Customer Relationship Management (CRM) Technologies

Lecture Objectives
In this lecture you will learn what the links between eMarketing and CRM actually are We will look at and learn the implementation issues of CRM such as cost, integration and organisational issues and the risks of CRM adoption You will be briefly introduced to analytics, data warehousing and data mining techniques eCRM (electronic-CRM) will be defined and you will learn the difference between eCRM and CRM You will learn the critical success factors (CSFs) for implementing a successful CRM strategy and a flow chart diagram will help you learn how all these elements link together Finally, we will learn about the possible future trends of CRM and its potential evolvement into another form of relationship management

Content
Implementation Issues of CRM
Cost Integration and Organisational Considerations Risk Factors of Implementing CRM

Technology in the CRM Process

Analytics Data Warehousing Data Mining Techniques

eCRM What next for CRM/eCRM Critical Success Factors of CRM Future Trends of CRM

Links between eMarketing and CRM

Upsetting your customers through any section of the transactional processes either online or offline may ultimately be the driver to enhancing your competitors revenue stream and profit margins Getting your customer relationships right and making your customers feel satisfied, fulfilled and valued is integral to the overall success of any eMarketing campaign and links to all the lectures within this module!

Implementation Issues of CRM

The main areas to consider when implementing a CRM Strategy would be the following:
Cost Integration and Organisational Considerations Risk Factors of Implementing CRM

Cost of CRM Spend by Businesses

On one level, this years survey shares many characteristics with our findings last time around. Around a third (32%) of the organisations we spoke to have already implemented an integrated CRM system, with a further third (36%) planning to do so within the next two years The majority (72%) of this years sample reckon to have invested under 250,000 in CRM systems over the past 12 months, including hardware, software and consultancy costs. However, 10% have ploughed in anything from 1 million to 5 million and more

Cost of CRM Spend by Businesses

The Gartner Group recently revealed that the majority of businesses implementing CRM projects will underestimate the costs by a whopping 40% to 75% Many companies calculate only the most obvious costs for CRM projects, such as software license and consulting fees In reality, CRM projects have many other costs, such as project planning, training, testing, documentation, data maintenance, software integration, and project management Gartner estimates that large businesses spend between $30 million and $90 million on CRM initiatives over a three-year period The irony is that despite all the money being spent on CRM, many of these projects -- as many as 70%, according to the Butler Group - are failures It is difficult to place an actual cost on any one CRM Strategy implementation for any one business as each business has different needs to cater for. A business would be wise to contact one of the software vendors mentioned on previous slides within this presentation As an example Microsoft has released a basic version of Solomon CRM Standard - aimed at smaller companies. Solomon Standard's target audience is organisations with 25 to 99 employees, annual revenue of up to $25 million and up to 10 licensed users, according to Microsoft. A typical single-user license costs $4,900

Source: http://techupdate.zdnet.com/techupdate/stories/main/0,14179,2818263,00.html

Integration and Organisational Considerations a CRM strategy it would also need to When a business is considering
Business and Its people

look at the deeper implications involved as far as the integration of the IT infrastructure is concerned and the effect that this would have on the overall

There is not a shortage of material of how a business should implement technological change or how a business should reengineer or redesign its IT and IS infrastructure and protocols. (Rockart et al, 1996, Feeny & Willcocks, 1998) With an array of different computer software and hardware systems in place within businesses the integration of them can be a logistical nightmare especially if the business wants to implement a CRM process, which services many customers on many touch points and on a one-to-one basis As Rockart et al (1996) argue businesses today have less slack time and they also suggest that change has become the trademark of the business world

Integration and Organisational Considerations

Tichy (1997) suggests that there are four main causes of strategic change, which can occur within an organisation, these are the environment, business relationships, technology and people (Tichy in Lynch, p742, 1997) For a business attempting to implement a full CRM solution it could be suggested that all four of these issues would apply, however, the speed at which these issues have to be implemented and addressed move at exponential rates From the perspective of employees, the CRM strategy will affect people quite dramatically; change is a people thing. But this is what organisations must not lose sight of, people do matter and need to be treated with dignity and respect However, Hill suggests that, teach people that change is inevitable and, if embraced, can be fun. (Leslie Hill in Thompson, p678, 1997) For CRM to be successful the integration issues need to be examined, addressed by the business and planned carefully with accuracy and precision

Risk Factors of Implementing CRM

All that can be said about risk is that whatever project a business may undertake in whichever area it invests its money there will always be an element of risk attached to it The main risk factors of implementing a CRM strategy may be:
Lack of CRM planning The business being unaware of its CRM strategy Under investment / over spending Poor front and back-end integration Not being customer focused or customer centric Failure to test the system Security issues

Within the perspective of CRM all of the above issues are risk factors, which can ultimately lead to CRM failure

Technology in the CRM Process

The main technological processes of CRM will be covered briefly to give you an overview of the processes involved and will include: Analytics Data Warehousing Data Mining

Analytics
It was once said that knowledge is power (Francis Bacon cited in Kahaner, 1997) Greenberg (p40, 2001) suggests that analytics is the process of capturing, storing, extracting, processing, interpreting and reporting customer data to a user The whole process of analytics is also known as business intelligence or data analysis However, knowledge of your customers may only come about by analysing the information a business holds and then disseminating it accordingly throughout the organisation It could also be said that businesses gather information about their customers and then analyse it to gain competitive advantage The technological tools used in analytics to collect, store, refine and personalise customer information are called data warehouses and data mining

Data Warehousing
A data warehouse is a database used as a data repository where all the information regarding a customer of a business is stored If a business manages and uses the data warehouse efficiently and effectively it may be possible to gain competitive advantage with it (Swift, p58, 2001) It may also help a business become customer-centric and promote customisation (Davenport, Harris & Kohli, p64, 2001), and may also help to reduce customer churn, promote customer retention and increase the businesses competitive advantage (Swift, p61, 2001) Brown (2001) suggests that a customer data warehouse can bring six strategic benefits to a business, which are
Strategic marketing New product development Channel management Sales productivity Customer equity / relationship marketing (CRM) and Customer care

Data Mining
Data mining is a technique used to extract exacting information from a data warehouse Using sophisticated analytical algorithms to discover correlations and patterns, which may be emerging from the data regarding an array of customers and their buying habits Data mining can be used to refine and personalise the information a business uses regarding its customers, which may allow it to become closer to customer-centricity and target products or services to a customer on a one-to-one basis On data mining Swift (p57, 2000) argues that it can be used to predict all sorts of customer behaviour with considerable success

eCRM
eCRM Defined: It could simply be suggested that eCRM (electronic Customer Relationship Management) is an extension to traditional CRM. Jutla et al (p1, 2001) describe e-CRM as the customer relationship care component of e-business. Greenberg (p45-46, 2001) suggests that eCRM is CRM online Differences between CRM and eCRM As customers move away from the traditional ways of purchasing goods and services to purchasing via the Internet businesses have to adapt their CRM to reflect these changes and so eCRM has evolved Greenberg (2001) suggests that eCRM is a way in which a business can look after its customers via the Internet and could also be a way in which customers can look after themselves In effect, within an eCRM environment the customer does most of the legwork for themselves and not for the businesses Because these customers are more clued up as far as the Internet is concerned they tend to shop around a lot more before deciding which business they will buy their product or service from

What next for CRM / eCRM

Perhaps the question should be: Is there really any difference between CRM and eCRM? Maybe the two elements will merge into one in the future? Perhaps they already have However, it would be a mistake for a business to concentrate on one and ignore the other With this in mind it would be wise for businesses to ensure that their CRM and eCRM solutions are fully integrated so that there is always a seamless consistency of service by whichever channel the customer decides to use or prefers using

Critical Success Factors for CRM

Source: Nolan, R , pp 32-36, 2001

Critical Success Factors for CRM

The flow diagram on the previous page indicates how the different sections of CRM link together within lectures 7 & 8. So how can this diagram along with its linkages be associated with the critical success factors of CRM / eCRM?

Critical Success Factors of CRM

Given the facts and figures detailed in these two lectures and with the evidence presented here it could be suggested that the emerging critical success factors for successful CRM implementation would be:
Businesses objectives of CRM Strategy i.e. acquisition, retention of customers, creating loyalty or all of the above Implementation issues i.e. does a business have the IT infrastructure, how much will it cost, what are the risk factors involved, will it work, how much will it cost to train our staff, what about other costs such as project planning, testing, documentation, data maintenance, software integration, and project management Technological issues cost of implementing, upgrading, integrating the systems including legacy systems, data warehousing, data mining costs and so on Strategic planning a plan for all the above and the whole processes involved

Critical Success Factors of CRM

Also research carried out and cited in Rockart (1979) by the MIT team (who at the time) identified what they termed the four prime sources of critical success factors for business in general, which were as follows:
Structure of a particular industry (SWOT Analysis maybe required to ascertain this) Competitive strategy, industry position, and geographic location (Porters Five Forces Model could be used here) Environmental factors (STEP Analysis may help to identify these factors) Temporal factors (what is going on in the world as a whole) (MIT cited in Rockart, p86, 1979)

These could also influence a businesses CRM Strategy and planning processes NB: The CSFs presented here are by no means definitive and could be described as purely subjective on the evidence given in this research

Future Trends of CRM

Despite ever-greater investments by organisations in CRM systems and processes, the nature of the relationship between the supplier and customer hasnt significantly changed since the industrial revolution The supplier still determines the product or service for sale and the customers choice is limited to buying or not buying in the immortal words of Henry Ford: Any colour, as long as its black, sir. But a wind of change is now beginning to blow that could completely reverse the balance of power in the mass market. New developments in products, services and technology including Microsofts .NET, My Services and Passport offerings are key enablers and indicators of this change The result will be a move from CRM to CMR customer managed relationships where organisations can no longer force unwilling customers to provide endless amounts of information just to secure the basic products and services they want Rather, theyll need to develop products, services and strategies that deliver genuine added value to their relationships with the members of an increasingly discerning and data-enabled community

Future Trends of CRM

Limitations: Retail banks, telecoms operators and direct retailers have led the way in this business-to-consumer CRM As a consumer, however, it now sometimes seems that everyone from the estate agent who sold you your house to your local sandwich bar wants to develop a long-term, mutually rewarding relationship with you This widespread adoption of CRM might suggest that a relationship-based strategy is the only game in town but it could also present organisations with significant problems

Future Trends of CRM

Limitations: Some of these problems derive directly from the limitations of CRM as currently practised. For example:
Assembling a complete view of the organisations relationship with its customers is difficult and costly Keeping this information up-to-date is even more difficult and costly as customers move houses, change jobs and have children but have little or no reason to inform the organisation of these changes Governments and industry regulators are placing increasing demands on organisations to comply with privacy and data protection legislation Analysis of the organisations own relationship with a customer may well lead to completely inaccurate assessments of the potential value of the customers future relationship or their existing relationships with other organisations Adopting a relationship-based approach no longer represents a means of differentiation in itself. Customers now understand the value of their own relationships and are demanding levels of service and tailoring of offerings to match this Many customers simply do not want relationships with their bank, telecoms provider or utility company because they dont see the value in laboriously providing extensive information or providing it repeatedly to different organisations

Future Trends of CRM

New Services
In response to all of this, customers are beginning to demand a re-balancing of power in their relationships with organisations and the emergence of a variety of new products and services is a reflection of this Rather than accepting the bundled propositions constructed for them by CRM-savvy organisations out to increase their share of the customers wallet and maximise total customer profitability, smart customers are increasingly using the internet and their home computing power to take matters into their own hands It is emerging that customers would prefer to be in charge of their own data & information as oppose to allowing businesses to hold information about them The common thread in this is that the customer has full access to and in many cases is responsible for the maintenance and flow of electronic data in relation to a variety of products and services: in other words, customer managed relationships the way seems clear for the development of similar customer-controlled data repositories or electronic vaults with information stored on the customers own computer hard disk, or hosted on the internet by a trusted service provider (see Figure 1 on next slide)

Future Trends of CRM

See next slide

Future Trends of CRM

See next slide

Future Trends of CRM

The emergence of electronic vault services will be a crucial enabler for truly customer-managed relationships

Future Trends of CRM

The value of this to organisations is that the direct maintenance and control of data by the individual directly addresses the limitations of traditional CRM described previously. Specifically:
The customer is uniquely positioned to assemble a complete view of their existing relationships with all organisations The customers view will always be up-to-date and accurate since they are the instigator of many of the life events or triggers that organisations are interested in Since the customer controls the information and provides it to the organisation as a consenting adult, the cost of compliance with government and regulatory requirements should be reduced With access to information about all of a customers relationships, the organisation can provide better informed recommendations on products and services, reducing both the cost of sale and risk For early movers, a new basis for differentiation is possible as electronic vault customers will prefer to deal only with organisations that accept application or transaction information in this form As the effort associated with providing information is reduced, customers will be far more willing to provide it, so enabling organisations to use it in developing deeper relationships

Future Trends of CRM

The future
For the individual, CMR will represent an entirely new way of buying products and applying for services, with no more Who are you? questions or repetitive form-filling Using an electronic vault will give customers the ability to shop around just as easily for complex, information-based products and services like mortgages, loans or the best mobile phone tariff as it is for commodities like washing powder or beans For organisations, CMR could represent more of a challenge In the short term, organisations who have derived competitive advantage from superior access to privileged data or the inertia of their customers including banks, insurance companies and telecoms providers may well find those advantages eroded As CMR accelerates the demand for relationships based on genuine understanding of needs rather than data access, organisations will need to fundamentally review their core customer facing processes

Future Trends of CRM

The future
Ultimately, however, the migration of spending from data collection and infrastructure to analysis capability will mean that the smart money is being spent where it can really make a difference by meeting the customer need New opportunities may also emerge for third-party providers of electronic vault-based services to intermediate between customers and organisations for information-based services such as address verification and credit checking To appreciate the potential benefits of electronic-vault based relationships, one only needs to consider a small number of everyday customer relationship scenarios, for example: Customer mailing - using a customer-maintained version of name and address from an electronic vault would eliminate inaccurate, misdirected and duplicate mailings with associated savings in processing of returns and complaints a welcome development for both the originator and the receiver and thus improved relationships

Future Trends of CRM

Potential Impact of CMR:

But what does all this mean for an organisations CRM investment? Should organisations just save their money and wait for the customers to do all the hard work of gathering, collating and organising their data so that organisations can use it The answer is that they could wait, and some may even manage to retain enough customers to survive until CRM is overtaken by this vision of electronic-vault based CMR though of course there is no guarantee this will happen And even if those organisations who shun business-driven CRM do survive, it is doubtful that they would have the wherewithal to compete in what will be a highly evolved, but still relationship-based competitive environment If an organisations competitive advantage is founded only in access to superior quality or privileged data, the threat of a level playing field might well cause it to re-appraise its investment plans

Future Trends of CRM

Potential Impact of CMR:

Regardless of where data is collected from, organisations looking to compete on the basis of a long-term relationship need to develop data analysis, customer proposition development, multi-channel delivery capabilities and behaviour change that is fundamental to providing differentiated treatment for specific groups of customers As so many organisations who have embarked on the CRM journey have discovered, the development of long-term customer relationships is about much more than data or the technology used to store it or move it around Those organisations who fully embrace the relationship element of CRM in its current incarnation will be best placed to take advantage of the emergence of CMR and the scenarios outlined here

Summary of Learning Outcomes

In this lecture you will have learnt what the links between eMarketing and CRM actually are We looked at and learnt the implementation issues of CRM such as cost, integration and organisational issues and the risks of CRM adoption You were briefly introduced to analytics, data warehousing and data mining techniques, which you should now fully understand You discovered what eCRM (electronic-CRM) is and you will have learnt the differences between eCRM and CRM You will have learnt the critical success factors (CSFs) for implementing a successful CRM strategy and the flow chart diagram will have helped you learn how all these elements link together Finally, we learnt the possible future trends of CRM and that it may eventually evolve into CMR Customer Managed Relationships

Assessment Question
With the information you now have from lectures 7 & 8. In relation to eMarketing please describe in your own words why you think CRM (Customer Relationship Management) is important to the overall success of a businesses eMarketing Strategy Implementation?

References and Useful URLs (Lectures 7 & 8)

Brown, S 2000, Customer Relationship Management: A Strategic Imperative in the World of e-Business, John Wiley & Sons Canada Limited Cannon, T 1996, Welcome to the Revolution Managing Paradox in the 21st Century, Pitman Publishing, London Christopher, M; Clark, M; Payne, A & Peck H 1999, Relationship Marketing Strategy and Implementation, Butterworth-Heinemann, Oxford Davenport, T H; Harris, J G & Kohli, A K 2001, How Do They Know Their Customers So Well?, Sloan Management Review, Winter 2001, pp 63 73 Evans, P & Wurster, T S 1999, Getting Real about Virtual Commerce, Harvard Business Review, November December 1999, pp 85 93 Feeny, DF & Ives, B 1990, In Search of Sustainability: Reaping Long-term Advantage from Investments in Information Technology, Journal of Management Information Systems, Summer 1990, Volume 7, Number 1, pp 27 46 Feeny, DF & Willcocks, LP 1998, Core IS Capabilities for Exploiting Information Technology, Sloan Management Review, Spring 1998, pp 9 21 Greenberg, P 2001, CRM at the Speed of Light: Capturing and Keeping Customers in Internet Real Time, Osborne / McGraw-Hill, USA Gronroos, C 2000, Service Management and Marketing A Customer Relationship Management Approach, John Wiley and Sons Limited, England Hagel III, J & Rayport, J F 1996, The Coming Battle for Customer Information, Harvard Business Review, January February 1997, pp 5 11 http://techupdate.zdnet.com/techupdate/stories/main/0,14179,2818263,00.html http://www-3.ibm.com http://www.amazon.com http://www.conspectus.com http://www.consultants-advisory.com/ (2001) (Outstanding free resource) http://www.CRMCommunity.com/ (Good resource)

References and Useful URLs (Lectures 7 & 8)

http://www.CRMguru.com http://www.crmguru.com/members/papers/index.html (useful resource) http://www.lloydstsb.com http://www.netlingo.com/ http://www.nwfusion.com/ http://www.metagroup.com/ (simply go here and search for CRM) http://www.opportunitywales.co.uk/ (Search here for CRM good resource) http://www.siebel.com/ Ives, B & Learmonth, GP 1984, The Information System as a Competitive Weapon, Communications of the ACM, December 1984, Volume 27, Number 12, pp 1193 1201 Jutla, D; Craig, J & Bodorik, P 2001, Enabling and Measuring Electronic Customer Relationship Management Readiness, Proceedings of the 34th Hawaii International Conference on System Sciences 2001 Kahaner, L 1997, Competitive Intelligence How to Gather, Analyze, and use Information to move your Business to the top, Simon & Schuster Inc. USA Kotler, P 1997, Marketing Management Analysis, Planning, Implementation and Control, Prentice-Hall International (UK) Limited, London Kundisch, D; Wolfersberger, P; Calaminus, D & Kloepfer, E 2001, Enabling eCCRM: Content Model and Management for Financial services, University of Augsburg, Business School, Department of Information Systems, Germany / Proceedings of the 34th Hawaii International Conference on System Sciences 2001 Levitin, A & Redman, TC 1998, Data as a Resource: Properties, Implications, and Prescriptions, Sloan Management Review, Fall 1998, pp 89 101 Lynch, R 1997, Corporate Strategy, Pitman Publishing, London Naumann, E; Jackson, D W & Rosenbaum, M S 2001, How to Implement a Customer Satisfaction Program, Business Horizons, January February 2001, pp 37 46

References and Useful URLs (Lectures 7 & 8)

Nolan, R J, 2001, PhD Proposal, Henley Management College, 2001 Source: http://www.consultants-advisory.com/ (2003) (Outstanding free resource) Nolan, R J, 2001, Towards A Model of IT enabled CRM, 10th EDAMBA European Conference Summer School, July 2001 Nolan, R J, 2001, What is CRM: Customer Relationship Management?, Henley Management College, 2001 Nolan, R J, Ezingeard, J-N, Money, A, 2001, A Taxonomy of Objectives of IT-Enabled Customer Relationship Management as a Basis of Evaluation of CRM Success, Eighth European Conference on Information Technology Evaluation, Oriel College, Oxford, UK, Sept, 2001 Peppard, J 2000, Customer Relationship Management (CRM) in Financial Services, European Management Journal, June 2000, Volume 18, Issue 3, pp 312 327 Porter, ME 2001, Strategy and the Internet, Harvard Business Review, March 2001, pp 63 78 Puschmann, T & Alt, R 2001, Customer Relationship Management in the Pharmaceutical Industry, Proceedings of the 34th Hawaii International Conference on System Sciences 2001 Reichheld, F F & Schefter, P 2000, E-Loyalty Your Secret Weapon on the Web, Harvard Business Review, July August 2000, pp 105 113 Rockart, JF 1979, Chief Executives Define Their Own Data Needs, Harvard Business Review, March April 1979, pp 81 92 Rockart, JF, Earl, MJ & Ross, JW 1996, Eight Imperatives for the new IT Organisation, Sloan Management Review, Fall 1996, pp 43 55 Ross, JW, Beath, CM & Goodhue, DL 1996, Develop Long-Term Competitiveness Through IT Assets, Sloan Management Review, Fall 1996, pp 31 42 Ryals, L, Know, S & Maklan, S 2000, Customer Relationship Management The business case for CRM, Pearson Education Limited, Harlow Sethi, V & King, WR 1994, Development of Measures to Assess the Extent to Which an Information Technology Application Provides Competitive Advantage, Management Science, December 1994, Volume 40, Number 12, pp 1601 1627

References and Useful URLs (Lectures 7 & 8)

Swift, R S 2001, Accelerating Customer Relationships Using CRM and Relationship Technologies, Prentice-Hall International (UK) Limited, London Thompson, J 1997, Strategic Management Awareness and Change, International Thomson Business Press Vandermerwe, Sandra 2000, Ford Motor Company: Using Web-Strategies to Drive Customer Relationship Management, The Management School, Imperial College of Science, technology and medicine, London Venkatraman, N, Henderson, JC, & Oldach, S 1993, Continuous Strategic Alignment: Exploiting Information Technology Capabilities for Competitive Success, European Management Journal, June 1993, Volume 11, Number 2, pp 139 149

Glossary of Terms
Please refer to the following references to help you understand IT terms used throughout all of the lectures:
http://www.marketingterms.com/ (Internet Marketing Dictionary and Acronyms) http://www.xetg.com/articles/search_engine_secrets/glossary.shtml (Xtreme eMarketing Techniques and Guide) http://www.activemarketingtips.com/amthome/dict.htm (Essential Tips for Marketing Success) http://www.atwebo.com/glossary.htm (@WEBO eMarketing Glossary) http://www.matisse.net/files/glossary.html (General IT Glossary of Terms) http://www.animatedsoftware.com/statglos/statglos.htm (Internet Glossary of Statistical Terms) http://www.weihenstephan.de/~schlind/genglos.html (A Hypermedia Glossary of Genetic Terms) http://www.webopedia.com/ (The only online dictionary and search engine you need for computer and Internet technology) http://www.grantasticdesigns.com/glossary.html (Glossary of Graphic Design and Web Page Design Terms) http://www.walthowe.com/glossary/ (Glossary of Internet Terms) http://www.wwli.com/translation/netglos/glossary/glossary.html (Internet Terms) http://www.sharpened.net/glossary/index.php (Glossary of Computer and Internet Terms). http://www.lib.berkeley.edu/TeachingLib/Guides/Internet/Glossary.html (Glossary of Internet and Web Jargon) http://www.yahooligans.com/docs/info/glossary1.html (Yahoo Glossary of Terms) http://www.northernlight.com/docs/glossary_help_terms_a.html (Northern Light Glossary of Internet Terms)