DEFINITION OF CRM

CRM was made possible by advances in Information Technology, namely the ability
to capture, store, interpret and distribute customer-related data costeffectively so that organizations could enact their relationship management
strategies.
CRM practice has conventionally relied on its exploitation of structured data about
customers, prospects and partners housed in company-owned databases
CRM is an information industry term for methodologies, software, and usually
Internet capabilities that help an enterprise manage customer relationships in an
organized way.
CRM is the process of managing all aspects of interaction a company has with its
customers, including prospecting, sales, and service.
CRM applications attempt to provide insight so as to improve the
company/customer relationship by combining all these views of customer
interaction into one picture.
By enabling organizations to manage and coordinate customer interactions
across multiple channels, departments, lines of business and geographies,
CRM helps organizations maximize the value of every customer interaction
and drive superior corporate performance.
CRM is an integrated information system that is used to plan, schedule and control
the pre-sales and post-sales activities in an organization. The primary goal of
CRM is to improve long-term growth and profitability through a better understanding
of customer behaviour.
CRM is a business strategy that maximizes profitability, revenue and customer
satisfaction by organizing around customer segments, fostering behaviour that
satisfies customers and implementing customer-centric processes.
CRM is facilitated by enterprise systems
There are three different models on how to integrate Cloud for Customer
with SAP ERP / CRM, as follows:

Cloud + CRM: Leveraging the existing investments and business processes

in SAP CRM Sales, Service and Marketing, while giving the frontline sellers an
easy-to-use, modern cloud sales application.

TWO-TIER CRM: Leveraging the SAP CRM deployments at existing locations

and deploy SAP Cloud for Customers at subsidiaries, recently acquired
divisions, etc.

Cloud + ERP: Leverage SAP Cloud for Customers for all of CRM selling needs
and tap into pre-built integration to SAP ERP for pricing, quotes, orders,
master customer data and more

Type of CRM

Dominant characteristic

Strategic

Strategic CRM is a core customer-centric business

strategy that aims at winning and keeping profitable
customers.

Operational

Operational CRM focuses on the automation of

customer-facing processes such as selling, marketing
and customer service.

Analytical

Analytical CRM focuses on the intelligent mining of

customer-related data for strategic or tactical
purposes.
TYPE OF CRM

Strategic CRM is focused upon the development of a customer-centric

business culture dedicated to winning and keeping customers by creating and
delivering value better than competitors.
o Resources to be allocated where they would best enhance customer
value, reward systems to promote employee behaviours that enhance
customer satisfaction and retention, and customer information to be
collected, shared and applied across the business.
Operational CRM
o Marketing automation
Marketing automation (MA) applies technology to marketing processes.
o Sales-force automation
Sales force automation (SFA) was the original form of operational CRM.
SFA systems are now widely adopted in business-to-business
environments and are seen as a competitive imperative that offers
competitive parity.
o Service automation
Service automation involves the application of technology to customer
service operations. Service automation helps companies to manage
their service operations, whether delivered through a call centre,
contact centre, field service, the Web or face to face, with high levels
of efficiency, reliability and effectiveness.
Analytical CRM
o concerned with capturing, storing, extracting, integrating, processing,
interpreting, distributing, using and reporting customer-related data to
enhance both customer and company value.
o Built on foundation of customer-related information
Beneficiaries of analytical CRM
Customer
Analytical CRM can deliver timely & customized solutions so as to
address the customers problems, thereby enhancing customer
satisfaction.
Company

Analytical CRM offers the prospect of powerful cross-selling and up-selling

programs, more effective customer retention and customer acquisition programs

Misunderstanding about CRM

Misunderstanding 1: CRM is database marketing
CRM has a wider scope than DB marketing- more strategic and focused.
Misunderstanding 2: CRM is a marketing process
CRM is not just customer marketing. There are holistic considerations such as
service, segmentation, salesforce management, etc.
Misunderstanding 3: CRM is an IT issue
Enterprise systems underpin customer engagement, however there are customer,
employee and business process issues that drive CRM.
Misunderstanding 4: CRM is about loyalty schemes
Loyalty schemes only form part of an overall CRM strategy.
Misunderstanding 5: CRM can be implemented by any company
Different CRM approaches are used across industry sectors.

Customer are empowered by digital

1) 99.76% of online ads are ignored.
2) 57% of buying process completed before 1st interaction with sales
3) 60% customers abandoned a purchase due to poor service
experience.

IDIC Model of CRM

focus on the customer as a central element
identify who your customers are and build a deep understanding of them
differentiate your customers to identify which customers have most value now
and which offer most for the future
interact with customers to ensure that you understand customer expectations
and their relationships with other suppliers or brands
customize the offer and communications to ensure that the expectations of
customers are met.
Paynes five-process model
The strategy development process,
The value creation process,

The multichannel integration process,

The performance assessment process and
The information management process.
Define RELATIONSHIP

A relationship is composed of a series of interactive episodes

between parties over a period of time.

Episodes are time bound (they have a beginning and an end) and
are nameable.

Episode interactions consists of both action and response interplay.

A relationship can be a social construct.

A relationship exists if people believe that a relationship exists and
they act accordingly.

Relationships can be uni-lateral or reciprocal

Either one, or both, parties may believe they are in a relationship.

Reduced customer churn creates

A larger customer base
Longer average customer tenure
Reduced marketing costs to replace defected customers
Better understanding of customer requirements
More cross-selling opportunities

Benefits from managing customer retention

o Reduced marketing costs
Fewer dollars need to be spent trying to replace lost customers
o

Better customer insight

Suppliers are able to develop a better understanding of customer

requirements and expectations.
Customers also come to understand what a supplier can do for
them.

Behavioural loyalty tends to be mediated by

customer patronage and buying
Attitudinal loyalty based on customer beliefs,
intentions and feelings

Customer Relation can be a SILO

There is often a lack of integration between channels. Sales and Customer
Service Agents had little visibility into the Web channel, and Web sites
sometimes had little correlation with what was available

----------------------------------------------------------------------------------------------------------------------------------------Implement CRM
Buttle defines five major phases of a CRM implementation, and the processes and tools that can be used
within those phases to ensure that CRM projects deliver what is expected of them.
Depending on the scope of the project some of these phases, processes and tools may not be required.
The key phases are:
1. develop the CRM strategy
2. build the CRM project foundations
3. specify needs and select partner
4. implement the project
5. evaluate performance.

CRM Strategy can be defined sa a high level plan of action that aligns
people processes and technology to achieve customer related goals
CRM projects can span several years and cost many million dollars.
1 Develop CRM strategy: Most businesses do not operate in all potential business
units of their customer startegy cube.
The goal of analysis Market Offers is get a clear insight into the strengths and
weaknesses of the company customer strategy. Data can be collected from
executives, manager, customer contact people and importantly customers. The
analysis will serve as the start point for thiking about what you want to achieve
from crm implementation.
Situation analysis (CHANNELS)
The analysis examines the three dimensions of the customer strategy cube to
answer questions such as

Which channel do we use to distribute to our cusomters

Which channels are most effective
What level of penetration do we have
Which channel are becoming more /less important

Commence CRM Education

With a CRM implementation, it is important that all stakeholders have a clear understanding of what
CRM denotes. Your IT people might think that it is a technology project. Your marketing people might
think it is something to do with a new approach to market segmentation. Your sales people might think it
is about a new centralized database for customer records. How is education carried out? CRM vendors
publish case histories which can give you a good idea of what is possible.
Develop CRM vision
A CRM vision is a high-level statement of how CRM will change your business as it relates to customers.
Set Priorities
CRM projects vary in their scope and can touch on one or more customer-facing parts of your business
sales, marketing or service.
Clear priorities for action, normally focused on cost reduction or enhanced customer experience, might
come out of the situation analysis. Priority might be given to projects which produce quick wins, fast
returns or are low-cost. Short term Vs long term.
Establish goals and objectives
Goals and objectives emerge from the visioning and prioritizing processes. goal to refer to a qualitative
outcome and objective to refer to a measurable outcome. For example, a CRM goal might be to acquire
new customers. A related CRM objective could be to generate 200 additional leads by the fourth quarter
of the next financial year. Gartner Inc. research shows that CRM goals generally cluster into three broad
areas: enhancing customer satisfaction or loyalty, growing revenues or reducing costs. Among the most
frequently cited goals are increased customer satisfaction and retention.
Identify contingencies, resources and people changes
The step is to begin the process of identifying the people, process and technology requirements for the
goals and objectives to be achieved. Youll return to these matters repeatedly as the project unfolds, but at
this stage you need a general idea of the changes that are necessary so that you can begin to identify costs
and construct a business case.

The business case is built around the cost and benefits of the crm implementation
CRM Implementation can generate revenues in a number of ways

Conversion of more leads from suspect to prospect to opportunity

More cross selling and up selling
More accurate product pricing
Higher levels of customer satisfaction and retention
High level of word of mouth influence

Cost can be reduces by Improved lead generation and qualification. Lower cost of
customer acquisition. More efficient account management. Less waste in marketing
campaign, reduce customer service costs

Many costs and benefits are measurable but there are also some important
strategic benefits that are much harder to value for example, development of a
customer centric way of doing business, better customer experience.
Immediate benefits : --> More Sales Leads , More revenues from cross selling and
up selling, better margins, lower cost of sales, increase retention and
recommendation, lower cost of customer acquisition
Latent Benefits --> Unspecified new products and services arising from enhanced
insight. Strong customer relationship. Increased customer satisfaction delivering
higher loyalty, willingness to pay and reduced cost to serve.

PHASE2: Build CRM Foundations

CRM projects are designed and implemented by people. Governance structures need to be put in place to
ensure that project roles and responsibilities are properly defined and allocated.
The program team is composed of major stakeholders [ They have the responsibility
of implementing the project successfully]
CRM Projects will have CRM consultant working with the steering committee.
System implementer is also shown as an important resource to ensure the system is
properly implemented. System integrator will need to program the interface in the
event of incompatibility between 2 systems (call center and web operator)

Kotter 8 Step Process.

Run the change process concurrently and continuously, Change is not static
but on going
Form a large volunteer army from up down and across the organization to
serve as the change engine and drive change effort.
Function as flexible and agile network in conjunction with a traditional
hierarchy.
Empower action by removing organizational barriers to change.
Operate as if strategy is a dynamic force by constantly seeking opportunities,
identifying initiatives to capitalize on them and completing them quickly and
efficiently. Produce sort term wins.
Dont let up but keep driving and promoting the vision
Make change stick by reshaping organizational culture

Organizational culture: A pattern of shared values and belief that help individual
understand organizational functioning and thus provide them with norms for
behavior in the organization.
Adhocracy organisational cultures and CRM implementations are most suited.
Adhocracy cultures are: highly flexible,

entrepreneurial,

externally-oriented,

creative & risk-takers.

Truly agile organizations, paradoxically, learn to be both stable (resilient, reliable,

and efficient) and dynamic (fast, nimble, and adaptive). To master this paradox,
companies must design structures, governance arrangements, and processes with a
relatively unchanging set of core elementsa fixed backbone. At the same time,
they must also create looser, more dynamic elements that can be adapted quickly
to new challenges and opportunities.

Intellectual buy-in is where people know what has to be changed and understand
the justification for the change. New technologies are adopted more quickly when
users believe that the system will be easy to use.
Emotional buy-in is where there is genuine heartfelt enthusiasm, even
excitement, about the change.
Champions are emotionally and rationally committed.
Weak links are neither emotionally nor rationally committed.
Bystanders understand the changes being introduced, but feel no emotional buyin to the change.
Loose cannons are fired up with enthusiasm, but really dont understand what
they have to do to contribute to the change

Identify project management needs

CRM implementation can place considerable demands on project management
skills. A project plan sets out the tasks to be performed, orders to executed, the
time each will take.
Identify critical success factors
Critical success factors are the must haves that underpin project success
Develop a risk management plan
Common causes of CRM failure :
1)
2)
3)
4)

management that has little customer understanding or involvement;

rewards and incentives that are tied to old, non-customer objectives;
organizational culture that is not customer-focused;
limited or no input from the customers; thinking that technology is the
solution;
5) poor-quality customer data and information;
Risk mitigation strategies are your responses to these risks.
1) Management could work in the front line serving customers
2) Listen to incall center for at least one hour per week
3) Mystery shop ur own and competitor organizations

Phase 3: Needs specification and partner selection

1st task is to identify business process that need attention, make them more
effective or efficient or flagging them as candidates for automation. A business
process is a set of activities performed by people and technology in order to achieve
a desired outcome. Business processes are how thing get done by the firm.

HOSTED or On-Premise CRM ?

Write Request for proposal The standard against which vendors proposal are
evaluated. It summarizes your thinking about the CRM Programmed and invites
interested parties to respond in a structured way.
Call for Proposal Invite partner, between 3 and 6 potential vendors are invited
Revised Technology needs Proposals from technology vendors will sometimes
identify opportunities for improved CRM performance that you may not have
considered. Perhaps there is some functionality or an issue that you had not
considered.
Assessment and Partner assessment Evaluation and selection of final partner.
Done by evaluation team

PHASE 4 : PROJECT IMPLEMENTATION

Redefine Project Plan The original project plan is clarify without consideration of
the needs and availability of partners.
Identify technology customisation needs Due to wide range of crm package,
normally customization if needed. Lead developer, database developer and front
end developer can be assigned to this duty
Prototype design, test, modify and roll-out The output of this customization
process will be a prototype that can be tested by users on a duplicated set or
dummy set of customer related data

Phase 5 : Evaluate Performance Timely n budget. Business outcome, project

objectives and the definition of success, business case revisited.

Customer portfolio: is the collection of mutually exclusive customer groups that

comprise a business entire customer base. Not all customer can be managed in the
same way unless it makes sense. Customer have different needs, preferences,
expectations, revenue, and cost profiles. Customer can be clustered
Customer portfolio management (CPM) aims to optimize business performance
whether that means sales growth, enhanced customer profitability, or something

else across the entire customer base. It does this by offering differentiated value
propositions to different segments of customers.
Market segmentation is the process of dividing up a market into more-orless homogenous subsets for which it is possible to create different value
propositions.
Market segmentation in many companies is highly intuitive. The marketing team will
develop profiles of customer groups based upon their insight and experience.
This is then used to guide the development of marketing strategies across
the segments.

Identify relevant segmentation variables

Business markets can be segmented in a number of ways. The basic starting point
for most B2B segmentation is the international standard industrial classification
which is a peroperty of the UN Statistics Divisions.

MARKET SEGMENTATION PROCESS

1) Identify the business you are in (Competitors, geography and products)
2) Identify analyse relevant segmentation variables (Luxury products ? , Analyse
the market using Consumer market ?)
3) Assess the value of the market segments
4) Select target to serve

5) Account value: Most businesses have a scheme for classifying their

customers according to their value. The majority of these schemes associate
value with some measure of sales revenue or volume. This is not an adequate
measure of value, because it takes no account of the costs to win and keep
the customer. We address this issue later in the chapter.
6) Share of wallet (SOW): Share of category spend gives an indication of the
future potential that exists within the account. A supplier with only a 15 per
cent share of a customer companys spending on some raw material has, on
the face of it, considerable potential.
7) Propensity-to-switch: Propensity-to-switch may be high or low. It is
possible to measure propensity-to-switch by assessing satisfaction with the
current supplier, and by computing switching costs. Dissatisfaction alone
does not indicate a high propensity to switch.
8) In principle, if the segment is attractive and the company and network
competencies indicate a good fit, the opportunity may be worth pursuing.
However, because many companies find that they have several opportunities,
some kind of scoring process must be developed and applied to identify the
more valuable opportunities. The matrix can be used for this purpose. To
begin with, companies need to identify attributes that indicate the
attractiveness of a market segment

The second discipline that can be used for CPM is sales forecasting. One major issue
commonly facing companies that conduct CPM is that the data available for
clustering customers takes a historical or, at best, present day view. The data
identifies those customers who have been, or presently are, important for sales,
profit or other strategic reasons. There are a number of sales forecasting techniques
that can be applied, providing useful information for CPM. These techniques, which
fall into three major groups, are appropriate for different circumstances.
qualitative methods:
customer surveys
sales team estimates
time-series methods:
moving average
exponential smoothing
time-series decomposition
causal methods:
leading indicators
regression models.
SALE FORCASTING
Qualitative methods:

 customer surveys Will be able to provide 2 years forecast

sales team estimates can be useful when sale ppl have built close relationships
with their customers.

There are a number of sales forecasting techniques that can be applied, providing
useful information for CPM. These techniques, which fall into three major groups,
are appropriate for different circumstances.
Time-series methods:
moving average
exponential smoothing
time-series decomposition
Time-series approaches take historical data and extrapolate them forward in a linear
or curvilinear trend. This approach makes sense when there are historical sales
data, and the assumption can be safely made that the future will reflect the past.
The moving average method is the simplest of these. This takes sales in a number
of previous periods and averages them. The averaging process reduces or
eliminates random variation.

Causal methods

Leading indicators

A leading indicator is some contemporary activity or event that indicates that

another activity or event will happen in the future.
For example:
housing starts are good predictors of future sales of kitchen appliances/furniture
when a credit card customer calls a contact centre to ask about the current rate of
interest, this is a strong indicator that the customer will switch in the future

Regression models

Mathematical modelling tools that to estimate future demand

For example:
demand for cars might use data on population size, average disposable income, car
price and average fuel price

CPM ACTIVITY BASED COSTING

The third discipline that is useful for CPM is activity-based costing. Many companies,
particularly those in a B2B context, can trace revenues to customers. In a B2C
environment, it is usually only possible to trace revenues to identifiable customers if
the company operates a billing system requiring customer details, or a membership
scheme such as a customer club, store-card or a loyalty programme.
In a B2B context, revenues can be tracked in the sales and accounts databases.
Costs are an entirely different matter. Because the goal of CPM is to cluster
customers according to their strategic value, it is desirable to be able to identify
which customers are, or will be, profitable. Clearly, if a company is to understand
customer profitability, it has to be able to trace costs, as well as revenues, to
customers. Costs do vary from customer to customer. Some customers are very
costly to acquire and serve, others are not. There can be considerable variance
across the customer base within several categories of cost:
customer acquisition costs : some customers require considerable sales effort
to move them from prospect to first-time customer status: more sales calls, visits to
reference customer sites, free samples, engineering advice, guarantees that
switching costs will be met by the vendor.
terms of trade: price discounts, advertising and promotion support, slotting
allowances (cash paid to retailers for shelf space), extended invoice due dates.
customer service costs: handling queries, claims and complaints, demands on
salespeople and contact centre, small order sizes, high order frequency, just-in-time
delivery, part load shipments, breaking bulk for delivery to multiple sites.
working capital costs: carrying inventory for the customer, cost of credit.

Life-Time Value Estimation LTV is measured by computing the present day value
of all net margins (gross margins less cost-to-serve) earned from a relationship with
a customer, segment or cohort. LTV estimates provide important insights that guide
companies in their customer management strategies. Clearly, companies want to
protect and ring-fence their relationships with customers, segments or cohorts that
will generate significant amounts of profit.
DATA MINING The fifth discipline that can be used for CPM is data mining. It has
particular value when you are trying to find patterns or relationships in large
volumes of data, as found in B2C contexts such as retailing, banking and home
shopping.

DATA MINING TECHNIQUES

Clustering
Used to find naturally occurring groupings within a dataset
Each customer is allocated to just one group
Attributes are similar
Identifies homogenous customers

 The groups collectively are very different from each other

Allows predictive modelling
Which customer segment likely to buy a given product?
Which customers are likely to default on payment?
Which customers are most likely to defect (churn)?
Decision trees --- are so called because the graphical model output has the
appearance of a branch structure. Decision trees work by analysing a dataset to find
the independent variable that, when used to split the population, results in nodes
that are most different from each other with respect to the variable you are tying to
predict. Figure contains a set of data about five customers and their credit risk
profile.
Clustering techniques are used to find naturally occurring groupings within a
dataset. As applied to customer data, these techniques generally function as
follows:
1. Each customer is allocated to just one group. The customer possesses attributes
that are more closely associated with that group than any other group.
2. Each group is relatively homogenous.
3. The groups collectively are very different from each other.
In other words, clustering techniques generally try to maximize both within-group
homogeneity and between-group heterogeneity. Data miners can build predictive
models by examining patterns and relationships within historic data. Predictive
models can be generated to identify:

CUSTOMER PORTFOLIO MANAGEMENT

Fiocca Model: Attractiveness of customer business is strongly influenced by
conditions in the customer served market
Sharpiro model : Based on cost to serve customer. Some customers are more costly
to win and serve and if this is accompanied by a relatively low received price , the
customer may be unprofitable

Customer can be:

1)
2)
3)
4)
5)
6)

High Future value: More profitable

High volume: Kep unit costs low
Benchmark: Other customers are influenced by these customers
Inspirations : Bring improvement to suppliers
Door openers : Improve access to new markets