Definitions

customer-centric

Customer relationship management

Customer relationship management (CRM) is a term applied to processes implemented by a company to handle its contact with its customers. CRM software is used to support these processes, storing information on current and prospective customers. Information in the system can be accessed and entered by employees in different departments, such as sales, marketing, customer service, training, professional development, performance management, human resource development, and compensation. Details on any customer contacts can also be stored in the system. The rationale behind this approach is to improve services provided directly to customers and to use the information in the system for targeted marketing and sales purposes.

While the term is generally used to refer to a software-based approach to handling customer relationships, most CRM software vendors stress that a successful CRM strategy requires a holistic approach. CRM initiatives often fail because implementation was limited to software installation without providing the appropriate motivations for employees to learn, provide input, and take full advantage of the information systems

Overview

From the outside, customers interacting with a company perceive the business as a single entity, despite often interacting with a variety of employees in different roles and departments. CRM is a combination of policies, processes, and strategies implemented by a company that unify its customer interaction and provides a mechanism for tracking customer information.

CRM includes many aspects which relate directly to one another:

  • Front office operations — Direct interaction with customers, e.g. face to face meetings, phone calls, e-mail, online services etc.
  • Back office operations — Operations that ultimately affect the activities of the front office (e.g., billing, maintenance, planning, marketing, advertising, finance, manufacturing, etc.)
  • Business relationships — Interaction with other companies and partners, such as suppliers/vendors and retail outlets/distributors, industry networks (lobbying groups, trade associations). This external network supports front and back office activities.
  • Analysis — Key CRM data can be analyzed in order to plan target-marketing campaigns, conceive business strategies, and judge the success of CRM activities (e.g., market share, number and types of customers, revenue, profitability, etc.).

Building Relationship with the Customers.

Types/Variations of CRM

There are several different approaches to CRM, with different software packages focusing on different aspects. In general, Campaign Management and Sales Force Automation form the core of the system (with SFA being the most popular).

Operational CRM

Operational CRM provides support to "front office" business processes, e.g. to sales, marketing and service staff. Interactions with customers are generally stored in customers' contact histories, and staff can retrieve customer information as necessary.

The contact history provides staff members with immediate access to important information on the customer (products owned, prior support calls etc.), eliminating the need to individually obtain this information directly from the customer.

Operational CRM processes customer data for a variety of purposes:

Sales Force Automation (SFA)

Sales Force Automation automates sales force-related activities such as:

  • Tracking leads
  • Scheduling sales calls or mailings
  • Tracking responses
  • Generating reports

Analytical CRM

Analytical CRM analyzes customer data for a variety of purposes:

  • Designing and executing targeted marketing campaigns
  • Designing and executing campaigns, e.g. customer acquisition, cross-selling, up-selling
  • Analysing customer behavior in order to make decisions relating to products and services (e.g. pricing, product development)
  • Management decisions (e.g. financial forecasting and customer profitability analysis)

Analytical CRM generally makes heavy use of data mining.

Sales Intelligence CRM

Sales Intelligence CRM is similar to Analytical CRM, but is intended as a more direct sales tool. Features include alerts sent to sales staff regarding:

  • Cross-selling/Up-selling/Switch-selling opportunities
  • Customer drift
  • Sales performance
  • Customer trends
  • Customer margins

Campaign Management

Campaign management combines elements of Operational and Analytical CRM. Campaign management functions include:

  • Target groups formed from the client base according to selected criteria
  • Sending campaign-related material (e.g. on special offers) to selected recipients using various channels (e.g. e-mail, telephone, post)
  • Tracking, storing, and analyzing campaign statistics, including tracking responses and analyzing trends

Collaborative CRM

Collaborative CRM covers aspects of a company's dealings with customers that are handled by various departments within a company, such as sales, technical support and marketing. Staff members within the departments can share information collected when interacting with customers. For example, feedback received by customer support agents can provide other staff members with information on the services and features requested by customers. Collaborative CRM's ultimate goal is to use information collected by all departments to improve the quality of services provided by the company.

Geographic CRM

Geographic CRM (GCRM) combines geographic information system and traditional CRM. Geographic data can be analysed to provide a snapshot of potential customers in a region or to plan routes for customer visits.

Strategy

Several commercial CRM software packages are available, and they vary in their approach to CRM. However, as mentioned above, CRM is not just a technology but rather a comprehensive, customer-centric approach to an organization's philosophy of dealing with its customers. This includes policies and processes, front-of-house customer service, employee training, marketing, systems and information management. Hence, it is important that any CRM implementation considerations stretch beyond technology toward the broader organizational requirements.

The objectives of a CRM strategy must consider a company’s specific situation and its customers' needs and expectations. Information gained through CRM initiatives can support the development of marketing strategy by developing the organization's knowledge in areas such as identifying customer segments, improving customer retention, improving product offerings (by better understanding customer needs), and by identifying the organization's most profitable customers.

CRM strategies can vary in size, complexity, and scope. Some companies consider a CRM strategy only to focus on the management of a team of salespeople. However, other CRM strategies can cover customer interaction across the entire organization. Many commercial CRM software packages that are available provide features that serve the sales, marketing, event management, project management, and finance industries.

Successes

While there are numerous reports of "failed" implementations of various types of CRM projects, these are often the result of unrealistic high expectations and exaggerated claims by CRM vendors.

Many of these "failures" are also related to data quality and availability. Data cleaning is a major issue. If a company's CRM strategy is to track life-cycle revenues, costs, margins, and interactions between individual customers, this must be reflected in all business processes. Data must be extracted from multiple sources (e.g., departmental/divisional databases such as sales, manufacturing, supply chain, logistics, finance, service etc.), which requires an integrated, comprehensive system in place with well-defined structures and high data quality. Data from other systems can be transferred to CRM systems using appropriate interfaces.

A well specified system is of vital importance before starting any implementation, as it can lead to a significant reduction in the time and cost of implementation, as well as highlighting any unrealistic expectations.

Privacy and data security

One of the primary functions of CRM software is to collect information about customers. When gathering data as part of a CRM solution, a company must consider the desire for customer privacy and data security, as well as the legislative and cultural norms. Some customers prefer assurances that their data will not be shared with third parties without their prior consent and that safeguards are in place to prevent illegal access by third parties.

Market structure

The following table lists the top CRM software vendors in 2006-2007 (figures in millions of US dollars) published in a Gartner study.
Vendor 2007 Revenue 2007 Share (%) 2006 Revenue 2006 Share (%) '06-'07 Growth (%)
SAP 2,050.8 25.3 1,681.7 26.6 22.0
Oracle 1,319.8 15.3 1,016.8 15.5 29.8
Salesforce.com 676.5 8.3 451.7 6.9 49.8
Amdocs 421.0 5.2 365.9 5.6 15.1
Microsoft 332.1 4.1 176.1 2.7 88.6
Others 3,289.1 40.6 2,881.6 43.7 14.1
Total 8,089.3 100 6,573.8 100 23.1

The following table lists the top software vendors for CRM projects completed in 2006 using external consultants and system integrators, according to a 2007 Gartner study.

Vendor Percentage of implementations
Siebel (Oracle) 41%
SAP 8%
Epiphany (Infor) 3%
Oracle 3%
PeopleSoft (Oracle) 2%
salesforce.com 2%
Amdocs 1%
Chordiant 1%
Microsoft 1%
SAS 1%
Others 15%
None 22%

A 2007 Datamonitor report lists Oracle (including Siebel) and SAP as the top CRM vendors, with Chordiant, Infor, and SalesForce.com as significant, smaller vendors.

See also

References

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