Chapter 11

BUILDING A CUSTOMER-CENTRIC ORGANIZATION
- CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management (CRM)

CRM is a business philosophy based on the premise that
those organizations that understand the needs of individual
customers are best positioned to achieve sustainable
competitive advantage in the future.

      A customer strategy starts with understanding who the
company's customers are and how the company can meet
strategic goals.
      As the business world increasingly shifts from product
focus to customer focus, most organizations recognize the
treating existing customers well is the best source of profitable
and sustainable revenue growth in the age of e-business,
however, an organization is challenged more than ever before
to truly satisfy its customers.



Recently, Frequency and Monetary Value

An organization can find its most valuable customers by using
a formula that industry insiders call RFM-recency, frequency,
and monetary value. In other words, an organization must track:

• How recently a customer purchased items (recently).
• How frequently a customer purchases an item (frequently).
• How much a customer spends on each purchase (monetary value).

The Evolution of CRM

Knowing the customer, especially knowing the profitability
of individual customers, is highly lucrative in the financial
service industry.
There are three phases in the evolution of CRM:

• CRM Reporting technology help organizations identify
  their customers across other applicants.

• CRM Analysis technology helps organizations segment
  their customers into categories such as best and worst
  customers.

• CRM Predicts technological help organizations make
  predictions regarding customer behavior such as which
  customers are at risk of leaving.

The Ugly Side of CRM: Why CRM Matter More Now Than Ever

Now companies have no choice as the power of the customer
grows exponentially as the internet grows. In every case,
customers have become an integral part of the action as a
member of the aggregated, interactive, self-organizing,
auto-entertaining audience on businesses. However, this
should no be a surprise, since it was the customers crazy
passion and hobbies and obsessions-that build up the web
in the first place.


CRM's Explosive Growth

When customers buy on Internet, they see, and they steer,
entire value chains.

• Customer web interaction become conversations,
  interactive dialogs with shared knowledge, not just
  business transaction. Web- based customer care can
  actually become the focal point of customer relationship
  management and provide breakthrough benefits for both
  the enterprise and its customers, substantially reducing
  costs while improving service.

• Current users allow allocating 20 percent of their IT
  budget to CRM solutions.

Using Analytical CRM To Enhance Decisions

The two components of a CRM strategy are:

• Operational CRM supports traditional transactional
  processing for day-to-day front-office operations or
  systems that deal directly with the customers.

• Analytical CRM supports back-office operations and
  strategic analysis and includes all systems that do not
  deal directly with the customers.

• The primary difference between operational CRM and
  analytical CRM in the direct interaction between the
  organization and its customers.

Personalization occurs when a website can know enough
about a person's likes and dislikes that it can fashion offers
that are more likely to appeal to that person. Many
organizations are now utilizing CRM to create customer
rules and templates that marketers can use to personalize
customer messages.


CRM Success Factor

CRM solutions make organizational business processes
more intelligent. This is achieved by understanding customer
behavior and preferences, then realigning product and service
offering and related communications to make sure they are
synchronized with customer needs and preferences. If an
organization is implementing a CRM system, it should study
the industry best practices to help ensure a successful
implementation.
  

      Using he analytical capabilities of CRM can help a
company Anticipate customer need and proactively serve
customers in way that build relationship, create loyalty,
and enhance bottom lines.