The Basic Small Business Customer Relationship Management Model

Home > Free Business Articles > The Basic Small Business CRM Model

The basic customer relationship management model for a small business or any business for that matter contains a set of seven basic components. The following dicusses each component:

1. A database for customer activity - Ideally the database should contain information about the following: o Transactions - including a complete purchasing history with accompanying details o Customer contacts from multiple channels and contexts o Descriptive information for segmentation and other data analysis purposes o Response to marketing stimuli - whether or not the customer responded to a direct marketing initiative, a sales contact, or any other direct contact o This data should also be collected over time.

2. Analyses of the database - For many years customer databases have been analyzed with the intent to define customer segments. However, taking a larger number of customers and forming groups or segments presumes a marketing effort towards an 'average' customer in the group. With the range of marketing tools available that can reach customers one at a time through personalized messages, there is less need to consider the usual market segmentation schemes. Instead there is an increase in attention being paid to understanding each "row", or customer, of the database, and what he or she can deliver to the company in terms of profit. The idea is that each row/customer of the database should be analyzed in terms if current and future profitability to the firm. 3. Given the analyses, decisions about which customers to target - Looking at past and current purchases a model of the profitability of a customer can be used by the marketing manager to target specific customers. The profit that a customer has produced for the firm is the sum of the margins of all products purchased over time less the cost of reaching that customer. These costs include any that can be broken down at the individual customer level such as direct mail, sales calls etc. Cross-selling is also becoming of interest to marketers, with complementary products being displayed on the same physical page in a hard-copy catalogue or virtual page on a Web site. 4. Tools for targeting the customers - Once the construction and analysis of the customer information contained in the database has been completed, the next step is to consider which customers to target depending on the firms marketing programs. This could be through segmentation, with the customers in the most desired segments targeted first. Individual customers could be targeted that are projected to be profitable for the company. The goal is to use the customer profitability analysis to separate customers that

will provide the most long-term profits from those that are currently hurting profits. Mass marketing is useful for generating awareness, but is poorly-suited for CRM due to its impersonal nature. Rather than talking "at" customers companies are urged to talk "to" their customers. In particular, "1-to-1" marketing has come to mean using the Internet to facilitate individual relationship building with customers. 5. How to build relationships with the targeted customers - The overall goal of relationship programs is to deliver a higher level of customer satisfaction than competing firms deliver. Research has shown that there is a strong, positive relationship between customer satisfaction and profits. Relationship programs include: o Customer service: With more choices available for customers today, customer service must receive a high priority within the company. Any contact or "touch point" that a customer has with a firm is a customer service encounter and has the potential to gain repeat business and help CRM or have the opposite effect. o Loyalty/Frequency Programs: Loyalty programs provide rewards to customers for repeat purchasing. However, a recent McKisey study identified the three leading problems with these programs: they are expensive, mistakes can be difficult to correct as customers see the company as taking away benefits, and also there are large questions about whether they work to increase loyalty or average spending behavior. A further problem is that due to the ubiquity of these programs, it is increasingly difficult to gain competitive advantage. o Customization: This notion implies the creation of products and services for individual customers, and not simply communicating with them as with 1-to-1 marketing. o Community: The Internet is allowing both online and offline businesses to build a network for exchanging product-related information and to create relationships between the customers and company or brand. The goal is to take a prospective relationship with a product and turn it into something more personal. This allows the manager to build an environment which makes it more difficult for the customer to leave the "family" of other people who also purchased this product. 6. Privacy issues - A CRM strategy as described in this paper depends upon a database containing customer information and the analysis of this data to achieve more effective targeting of marketing communications and relationship-building activities. With the increase in the popularity of the Internet, many consumers and advocacy groups are concerned about the amount of personal information necessary to enable this delivery. The current debate about privacy centers around how much control Web surfers should have over their own information. 7. Metrics for measuring the success of the CRM process - As more attention is paid to CRM, the traditional metrics used by managers to measure the success of their products and services in the marketplace have to be updated. Some of the CRM-based measure in both Web and non-Web based businesses are as follows: o Customer acquisition costs o Conversion rates (from lookers to buyers) o Retention /churn rates o Same customer sales rates

o o

Loyalty measures Customer share or share of requirements (the share of a customer's purchases in a category devoted to a brand).

All of these measures imply doing a better job through acquiring and processing internal data and focusing on how the company is performing at the customer level.

CRM Architecture
Author : Exforsys Inc. CRM Architecture Published on: 10th Dec 2006

The Customer relationship management architecture can be broken down into three categories, and these are operational, collaborative, and analytical. Each plays an important role in Customer relationship management, and a company that wants to success must understand the importance of using these three components successfully.

Operational CRM deals with the automation of certain business processes. An example of business processes that are connected to operational CRM are marketing and sales. When a connection is made to a customer, the information related to this interaction will be automatically stored in a database, and the company can pull up specific information on that customer when it is needed. Operational CRM can further be broken down into three components. These components are Enterprise marketing automation, Customer service automation, and Sale force automation. The Enterprise marketing automation will give the company information about the business climate, and it will also provide them with crucial data on their competitors, as will as trends within the industry and other important variables. As the name implies, Enterprise marketing automation deals with strategies a company can use to strengthen their marketing tactics. Customer service and support will automate specific processes that are connected to service. An example of this could be item returns or customer complaints. Sales force automation will be responsible for automating some of the company's sales tasks. An example of tasks that SFA would automate are demographics, customer needs, and accounting management. A number of corporations will use call centers to store data on their customers. Once the customer makes a call, the customer service representative can provide them with relevant information. Many companies will also automate processes such as allowing customers to access their accounts. The next important part of CRM architecture is Analytical CRM. As the name suggests, Analytical CRM deals with analyzing data that is collected by the company. This

data will be analyzed so that the company can enhance its customer service capabilities. By enhancing its customer service capability, a company will build a stronger relationship with its customers. There are a number of common ways that Analytical CRM is used to achieve this. A number of companies will use the data they've collected and analyzed to cross-sell products to their customers, as well as retaining customers that may normally switch to another company. Analytical CRM can also be used to provide important information to customers within a short period of time. In addition to building stronger relationships with customers, Analytical CRM can be an important tool for fraud prevention and detection. It can analyze the patterns of sales, inventory, and profits in order to find any patterns that are not consistent. Analytical CRM is also important when it comes to both product development and risk management. It is important to realize that Analytical CRM is an ongoing process. The company may need to alter its strategies or methods based on the information that is analyzed through this process. The third important aspect of CRM architecture is Collaborative CRM. Collaborative CRM is important because it places an emphasis on the interactions that a company will make with its customers. These interactions could be personal, or they could come through mediums such as the telephone or the Internet. Collaborative CRM will give companies a powerful form of communication that will utilize multiple technologies. It will also be responsible for providing services over the Internet so that the costs of the service can be reduced. When interactions are made with customers, Collaborative CRM will allow the company to provide them with useful information. At the highest level, CRM should be an important part of all interactions that a company makes with its customers.

CRM Architecture There are three parts of application architecture of CRM: operational - automation to the basic business processes (marketing, sales, service) analytical - support to analyze customer behavior, implements business intelligence alike technology co-operational - ensures the contact with customers (phone, email, fax, web, sms, post, in person) Operational CRM Operational CRM means supporting the so-called "front office" business processes, which include customer contact (sales, marketing and service). Tasks resulting from these processes are forwarded to employees responsible, information necessary for carrying out the tasks and interfaces to back-end applications are being provided and activities with customers are being documented for further reference. Operational CRM provides the following benefits: Delivers personalized and efficient marketing, sales, and service through multi-channel collaboration Enables a 360-degree view of your customer while you are interacting Sales people and service engineers can access complete history of all customer interaction with your company, regardless of the touch point According to Gartner Group, the operational part of CRM typically involves three general areas of business:

Sales force automation (SFA) : SFA automates some of the company's critical sales and sales force management functions, for example, lead/account management, contact management, quote management, forecasting, sales administration, keeping track of customer preferences, buying habits, and demographics, as well as sales staff performance. SFA tools are designed to improve field sales productivity. Key infrastructure requirements of SFA are mobile synchronization and integrated product configuration. Customer service and support (CSS) : CSS automates some service requests, complaints, product returns, and information requests. Traditional internal help desk and traditional inbound call-center support for customer inquiries are now evolved into the "customer interaction center" (CIC), using multiple channels (Web, phone/fax, face-to-face, kiosk, etc). Key infrastructure requirements of CSS include computer telephony integration (CTI) which provides high volume processing capability, and reliability. Enterprise marketing automation (EMA) : EMA provides information about the business environment, including competitors, industry trends, and macroenviromental variables. It is the execution side of campaign and lead management. The intent of EMA applications is to improve marketing campaign efficiencies. Functions include demographic analysis, variable segmentation, and predictive modeling occur on the analytical (Business Intelligence) side. Integrated CRM software is often also known as " front office solutions." This is because they deal directly with the customer. Many call centers use CRM software to store all of their customer's details. When a customer calls, the system can be used to retrieve and store information relevant to the customer. By serving the customer quickly and efficiently, and also keeping all information on a customer in one place, a company aims to make cost savings, and also encourage new customers. CRM solutions can also be used to allow customers to perform their own service via a variety of communication channels. For example, you might be able to check your bank balance via your WAP phone without ever having to talk to a person, saving money for the company, and saving you time. Analytical CRM In analytical CRM, data gathered within operational CRM are analyzed to segment customers or to identify cross- and up-selling potential. Data collection and analysis is viewed as a continuing and iterative process. Ideally, business decisions are refined over time, based on feedback from earlier analysis and decisions. Collaborative CRM Collaborative CRM facilitates interactions with customers through all channels (personal, letter, fax, phone, web, e-mail) and supports co-ordination of employee teams and channels. It is a solution that brings people, processes and data together so companies can better serve and retain their customers. The data/activities can be structured, unstructured,conversational, and/or transactional in nature. Collaborative CRM provides the following benefits: Enables efficient productive customer interactions across all communications channels Enables web collaboration to reduce customer service costs Integrates call centers enabling multi-channel personal customer interaction Integrates view of the customer while interaction at the transaction level

CRM Technical Functionality

A CRM solution is characterised by the following functionality: scalability - the ability to be used on a large scale, and to be reliably expanded to what ever scale is necessary. multiple communication channels - the ability to interface with users via many different devices (phone, WAP, internet, etc) workflow - the ability to trigger a process in the backoffice system, e. g. Email Response, ... assignment - the ability to assign requests (Service Requests, Sales Opportunities) to a person or group. database - the centralised storage (in a data warehouse) of all information relevant to customer interaction customer privacy considerations, e.g. data encryption and the destruction of records to ensure that they are not stolen or abused Improving Customer Relationship CRMs are also claimed to be able to improve customer relationships . Proponents say this is because: CRM technology can track customer interests, needs, and buying habits as they progress through their life cycles, and tailor the marketing effort accordingly. This way customers get exactly what they want as they change. The technology can track customer product use as the product progresses through its life cycle, and tailor the service strategy accordingly. This way customers get what they need as the product ages. In industrial markets, the technology can be used to micro-segment the buying centre and help coordinate the conflicting and changing purchase criteria of its members When any of the technology driven improvements in customer service (mentioned above) contribute to long-term customer satisfaction, they can ensure repeat purchases, improve customer relationships, increase customer loyalty, decrease customer turnover, decrease marketing costs (associated with customer acquisition and customer training), increase sales revenue, and thereby increase profit margins.

Customer Performance Measurement

Customer Performance Measurement (CPM) is the acquisition, analysis and the evaluation of performance-related customer information and an important task of (analytical) Customer Relationship Management (CRM). A Customer Performance Measurement System (CPMS) is therefore a CRM system used to analyse, evaluate, control and communicate customer performance and customer strategies. CPM is an important instrument of analytical Customer Relationship Management (aCRM) in order to improve the efficiency and effectiveness of process and customer management. Hearth of the aCRM resp. CPM is a relational customer database and a customer data warehouse.

CPM has to rely on an adequate number Customer Performance Indicators (CPIs), which can be defined as customer-related monetary or non-monetary criteria (measures, metrics, indices, figures or ratios) about customer performance. Examples of important CPIs are:

Customer value Customer satisfaction Customer loyalty and retention Customer equity Customer turnover, margins, profit, etc.