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Customer Relationship Management
Introduction
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Customer Relationship
Management?
• A customer-centric business strategy with the
key goals of maximizing profitability, revenue,
and customer satisfaction.
• A process concerning the relationship between
an organisation and its customers.
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Traditional vs. Modern
• The traditional approach to CRM is based
on sales.
• All communication and dealings go via the
sales team and buyer even where both
organisations contain many departments
(distribution, sales, quality, finance, etc).
• traditional customer service is something
'done to' the customer
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Traditional vs. Modern
• The modern approach to CRM is based on
satisfying all of the needs - people,
systems, processes, etc - across the
customer's organisation
• modern Customer Relationship
Management is 'done with' the customer
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Why manage customers?
• Customers are the usual source of income
for an organisation.
• Customers are also an exceptional source
of information - information which is vital to
enable a business to succeed; i.e. finding
out what the customer needs!
• The cost of retaining existing customers
through CRM is a tiny fraction of the cost
of acquiring new customers.
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Business Benefits of CRM
• Customer satisfaction and good CRM will
– Increase customer loyalty
Which will
– maximise Average Revenue Per User
(customer) - ARPU
And
– Increase customer referrals
• The above will increase
– Revenue
– Profit
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Where does IT come in?
• Where there is Information – IT can help.
• Data mining technologies enable
organisations to:
– find out about customers in terms of
• purchasing habits
• preferences
– profile individuals and groups to market more
effectively and thereby increase sales
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IT helps to build relationships
by:
• Using data mining to find out about
customers
• Using database technologies to store and
make customer data widely accessible
throughout the organisation
• Using IT to facilitate communication and
to record details of communication
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Loyalty
• Research has found that a 1% increase in
customer loyalty generates a 25% increase in
profits.
• An example of a business building loyalty is
Tesco PLC who in 1995 launched a loyalty card
called ‘Tesco Clubcard’
• Within the first six months the Clubcard had
increased the businesses six monthly profits by
16% and market share increased by 2.1%
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Customer Retention
• Customer churn or defection rate is the process
in which customers move from one business to
their competitors
• A loss of a customer means loss of revenue
• The churn rate within competitive markets such
as the mobile telephone sector can be especially
high - anywhere between 20 and 30%
• Customer retention depends on reducing
customer churn.
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Identifying customers who are
likely to churn
• Use data-mining (neural modelling) to look into
behaviour of past customers who churned eg
– frequency and number of purchases
– Spending
– Range of products purchased
• Use this data to predict loss of valuable
customers well in advance
• Produce an effective retention strategy to
prevent this
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Preventing a churn
• Possible strategies to prevent a customer
from churning might be
– Special offers
– Discounts
– Enhanced credit limits
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Personalisation
• An example of personalisation could include
Amazon.com who, once a user has registered
their details and / or made their first purchase
steers its repeat book buyers to other types of
products according to interests they’ve shown in
past purchases
• Through the use of technology the Web site
recognises a user when they return and greets
them accordingly
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Cross Selling/Upselling
• Cross-selling and up-selling are techniques
used to entice customers to buy all of
their purchases from one business as
oppose to them going to multiple suppliers
• Data Mining can be used to
– explore linkages between products
– Profile or segment customers - find out what
type of customer buys which product.
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Types of Customer Relationship
Management
• Operational CRM
• Analytical CRM
• Collaborative CRM
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