Customer Relationship Management (CRM)
Customer experience management
Updated: July 01, 2010
Definition: Customer relationship management (CRM) is a component of electronic commerce and is a broad term that covers concepts used by companies to manage their relationships with customers, including the capture, storage and analysis of customer information.
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CRM is not just a technology, but rather a holistic approach to an organization’s philosophy in dealing with its customers. This includes policies and processes, front-of-house customer service, employee training, marketing, systems and information management. Hence, it is important that any CRM implementation considers not only technology, but furthermore the broader organizational requirements.
Objectives
The objectives of CRM strategy must consider a company’s specific situation and its customers' needs and expectations.
There are three aspects of CRM which can each be implemented in isolation from one another:
1. Operational CRM
Automation or support of customer processes that include a company’s sales or service representative.
Operational CRM provides support to "front office" business processes, including sales, marketing and service. Each interaction with a customer is generally added to a customer's contact history, and staff can retrieve information on customers from the database as necessary.
One of the main benefits of this contact history is that customers can interact with different people or different contact “channels” in a company over time without having to repeat the history of their interaction each time.
2. Collaborative CRM
Direct communication with customers that does not include a company’s sales or service representative (“self service”)
Collaborative CRM covers the direct interaction with customers. This can include a variety of channels, such as internet, email, automated phone/ Interactive Voice Response (IVR). It can generally be equated with “self service”.
The objectives of Collaborative CRM can be broad, including cost reduction and service improvements. Collaborative CRM seems to be the new paradigm to succeed the leading Efficient Consumer Response and Category Management concept in the industry/trade relationship. Many organizations are searching for new ways to achieve and retain a competitive advantage via customer intimacy. Collaborative CRM gives a 360 degree feedback of the customer, industry and trade are pooling their respective customer data in the different sales and communication channels and therefore generate better customer insight.
3. Analytical CRM
Analysis of customer data for a broad range of purposes
Analytical CRM analyzes customer data for a variety of purposes including....
 design and execution of targeted marketing campaigns to optimize marketing effectiveness
design and execution of specific customer campaigns, including customer acquisition, cross-selling, up-selling, retention
analysis of customer behavior to aid product and service decision making (eg pricing, new product development, etc)
management decisions, e.g. financial forecasting and customer profitability analysis
risk assessment and fraud detection, in particular for credit card transactions Analytical CRM generally makes heavy use of Predictive analytics.
Sales force management systems
Sales force management systems are information systems used in marketing and management that automate some sales and sales force management functions. They are frequently combined with a marketing information system, in which case they are often called customer relationship management systems.
Sales Force Automation Systems (SFA), typically a part of a company’s customer relationship management system, is a system that automatically records all the stages in a sales process. SFA includes a contact management system which tracks all contact that has been made with a given customer, the purpose of the contact, and any follow up that might be required. This ensures that sales efforts won’t be duplicated eliminating the risk of irritating customers. SFA also includes a sales lead tracking system, which lists potential customers through paid phone lists, or customers of related products. Other elements of a SFA system can include, sales forecasting, order management and product knowledge. More developed SFA systems have features where customers can actually model the product to meet their required needs through online product building systems. This is becoming more and more popular in the automobile industry, where patrons can customize various features such as color and interior features such as leather vs. upholstered seats.
An integral part of any SFA system is company wide integration among different departments. If SFA systems aren’t adopted and properly integrated to all departments, there might be a lack of communication which could result in different departments contacting the same customer for the same purpose. In order to mitigate this risk, SFA must be fully integrated in all departments that deal with customer service management
Advantages to sales people
Proponents claim that sales force automation systems can improve the productivity of sales personnel. Here are some examples:
Rather than write-out sales orders, reports, activity reports, and/or call sheets, sales people can fill-in prepared e-forms. This saves time.
Rather than printing out reports and taking them to the sales manager, sales people can use the company intranet to transmit the information. This saves time.
Rather than waiting for paper based product inventory data, sales prospect lists, and sales support information, they will have access to the information when they need it. This could be useful in the field when answering prospects’ questions and objections.
The additional tools could help improve sales staff morale if they reduce the amount of record keeping and/or increase the rate of closing. This could contribute to a virtuous spiral of beneficial and cumulative effects.
These sales force systems can be used as an effective and efficient training device. They provide sales staff with product information and sales technique training without them having to waste time at seminars.
Better communication and co-operation between sales personnel facilitates successful team selling.
More and better qualified sales leads could be automatically generated by the software.
This technology increases the sales person’s ratio of selling time to non-selling time. Non-selling time includes activities like report writing, travel time, internal meetings, training, and seminars.
Advantages to the sales manager
Sales force automation systems can also affect sales management. Here are some examples:
The sales manager, rather than gathering all the call sheets from various sales people and tabulating the results, will have the results automatically presented in easy to understand tables, charts, or graphs. This saves time for the manager.
Activity reports, information requests, orders booked, and other sales information will be sent to the sales manager more frequently, allowing him/her to respond more directly with advice, product in-stock verifications, and price discount authorizations. This gives management more hands-on control of the sales process if they wish to use it.
The sales manager can configure the system so as to automatically analyze the information using sophisticated statistical techniques, and present the results in a user-friendly way. This gives the sales manager information that is more useful in :
Providing current and useful sales support materials to their sales staff
Providing marketing research data : demographic, psychographic, behavioral, product acceptance, product problems, detecting trends
Providing market research data : industry dynamics, new competitors, new products from competitors, new promotional campaigns from competitors, macro-environmental scanning, detecting trends
Co-ordinate with other parts of the firm, particularly marketing, production, and finance
Identifying your most profitable customers, and your problem customers
Tracking the productivity of their sales force by combining a number of performance measures such as : revenue per sales person, revenue per territory, margin by , margin by customer segment, margin by customer, number of calls per day, time spent per contact, revenue per call, cost per call, entertainment cost per call, ratio of orders to calls, revenue as a percentage of sales quota, number of new customers per period, number of lost customers per period, cost of customer acquisition as a percentage of expected lifetime value of customer, percentage of goods returned, number of customer complaints, and number of overdue accounts
Advantages to the marketing manager
It is also claimed to be useful for the marketing manager. It gives the marketing manager information that is useful in:
Understanding the economic structure of your industry
Identifying segments within your market
Identifying your target market
Identifying your best customers
Doing marketing research to develop profiles (demographic, psychographic, and behavioral) of your core customers
Understanding your competitors and their products
Developing new products
Establishing environmental scanning mechanisms to detect opportunities and threats
Understanding your company's strengths and weaknesses
Auditing your customers' experience of your brand in full
Developing marketing strategies for each of your products using the marketing mix variables of price, product, distribution, and promotion
Coordinating the sales function with other parts of the promotional mix (such as advertising, sales promotion, public relations, and publicity)
Creating a sustainable competitive advantage
Understanding where you want your brands to be in the future, and providing an empirical basis for writing marketing plans on a regular basis to help you get there
Providing input into feedback systems to help you monitor and adjust the process
Strategic advantages
Sales force automation systems can also create competitive advantage. Here are some examples:
As mentioned above, productivity will increase. Sales staff will use their time more efficiently and more effectively. The sales manager will also become more efficient and more effective.(see above) This increased productivity can create a competitive advantage in three ways: it can reduce costs, it can increase sales revenue, and it can increase market share.
Field sales staff will send their information more frequently. Typically information will be sent to management after every sales call (rather than once a week). This provides management with current information, information that they will be able to use while it is still valuable. Management response time will be greatly reduced. The company will become more alert and more agile.
These systems could increase customer satisfaction if they are used with wisdom. If the information obtained and analyzed with the system is used to create a product that matches or exceeds customer expectations, and the sales staff use the system to service customers more expertly and diligently, then customers should be satisfied with the company. This will provide a competitive advantage because customer satisfaction leads to increased customer loyalty, reduced customer acquisition costs, reduced price elasticity of demand, and increased profit margins.
Disadvantages
Detractors claim that sales force management systems are:
difficult to work with
require additional work inputting data
dehumanize a process that should be personal
require continuous maintenance, information updating, and system upgrading
costly
difficult to integrate with other management information systems
Encouraging use
For all the reasons stated above many organizations have found it difficult to persuade sales people to enter data into the system. For this reason many have questioned the value of the investment. Recent developments have embedded sales process systems that give something back to the seller within the CRM screens. Because these systems help the sales person plan and structure their selling in the most effective way they give a reason to use the CRM
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