why not? Do you think that Ritz-Carlton might find itself at a competitive disadvantage to hotels that are embracing technology to become more efficient and effective? Why or why not? 11-18
Notas do Editor
- CLASSROOM OPENER GREAT BUSINESS DECISIONS – Harley-Davidson Begins the Harley Owners Group (H.O.G.) to Encourage Customer Involvement One of the biggest assets for Milwaukee-based Harley-Davidson Motorcycle Company is its intensely loyal customers. After struggling against Japanese competition throughout the 1960s and 1970s, the company turned a corner in 1981 when a group of 13 senior Harley-Davidson executives purchased the company. Vaughn Beals, the leader, celebrated with a victory ride from the company’s factory in York, Pennsylvania, to its headquarters in Milwaukee. The new owners decided to begin the Harley Owners Group (H.O.G) to get customers more involved with the product. HOG worked. With HOG, the company was able to key into its greatest asset – the people who care about the Harley-Davidson company. HOG opened a dialog outside the company with its loyal customer base and inside the company with its workforce. In 1993, a little over 10 years after the start of HOG, the company celebrated its 90th anniversary with more than 100,000 HOG members converging on Milwaukee for a drive-through parade featuring 60,000 Harley-Davidson machines.
- 11.1 Compare operational and analytical customer relationship management Operational CRM supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers. Analytical CRM supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers. The primary difference between operational CRM and analytical CRM is the direct interaction between the organization and its customers. 11.2 Identify the primary forces driving the explosive growth of customer relationship management The primary forces driving the explosive growth of CRM include Automation/Productivity/Efficiency, Competitive advantage, Customer demands/requirements, Increase revenues, Decrease costs, Customer support, Inventory control, Accessibility 11.3 Define the relationship between decision making and analytical customer relationship management Analytical CRM solutions are designed to dig deep into a company’s historical customer information and expose patterns of behavior on which a company can capitalize. Analytical CRM is primarily used to enhance and support decision making and works by identifying patterns in customer information collected form the various operational CRM systems. 11.4 Summarize the best practices for implementing a successful customer relationship management system CRM success factors include clearly communicate the CRM strategy , define information needs and flows, build an integrated view of the customer, implement in iterations, scalability for organizational growth
- As the business world increasingly shifts from product-focus to customer-focus, most organizations recognize that treating existing customers well is the best source of profitable and sustainable revenue growth Ask your students why, in the age of e-business, an organization is challenged more than ever before to truly satisfy its customers
- Once a company knows this information, it can begin to strategize marketing campaigns, sales promotions, and other ways to increase business For example: If Ms. Smith buys only at the height of the season, then the company should send her a special offer during the “off-season” Ask your students if they have received any personalized promotions lately How did the company gather information on the student to be able to offer the personalized promotion?
- Reporting Help organizations identify their customers across applications Analyzing Help organizations segment their customers into categories such as best and worst customers Predicting Help organizations make predictions regarding customer behavior such as which customers are at risk of leaving
- Reporting Help organizations identify their customers across applications Analyzing Help organizations segment their customers into categories such as best and worst customers Predicting Help organizations make predictions regarding customer behavior such as which customers are at risk of leaving
- Ask your students to define additional examples of reporting, analyzing, and predicting questions CLASSROOM EXERCISE Implementing a CRM Strategy Organizations can find their most valuable customers through “RFM” - R ecency, F requency, and M onetary value How recently a customer purchased items (Recency) How frequently a customer purchased items (Frequency) How much a customer spends on each purchase (Monetary Value) Break your students into groups and ask them to form a CRM strategy for a new company that sells office supplies. Have your students present their strategy to the class. The strategy should address how to gain new customers and how to keep existing customers. For example, The company should create personal promotions for its best customers The company should target new customers in the surrounding area, especially business customers The company should try to buy a list of business customers in the area from a valid source The company should advertise in local trade papers, newspapers, radio stations, and restaurants The company should track the responses it receives from the various advertising sources
- Business 2.0 ranked “You—the customer” as number one in the top 50 people who matter most in business. It has long been said that the customer is always right, but for a long time companies never really meant it. Now, companies have no choice as the power of the customer grows exponentially as the Internet grows. You—or rather, the collaborative intelligence of tens of millions of people, the networked you— continually create and filter new forms of content, anointing the useful, the relevant, and the amusing and rejecting the rest. You do it on Web sites like Amazon, Flickr, and YouTube, via podcasts and SMS polling, and on millions of self-published blogs Business 2.0 ranked "You - the customer" as one of the 50 people who matter now for 2006. http://money.cnn.com/magazines/business2/peoplewhomatter/ These Web sites show the power people have in the consumer market today http://www.ihatedell.net/ http://www.donotbuydodge.ca/
- Brother International experienced skyrocketing growth in its sales of multifunction printers Along with skyrocketing sales growth came a tremendous increase in customer service calls When Brother failed to answer the phone fast enough, product returns started to increase Brother purchased, designed, developed, and deployed SAP’s CRM solution The 1.8 million calls dropped to 1.57 million – reducing call center staff from 180 agents to 160 agents The CRM system has also reduced call duration by an average of one minute, saving the company $600,000 per year CLASSROOM EXERCISE CRM AGAIN Break your students into groups and ask them to identify how each of the “CRM business drivers” in the figure is supported by a CRM system For example, how does CRM help an organization automate, increase productivity, and improve efficiency? Ans: The Brother example mentioned above is a perfect example of how a CRM system can do all three of these things for an organization The answers to these questions will vary and the goal of the activity is for students to understand the many different benefits an organization can gain through a CRM system
- Can you think of an industry or company that would not benefit from a CRM system? Every business can benefit from CRM! Business 2.0 recently rated the top 50 important people for 2006 The number 1 person was “You, The Consumer”, due to the information age, personalization, and the growing importance of the consumer
- Can you list a few examples of front-office systems? Customer service, sales, billing Can you list a few examples of back-office systems? Accounting, finance, human resources, data warehouses Ask your students which systems are more important to an organization – front-office or back-office Ans: Both, one cannot function without the other CLASSROOM EXERCISE Designing a Digital Dashboard for a CRM System Digital dashboards offer an effective and efficient way to view enterprisewide information at near real-time. According to Nucleus Research, there is a direct correlation between use of digital dashboards and a company’s return on investment (ROI), hence all executives should be using or pushing the development of digital dashboards to monitor and analyze organizational operations. Break your students into groups and ask them to develop a digital dashboard for a CRM system. Be sure your students have addressed all of the following in their digital dashboard: Customers Sales Marketing Customer service Order entry Billing Collections Credit limits Shipping Transportation
- Walk-through the Figure with your students Why would an organization have a separate system for each front-office system and each back-office system? Most organizations operate functional “silos”, and each department typically has its own systems A company might purchase an ERP and then all of the functional silos would be on one system, however, this doesn’t happen very often in the real world. Most organizations require anywhere from 10 to 100 to 1,000 different systems to run their business Finding one system that could meet all the needs of an entire organization from billing to sales is almost impossible For this reason, the CRM system is the integrator, gathering all of the customer information from the many different system to obtain a single view of the customer Personalization is one of the benefits of an analytical CRM system Personalization occurs when a Web site can know enough about a person’s likes and dislikes that it can fashion offers that are more likely to appeal to that person
- Clearly communicate the CRM strategy – ensuring that all departments and employees understand exactly what CRM means and how it will add value to the organization is critical to the success of the implementation Define information needs and flows – the organization must understand all of the different ways that information flows into and out of the organization to implement a successful CRM system. If the organization misses one of the information flows, such as a customer service Web site, then none of that information from that Web site will be integrated into the CRM system and the company will not have a complete view of its customers Build an integrated view of the customer – the CRM system must support the organization's strategies and goals Implement in iterations – avoid the big-bang approach and implement in small, manageable, pieces Scalability for organizational growth – ensure the system can support the organization's future growth CLASSROOM EXERCISE CRM Correlations Break your students into groups and have them compare and analyze the SCM industry success factors and the CRM industry success factors to determine any correlations Ans: Many of the success factors are the same. The sooner your students learn and understand these success factors, such as implementing in iterations or small pieces, the sooner they can apply them to any big system installation and help ensure IT system success
- 1. Why is it important for any company to use CRM strategies to manage customer information? CRM technologies can help organizations answer tough questions such as who are their best customers and which of their products are the most profitable. CRM solutions make organizational business processes more intelligent. This is achieved by understanding customer behavior and preferences, then realigning product and service offerings and related communications to make sure they are synchronized with customer needs and preferences. If you do not know and understand your customers then they might not be your customers for long! 2. How are CRM strategies in Second Life different from CRM strategies in the real world? Operating in a virtual world has many similarities and differences from operating in the real world. In a virtual world you will be operating with many different types of customers who look different from real customers. Here is an excellent article on How Second Life Changes Customer Service http://www.businessweek.com/globalbiz/content/apr2007/gb20070410_481047.htm?campaign_id=rss_tech
- 3. If the virtual world is the first point of contact between a company and its customers, how might that transform the entire shopping experience? Read the above article on How Second Life Changes Customer Service http://www.businessweek.com/globalbiz/content/apr2007/gb20070410_481047.htm?campaign_id=rss_tech 4. How could companies use Second Life to connect with customers that would be difficult or too expensive in the real world? With a virtual world you will not experience any of the problems we have in the real world with travel. A trip to Japan, China, or Australia can cost a company thousands and thousands of dollars in airfare, hotels, taxis, food, etc. Not to mention employee time. By visiting customers in Second Life you can have a one-on-one or group conversation with people from all over the globe without leaving your office. Second Life will help flatten the world and make everyone next door neighbors (just as Freidman discussed in The World is Flat).
- 1. What are the two different types of CRM and how has the Ritz-Carlton used them to become a world-class customer-service business? Operational CRM supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers. Analytical CRM supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers. The primary difference between operational CRM and analytical CRM is the direct interaction between the organization and its customers. The Ritz-Carlton is a leader in customer service. It uses CRM for everything from knowing a customer’s name to recognizing a customer’s birthday. 2. Determine which of Ritz-Carlton’s six steps of customer service is the most important for its business. They are all important! 3. Rank Ritz-Carlton’s six steps of customer service in order of greatest to least importance in a CRM strategy for an online book-selling business such as Amazon.com. Student answers to this question will vary. The important part is that they justify why the order in relation to Amazon’s business strategy. It is also important that the student understand that these strategies can be applied to any business that wants to succeed in CRM.
- 4. Describe three ways Ritz-Carlton can extend its customer reach by performing CRM functions over the Internet. There are numerous ways that the Ritz-Carlton can extend its reach including personalization through a Web site that offers activities in the area, information on conferences that customers might want to attend, and menu plans that customers can place orders before they arrive or during their stay. 5. The sixth step states to eschew technology— “We will not replace human service with machines.” Do you agree that customer service and satisfaction would decrease at Ritz-Carlton if it used technology such as automatic check-in kiosks? Why or why not? Do you think that Ritz-Carlton might find itself at a competitive disadvantage to hotels that are embracing technology to become more efficient and effective? Why or why not? Student answers to this question will vary. This question makes for an interesting classroom debate if you have the time.