CRM Exam portions Answer 6 out of 8 que(10 marks each) Que 9- compulsory(20 marks)

1. Importance of crm strategy Customer relationship management (CRM) helps businesses to gain an insight into the behaviour of their customers and modify their business operations to ensure that customers are served in the best possible way. In essence, CRM helps a business to recognise the value of its customers and to capitalise on improved customer relations. The better you understand your customers, the more responsive you can be to their needs. CRM can be achieved by: finding out about your customers' purchasing habits, opinions and preferences profiling individuals and groups to market more effectively and increase sales changing the way you operate to improve customer service and marketing Benefiting from CRM is not just a question of buying the right software. You must also adapt your business to the needs of your customers. Below are some analysis on why CRM systems are very important for a business operation: 1. A CRM system will store all the past transactions and record the history or assessments of requirements or needs provided from the customers. This will help to fast-track or compare the current and future customers needs effectively, thus improving the business performance. 2. CRM systems can contain adequate information of a customer from basic to detailed as possible. Therefore, it is easy for you to look up a suitable customer and see if he/she can brings you benefit or not. 3. In the CRM system, clients can be created into groups according to classifications or characteristics. We can classify customers by geographical location or industry and managed by account managers. This will help focusing or concentrating on one or a few groups of customers to serve them better, relevant to the current situation of your company. crm3 4. A CRM system is not only used to track the number of current customers but also for acquiring new or potential customers. It is very important to maintain and keep information of all these potential customers in your CRM system and this is called Sales Opportunities . Once the Sales Opportunities have come into real sales, these potential customers have automatically become your current customers. All these things can be managed easily and effectively in your CRM system.

5. A very crucial element of CRM system is the Cost & Effective. Implementing a CRM system requires less standard or framework, less human resources, manual and paper works. Investment on a CRM system is also cheap, suitable and flexible as compared to traditional ways of doing business. However, the yield it brings to you is significant and the results can be quickly seen once implemented. 6. With the popularity and advanced technology of mobile phones and tablets, all customers information can be stored safely and you can access or interact with them from any where and any time. This helps increase revenue in double or triple with less effort and time. 7. CRM systems help increase customers satisfaction, handling all incidents that may occur, giving clients the right products and suitable advices according to their needs in the fast and efficient ways. 8. If customers satisfy with your company, they will be always loyal to your products, services and brand-name. These customers will indirectly help recommend your products or services to others, and this is the most effective way to increase the number of customers and thus your sales in the future 2. Role of technology ( reqmts- sw,h/w etc)

Customer relationship management (CRM) is important in running a successful business. The better the relationship, the easier it is to conduct business and generate revenue. Therefore using technology to improve CRM makes good business sense. CRM solutions fall into the following four broad categories. Outsourced solutions Application service providers can provide web-based CRM solutions for your business. This approach is ideal if you need to implement a solution quickly and your company does not have the in-house skills necessary to tackle the job from scratch. It is also a good solution if you are already geared towards online e-commerce. Off-the-shelf solutions Several software companies offer CRM applications that integrate with existing packages. Cut-down versions of such software may be suitable for smaller businesses. This approach is generally the cheapest option as you are investing in standard software components. The downside is that the software may not always do precisely what you want and you may have to trade off functionality for convenience and price. The key to success is to be flexible without compromising too much. Custom software For the ultimate in tailored CRM solutions, consultants and software engineers will customise or create a CRM system and integrate it with your existing software.

However, this can be expensive and time consuming. If you choose this option, make sure you carefully specify exactly what you want. This will usually be the most expensive option and costs will vary depending on what your software designer quotes.

TECHNOLOGY AND CRM - THE CRM ECOSYSTEM Technological developments continue to affect the organisation and the marketing of its products and services. These technological applications include the computer (specifically the World Wide Web) and mobile telephone technology. CRM needs to be seen as more than just technology with the technology being regarded as the enabler of the CRM strategy (Xu, Yen, Lin & Chou 2002: 445). In using technology, a number of technology applications can be identified that are used in the development of CRM strategy (Xu & Walton, 2005; Zaayman, 2004; Chen & Popovich, 2003; META Group, 1999). Three main components of CRM systems can be identified, as illustrated in Figure 1. Figure 1: Technology applications of CRM

Source: Adapted from: Shahnam, 2000:3 Operational CRM includes customer-facing applications such as sales force automation, enterprise marketing automation and customer service and support (Chen & Popovich, 2003:672). Customer call centres are also a component of operational CRM, and have been identified as the dominant aspect in CRM systems (Xu & Walton, 2005:960; Anon, 2000). All interactions with the customer are recorded, enabling the organisation to gather data on the customer and thus track the customer (Xu & Walton, 2005:961). Despite call centres being the dominant form of operational

CRM, in research conducted in the UK, it was found that less than 40% of organisations had implemented a call centre (Abbott, 2001:184). Analytical CRM analyses the data that has been created through operational CRM to build a picture of the customer. Analytical CRM includes the capturing, storage, extraction, processing, interpretation and reporting of customer data stored in data warehouses (Xu & Walton, 2005:961). This enables the organisation to examine customer behavioural patterns in order to develop marketing and promotional strategies (Xu & Walton, 2005:961). In research conducted in the UK, 25% of the organisations surveyed indicated that they used analytical CRM (Xu & Walton, 2005:960). This would appear to indicate that the primary use of CRM systems is operational in nature (Xu & Walton, 2005:960). Collaborative CRM uses new and traditional communication technologies to enable customers to interact with the organisation (Meta Group, 1999). Collaborative CRM allows a better level of response to customer needs by involving all the members of the supply chain such as suppliers or other partners (Xu & Walton, 2005:961). It also involves channel strategies or any function that provides a point of interaction (or touch point) between the customer and the channel (Shahnam, 2000:3). A further category of CRM systems identified by Chaudbury and Kuiboer (2002) in Xu & Walton, 2005:960 is that of e-CRM. e-CRM makes it possible for the organisation to have as much contact as possible through all communication channels, notably through the Internet and Intranet. e-CRM is thus a web-centric approach to customer contact (Xu & Walton, 2005:961). This Internet support takes on the form of presales, services and post-sales support (Sterne in Feinberg, Kadam, Hokama & Kim, 2002:470). The Internet makes it possible to have frequent contact with the customer, and so keep their databases as pure as possible while developing better customer relationships (OLeary, Rao & Perry, 2004:338). It has also been suggested that the value of the Internet can be seen in the quicker flow of information and more consistent communications that can result from its use (Luck & Lancaster, 2003:216). Using the Internet enables CRM to become more interactive, affecting the relationships that are developed (Xu et al., 2002:445). It has been suggested that while the Internet is used for promotional purposes, its interactive capabilities have not been used to their fullest extent (OLeary et al., 2004: 338). It is further suggested by Taylor & Hunt (2002:453) that the consequences of e-CRM may not assist in attaining the CRM goals as identified for a specific strategy. SPECIFIC TECHNOLOGY APPLICATIONS WITHIN CRM The development of CRM technology can be viewed from the perspective of the level of information technology applied in building customer relationships. Four stages can be identified in this development process (Stefanou, Sarmaniotis & Stafyla, 2003:623). These four stages are illustrated in Figure 2.

Figure 2: The phases in the development of CRM

Adapted from: Stefanou, Sarmaniotis & Stafyla, 2003:623

3. Fundas of relationship mgmt. Ch 1,2,3 plus pdf 4. Leveraging of marketing concepts Ch5,6 5. Applicns of RFM,LTV,Cross selling,UP selling( eg: hospital domain,airlines etc)

RFM
RFM is a method used for analyzing customer value. It is commonly used in database marketing and direct marketing and has received particular attention in retail and professional services industries. RFM stands for Recency - How recently did the customer purchase? Frequency - How often do they purchase? Monetary Value - How much do they spend?

Most businesses will keep data about customer purchases. All that is needed is a table with the customer name, date of purchase and purchase value. One methodology is to assign a scale of 1 to 10, whereby 10 is the maximum value and to stipulate the a formula by which the data suits the scale. For example in a service based business you could have: Recency = 10 - the number of months that have passed since the customer last purchased Frequency = number of purchases in the last 12 months (maximum of 10) Monetary = value of the highest order from a given customer (benchmarked against $10k)

Alternatively, one can create categories for each attribute. For instance, the Recency attribute might be broken into three categories: customers with purchases within the last 90 days; between 91 and 365 days; and longer than 365 days. Such categories may be arrived at by applying business rules, or using a data mining technique, such as CHAID, to find meaningful breaks. Once each of the attributes has appropriate categories defined, segments are created from the intersection of the values. If there were three categories for each attribute, then the resulting matrix would have twenty-seven possible combinations (one well-known commercial approach uses five bins per attributes, which yields 125 segments). Companies may also decide to collapse certain subsegments, if the gradations appear too small to be useful. The resulting segments can be ordered from most valuable (highest recency, frequency, and value) to least valuable (lowest recency, frequency, and value). Identifying the most valuable RFM segments can capitalize on chance relationships in the data used for this analysis. For this reason, it is highly recommended that another set of data be used to validate the results of the RFM segmentation process. Advocates of this technique point out that it has the virtue of simplicity: no specialized statistical software is required, and the results are readily understood by business people. In the absence of other targeting techniques, it can provide a lift in response rates for promotions. 2.

RFM (recency, frequency, monetary) analysis is a marketing technique used to determine quantitatively which customers are the best ones by examining how recently a customer has purchased (recency), how often they purchase (frequency), and how much the customer spends (monetary). RFM analysis is based on the marketing axiom that "80% of your business comes from 20% of your customers." For more than 30 years, direct mailing marketers for non-profit organizations have used an informal RFM analysis to target their mailings to customers most likely to make donations. The reasoning behind RFM was simple: people who donated once were more likely to donate again. With the advent of e-mail marketing campaigns and customer relationship management software, RFM ratings have become an important tool. Using RFM analysis, customers are assigned a ranking number of 1,2,3,4, or 5 (with 5 being highest) for each RFM parameter. The three scores together are referred to as an RFM "cell" . The database is sorted to determine which customers were "the best customers" in the past, with a cell ranking of "555" being ideal. Although RFM analysis is a useful tool, it does have its limitations. A company must be careful not to oversolicit customers with the highest rankings. Experts also caution marketers to remember that customers with low cell rankings should not be neglected, but instead should be cultivated to become better customers.

LTV
From Wikipedia, the free encyclopedia

In marketing, customer lifetime value (CLV) (or often CLTV), lifetime customer value (LCV), or user lifetime value (LTV) is a prediction of the net profit (or gross profit for start-ups
[citation needed]

attributed to the entire future relationship with a customer. The prediction model can have varying levels of sophistication and accuracy, ranging from a crude heuristic to the use of complex predictive analytics techniques. Customer lifetime value (CLV) can also be defined as the dollar value of a customer relationship, based on the present value of the projected future cash flows from the customer relationship. Customer lifetime value is an important concept in that it encourages firms to shift their focus from quarterly profits to the long-term health of their customer relationships. Customer lifetime value is an important number because it represents an upper limit on spending to acquire new customers. One of the first accounts of the term Customer Lifetime Value is in the 1988 book Database Marketing, and includes detailed worked examples.
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Cross selling and up selling

Cross Selling (selling the customer additional, related, products) and Up Selling (selling the customer a more expensive version of the product) are keys to profitability for the seller and are (or should be) an advantage to the customer. Fundamentally Cross Selling and Up Selling is a win-win situation. The customer's needs are better met and your profit is increased. However this only works if the Cross Sale Up Sell strategy is correct. And that's where CRM comes in. One of the advantages of cross selling from the seller's point of view is that the items which are crosssold often have higher margins than the main sell. This is especially true of less expensive items. In fact it's not unusual to make more of the profit on the sale from cross-selling. Warranties are an excellent example of this. The total profit margin on a warranty on consumer goods is 70 percent, split between the seller and the warranty organization. Perhaps the most important factor in successful Cross Selling and Up Selling is the customer needs. Cross Selling and Up Selling works because it meets the customer's needs at that specific time. A warranty to protect the main purchase is a very good example of this. On the other hand, offering the

customers merchandise they aren't interested in doesn't do anything except possibly irritate the customers. One well-known chain of book stores violated this principle when it decreed that its employees should try to cross sell as a way of increasing sinking profits. Unfortunately the chain ordered their clerks to try to cross sell a different best seller each week. Book buyers, of course, tend to have rather specific interests and most of them weren't interested in the book being offered, best seller or no. The result was irritated customers, depressed clerks (who knew this perfectly well) and very few sales of the offered items. With that kind of clunky management, it's not surprising the chain went out of business a few months later. So how do you know what the customer needs? That's where CRM comes in. A properly implemented CRM system gives the sales person or Customer Service Representative (CSR) a 360 degree view of the customer based on all the contacts the customer has had with the enterprise. By analyzing that information and using the results intelligently, you'll know what you can offer your customers that they are likely to purchase. The information in your CRM system will include things like purchase history. That can be used to generate recommendations for additional purchases. If the customer has purchased dog food at the same time they bought tennis balls, you're probably not going to sell the customer a tennis racket, but you might well we able to sell that customer an upscale dog collar. Remember that not all Cross Selling and Up Selling take place at the time of purchase. You can analyze the information later and provide timely follow-up offers by email or regular mail. The trick here, in addition to targeting, is to strike while the iron is hot. Your sales or marketing team should follow up quickly while the purchase is still fresh in the customer's mind. Another use for CRM is to develop highly targeted campaigns aimed at specific customer segments. This is a very successful technique if you have correctly identified your target market and their interests. The downside of such campaigns is that they will miss utterly if you haven't correctly identified the market segment. With CRM you can analyze the sales patterns. A customer who purchases high-end synthetic motor oil by the case isn't likely to be interested in your cheapest brand of tires. Neither is the customer from a high-income zip code who buys off-road accessories. Another advantage of a successful Cross Selling and Up Selling strategy is that is can improve customer relations and cement customer loyalty. A properly conducted offer of Cross Selling and Up Selling is taken by the customer as an expression of interest in the customer and builds a sense of loyalty.

Cross Selling and Up Selling means reaching the customer at the right time. If the customer has made a purchase, his or her mind is focused on your product. Now is an ideal time to suggest additional, related, items for purchase. It's important to recognize that the Up Sell Cross Sell is not a shotgun approach to selling. Rather it is a carefully targeted offer of additional, or substitute products to particular customers. However Up Selling Cross Selling faces barriers that have to be overcome. Some of the barriers are internal. Everything from corporate culture or commission structure can work against cross selling and upselling. It's important to tear those barriers down. Ignorance is another problem. Everyone has heard of cross selling and up selling, but a lot of sales reps and CSRs don't know how to go about it. Here the answer is training. There are many programs today that will teach your people the art of Cross Selling and Up Selling. Another difficulty is the state of your database. According to recent surveys, as much as 17 percent of the customer data in a corporate database is duplicated, corrupt or just plain wrong. This may have been good enough in the pre-CRM era, but it is no longer acceptable. CRM works your customer information harder and accuracy becomes more important. One direct mail organization found it had massive problems with incorrect data when it tried to make use of its customer information to upsell. Among other things, the company discovered it had no less than 18 different ways of spelling McDonald's, the hamburger chain, and that a large portion of the prospect base consisted of duplicates. You can find out if you have a problem with database integrity by auditing your customer information. Pull a sample and cross check it for accuracy. If you find a lot of problems, you need to consider how to clean up the data.

PLO learn each from the course pack- what is, Why etc etc