CUSTOMER RELATIONSHIP (RESOURCE) MANAGEMENT (CRM) SYSTEMS

8.13 CUSTOMER RELATIONSHIP (RESOURCE) MANAGEMENT (CRM) SYSTEMS

INTRODUCTION Customer relationship m a n a g e m e n t ( C R M ) is an enterprise approach to understand-

ing and influencing customer behavior through meaningful communications in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability (Swift, 2001). A customer relationship m a n a g e m e n t ( C R M ) system (also k n o w n as a customer resource m a n a g e m e n t system) provides the t e c h n o l o g y to do so.

Corporations that achieve high customer retention and high customer profitability aim

for the right product (or service), to the right customer, at the right price, at the right time,

through the right channel, to satisfy the customer's need or desire (Swift, 2001). This is t h e m a i n goal o f C R M . T h o u g h i t has the s a m e goal a s r e v e n u e m a n a g e m e n t ( s e e

Chapter 4), C R M generally puts a major focus on the selling side. A broader definition of C R M includes all activities that turn casual (seemingly o n e - t i m e ) c o n s u m e r s into

loyal c u s t o m e r s by satisfying or e x c e e d i n g their r e q u i r e m e n t s so that they will buy again. E - c o m m e r c e i n f l u e n c e impacts the n e e d for quality and accurate C R M ( s e e Berkowitz, 2001; Kohli, 2001).

C R M is an interactive process that turns customer information into positive cus- t o m e r relationships. It e m p o w e r s m a n y m o r e customer contact personnel, information workers, marketing and sales functions, and m a n a g e m e n t e m p l o y e e s with significantly better and m o r e informative business intelligence about their customers. C R M should

be integrated into everything a c o m p a n y does, e v e r y o n e it employs, and everywhere it transacts. W h e n a firm states that excellent customer service is its goal, this m e a n s that it is the goal of the entire organization, not just the p e o p l e w h o connect directly with

customers (see Swift, 2001). C R M is fundamentally an enterprise-level DSS. A n d C R M efforts are not restricted to companies. G o v e r n m e n t agencies use it to i m p r o v e cus-

tomer service (Scalet, 2000), and nonprofit organizations for fund-raising efforts (see Cohen, 2002).

Customer loyalty is important. In competitive markets, if y o u do not maintain cus- t o m e r s ' loyalty, a n o t h e r firm will t a k e t h e m away. In the m o b i l e p h o n e industry,

b e t w e e n 20 and 30 percent of customers change their provider every year. Identifying w h o is likely to churn and maintaining e v e n a small percentage can generate millions of dollars in m a i n t a i n e d r e v e n u e (Swift, 2001). L o y a l c u s t o m e r s are typically m o r e profitable customers. If an organization can accurately predict future sales based on customer behavior, it will lead to cross selling. C R M enables customer retention and higher profits by k n o w i n g the c u s t o m e r and using cross selling. It e n a b l e s accurate target marketing by helping identify customers and their n e e d s via customer s e g m e n - tation.

For decades, airlines h a v e r e c o g n i z e d the i m p o r t a n c e of retention. T h e y recog- nized early that incentives generate further purchases and positive contacts with cus-

4 5 8 P A R T 111 ' COLLABORATION, COMMUNICATION, ENTERPRISE DECISION SUPPORT SYSTEMS, AND KNOWLEDGE MANAGEMENT

tomers, leading to long-term growth and customer retention. Airlines pioneered cus- tomer retention programs and revenue management (sometimes called yield manage- m e n t ) e f f o r t s t o p r o v i d e t h e right p r o d u c t t o t h e right c u s t o m e r a t t h e right price i n t h e right m a n n e r , a n d utilized t e c h n o l o g y t o a p p l y o p t i m i z a t i o n m e t h o d s t o m a n a g e price, supply, and demand. Superior and personalized customer service to their best cus- t o m e r s a n d s p e c i a l p r i v i l e g e s ( f r e e f l i g h t s ) h a v e c r e a t e d b r a n d loyalty. H o t e l s , rental car a g e n c i e s , p a s s e n g e r railroads, a n d o t h e r travel i n d u s t r y f i r m s s o o n a d o p t e d t h e s e m e t h o d s . N o w t h e y are b e i n g a d o p t e d b y t h e m a i n s t r e a m , i n c l u d i n g i n d u s t r y s e g m e n t s s u c h as retail, insurance, a n d service.

CRM gathers data on and tracks customers. The point is to use data better to man- a g e r e l a t i o n s h i p s w i t h c u s t o m e r s . T h e C h i c a g o W h i t e S o x , a U.S. m a j o r l e a g u e b a s e b a l l t e a m , u s e s C R M t o i n c r e a s e f a n l o y a l t y ( w i n n i n g i s b e t t e r f o r b u i l d i n g loyalty, b u t w i n - n i n g b e t t e r w i t h t e c h n o l o g y i s e v e n b e t t e r ) a n d i n c r e a s e s sales. S e e D S S i n A c t i o n 8.27.

MARKETING M a r k e t i n g h a s m o v e d t h r o u g h t h e p h a s e s o f ( 1 ) m a s s m a r k e t i n g , ( 2 ) target m a r k e t i n g ,

(3) customer marketing, and (4) 1-to-l marketing. Each phase has used technology to b o o s t sales. N o w C R M i s e n a b l i n g t h e c o n c e p t o f 1 - t o - l m a r k e t i n g . I n 1 - t o - l m a r k e t -

DSS IN ACTION 8.27