Customer Relationship Marketing

What is CRM?
 “Process of creating and maintaining relationships
with business customers or consumers”
 “A holistic process of identifying, attracting,
differentiating, and retaining customers”
 “Integrating the firm’s value chain to create
enhanced customer value at every step”
 “An integrated cross-functional focus on
improving customer retention and profitability for
the company.”
 Meaning of CRM
 Bottom-line:

 The use of information-enabled systems

for enhancing individual customer
relationships to ensure long-term customer
loyalty and retention
 Is CRM New?
No! Yes!
• Simply an extension of • A shift in corporate

relationship marketing philosophy concerning the

approach to value delivery
• Builds on customer
• Customer-centric approach
service and satisfaction to value chain
concepts • New and technology-
• Just the latest buzzword enhanced processes
for creating customer • Focus is not just on
orientation bottom-line, but on top-line
• Bottom-line is still the • Goal is to create satisfying

same experiences across all

customer contact points
 Overview Of CRM
 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).
 Types of CRM Programs
1. 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.

Operational CRM processes customer data for a variety of purposes:

 'Managing Campaigns'
 Enterprise Marketing Automation
 Sales Force Automation
 Sales Management System
 Types of CRM Programs

2 Sales Force Automation

Sales Force Automation automates sales force-related
activities such as:
 Activity Management: Scheduling sales calls or mailings
 Tracking responses
 Generating reports
 Opportunity Management and Assessment
 Account Management and Target Account Selling
 Goldmine and SalesLogix are examples of prepackaged
SFA solutions.
 Types of CRM Programs

3. 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 information system (e.g. financial
forecasting and customer profitability analysis)
 Types of CRM Programs

4. 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
 Types of CRM Programs
4. 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
 The following table lists the top CRM software vendors in
2006-2007 (figures in millions of US dollars) published in a
Gartner study

 SAP 25.3%
 Oracle 15.3%
 Salesforce.com 08.3%
 Amdocs 05.2%
 Microsoft 04.1%
 Others 40.6%
Customerization
 What is “Customer”ization?
 Customerization defines the exchange
process of marketing in the context of
complete customer-control.
 Natural fit with the electronic environment
 Entices customers to remain loyal
 Overview of the Model
 Customerization is a buyer or customer-
centric marketing model.
 Develops a relationship between:
– One-to-one marketing
– Mass customization
 Internal operations must have the capability
to customize
– “Build to order process”
 Characteristics
 Flexible  Relies on a number
 Requires database marketing approaches:
integration, – traditional
operations, and – mass marketing
production for success – targeted
– direct marketing
Mass Marketing V/s One-to-One Marketing

 Average customer  Individual customer

 Standard product  Customized market offering
 Mass production  Customized production
 Mass distribution  Customized distribution
 Mass advertising  Individual advertising
 Mass promotion  Individual incentives
 One-way message  Two-way messages
 Economies of scale  Economies of scope
 Share of market  Share of customer
 All customers  Profitable customer
 Customer attraction  Customer retention
 Customer Databases and Database
marketing
 A customer database is an organized
collection of comprehensive information
about individual customers or prospects that
is current, accessible, and actionable for
such marketing purposes as lead generation,
lead qualification, scale of a product or
service or maintenance of customer
relationships.
 Customer Databases and Database
marketing
 Database marketing is the process of
building, maintaining, and using customer
databases and other databases (products,
suppliers, resellers) for the purpose of
contacting, transacting and building
relationships.
 Customer mailing list and business
database
 A customer mailing list is simply a set of names,
addresses, and telephone numbers.
 A customer database ideally would contain the
consumer’s past purchases, demographics,
psychographics, media-graphics and other useful
information.
 A business database ideally would contain past
purchases of business customers; past volumes,
prices and profits; buyer team member names,
status of current contracts; competitive suppliers;
relevant buying practices, patterns and policies.
 Data warehousing
 Data warehouse is a repository of an
organization's electronically stored data.
Data warehouses are designed to facilitate
reporting and analysis
 The process of transforming data into
information and making it available to the
user in a timely enough manner to make a
difference is known as data warehousing.
 Limitation
 The product is a once in a lifetime purchase
 Customer show little loyalty to a brand
 Unit sale is very small
 Cost of gathering information is too high.
 Why Data Mining
 Credit ratings/targeted marketing:
– Given a database of 100,000 names, which persons are the least likely
to default on their credit cards?
– Identify likely responders to sales promotions
 Fraud detection
– Which types of transactions are likely to be fraudulent, given the
demographics and transactional history of a particular customer?
 Customer relationship management:
– Which of my customers are likely to be the most loyal, and which are
most likely to leave for a competitor? :

Data Mining helps extract such

information
 Data mining

 Process of semi-automatically analyzing large

databases to find patterns that are:
– valid: hold on new data with some certainity
– novel: non-obvious to the system
– useful: should be possible to act on the item
– understandable: humans should be able to
interpret the pattern
 Also known as Knowledge Discovery in
Databases (KDD)
 Applications
 Banking: loan/credit card approval
– predict good customers based on old customers
 Customer relationship management:
– identify those who are likely to leave for a competitor.
 Targeted marketing:
– identify likely responders to promotions
 Fraud detection: telecommunications, financial
transactions
– from an online stream of event identify fraudulent events
 Manufacturing and production:
– automatically adjust knobs when process parameter changes
 Applications (continued)
 Medicine: disease outcome, effectiveness of
treatments
– analyze patient disease history: find relationship
between diseases
 Molecular/Pharmaceutical: identify new drugs
 Scientific data analysis:
– identify new galaxies by searching for sub clusters
 Web site/store design and promotion:
– find affinity of visitor to pages and modify layout
 The KDD process
 Problem fomulation
 Data collection
– subset data: sampling might hurt if highly skewed data
– feature selection: principal component analysis, heuristic search
 Pre-processing: cleaning
– name/address cleaning, different meanings (annual, yearly), duplicate
removal, supplying missing values
 Transformation:
– map complex objects e.g. time series data to features e.g. frequency
 Choosing mining task and mining method:
 Result evaluation and Visualization:

Knowledge discovery is an iterative process