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Chapter 5

Commerce 2KA3 - Chapter 5 Summary

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Chapter 5: Customer Relationship Management
Customer Relationship Management involves managing all aspects of a
customer’s relationship with an organization to increase customer loyalty and
retention and an organization’s profitability.
Business Benefits of CRM
CRM is a business philosophy based on the premise that those organizations
that understand the needs of individual customers are best positioned to
achieve sustainable competitive advantage in the future
CRM Basics
An organization can find its most valuable customers by using a formula that
industry insiders all RFM
RFM: Recency, Frequency, and Monetary Value
oHow recently a customer purchased items (recency)
oHow frequently a customer purchases items (Frequency)
oHow much a customer spends on each purchase (Monetary Value)
Once a company has gathered this initial CRM information, it can compile it
to identify patterns and create marketing campaigns, sales promotions, and
services to increase business
The Evolution of CRM
There are three phases in the evolution of CRM: (1) reporting, (2) analyzing,
and (3) predicting
CRM reporting technologies: help organizations identify their customers
across other applications
CRM analysis technologies help organizations segment their customers into
categories such as best and worst customers
CRM predicting technologies: help organizations make predictions regarding
customer behaviour such as which customers are at risk of leaving
Operational and Analytical CRM
The two primary components of a CRM strategy are operational CRM and
analytical CRM
Operational CRM supports traditional transactional processing for day-to-day
front-office operations or systems that deal directly with the customers
Analytical CRM: supports back-office operations and strategic analysis and
includes all sytems that do not deal directly with the customers.
The primary difference between operational CRM and analytical CRM
is the direct interaction between the organization and its customers
Using Information Technology to Drive Operational CRM
Marketing and Operational CRM
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Three primary operational CRM technologies a marketing department can
implement to increase customer satisfaction are
oList Generator: They compile customer information from a variety of
sources and segment the information for different marketing
campaigns. They provide the marketing department with a solid
understanding of the type of customer it needs to target for marketing
oCampaign Management: campaign management systems guide users
through marketing campaigns performing such tasks as campaign
definition, planning, scheduling, segmentation, and success analysis
oCross-Selling and Up-Selling: Two key sales strategies a marketing
campaign can deploy are cross-selling and up-selling
Cross-selling: is selling additional products or services to a
Up-selling: is increasing the value of the sale
Sales and Operational CRM
Sales departments were the first to begin developing CRM systems
Sales Force Automation: is a system that automatically tracks all of the steps
in the sales process. SFA products focus on increasing customer satisfaction,
building customer relationships, and improving product sales by tracking all
sales information
The Three primary operational CRM technologies a sales department can
implement to increase customer satisfaction are
oSales Management CRM systems
oContact Management CRM systems
oOpportunity Management CRM systems
Sales Management CRM systems: automate each phase of the sales process,
helping individual sales representatives coordinate and organize all of their
Contact Management CRM systems: Maintain customer contact information
and identifies prospective customers for future sales
Opportunity Management CRM systems: target sales opportunities by finding
new customers or companies for future sales. They determine potential
customers and competitors and define selling efforts including budgets and
The primary difference between contact management and opportunity
management is that contact management deals with customers and
opportunity management deals with new customers
Customer Service and Operational CRM
Sales and marketing are the primary departments that interact directly with
customers before a sale. It is actually more important to build postsale
relationships if the company wants to ensure customer loyalty and
One of the primary reasons a company loses customers is bad customer
service experiences
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