Customer Relationship
Management
University of Economics & Finance
Chapter 4:
Implementing the
CRM Strategy
Unit 4
1
Overview
Topics discussed:
▪ Elements of a CRM System
▪ Customer Interphase / Touch Points
▪ CRM Applications
▪ Return on Investment (ROI) of CRM
▪ CRM Costs
▪ Why is ROI of CRM difficult to
measure?
▪ Stages of ROI Estimation
▪ CRM Implementation
▪ Case Study: Capital One
Elements of a CRM System
Customer Mobile-Based
Web based
Interface/ Sales Person
Contacts:
• Text Message
Contacts • Direct mail • Telesales
Contacts • Email • Coupons • Kiosks
Touchpoints • Mobile Sites
• Applications
• Websites
Marketing Functions
CRM Sales
Customer Service
Functions
• Campaign Management
Applications Management • Segmentation • Helpdesk
Functions • Personalization and • Customer Care
Customization
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Customer Interface / Touch Points
• Touch Points
• Exact moment the firm can simultaneously gather and disseminate
information
• Interfaces used for customers to interact with the company
• CRM System
• Needs to provide consistent view of all customers regardless of the
touch point being used
• Should provide current information about customer’s needs to
maximize opportunity for sale
CRM Applications
• Sales and Sales Management Function
• Contact and quote management, account management, pipeline analysis
• Interaction of sales force with prospect, turning prospect into customer,
maintaining mutually profitable relationship
• Marketing function
• Multi-channel campaign management, opportunity management, web-based
encyclopedia, market segmentation, and lead generations /enhancement
/tracking
• Personalization
• Content management, relationship marketing, and one-to-one marketing
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CRM Applications (2)
• 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
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Return on Investment (ROI) of CRM
• Formula:
𝑷𝒓𝒐𝒇𝒊𝒕𝒔
𝑹𝑶𝑰 = × 𝟏𝟎𝟎%
𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕
• Is the investment in CRM elements worth it?
• The practice of developing and implementing a CRM system should always measure
the expected monetary benefits to see if the investment is likely to payoff
• Key questions when ROI is applied in the context of CRM
• What should be counted as an investment in CRM?
• What should be counted as a return on that investment?
• What is the time period over which ROI should be measured?
• How do we arrive at the ROI estimate?
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ROI of CRM (2)
Questions on what can be counted as investment in CRM?
• 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?
ROI of CRM (3)
• Key Decision Questions to Compute ROI for CRM Activities
Consulting Services Procurement & Maintenance
• Can the system be easily configured
• What will be the consulting cost for and maintained by internal IT staff or is
the project continuous external assistance
required?
Business Processes
Staffing & Training
• To what degree is business process • What is the cost of training the
re-design necessary? company’s staff to use the CRM
system?
Information Technology
Implementation
• What new IT software and • What is the timeframe for
hardware must be purchased to implementation and what will happen
accommodate the new system? to the current system processes during
that time?
Vendor Management Costing
• How much customization is • What are recurrent costs in the
required and at what cost? implementation?
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CRM Costs
• IT Costs
• People Costs
• Process Costs
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IT Costs
• One-fifth to one-third of total cost
• Investment in IT infrastructure, database development and software
• Software categories required for CRM Investment
• Sales Force Automation
• Sales Management Automation
• Call-Center Automation
• Customer Service Automation
• Marketing Automation
• Operations Management
• E-commerce Functions
• Knowledge Management
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People and Process Costs
• People costs
• Recruitment, redeployment and training costs
• Process costs
• Market segmentation process, selling process and campaign
management process
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Why is ROI of CRM difficult to measure?
• Computing the gain associated with a CRM initiative requires that
all other variables impacting profit are held constant
• Some CRM investments are necessary costs which enable the
functionality of CRM.
• Although measuring the return on CRM investment becomes
easier with small scale projects, without appropriate controls in
place, the management can-not be sure that the cause of the
change is the CRM investment
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Stages of ROI Estimation
Setting the target
Reaching the target
Building consensus and commitment
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Setting the target
• Content
• 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?
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Reaching the Target
• Content
• 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?
• Does it work from a technical perspective?
• Are the proposed benefits clear?
• Will customers and/or staff accept these measures?
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Building Consensus and Commitment
• Content
• 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?
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CRM Implementation
Implementation Projects
Operational Projects Analytical Projects
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1. Operational Projects
• Objectives:
• Construct infrastructure meeting technical and functional
requirements of CRM
• Don’t directly generate revenue, but provide resources to perform
value-added CRM Projections
• Maximize profitability
• Reduce support costs
• Increase sales and customer loyalty
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Components of CRM Infrastructure
Information
Delivery/ Online
Catalogs
Customer Database
Personalization and Content
Management
Sales force Automation
Partner Channel Automation
Customer Services
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2. 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
• Customer knowledge discovery - data analysis, prediction based on
results
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Analytical Projects (2)
• 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
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Analytical Projects (3)
• Customer demographic analysis and customer behavior
modeling
• Define customer segments to form basis for differential marketing
decisions
• Analysis of customer transaction history
• Analysis of customer service records
• Prediction of future purchase behavior
• Customer Value Assessment
• Focus resources on most valuable customer relationships
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3. Deploying Operational and Analytical
Outputs
• Issues with executing CRM strategies
• Resistance from employees
• Motivation and Training
• Availability of information
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Improving Profitability by Investing in CRM
Economic
Medical Legal
Social Issues Marketing
Challenges
Ignored Technical
Managerial
Political
Resources
Required
Original Process
Pre-CRM
Challenges
Addressed
New Process
Time
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CRM at Work
Enhancing Customer Interface using technology
• La Croissanterie introduced loyalty program
which allowed customers to record purchases through
three channels – loyalty card, a mobile phone, or a transit pass
• Customer data collection was possible using
Near Field Communication (NFC) technology
CRM Implementation
• In 2008 economic slump, Giant Eagle, a national
grocery chain, realized the importance of CRM program
• Giant Eagle increased use of its customer loyalty program through fuel
discounts, which managed to cross-over fuel discounts with a food discount
loyalty card and increasing cross buy between food and fuel.
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Case: CRM Practices at Capital One
• Segmentation Strategy
• Targeting all types of risk profiles, offering different prices and products
• Customer database distinguishes high-risk ‘revolvers’ and low-risk ‘transactors’
• Retention Strategy
• Help retain customers when introductory rate expires or risk of ‘dormancy’
exists
• Operations aligned with customer requirements
• Personalized and flexible handling of customers
• Calculation of profitability on an individual basis to improve product offer to
customer
• IT infrastructure
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CRM Practices at Capital One (2)
• Collections
• Payment assistance, recoveries and fraud
• Sales
• Sales system (SALSA) enables targeting cross-sell offers to specific customers
• Uses accumulated data on customers to suggest how to react to specific
customer requests
• Co-operation between Marketing and Analysis (M&A) and operations
• Partnership to review risk perspective of present and future strategies enabled
through IT
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CRM Practices at Capital One (3)
• Information Technology
• Interaction with company in terms of prospect pool management
and solicitation, account acquisition, account servicing and call-
center technologies, core systems
• Human Resources
• Managing associate selection and development of company culture
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Test and Learn Strategy
Account Acquisition Account Management
Test Stragety
Executed Developed
Strategies Accounts Account
Tests
Performance
Developed Required Developed
Assessed
Results Results
Analyzed Analyzed
Drives New Product Development
Fig. 4.5 Capital One’s Test and Learn Strategy
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Systems Infrastructure
Different Systems Working together
Service View
Screen of front-end accolades
Vectus Bass Salsa
Data from customer Data from customer Solicitation and
applications applications marketing data
MIS
Data Warehouse
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Systems Infrastructure
Use of Data
Online decision
Customer Data Segmentation
of associate
• Statistic consumer • Expected NPV • Rank order of what
data (identity) • For every to offer/ cross-sell
• Demographics customer • Which products
• Transaction data • For all sales • Value per product
• Products sold activities • Products already
• Campaigns • Monthly offered (=bared
received recalculated from sale)
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Growth of Capital One’s Revenues
(Worldwide Operations)
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Summary
• Illustrates successful implementation of a CRM strategy
• Business model founded on the crucial premise that each customer
requires a different product and service from a credit card provider
• Adopted an Information Based Strategy (IBS), to collect information on
customers
• “Test & Learn” tests customer related activity in a controlled condition
before it is introduced in the market
• CRM is viewed as a key strategic process in Capital One; different depts.
work in an integrated fashion towards understanding and satisfying
customers
• 2001 - Capital One was named 3rd ‘Best Place to Work in the UK’ by The
Sunday Times. Capital One named in Forbes 400 list -Best Big
Companies in America
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Minicases : Challenges in Implementing CRM
• CRM in FMCG Industry:
• To define, conceptualize, and implement a suitable CRM approach
• B2B CRM Implementation:
• To create transparency across customer relationships
• To design cooperation processes across the three companies
• To develop sales support tools
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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
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