2.

Managing the Customer Life cycle

Current facts

Today customers are in charge they make the rules

Putting technology at the center stage
Business intelligence is one of the most growing segment in the
marketplace
Customer loyalty is very difficult to maintain due to competition
Customers want an excellent service and they want to feel special
Most companies think they are customer-focused however in
reality they are product-centric
There is a need to formulate customer-focused firms which needs:

CRM strategy
Organizational change
Corporate culture

Economics of customer retention

Winning back a lost customer can cost up to 50-100 times as much as keeping a
current one satisfied.
Rob Yanker, Partner, McKinsey & Company

Understanding your customer is key to retention..

Why CRM?

It costs 6 times more to sell to a new customer than to sell

to an existing one
A typically dissatisfied customer will tell 8 to 10 people
about his/her experience (mainly related to poor customer
service)
The odds of selling to a new customer is 15% versus 50%
to an existing customer
70% of the customers complaining will do business again
with the company if the complaints are quickly addressed
90% of existing companies do not have integrated CRM
tools and platforms

Customer Relationships Today

Customer
Relationships
Branding

Product

Pricing

Distribution

Building a customer-centric
approach to Internet
marketing by focusing on
customers

Community

Communication

CRM Basics

CRM is the timely delivery of excellent service

customer relationship management
CRM is a combination of business process and
technology that seeks to understand a companys
customers from a number of perspectives including:

Who they are?

What they do?
What do they like?

Age of the never-satisfied customer

CRM becomes a support tool in a time characterized by:

Increased competition
Globalization
Growing cost of customer acquisition
High customer turnover

CRM is all about creating a better value proposition to

customers
Information and communication technology is now
acting as a catalyst for CRM

Extended enterprise
World wide web and the Internet

Defining CRM

CRM is an integrated sales, marketing and service

strategy that is based on a timely and accurate
information infrastructure and that depends on
coordinated enterprise-wide activities

Example: tracking customers interactions with the firm

Customer tracking includes steps in the selling and customer
service cycles

CRM steps include

Targeting
Acquisition
Retention
Expansion

Defining CRM

Targeting

Who do we target?
What segments are most profitable?
What segments match our value proposition?
What is the best segmentation strategy for us/our industry?

Acquisition

What is the best channel for each segment?

What is the acquisition cost for a channel/segment?
Do certain channels deliver certain types of customers?
Cost effective acquisition?

Defining CRM

Retention

How can we improve retention?

What is our average customer relationship length?
How can we hold customer for as long as possible?
What is the most cost effective method of retention?

Expansion

How many products does our average customer buy?

How can we induce our current base to buy more products?
Who are the prime targets for expansion?
What is the cost of expansion?

Goals of CRM

Using existing relationship to grow revenue

Using integrated information for excellent service
Introducing consistent, replicable channel processes
and procedures

CRM

CRM is a business strategy and not a product

Putting CRM into practice requires developing a set of
integrated applications to address all aspects related to
the front-office needs
CRM could be a major support platform for small and
medium-sized enterprises
Cost of the information and communication technology
applications and infrastructure should be calculated as
opposed to the return-on-investment

Evolution of information requirements

Materials requirements planning (MRP)

Manufacturing resource planning (MRP II)
Enterprise resource planning (ERP)
Supply chain management (SCM)
Customer relationship management (CRM)

Managing the customer life cycle

Acquiring

Enhancing

Retaining

new customers

profitability of existing
customers

profitable customers
for life

Acquiring new customers

Promoting the companys product and service

leadership
Redefine the companies competitive edge and
innovations
Offer a superior product backed by an excellent service

Example: Browsing on the net, submitting a request, receiving

a phone call

Model for a sales and service strategy

Enhancing profitability of existing

customers

Encouraging cross-selling and up-selling

Cross selling is used by suggesting alternative products or upselling by rendering the customer more informed with the new
products and services.

Broadening the relationship between the company and

the customers
Providing a value proposition represented by offering a
greater convenience at low cost (one-stop-shopping)

Example: Best Buy an electronic retailer with more than 300

stores capitalizes on committed relationships with customers

3000 calls a day with more than 50% having computer-based

answers and solutions

Retaining profitable customers for life

Retention focused on service adaptability

Delivering not what the market wants but what the
customer wants
Providing a value proposition that offers a proactive
relationship that works on the best interest of the
customer

Example: customer retention is becoming a key competitive

strategy for many companies

Integrated CRM
Customer
Life cycle

Acquire

Enhance

Direct Marketing
Partial
Functional
Solutions

Complete
Integrated
Solutions

Cross-sell and Up-sell

Sales Force Automation

Retain

Proactive Service

Customer Support

Integrated CRM Applications

Core CRM process competencies

Marketing and
Fulfillment
Sales
Cross-sell
Up-sell
Telesales

Fax

Prospect
Or
Customer
Phone

Field Sales
and Service

Customer
Service and
Billing
eMail

WWW

Loyalty
and Retention
Programs

Content Management
Technical Infrastructure

How to build a CRM infrastructure

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.

Involve top management

Decide on a vision of an integrated CRM
Establish a CRM strategy and specify its objectives
Understand the customer
Review cultural changes that will need to occur
Develop a business case
Evaluate current readiness
Evaluate appropriate applications to do a better business
Identify and target quick wins
Have one manager to own the end-to-end project
Implement in stages
Be sure to create a close-loop CRM environment
Create concrete measurement goals

5 key drivers of the customer value

Cost of Targeting
Cost of Acquisition
Service and Usage Revenue
Cost of service
Duration of relationship

4 stages of a customer relationship

Awareness
Awareness

Customer

recognizes
the firm but
has not
initiated any
transactions

Exploration
Exploration //
Expansion
Expansion

Commitment
Commitment

Customer

Customer

gathers
information
about the
firm which
determines
whether
repeated
transactions
will occur

and firm feel

a sense of
obligation or
responsibility
to one
another

Dissolution
Dissolution

Total

loss of
commitment
and
relationship

Challenges to understanding customers

Identify the customer

Learn from customers
Know the customers value
Determine best resources
Access complete customer profile and history