IT IN BUSINESS FAST School of Management

Instructor: Ramsha Khan

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CUSTOMER RELATIONSHIP MANAGEMENT: THE
BUSINESS FOCUS
This chapter will focus on systems that span the enterprise and that are intended to support
three enterprise wide operations:
1. customer relationships
2. resource planning
3. supply chain
Each operation requires a unique focus and, thus, a unique system to support it, but they all
share one common goal: to get the entire organization to line up and head in the same
direction.
Without this guidance and control, these three essential activities would very likely go in a
variety of directions, with no clear target.
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CUSTOMER RELATIONSHIP MANAGEMENT:
INTRODUCTION
Businesses want to be:
 Organized
 Structured
 Focused
Many companies are implementing customer relationship management (CRM) business initiatives
and information systems as part of a customer-focused or customer-centric strategy to improve
their chances for success in today’s competitive business environment.

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WHAT IS CRM?
Companies are turning to customer relationship management to improve their customer focus.
CRM uses information technology to create an enterprise wide system that integrates and
automates many of the customer-serving processes in sales, marketing, and other customer-
related services that interact with a company’s customers.
CRM systems include a family of software modules that provides the tools that enable a
business and its employees to deliver:
Fast
Convenient
Dependable
Consistent service to its customers
Examples: Oracle, PeopleSoft, SAP AG

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MAJOR APPLICATION COMPONENTS OF CRM?

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MAJOR APPLICATION COMPONENTS OF CRM?
Contact and Account Management:
CRM software helps sales, marketing, and service professionals capture and
track relevant data about every past and planned contact with prospects and
customers, as well as other business and life-cycle events of customers.
Information is captured from all customer touchpoints, such as telephone, fax, e-
mail, the company’s Web site, retail stores, kiosks, and personal contact.
CRM systems store the data in a common customer database that integrates all
customer account information and makes it avail able throughout the company
via Internet, intranet, or other network links for sales, marketing, service, and
other CRM applications.
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MAJOR APPLICATION COMPONENTS OF CRM?
Sales:
A CRM system provides sales representatives with the software tools and company data
sources they need to support and manage their sales activities and optimize cross-selling and
up-selling.
Cross-selling is an approach in which a customer of one product or service, say, auto
insurance, might also be interested in purchasing a related product or service, say,
homeowners insurance.
Up-selling refers to the process of finding ways to sell a new or existing customer a better
product than they are currently seeking.
CRM also provides real-time access to a single common view of the customer, enabling sales
representatives to check on all aspects of a customer’s account status and history before
scheduling their sales calls.
For example, a CRM system would alert a bank sales representative to call customers who
make large deposits to sell them premier credit or investment services.
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MAJOR APPLICATION COMPONENTS OF CRM?
Marketing and Fulfillment:
CRM systems help marketing professionals accomplish direct marketing campaigns
by automating such tasks as qualifying leads for targeted marketing, and scheduling
and tracking direct marketing mailings.
CRM software helps marketing professionals capture and manage prospect and
customer response data in the CRM database, and analyze the customer and business
value of a company’s direct marketing campaigns.

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MAJOR APPLICATION COMPONENTS OF CRM?
Customer Service and Support:
A CRM system provides service reps with software tools and real-time access to the
common customer database shared by sales and marketing professionals.
CRM helps customer service managers
create
assign
manage requests for service by customers
Includes call center software, help desk software

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MAJOR APPLICATION COMPONENTS OF CRM?
Retention and Loyalty Programs:
Consider the following:
• It costs six times more to sell to a new customer than to sell to an existing one.
• A typical dissatisfied customer will tell 8 to 10 people about his or her experience.
• A company can boost its profits 85 percent by increasing its annual customer
retention by only 5 percent.
• The odds of selling a product to a new customer are 15 percent, whereas the odds
of selling a product to an existing customer are 50 percent.
• If a company takes care of a service problem quickly, 70 percent of complaining
customers will do business with the company again.
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MAJOR APPLICATION COMPONENTS OF CRM?
Retention and Loyalty Programs:
Enhancing and optimizing customer retention and loyalty is a major business strategy and
primary objective of customer relationship management.
CRM systems try to help a company identify, reward, and market to their most loyal and
profitable customers.
CRM analytical software includes data mining* tools and other analytical marketing
software.
CRM databases may consist of a customer data warehouse and CRM data marts.
Tools are used to identify profitable and loyal customers and to direct and evaluate a
company’s targeted marketing and relationship marketing programs toward them.
* Data mining is a process used by companies
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THREE PHASES OF CRM
CRM supports the three phases of the relationship between a business and its customers.
1. Acquire: A business relies on CRM software tools and databases to help it acquire new
customers by doing a superior job of contact management, sales prospecting, selling, direct
marketing, and fulfillment. The goal of these CRM functions is to help customers perceive the
value of a superior product offered by an outstanding company.
2. Enhance: Web-enabled CRM account management and customer service and support tools
help keep customers happy. CRM sales force automation and direct marketing and fulfillment tools
help companies cross-sell and up-sell to their customers, thus increasing their profitability to the
business. The value the customers perceive is the convenience of one-stop shopping at attractive
prices.
3. Retain: CRM analytical software and databases help a company proactively identify and
reward its most loyal and profitable customers to retain and expand their business via targeted
marketing and relationship marketing programs. The value the customers perceive is of a
rewarding personalized business relationship with “their company.”
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BENEFITS OF CRM
CRM allows a business to identify and target its best customers—those who are the
most profitable to the business—so they can be retained as lifelong customers for
greater and more profitable services.
It makes possible real-time customization and personalization of products and
services based on customer wants, needs, buying habits, and life cycles.
CRM can also keep track of when a customer contacts the company.
CRM systems can enable a company to provide a consistent customer experience
and superior service and support across all the contact points a customer chooses.
All of these benefits would provide strategic business value to a company and
major customer value to its customers.

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CHALLENGES/ FAILURES OF CRM
The business benefits of customer relationship management are not guaranteed.
Surveys by industry research groups include a report that more than 50 percent of
CRM projects did not produce the results that were promised.
In another research report, 20 percent of businesses surveyed reported that CRM
implementations had actually damaged long-standing customer relationships.
In a survey of senior management satisfaction with 25 management tools, CRM
ranked near the bottom in user satisfaction, even though 72 percent expected to
have CRM systems implemented shortly.
Research shows that the major reason for CRM failure is a familiar one: lack of
understanding and preparation
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CHALLENGES/ FAILURES OF CRM
For example, in many cases, failed CRM projects were implemented without the
participation of the business stakeholders involved. There fore, employees and
customers were not prepared for the new processes or challenges that were part
of the new CRM implementation.
Remember that information technology and information systems alone do nothing!
It takes people, processes, and internal structuring of the project for IT/IS make
a difference.
Without the rest, the IT is just a machine, and the IS is just a tool with no skilled
user.

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TRENDS IN CRM

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ENTERPRISE RESOURCE PLANNING: THE BUSINESS
BACKBONE
Businesses of all kinds have now implemented enterprise resource planning (ERP)
systems.
ERP serves as a multifunctional enterprise wide backbone that integrates and
automates many internal business processes and information systems within the
manufacturing, logistics, distribution, accounting, finance, and human resource
functions of a company.
ERP is recognized as a necessary ingredient for many companies to gain the
efficiency, agility, and responsiveness required to succeed in today’s dynamic
business environment.

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WHAT IS ERP?
Enterprise resource planning is a cross-functional enterprise system driven by an
integrated suite of software modules that supports the basic internal business
processes of a company.
For example, ERP software for a manufacturing company will typically process the
data from and track the status of sales, inventory, shipping, and invoicing, as well
as forecast raw material and human resource requirements.

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WHAT IS ERP?
ERP gives a company an integrated real-time view of its core business processes,
such as production, order processing, and inventory management, tied together by
the ERP application software and a common database maintained by a database
management system.
ERP systems track business resources (such as cash, raw materials, and production
capacity), and the status of commitments made by the business (such as customer
orders, purchase orders, and employee payroll), no matter which department
(manufacturing, purchasing, sales, accounting, and so on) has entered the data into
the system.
ERP software suites typically consist of integrated modules of manufacturing,
distribution, sales, accounting, and human resource applications.

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BENEFITS OF ERP
ERP systems can generate significant business benefits for a company.
• Quality and efficiency
• Decreased costs
• Decision support: ERP helps make better decisions in a timely manner across the
entire business enterprise.
• Enterprise agility: More flexible organizational structures, managerial
responsibilities, and work roles, and therefore a more agile and adaptive
organization and workforce that can more easily capitalize on new business
opportunities.

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COSTS OF ERP

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CAUSES OF ERP FAILURES
Failure to involve affected employees in the planning and development phases and
to change management programs, or trying to do too much too fast in the
conversion process were typical causes of failed ERP projects.
Insufficient training in the new work tasks required by the ERP system and failure to
do enough data conversion and testing were other causes of failure.
ERP failures were also due to overreliance by company or IT management on the
claims of ERP software vendors or on the assistance of prestigious consulting firms
hired to lead the implementation.

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TRENDS IN ERP
There are four major developments and trends that are evolving in ERP applications.
First, the ERP software packages that were the mainstay of ERP implementations in
the 1990s, and were often criticized for their inflexibility, have gradually been
modified into more flexible products.
Companies that installed ERP systems pressured software vendors to adopt more
open, flexible, standards-based software architectures.
Leading ERP vendors, including Oracle, PeopleSoft, and J.D. Edwards, have also
developed more flexible ERP products.

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TRENDS IN ERP
Web-enabling ERP software is a second development in the evolution of ERP. The
growth of the Internet and corporate intranets and extranets prompted software
companies to use Internet technologies to build Web interfaces and networking
capabilities into ERP systems.

Internet connectivity has led to the development of interenterprise ERP systems that
provide Web-enabled links between key business systems (such as inventory and
production) of a company and its customers, suppliers, distributors, and others.

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TRENDS IN ERP
All of these developments have provided the business and technological momentum
for the integration of ERP functions into e-business suites. The major ERP software
companies have developed modular, Web-enabled software suites that integrate
ERP, customer relationship management, supply chain management, procurement,
decision support, enterprise portals, health care functionality, and other business
applications and functions.
Examples include Oracle’s e-Business Suite and SAP’s mySAP.

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SUPPLY CHAIN MANAGEMENT: THE BUSINESS
NETWORK
Supply chain management is a cross-functional interenterprise system that uses
information technology to help support and manage the links between some of a
company’s key business processes and those of its suppliers, customers, and business
partners.
The goal of SCM is to create a fast, efficient, and low-cost network of business
relationships, or supply chain , to get a company’s products from concept to market.

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WHAT EXACTLY IS A COMPANY’S SUPPLY CHAIN?
Let’s suppose a company wants to build and sell a product to other businesses.
Then it must buy raw materials and a variety of contracted services from other companies.
The interrelationships with suppliers, customers, distributors, and other businesses that are
needed to design, build, and sell a product make up the network of business entities,
relationships, and processes that is called a supply chain.
In essence, supply chain management integrates supply and demand management within
and across companies.

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SCM
The demands of today’s competitive business environment are pushing manufacturers to
use their intranets, extranets, and e-commerce Web portals to help them reengineer their
relationships with their suppliers, distributors, and retailers.
The objective is to significantly reduce costs, increase efficiency, and improve their supply
chain cycle times. SCM software can also help to improve interenterprise coordination
among supply chain process players.
The result is much more effective distribution and channel networks among business
partners. The Web initiatives of PC Connection illustrate these developments.

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ELECTRONIC DATA INTERCHANGE
Electronic data interchange (EDI) was one of the earliest uses of information technology
for supply chain management.
EDI involves the electronic exchange of business transaction documents over the Internet
and other networks between supply chain trading partners (organizations and their
customers and suppliers). Data representing a variety of business transaction documents
(such as purchase orders, invoices, requests for quotations, and shipping notices) are
automatically exchanged between computers using standard document message formats.
Typically, EDI software is used to convert a company’s own document formats into
standardized EDI formats as specified by various industry and international protocols. Thus,
EDI is an example of the almost complete automation of an e-commerce supply chain
process. EDI over the Internet, using secure virtual private networks , is a growing business-
to-business (B2B) e-commerce application.

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THE ROLE OF SCM
Figure 8.17 helps us understand the role and activities of supply chain management in
business more clearly.
The top three levels of Figure 8.17 show the strategic, tactical, and operational objectives
and outcomes of SCM planning, which are then accomplished by the business partners in a
supply chain at the execution level of SCM.
The role of information technology in SCM is to support these objectives with inter-
enterprise information systems that produce many of the outcomes a business needs to
manage its supply chain effectively. That’s why many companies today are installing SCM
software and developing Web-based SCM information systems.
Until recently, SCM software products have typically been developed for either supply
chain planning or execution applications. SCM planning software from vendors such as
SAP and Oracle support a variety of applications for supply and demand forecasting.

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BENEFITS OF SCM
Companies know that SCM systems can provide them with key business benefits such as
faster, more accurate, order processing; reductions in inventory levels; quicker times to
market; lower trans action and materials costs; and strategic relationships with their
suppliers.
All of these benefits of SCM are aimed at helping a company achieve agility and
responsiveness in meeting the demands of its customers and the needs of its business
partners.

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CHALLENGES OF SCM
Achieving the business value and customer value goals and objectives of supply chain
management, as illustrated in Figure 8.19 , has been a major challenge for most
companies.

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CHALLENGES OF SCM
What are the causes of problems in supply chain management?
A lack of proper knowledge about demand planning, tools, and guide lines is a major
source of SCM failure.
Inaccurate or overly optimistic demand forecasts will cause major production, inventory, and
other business problems, no matter how efficiently the rest of the supply chain management
process is constructed.
Inaccurate production, inventory, and other business data provided by a company’s other
information systems are a frequent cause of SCM problems.
Lack of adequate collaboration among marketing, production, and inventory management
departments within a company, and with suppliers, distributors, and others, will sabotage
any SCM system.

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TRENDS IN SCM
Figure 8.20 illustrates the trends in the use of supply chain management today as three
possible stages in a company’s implementation of SCM systems.

In the first stage, a company concentrates on making improvements to its internal supply
chain processes and its external processes and relationships with suppliers and customers.
Its e-commerce Web site and those of some of its trading partners provide access to online
catalogs and useful supply chain information as they support limited online transactions.

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TRENDS IN SCM
In stage two, a company accomplishes substantial supply chain management applications
by using selected SCM software programs internally, as well as externally via intranet and
extranet links among suppliers, distributors, customers, and other trading partners.
Companies in this stage also concentrate on expanding the business network of Web-
enabled SCM-capable trading partners in their supply chain to increase its operational
efficiency and effectiveness in meeting their strategic business objectives.

In the third stage, a company begins to develop and implement cutting-edge collaborative
supply chain management applications using advanced SCM software, full service extranet
links, and private and public e-commerce exchanges.

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