Customer Relationship Management

1.4.2 Customer Relationship Management

Customer relationship management (CRM for short) is a new research filed of management which devolved rapidly to adapt to the strategic transfer from product-centered management to costumer-centered one. It considers satisfaction and loyalty of customers as the final goal. In recent years, more and more enterprises and software developers home and abroad study it as a hotspot. Being an integration of the front end application systems on the background, the CRM system is an applicable concept, resting itself on the increase and automation of sales, marketing, service and supporting application featuring customer-centered in the hope of bringing the enterprises long-term benefits by improving the customers’ satisfaction and loyalty. This principle is broken when many enterprises carry out CRM that causes countless unsuccessful cases.

The articles on CRM mainly illustrate the impact on establishment of CRM system and procedures, with little concern about what should be done first: knowing who your customers are and what will influence their behaviors. Currently what the enterprises are able to do is to learn about their customers rather than understand the customers themselves. KPMG report shows that up to 70% of British enterprises admitted it difficult to identify who are their customers and what they want to buy most. It is quite difficult to find such valuable information related to CRM in daily reports and analyses.

According to Jim Berkowitzˈa well-known management consultant, CRM has to rest on two solid foundations: reasonable organization structure and reasonable information structure. If the enterprises carry out CRM with the motive of separate interest of each department rather than the motive of adapting to philosophy, culture and strategy of customer-centered commerce, CRM will suffer a lack of reasonable organization foundation. This reasonable organization structure can substitute a more integrated and shared work flow and information flow for the original collective process among departments, thus the enterprises becomes a unified organization to effectively predict customers’ needs, and value and simplify their work process.

On the other hand, under the keen competition atmosphere, competition for the limited clients will turn more fierce. Because the cost of obtaining a new client is far more than that of maintaining an original client, it has been a key problem what measures the enterprises must take to maintain the clients and improve the clients’ loyalty. The answer lies in the record of dealing with the clients, that is,

1 Fundamentals of E-commerce

the clients database, but the enterprises do not make effective use of it to discover valuable potential client-loyalty-related information. According to survey made by META, only 4% of the managers of 800 commercial IT enterprises think they make full use of clients’ data to understand them, while 29% of the managers interviewed use the data to some extent and 67% of the managers do not use the data at all.

Client Intelligence (CI)

Some specialists mentioned the notion of client intelligence in research. They classified it into three categories: the first one is the research on function, contents and essence of client intelligence. Mark Allen Smith equals client intelligence to client analysis. Analyzing the relationship between client intelligence and CRM, Paul Clark in BO Company thinks that client intelligence is where the wisdom of CRM is. The second is the research on realization of client intelligence. Jim Berkowitz puts forward that business intelligence is the foundation of CRM. The other valuable point is that the analysis is made about the components of CRM, regarding OLAP, database, and data mining technology as the indispensable components for business intelligence. The third one is the research closely related to client intelligence. Emma Chablo points out that client knowledge is an important part of CRM while marketing data intelligence is the part to provide CRM the real client knowledge. He defines marketing data intelligence as using data-driven marketing metrics and technology to improve the understanding of clients and products, and to deal with the data and accordingly help CRM make strategic decisions.

Because different people do research on it from different perspectives, it is difficult to sum up a convincing definition. There is one thing in common below: few people have done research on client intelligence from the perspective of the role that knowledge plays in making client-related decisions. As a matter of fact, only by doing research on knowledge can people discover the essential contents of client intelligence. In this book, client intelligence is the creative use of clients information, an integration of concepts, methodology, process and software of decision-making and overall operation capacity to help enterprises improve clients relationship. Client intelligence system as shown in Fig. 1.11 comprises the following levels:

(1) Theoretical foundation The theoretical foundation of client intelligence is guidance for enterprises to

make decisions about clients. It includes not only the theories and measures by which enterprises analyze and treat clients, but client value analysis from the perspective of clients and enterprises respectively. Through analysis on consumption behaviors, satisfaction, interest rate, etc. enterprises reach the goal of scientific decision-making and rationality.

Analysis on clients value is tremendously supportive to client-related activities.

Introduction to E-commerce

For example, such activities as customer identification, customer segmentation, customer differentiation, customer satisfaction and so on will be goal-oriented and guide a correct client relation with support of the analysis on client value.

(2) information system It is the physical foundation for CI system, and is reflection in software which

has strong capacity to make decision and analysis and in information system platform gearing to the special application field.

(3) data analysis As a series of computation, devices or models, it intends to obtain high-quality

data or information about the theme concerned, then involve in using analytical computation, devices or models automatically or by hand to help people analyse information, reach a conclusion, form a hypothesis and test a hypothesis.

(4) knowledge discovery Same as level (3) above, it is also a series of computation, tools or models. It

intends to transform data into information, then into knowledge through discovery, or directly transform data into knowledge.

(5) strategic level It intends to apply information or knowledge to such aspects as improving

decision-making, operational capacity, enterprises’ construction model, etc. The strategic level is a combination of a series of concepts, methods and processes for improving the enterprises’ capacity to make decisions by use of information from many sources and application experience and hypothesis. By obtaining, managing and analyzing information, it provides all the staffs the access to knowledge so as to improve the capacity of strategic decision-making and tactic decision-making.

The strategy for client development refers to the client-centered development strategy, taking into account the resources inside the enterprises and environmental elements outside enterprise and reaching the final goal of maximizing the life periodical value of the clients. The client development strategy must be supported by other strategies like aimed market, marketing combination, market competition, accounting, coordination, organization, talents and so on. Client-centered development strategy cannot substitute for the overall strategy of an enterprise, while it is the most valuable strategy for reference in the overall strategy.

As a system framework based on the controllability of CI theory, CI system includes information system, data analysis, knowledge discovery in CI series. Therefore, CI series can also be shown simply by basic CI theory and CI system based on CI theory. CRM system based on CI is one of the CI systems presented in this book.

All in all, CI aims at transforming the information in the enterprises to competitive advantage, improving its capacity to make decisions, the efficiency and accuracy of decision-making. To fulfill this aim, CI must have the computation, model and process for realizing the transfer from data analysis to knowledge discovery while the theme of decision-making has to be extremely general.

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Figure 1.11 Expanding CI Series