Agenda

„ Key Drivers of CRM

Customer Relationship „ Definitions of CRM
„ CRM Objectives
Management (CRM) „ Key CRM Marketing Initiatives
„ Types of CRM
„ Overview of CRM Market
„ CRM Success Stories
Jai-Yeol Son
„ Risks in CRM projects

MIS Division
Sauder School of Business, UBC
Vancouver, BC CANADA

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“Go back to the good old days” Drivers of CRM:

(Merchants in earlier time knew their customers very well.)
Relationship Marketing
One to one marketing
(= Relationship marketing)
- Customer- focused
- many campaigns
- Discrete reach
- Based on detailed customer behavior
and profiles
- Long
- term

Mass marketing Target marketing

- Product focused - Group focused
- Anonymous - General category profiles
- Few campaigns - More campaigns
- Wide reach - Smaller reach
- Little or no research - Based on segment analysis of
- Short- term demographics
- Short- term

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Source: J. Dyche, CRM Handbook, 2002.

Drivers of CRM: IT Drivers of CRM: IT

“IT as a critical enabler”
IT Enables firms to collect, maintain, and analyze a very large
amount of data related to customers.

customer Sales Web-enabled

database customer
customer
database interactions
Sales
Integrated
Marketing Marketing customer
database
customer Internet technology Post sale:
Finance & database
Accounting customer service &
customer Finance & technical support
database Post sale:
Accounting
customer service &
technical support
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Acknowledgement: Carson Woo and Ofer Arazy Acknowledgement: Carson Woo and Ofer Arazy

1
 What is CRM? Some Acronyms
Means different things to different people!
Some Definitions

A strategy used to learn more about customers' needs and behaviors in order
to develop stronger relationships with them. (CIO.com)

A business strategy to select and manage customers to optimize long-term

value. CRM requires a customer-centric business philosophy and culture to
support effective marketing, sales, and service processes. (crmguru.com)
„ eCRM: Web
- based CRM
„ PRM (“Partner relationship management”)
The infrastructure that enables the delineation of and increase in customer
value, and the correct means by which to motivate valuable customers to
remain loyal—indeed, to buy again. (CRM Handbook)
„ SRM (“Supplier relationship management”)
„ ERM (“Employee relationship management”) or,
Any application or initiative designed to help an organization optimize
interactions with customers, suppliers, or prospects via one or more touch
points – such as a call center, salesperson, distributor, store, branch office,
(“Enterprise resource management”)
Web, or e-mail – for the purpose of acquiring, retaining, or cross-selling
customers. (The Data Warehousing Institute)

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Objectives of CRM Some Key CRM Marketing Initiatives

„ Cross
- selling and up - selling
„ Acquire new customers
„ Retain the right existing customers „ Cross-selling: act of selling a product or service to a

„ Grow the relationships with existing customer as a result of another purchase

customers „ “Would you like fries with that?”
„ Up-selling: act of motivating customers to trade up to
More specifically, CRM allows firms to more profitable products
„ provide better customer service „ “You wanna supersize that”
„ make call centers more efficient
„ cross sell products more effectively
„ Customer retention
„ help sales staff close deals faster „ Churn analysis: identify who are likely to “churn” and
„ simplify marketing and sales processes understand why they leave and join
„ discover new customers
„ increase customer revenues Sources:
- An Executive Guide to CRM, Patricia Seybold Group.
- CRM Executive Summary, CIO Magazine.
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Some Key CRM Marketing Initiatives Some Key CRM Marketing Initiatives

„ Behavior prediction „ Channel Optimization

„ Propensity-to-buy analysis: Understanding which products or „ “offer the right message to the right customer at the
services a particular customer is likely to purchase
right time”
„ Next sequential purchase: Predicting what product or service a
customer is likely to buy next „ Personalization
„ Project affinity analysis: Understanding which products will be „ Critical to interactions through the Web
purchased with other products
„ Capability to customize customer communication
„ Price elasticity modeling and dynamic pricing: Determining the
optimal price for a given product, often for a given customer or based on knowledge preferences and behaviors at
customer segment. the time of interaction
„ Customer profitability and value modeling
„ Value modeling allows firms to score a customer based on her
relative worth to the firm over time.
„ Customer's lifetime value (LTV), potential value

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2
 Types of CRM Applications I

„ Operational CRM
„ Also known as “front-office” CRM
„ Involves the areas where direct customer contact occurs.
„ Two types of touch points: inbound and outbound contact

„ Analytical CRM
„ Also known as “back-office” or “strategic” CRM
„ Involves “understanding” the customer activities that
occurred in the front office.

Source: Goodhue et al. Realizing Business Benefits

through CRM: Hitting the Right Target in the Right Way.
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Types of CRM Applications II Customer-facing Applications

„ Customer- facing applications
„ Support “customer facing” groups – sales, field
service and call center reps - who actually interact
with customers, field service representatives
„ Customer- touching applications
„ Customers are able to interact directly with the
“customer-touching” applications rather than through
company representatives.
„ Customer- centric intelligent applications
„ Analytic applications intended to analyze the results
of operational processing, and use the results to
improve operational CRM operations
„ Contact center applications
„ Also known as “call center” and “customer interaction center”
„ Telephony applications that support marketing, sales, and service
„ Extend the functionality of the conventional call center to e-mail,
fax, and Web
„ Sales force automation (SFA)
„ Automates the tasks performed by sales people in the field, such
as data collection and its transmission
„ “SFA goes mobile.”
„ Field service automation
„ Support the customer service efforts of field service reps and
service managers

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Customer-centric Intelligent
Customer-touching Applications
Applications
„ Campaign management „ Data warehousing and reporting
„ Data warehousing
„ Automates marketing campaign activities such as
„ “Making the data available”
online ad planning and analysis „ A special type of data repository that allows centralized analysis,
security, and control over the data
„ Allows firms to deliver to more markets more (cost)
„ Reports present information stored in the data warehouse.
efficiently, more effectively, and more frequently
„ Analytic applications using advanced analysis techniques
„ EC applications such as data mining
„ Allow customers to shop for products by themselves „ Also known as business intelligence applications
via the Web „ Data mining
„ “Obtaining knowledge from the data”
„ Self-service customer support through customer „ Involves sifting through an immense amount of data to discover
touch points, usually the Web previously unknown patterns
„ Critical to support various types of sophisticated CRM-based
marketing initiatives

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3
 CRM Software Market Forecast

Gartner Dataquest's forecast for 2003 is $2.36 billion, down from $2.81 billion in 2002. For 2004,
$2.39 billion is projected, up 1 percent from 2003. The 2007 forecast is $2.94 billion, with a five-
year compound annual growth rate (CAGR) of 0.9 percent

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Source: Patricia Seybold Group. An Executive's Guide to CRM 19 Jai Son, UBC Source: Gartner Dataquest (October 2003) 20

Major CRM Players Major CRM Players

Applications Representative Vendors

Marketing Automation Teradata, Unica, Xchange, Revenio,
MarketFirst, Aprimo Marketing
CRM Suites Siebel, SAP, PeopleSoft, Oracle, E.piphany,
Onyx, Pivotal, Microsoft
Analytics Quadstone, SAS, Marketswitch

Customer Channel Kana, eGain, Divine, Trilogy, Blue Martini,

Management BroadVision, Primus, ServiceWare, Banter

Sales force automation Dendrite, UpShop, MarketSoft, Click

Commerce, ChannelWave, Allegis, ViryaNet,
FieldCentrix
Based on Forrester Research report, July 2002.

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Adapted from Forrester Research Report, July 2002 22

Major CRM Players CRM Software Market Share

Services Representative Vendors
Contact center Convergys, TeleTech, APAC, SYKES
outsourcing
Consulting Accenture, Monday, Deloitte, IBM Global
Services, KPMG, Akibia, eLoyalty
Marketing services Experian, Acxiom, Group 1 Software

Infrastructure Representative Vendors

Data integration DWL, BEA, Siperian, Acta

Contact center Avaya, Alcatel, Witness Systems, Aspect,

infrastructure Blue Pumpkin
Based on Forrester Research report, July 2002. Source: Forrester Research report, July 2002.

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4
 Success Story:
Harrah’s Entertainment
„ Harrah’s Entertainment, which operate 26 casinos in 13
states with more than $4 billion in revenue in 2002,
posted 16 straight quarters of same-store sales growth.
„ Rather than pursuing “If you build it, they will come”
philosophy, they focused on creating CRM-based
marketing programs that allowed them to compete without
continuing to pour additional capital into their properties.
„ Database-based marketing and decision-science-based
analytical tools enabled them to implement finely tuned
marketing and service-delivery strategies that keep
customers coming back.
Success Story:
Harrah’s Entertainment
„ Infrastructure
„ Realized that they needed consolidate all far-flung and isolated IT systems
throughout the country
„ WINet (Winner’s information network), which enabled them to develop the industry’s
first national customer database, was up and running from 1997.
„ Applications
„ Data Warehouse Query Tools software from Cognos
„ Predictive modeling software from SAS Institute
„ Marketing initiatives and business strategies
„ Total rewards program was rolled out 1997
„ Lifetime value of each customer was obtained and used in various marketing
programs.
„ Employee performance evaluation (e.g., bonus plan) was linked to customer
satisfaction, rather than the revenue level of a location.
Æ Same-store sales grew 14% in1998, 2 to 3 times the growth of its competitors
Sources:
“Diamonds in the Data Mine” by Gary Loveman. Harvard Business Review. May 01, 2003.
“Jackpot” CIO Magazine, Feb 1, 2001.available at http://www.cio.com/archive/020101/harrah.html.

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Wanna More Success Stories? “Getting CRM Right”

„ Banking and financial industry
„ “The Little Banks that Could,” CIO Magazine, Jun 2002.
Available at http://www.cio.com/archive/060102/banks.html.
(Hilton, Continental, Hertz, Wyndham)
„ “CRM’s Best Practices: Egg’s Cutting-Edge Play” (Egg: UK
Bank)
„ Travel industry
„ “Best Practice in Travel CRM,” Forrester Report, December
2003. (Hilton, Continental, Hertz, Wyndham)
„ Retailing industry (Drug Store)
„ “CRM Best Practices: CVS Loyalty Card Marketing,” Forrester
Report, June 2003. (CVS: US-based drug store)
“Garter report predicts that 60% of managers will view their
CRM implementation as failures.”
(“People Problems” Information Week, July 2001.).
“No more than 35% of managers whose companies
implemented CRM indicated that their expectations had
been met. Only 20% of the US retail banks that
implemented CRM have raised their profitability as a result.”
(“How to Rescue CRM” The McKinsey Quarterly, 2002.)

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Obstacles in CRM Efforts

Why CRM Fails?
Top 3 Reasons Recommendations
Have a data quality strategy. Devote
1. “Data ignored”: Did not one-half of the total timeline of the CRM
prepare data properly project to data elements.

2. “Politics Rule”: Worried more Formulate CRM strategies at the

about individual CRM needs enterprise level. Appoint a senior
and less about enterprise-wise manager to be responsible for cross-
CRM requirements departmental CRM.

Establish cross-discipline teams early in

3. The IS Organization and
Business Users Can't Work
Together
Source: Gartner report, August 2001.
the process, requiring the IS
organization and business users to
work together. Ensure that both sides
sign off on all steps of the CRM
process.

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5
 CRM Projects: Enablers and Inhibitors CRM Projects: Enablers and Inhibitors

May 2002 May 2002

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Selected References
„ Dyche, J. The CRM Handbook. Addison Wesley, 2002.
„ Patricia Seybold Group. An Executive’s Guide to CRM. <Available at
http://www.psgroup.com/freereport/imedia/CRM-EXECGUIDE3-02.pdf>
„ “CRM Executive Summary,” CIO Magazine. <Available at
http://www.cio.com/summaries/enterprise/crm/index.html>
„ Loveman, G. “Diamonds in the Data Mine” Harvard Business Review. May
01, 2003.
„ D. Rigby, F. Reichheld, and P. Schefter, “Avoid the Four Perils of CRM,”
Harvard Business Review, February 2002

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