1.

Introduction to CRM
• 1.1What is CRM? Why we need CRM?
Definition of CRM
• 1.2 Architecture of CRM
• 1.3 Technology considerations of CRM
• 1.4 Technology Components of CRM
• 1.5 Customer Life Cycle, Customer Lifetime
Value computation.
• 1.6 Implications of Globalization on Customer
Relationship Management
 1.1What is CRM
• Customer relationship management (CRM) is a
set of processes that enable you to manage your
interactions with your customers.

• CRM (customer relationship management) is all

aspects of interactions that a company has with
its customers, whether it is sales or service-
related.
• Customer Relationship Management(CRM) is a
business strategy to acquire and manage the
most valuable customer relationships.
 CRM Definition
• Customer relationship management (CRM): is a
term that refers to practices, strategies and
technologies that companies use to manage and
analyze customer interactions and data throughout
the customer lifecycle, with the goal of improving
business relationships with customers, assisting in
customer retention and driving sales growth.
 Why we need CRM
• Today’s dynamic market demand is long-term
relationships with customers.

• Just offering a service or a product a business

wont be at an advantage for too long.

• CRM is a shift from traditional marketing as it

focuses on the retention of customers in
addition to the acquisition of new customers .
• Then, what is creating waves in today’s CRM
industry? Is that small electronic ‘e’ changing
the trend?
• CRM enables organisations to gain
‘competitive advantage’ over competitors that
supply similar products or services .
• Market research can be taken to assess
customer needs and satisfaction
 10 Reasons Why You Need a CRM

• 1. Be organized
• 2. Track your tasks and events
• 3. Predict your future
• 4. Never lose your data
• 5. Competition helps business
• 6. History is important
• 7. Statuses are important
• 8. You need metrics
• 9. Emails are decentralized
• 10. Your memory is not perfect
• Risk Management
• Customer Intimacy
 CRM Architecture

• CRM can be broken down into three categories.

1) Operational
2) Analytical
3) Collaborative

Each plays an important role in Customer

relationship management, and a company that
wants to success must understand the importance
of using these three components successfully.
• 1) Operational CRM deals with the automation of certain
business processes.

• An example of business processes that are connected to

operational CRM are marketing and sales.

• When a connection is made to a customer, the information

related to this interaction will be automatically stored in a
database, and the company can pull up specific information
on that customer when it is needed.
• Operational CRM can further be broken down into three components.

• 1.1 Enterprise marketing automation.

• 1.2 Customer service automation
• 1.3 Sale force automation.

• 1.1 The Enterprise marketing automation will give the company information about
the business climate, and it will also provide them with crucial data on their
competitors, as will as trends within the industry and other important variables.
• Enterprise marketing automation deals with strategies a company can use to
strengthen their marketing tactics.

• 1.2 Customer service and support will automate specific processes that are
connected to service.
• An example of this could be item returns or customer complaints.
• 1.3 Sales force automation will be responsible for
automating some of the company’s sales tasks.
• An example of tasks that SFA would automate are
demographics, customer needs, and accounting
management.
• A number of corporations will use call centers to store data
on their customers.
• Once the customer makes a call, the customer service
representative can provide them with relevant information.
• Many companies will also automate processes such as
allowing customers to access their accounts.
3) Analytical CRM:
As the name suggests, Analytical CRM deals with analyzing
data that is collected by the company.
This data will be analyzed so that the company can enhance
its customer service capabilities.
By enhancing its customer service capability, a company will
build a stronger relationship with its customers.
There are a number of common ways that Analytical CRM is
used to achieve this. A number of companies will use the data
they’ve collected and analyzed to cross-sell products to their
customers, as well as retaining customers that may normally
switch to another company.
• Analytical CRM can also be used to provide
important information to customers within a
short period of time.
• In addition to building stronger relationships with
customers, Analytical CRM can be an important
tool for fraud prevention and detection.
• It can analyze the patterns of sales, inventory, and
profits in order to find any patterns that are not
consistent.
• Analytical CRM is also important when it
comes to both product development and risk
management.
• It is important to realize that Analytical CRM is
an ongoing process.
• The company may need to alter its strategies
or methods based on the information that is
analyzed through this process.
3) Collaborative CRM.

• Collaborative CRM is important because it places an

emphasis on the interactions that a company will make
with its customers.

• These interactions could be personal, or they could come

through mediums such as the telephone or the Internet.

• Collaborative CRM will give companies a powerful form of

communication that will utilize multiple technologies.
• It will also be responsible for providing
services over the Internet so that the costs of
the service can be reduced.
• When interactions are made with customers,
Collaborative CRM will allow the company to
provide them with useful information.
• At the highest level, CRM should be an
important part of all interactions that a
company makes with its customers.
• When this done, a company can become highly successful.
• The goal of CRM is to find out what customers need, and to
make sure those needs are filled.
• Once a company is making interactions with their
customers, they can collect and analyze information.
• This information can be used to strengthen interactions.
Customer relationship management can also be used to
stop problems before they occur.
• A number of companies strive to solve problems once they
occur, but CRM can be used to stop potential problems
before they occur.
• Preventing a problems is much easier than solving it.
• 1. Collaborative
• All communications between a business and its customers are
recorded, organised and processed in the collaborative section of
the software. This means communication by telephone, in person,
and by email.
• Customer relationships can be nurtured using data already provided
by them which demonstrates their shopping patterns and
behaviours, likes and dislikes, the times they are most likely to buy,
and how much they spend on average.
• Businesses use this information to provide enhanced customer
service, cross-sell products based on previous buying history, and
offer targeted deals to segments of their customer base. Customers
can be segmented by various criteria including geographical
location, age, gender, and profession, and can be targeted via
personalised emails or newsletters offering discounts and deals.
• 2. Operational
• This category within a CRM system deals with the automation of business processes including customer service,
data on competitors, industry trends, customer account information and management.
• Data is collected and stored within the database, ready for use in day-to-day operations such as management of
customer accounts, in addition to overall strategic planning. Detailed information about special customer needs,
destined for the sales force, is also stored here. Use of this type of data further enables a business to personalise
its approach to customers.
• 3. Analytical
• Analytical CRM might result in cross-selling certain items to particular customers based on their previous buying
habits, or imparting information relevant only to certain segments of a customer base.
• This part of the CRM architecture is also invaluable for identifying changes in the industry as a whole, so that
businesses remain agile and respond quickly to changing market demands. Data can be analysed in a number of
ways, and graphs, reports and diagrams produced to better illustrate the results.
• This is the basic architecture of a customer relationship management system, but the rise of social media and
mobile working has brought other, more defined systems to the market. Popular ‘add-ons’ to the basic structure of
a CRM solution might include cloud based systems that are accessible from any device.
• The key word in CRM is integration – integration of data so that it can be put to use in a way that benefits not only
the business, but also customers, suppliers and the workforce. Using mobile technology and social media was the
obvious next step in this process, and targets a whole new potential customer base.
 CRM Technology
• There are 3 types of CRM technologies – operational,
analytical and collaborative

• § Operational CRM is the customer facing applications of

CRM as SFA, EMA and front office suites.

• § The analytic segment included data marts or data

warehouses that are used by applications that apply
algorithms to separate the data and present it in a form
that is useful to the user.

• § The collaborative CRM reaches across customer touch

points, all the different communication means that a
customer might interact with, such as email, phone call,
fax, website pages etc. it includes application such as PRM
software.
OPERATIONAL CRM:

• Operational CRM is the “ERP-like” segment of CRM.

• Business Functions like customer service, order

management, invoice/billing, sales are all part of
operational CRM.

• One fact of operational CRM is the possibility of

integrating with the HR functions and financial
functions of ERP applications.

With this integration, end-to-end functionality from lead

management to order tracking can be implemented.
ANALYTICAL CRM:

• Analytical CRM is the capture, storage, extraction,

processing, interpretation and reporting of customer
data to a user.

• Companies have developed applications that can

capture the customer data from multiple sources and
store it in a data warehouse and then use algorithms to
interpret the data as needed.

• The value of the application is not just in the algorithm

and storage, but also in the ability to individually
personalize the response using the data.
COLLABORATIVE CRM:

• This is almost an overlay. It is the communication

center, the coordination network, that provides paths
to customer and his suppliers.

• This could mean a portal, a partner relationship

management application (PRM) or a customer
interaction center (CIC).

• This could be defined as any CRM function that

provides a point of interaction between the customer
and channel itself (web, email, voice applications,
snail mail or any channel strategies)
 Technology component of CRM
• CRM Technology Components:
• The CRM technology components are:
§ CRM engine
§ Front-office solutions
§ Enterprise Application Integrations (EAIs) for
CRM.
CRM Engine
1) The CRM Engine is the customer data repository or the data
mart or data warehouse where all data on the customer is
captured and stored.

2) This includes basic stuff such as name, address, phone

number and birth date.

3) This could also include more sophisticated information like

the number of time you access a particular website and what
you did on the pages you accessed.

4) CRM engine provides a single gathering point for all

individual customer information so that a unified customer
view can be created.

5) CRM engine provides personalization

§ FRONT-OFFICE SOLUTIONS:
• The front-office solutions are applications that run on top
of the customer data warehouse (CDW).

• The applications could be SFA, EMA or service and support

and customer interaction applications.
The hallmarks(stamp) of these front-office solutions are
a. Analytics
b. Reports
c. Instant access to information

• In the client server architecture (environment), they

provide employees with the information on what to do next
with a customer.

• The more specific applications provide an element of self-

service for the customer.
§ Enterprise Application Integrations (EAIs) :

• These sit between the CRM back office and front office.

• They also sit between the newly installed CRM system

and the been-around-forever enterprise legacy
systems.

• They also allow CRM-to-CRM communications. “They”

– are pieces of code and connectors and bridges that as
a body are called EAIs, formerly known as middleware.

• EAIs provide the messaging services and data mapping

services that allows one system to communicate with
other system.
 1.5 Customer Life Cycle, Customer
Lifetime Value computation.
1) CUSTOMER LIFECYCLE

• Customer lifecycle is defined as the process the customer has been undergoing to
be with you for many years.

• This includes the customer’s purchase history, perhaps how often one has taken
advantage of special offers directed at ones customer class.

• Customer lifecycle is the customer’s marketing value to you and how much
revenue that marketing value could be worth indirectly.

• With customer lifecycle and customer lifetime value (CLV). We can find out the
expected revenue generated from a single customer over a lifetime of that
customer’s relationship.

• Customer lifecycle helps in determining the value of the customer to a particular

company.
• customer life cycle : is a term used to describe
the progression of steps a customer goes
through when considering, purchasing, using,
and maintaining loyalty to a product or
service.
• The customer life cycle is the different stages
a customer goes through from considering a
product, service or solution to the actual buy
and, at least as important, the post-purchase
stages (where customer
retention, loyalty and advocacy come in).
Customer Life Cycle
• Reach: trying to get the attention of the people
we want to reach.
• Acquisition: attracting and bringing the reached
person into the influence sphere of our
organization.
• Conversion: when the people we reach or have a
more established relationship with, decide to buy
something from us.
• Retention: trying to keep the customers and
trying to sell them more (cross-selling, up-
selling).
• Loyalty: we would like the customer to become
more than a customer: a loyal partner and even a
‘brand advocate’.
Customer Lifetime Value computation
• The Customer Lifetime Value (CLV) is a prediction of the
total value (mostly expressed in net profit) generated by a
customer in the future across the entire customer life
cycle.

• CLV also comes from a CRM and database marketing

background.

• However, it’s used more often in customer-centric and

integrated marketing and in a customer experience context,
whereby the focus is on long-term customer relationships,
as is the case in the end-to-end customer experience.
• Using the customer life cycle and customer
lifetime value offers several benefits, among
others regarding budgeting, segmentation,
prioritization and different circumstances
where the “health” of the organization can be
forecasted – and improved.

• CLV is one of the domains where predictive

analytics play an increasing role.
• The customer lifetime value (CLV) is a
financial metric used to look at customer
profitability and, when properly calculated, a
potential impact on the different marketing
efforts across the customer’s life cycle. Just
like marketing ROI or Return on Marketing
Investment it is a financial value. It is advised
to use CLV in order to create value across the
customer life cycle.
• The value of the customer lifetime looks at the
investments we plan to make for the
customers ,and the return we expect from
them.
• CLV is the expected future cash flows from
the customer.
 Simple CLV Formula

• THE SIMPLE CUSTOMER LIFETIME VALUE FORMULA

• Annual profit contribution per customer X Average number of
years that they remain a customer - the initial cost of customer
acquisition
• Let’s assume the following:
• Profit generated by the customer each year = $1,000
• Number of years that they are a customer of the brand = 5 years
• Cost to acquire the customer = $2,000
• The customer lifetime value of this customer would be:
• $1,000 (annual profit from the customer) X
• 5 (number of years that they are a customer) less
• $2,000 (acquisition cost) = $3,000 = CLV.
• That is, $1,000 X 5 – $2,000 = $3,000.
• A MORE DETAILED EXAMPLE OF THE SIMPLE CLV FORMULA
• Let’s look at the same formula to calculate customer
lifetime value, the building a little bit more complexity
by changing the initial assumptions as follows:
• annual revenue per average customer is $2,000 per
annum
• product costs associated with the average customer’s
purchases is $500 per year
• the firm also spends $100 a year per customer to
provide customer service
• annual retention rate (loyalty rate) is 80%
• average costs to acquire a new customer are $1,000
• In this example, we have a similar challenge to the
example above, but the information is not presented as
neatly and we need to modify some of the above data
to feed into the customer lifetime value formula.
• Our first step here is to calculate the average
annual profit per customer – which is determined
by deducting the two sets of costs (product costs
and service costs) from the annual revenue. In
this case, it is $2000 – $500 – $100 = $1,400.
• We have acquisition costs provided for us
($1,000), but unfortunately we do not have the
average lifetime of the customer in years – we
only have the annual retention rate. This will be a
common situation in a workplace, as it is
relatively easy from a customer database to
calculate retention rates. So our challenge is now
to convert a retention rate to the average number
of years that the customer will deal with the firm.
• There is another article on converting retention
(loyalty) rates to an average customer lifetime period.
However, it is quite easy to calculate the customer
lifetime in years from a retention rate, as follows:
• 100% divided by (100% minus the annual retention
rate)
OR (1 / 1- annual retention rate)
• So in this example of an 80% loyalty rate, the average
customer lifetime would be:
• 100% / (100% -80%) =
100% / 20% = 5 years average customer lifetime period
• Now we have all the inputs into the simple customer
lifetime value formula, we can then calculate CLV as:
• CLV = $1,400 (profit) X 5 (years) – $1,000 (acquisition)
= $6,000
Q4) Calculate customer lifetime value with following assumptions:
•Annual revenue per average customer is Rs. 2000 per annum.
•Product costs associated with the average customer's purchases is Rs.500 per year.
•The firm also spends Rs. 250 a year per customer to provide customer service.
•Annual retention rate (loyalty rate) is 50%
• Average costs to acquire a new customer are $ 1000 [10]
 Implications of Globalization on Customer
Relationship Management

• The Impact of Globalization on Client Relationship Management

• Today’s world is highly connected. In a moment’s time, you can open your Internet browser, see
what is happening around the world, chat with a colleague or friend, and place an order for a
product or service sold in another country – all without leaving the comfort of your own desk.

• While globalization has certainly opened up new opportunities for businesses in terms of reaching
untapped markets, it has also further complicated the balancing act known as client relationship
management.

• In the past, businesses only had to compete with companies who sold or provided similar products
and services in their community. Today, however, they are having to compete with companies all
over the world, whether they be mere cities away or entire continents away.

• As new stores and suppliers emerge, companies are having to develop new strategies for winning
new clients and retaining existing ones. While no one can deny that globalization has had a positive
impact on the consumer, we must acknowledge the challenges globalization presents to modern-
day businesses, particularly in the area of client retention. (i.e client retention is difficult)
• Client Retension:
• In order to improve client retention, you have to change the way
you approach client relationship management. Simply adopting
new and creative marketing strategies will not do the trick,
especially when there is someone else out there who can probably
do the same thing – only bigger and better.
• You can offer your existing clients discounts and incentives to
encourage them to remain loyal customers, but if your client
relationship management processes are not effective, even the best
client loyalty offers will fall flat.
• How you manage your clients through every stage of the process
can say a lot about your company and your values. If you respond to
queries in a timely manner and take the time to talk to the client
personally, you are saying that your clients are valuable. If you rush
through the sales process, forget important details about their
order or history, or fail to establish personal (not automated)
contact with your clients, you are not communicating value. In
these instances, the clients will most likely leave your company for
another company that will appreciate their business.
CRM Software: The Key to Customer Retention Concerns
• client relationship management (CRM) software is key.

• By implementing effective CRM solutions, you can begin to start communicating value to your
customers the moment you connect with them.

• Designed to help companies manage marketing, sales, and all other client interactions in a timely
and efficient manner, CRM software can bridge the distance between you and your customers and
help you maintain a competitive advantage in the global marketplace.

• Sage CRM

• Our small and dedicated team specializes in helping small-to-medium size Canadian businesses and
non-profits select and adapt Enterprise Resource Planning (ERP), Customer Relationship
Management (CRM), Human Resource Management (HRMS) and IT services. With IWI’s 15 years in
business and 100 plus years of combined experience, IWI has helped hundreds of manufacturing,
distribution, and financial service companies gain efficiency, grow, and lower their operating costs.

• With the unique combination of industry knowledge and diverse technology expertise, IWI provides
cost-effective solutions to help clients gain a competitive edge. As a Sage business partner, servicing
the Greater Toronto Area, we support evaluation and implementation of operations and finance
systems to optimize technology, ensuring high return on investment with a quick and painless
transition to new software.
• Competition
• Globalization leads to increased competition. This competition can be
related to product and service cost and price, target market, technological
adaptation, quick response, quick production by companies etc. When a
company produces with less cost and sells cheaper, it is able to increase its
market share.
• Customers have a large multitude of choices in the market and this affects
their behaviors: they want to acquire goods and services quickly and in a
more efficient way than before. They also expect high quality and low
prices. All these expectations need a response from the company,
otherwise sales of company will decrease and they will lose profit and
market share. A company must always be ready for price, product and
service and customer preferences because all of these are global market
requirements.
•
•
• Exchange of Technology
• One of the most striking manifestations of globalization is the use of new technologies by
entrepreneurial and internationally oriented firms to exploit new business opportunities. Internet
and e-commerce procedures hold particular potential for SMEs seeking to broaden their
involvement into new international markets.
• Technology is also one of the main tools of competition and the quality of goods and services. On
the other hand it necessitates quite a lot of cost for the company. The company has to use the
latest technology for increasing their sales and product quality.
• Globalization has increased the speed of technology transfer and technological improvement.
Customer expectations are directing markets. Mostly companies in capital intensive markets are at
risk and that is why they need quick/rapid adapting concerning the customer/market expectations.
These companies have to have efficient technology management and efficient R&D management.
• Knowledge/Information transfer
• Information is a most expensive and valuable production factor in the current environment.
Information can be easily transferred and exchanged from one country to another. If a company
have a chance to use knowledge and information then it means that it can adapt to this global
changing. This issue is similar with the technology transfer issue in global markets. The rapid
changing of the market requires also quick transfer of knowledge and efficient using of that
knowledge and information.
• If you want to find out about other effects and aspects of globalization, read “Corporate Social
Responsibility: Part II” by David Crowther and Güler Aras.
•
• Globalization and ubiquitous connectivity are forcing
companies to re-evaluate how to deliver value to
customers.
• Large and small companies now deliver similar
products at low cost with an abundance of options for
customers mainly due to globalization.
• To be successful in this competitive environment,
companies have to deliver both quality products and
unique and dynamic experiences for the customer
depending on his/her needs.
• 1: OPPORTUNITIES
• The world being a global village has allowed organizations to have more business opportunities. It has allowed
organizations to access new markets. They now have new business opportunities as they are not only dealing with
their immediate business environment but the whole world.
• Apart from that, it has also presented new customers challenges. You should know that your internet customers
are “ghosts”. You may not have their contact details or other reliable information. That makes it easier for them to
move to another organization which is just a mouse-click away.
• #2: INCREASED ROLES
• CRM has increased the role of CRM in managing global marketing, sales, services and products. In a customer-
centric or ebusiness environment, the role of the front office has changed. Your services department is no longer
rendering services but they are building relationship with customers. They are to help the organization to
understand their customers and do business from customers’ perspective.
• #3: SIMILAR MARKETING STRATEGY
• Nowadays, due to the advent of the internet, organizations are now adopting the same strategy in the way they
are doing businesses online. If I ask the question for example, who started sharing of internet airtime or borrow
airtime credit among the telecommunication giants in Nigeria? You may not be able to answer the question
because almost all of them started it at the same time. That is one thing that is common to globalized marketing
environment.

• #4: NO BARRIER
• In a global village, cultural differences are no longer barriers. Organizations that operates in a customer-centric
environment operates with the mindset that they are having the whole world as their customers. They operate
beyond regional boundaries. Here, we are saying that your environment does not have anything to do with those
that are going to purchase your product.
END
 Information Technology and CRM
• Technology plays important role in CRM .
• It involve the use of databases, data mining and one-to-one
marketing.

• It can be used to keep a record of customers names and

contact details in addition to their history of buying products
or using services .

• This information can be used to target customers in a

personalised way and offer them services to meet their
specific needs .

• This personalised communication provides value for the

customer and increases customers loyalty to the provider .
 Information Technology and CRM: Examples

Here are examples of how technology can be used to create

personalised services to increase loyalty in customers:

• Phone calls, emails, mobile phone text messages, or WAP services

(2):
Having access to customers contact details and their service or
purchase preferences through databases etc can enable organisations
to alert customers to new, similar or alternative services or products

- Illustration: When tickets are purchased online via Lastminute.com,

the website retains the customers details and their purchase history.
The website regularly send emails to previous customers to inform
them of similar upcoming events or special discounts.
- This helps to ensure that customers will continue to purchase tickets
from Lastminute.com in the future.
 Information Technology and CRM: Examples
• Cookies
“A “cookie” is a parcel of text sent by a server to a web browser
and then sent back unchanged by the browser each time it
accesses that server. HTTP cookies are used for authenticating,
tracking, and maintaining specific information about users,
such as site preferences and the contents of their electronic
shopping carts” .

- Illustration: The online store, Amazon, uses “cookies” to

provide a personalised service for its customers. Amazon
requires customers to register with the service when they
purchase items. When registered customers log in to Amazon
at a later time, they are ‘greeted’ with a welcome message
which uses their name (for e.g. “Hello John”).
- In addition, their previous purchases are highlighted and a list
of similar items that the customer may wish to purchase are
also highlighted.
 Information Technology and CRM: Examples
• Loyalty cards
“the primary role of a retailer loyalty card is to gather data about customers. This in
turn leads to customer comprehension and cost insights (e.g. customer retention
rates at different spending levels, response rates to offers, new customer conversion
rates, and where money is being wasted on circulars), followed by appropriate
marketing action and follow-up analysis” .

- Illustration: The supermarket chain, Tescos, offers loyalty cards to its customers.
When customers use the loyalty cards during pay transactions for goods, details of
the purchases are stored in a database which enables Tescos to keep track of all the
purchases that their customers make. At regular intervals, Tescos sends its customers
money saving coupons by post for the products that the customers have bought in
the past. The aim of this is to encourage customers to continually return to Tescos to
do their shopping

• CRM software- “Front office” solutions

- “Many call centres use CRM software to store all of their customer's details. When a
customer calls, the system can be used to retrieve and store information relevant to
the customer. By serving the customer quickly and efficiently, and also keeping all
information on a customer in one place, a company aims to make cost savings, and
also encourage new customers” .
 Face-to-face CRM
• CRM can also be carried out in face-to-face interactions
without the use of technology
• Staff members often remember the names and favourite
services/products of regular customers and use this
information to create a personalised service for them.
• For example, in a hospital library you will know the name of
nurses that come in often and probably remember the area
that they work in.
• However, face-to-face CRM could prove less useful when
organisations have a large number of customers as it would be
more difficult to remember details about each of them.