CUSTOMER RELATIONSHIP MANAGEMENT

What is CRM?

 CRM stands for Customer Relationship Management.

 CRM is combination of a variety of strategies used for managing the companies
relationships and interactions with potential customers.
 It helps you improve profitability.
 It is the strongest and the most efficient approach in maintaining and creating
relationships with customers.
 CRM helps in understanding the customer's needs and behaviors.
 It defines appropriate actions for retaining customers such as special incentive programs.
 It involves a process of continuously gathering data at all customer points and then
turning that data into knowledge for building more profitable customer relationships.

Features of CRM

 CRM fulfills customer needs effectively and maintains a long-term deal.

 CRM is customized by an organization to manage and administrate its customers and
vendors in an efficient manner to achieve excellence.
 It considers customer satisfaction.
 It focuses on customer loyalty, retention and complaints.
 It delivers better information and services regarding all the products and brands to the
customer.

Importance of CRM

 CRM foresees customer needs effectively and increases business.

 CRM includes a historical view and analysis of all the acquired customers.
 It contains each and every bit of customer details making it easy to track customers and
determine the most profitable ones.
 It is very cost effective.
 It reduces the process time and increases the productivity.

Misunderstandings about CRM

Following are the misunderstandings about CRM

 CRM is very expensive and not affordable by small enterprises.

 This is a complicated system.
 It is difficult to understand.
 It makes wrong assessment for the return on investment.
 Customer Relationship Management can not be identified with a software system.

Reality

 CRM is cost effective and provides affordable price.

 CRM is not difficult to understand. It is easy to fetch customers' details and maximize
the profitability owing to fast developing technology.
 CRM is a strategy which consists of people and business process. It is not an IT issue
only to be simply equated to software.

SCM

 SCM stands for Supply Chain Management.

 It is also called the art of management of providing the right product, at the right time, at
the right place and at the right cost to the customer.
 SCM strategy is important for an organization. These strategies are the critical backbone
to Business Organizations today.
 Definition of Supply Chain Management

Supply Chain Management (SCM) is the management of a network of all business  processes

and activities involving procurement of raw materials, manufacturing and distribution
management of finished goods.

 This process is an inspection of materials, information and finances as they move in a

process from supplier to manufacturer to wholesaler to retailer to consumer.
 It is the management flow of goods and services.
 It involves coordinating and integrating flows among companies.
 SCM reduces the cost and improves the time-to-market of products.

These SCM flows can be divided into three categories

1. Product Flow

2. Information Flow

3. Finances Flow

1. In Product Flow, it includes the movement of goods from supplier to customer.

2. In Information Flow, it involves transmitting orders and updating the status of delivery.

3. In Financial Flow, it involves credit terms, payment schedules and consignment.

SCM can be classified into two types

1. Planning Application

2. Execution Application
1. Planning Application determines the best way to fill an order using advanced algorithms.

2. Execution Application tracks the physical status of goods, materials and involves financial
information.When your company communicates with your customers the process can involve
many different people within both organizations using a variety of different methods. The main
tool that is used is an order that is communicated by your customer to your sales department.
However, this is only one of many communications that should be managed. To ensure that your
company can provide the best customer service experience possible the use of customer
relationship management (CRM) software should be considered.

Typical CRM software will allow you to track and organize its contacts with its current and
prospective customers. The software allows your employees to store information about
customers and customer interactions which then can be accessed by employees in different
departments within your company.

There are three areas which your company interacts with your customers.

 Front Office Contacts - These involve the direct contact your employees have with your
customers which can include phone calls, e-mail, instant messages and face to face
communication.
 Back Office Operations – These are processes that are used to facilitate the front office,
such as finance communications, marketing, customer billing, and advertising.
 Business Contacts – Your employees will interact with customers and suppliers
through networking, industry events, and trade associations.

Key Elements of CRM

CRM can be broken down into a number of different components which many software vendors
have developed packages for. For the most part, there are three areas which are core to successful
customer relationship management; Customer Service, Sales Force Automation and Campaign
Management.

Customer Service

The customer service function in your company represents the front office functions that interact
with your customers. These are the business processes that allow your company to sell products
and services to your customers, communicate with your customers with regards marketing and
dealing with the after sales service requirements of your customers. Each interaction with the
customer is recorded and stored within the CRM software where it can be retrieved by other
employees if needed.

Sales Force Automation

Your company’s sales department is constantly looking for sales opportunities with existing and
new customers. The sales force automation functionality of CRM software allows the sales teams
to record each contact with customers, the details of the contact and if follow up is required. This
can provide a sales force with greater efficiencies as there is little chance for duplication of
effort. The ability for employees outside of the sales team to have access to this data ensures that
they have the most recent contact information with customers. 

This is important when customers contact employees outside of the sales team so that customers
are given the best level of customer service.

Campaign Management

The sales team approach prospective customers in the hope of winning new business. The
approach taken by the sales team is often focused on a campaign, where a group of specific
customers is targeted based on a set of criteria. These customers will receive targeted marketing
materials and often special pricing or terms are offered as an inducement. CRM software is used
to record the campaign details, customer responses, and analysis performed as part of the
campaign.

Popular CRM Software

CRM software has been popular over the last twenty years and a number of software packages
have been popular during that time. Siebel Systems was founded by Thomas Siebel back in 1993
and developed popular Sales Force Automation and CRM packages. In 2002, Siebel controlled
45% of the CRM market and in 2005 it was purchased by Oracle.

Epiphany was founded around the same time as Siebel and launched a very popular modular
CRM package. Epiphany was purchased by SSA in 2005, which was in turn purchased by Infor
in 2006. The Epiphany CRM software is now marketed as Infor CRM Epiphany.

Salesforce.com is a leading CRM product that is not traditional software that is installed at a
client but is offered over the internet, which is commonly referred to a software-as-a-service
(SaaS). Salesforce.com was founded in 1999 and now has over 55,000 customers.

SAP, which is more commonly known as a vendor of enterprise resource planning (ERP)
software, offers a very popular CRM package. SAP’s CRM product is often purchased by
companies who are already SAP customers because of the ease of integration.

Role of CRM in the context of SCM

To deliver on these expectations, CRM applications must operate across multiple business areas
and affect numerous activities and processes that identify, segment, acquire and enhance
profitable relationships. The activities that fall within scope would therefore include -

i) Customer acquisition via targeted marketing campaigns, using segmentation and demographics
to increase relevance of message and hence propensity to respond and buy.

ii) Maintaining a customer database, separate from operational systems, de-duplicated and
capable of holding both transactional information and ‘soft’ information about the customer (to
the extent permitted under data protection rules). The customer can be encouraged, ideally by
giving back some value (e.g. prize competitions), to divulge information such as demographic
details and product preferences.

iii) Sensing and recording customer needs and behaviours, both declared and observed, from
analysis of their interactions with the organisation. Log information (clickstream) from
interactive channels can give insights into what products/services the customer was actually
searching for, which may be at variance from their declared preferences.

Such information must be fed back into the supply chain to optimise the product mix and
increase availability of the correct products. Lands' End is extending the information held about
customers into its supply chain in anticipation of demand. The company is planning to integrate
historical purchases based on colours, sizes, price sensitivity and types of clothing purchased
with customer-segmented e-mailed newsletters (Duffield, 2001).

iv) Building loyalty from recognising the customer and responding appropriately either via a
personalised service or a customised product. Marriott hotels capture customer preference at
initial contact and will give their guests the same experience at subsequent visits. On-line
vendors strive to serve content which will encourage sales or add value to the relationship, such
as Amazon.com’s recommendation feature. Effective retention has a high payback, Reicheld
(1996) finding that a 1% increase in retention leads to a minimum 7% improvement in
profitability.

v) Supporting consistent customer service across all ‘touch points’, by providing information to
staff on customer contact history and context. Such channel independent support would allow the
organisation to differentiate on service, e.g. customers using interactive channels should expect
that a transition to call-centre will be seamless.

vi) Analysing customer lifetime profitability (potential future revenue from an individual
customer, discounted to current value). High-value customers may then be segmented and
provided with additional services, e.g. allowing entry to Thomas Cook Privilege Club from
www.thomascook.com.

vii) In the context of a B2B, providing information to the account manager and guiding the sales
process to optimise sales force effectiveness.

Given that organisations are very careful about sharing customer information, CRM applications
have an indirect relationship with e-business applications in other organisations. Information
may be shared, in summary or aggregate form, with partners in the supply chain to allow them to
optimise manufacturing, product or packaging based on up-to-date analytics from the sales
channels.

Information recorded as part of the CRM activity can be provided to customers as a value added
‘product’ built from information. For example, Purchasing Managers could review subscription
service utilisation to determine if their organisation was getting value for money. In this manner
a greater degree of trust can be established, increasing loyalty and decreasing the likelihood of
defection to a competitor as the ‘switch costs’ are increased through interdependence.

Supply Chain Management Vs. Customer Relationship Management

Supply chain management strategies enable companies to ensure the business has the materials,
information and financial resources it needs to produce quality goods and services in a timely
manner. By coordinating the flow of work from vendors to manufacturers and then from
distributors to retailers, effective supply management techniques reduce inventory and ensure
product availability when required. Customer relationship management programs are used to
ensure parts and service get to customers when needed after sales are completed by automating
business processes used for sales, service and support. Integrate supply chain management and
customer relationship management functions to maximize your operations.

Differences

Supply chain management personnel ensure that all departments in the business get the raw
materials they need to complete their work, while customer relationship management personnel
deal with customers to make sure they get the support and services they need. Supply chain
personnel work with vendors, while customer relationship personnel work with customers. For
example, at a small veterinary hospital, the supply chain management personnel make sure the
veterinarians and technicians have the medical supplies required to conduct routine
examinations, perform surgeries and treat medical conditions for clients' animals at the hospital,
while customer relationship management personnel work with customers to make sure they get
the right medications to administer to their animals at home.
Product Flow

The supply chain management function ensures that movement of resources from suppliers to
manufacturing occurs smoothly. For example, at a small brochure printing business, supply chain
management personnel buy and distribute the paper products and ink required to run the
business. The customer relationship management function takes and transmits orders and ensures
that product returns and customer support needs are handled. At the small brochure printing
business, customer relationship personnel take orders from customers who want brochures
printed by the business. Supply chain management software applications facilitate planning and
track the management of materials. Ideally, these applications share data across the business,
including suppliers and business partners to ensure the smooth flow of products from
development through delivery. When customer relationship management personnel take a large
order for brochure printing, for example, the vendor supplying the paper gets an alert that the
company needs more paper than usual. This expedites service for the customer.

Information Flow

Supply chain management professionals use data generated from software applications to ensure
their suppliers provide the right raw materials to create products and services. Accurate analysis
and interpretation allows them to improve the production schedules, reduce costs, eliminate
bottlenecks and plan for future work. Customer relationship management professionals also need
access to data regarding spare parts availability to support consumers. Customer relationship
management personnel work with customers to take orders, solve problems and get new
business. For example, at a small catering business, supply chain management personnel make
sure that the cooks have all the raw ingredients required to make meals for events. They inform
the customer relationship management personnel if problems arise in obtaining the required
products, such as flour, sugar or fresh produce.

Considerations

Supply chain management personnel need accurate manufacturing and inventory data from
suppliers. This enables them to ensure the small business has the raw materials it needs to
conduct business in a cost-effective manner. For example, supply chain management personnel
at a small computer repair business need parts from suppliers, such as Apple, IBM, Dell and HP,
to support the business but typically they cannot afford to stock all part to all computers. By
contrast, customer relationship management personnel need to be able to respond quickly to
customer needs. By establishing good relationships with suppliers to obtain access to current
spare parts availability and pricing information, small businesses can get the information they
need to run a profitable operation.