Chapter 1: An Introduction to CRM PDF

# Chapter 1: An Introduction to CRM ## Chapter Objectives By the end of this chapter, you will be able to: - describe three major forms of CRM: Strategic, Operational and Analytical - describe where Social CRM fits in the CRM landscape - describe the changing character of CRM - list several c...

# Chapter 1: An Introduction to CRM ## Chapter Objectives By the end of this chapter, you will be able to: - describe three major forms of CRM: Strategic, Operational and Analytical - describe where Social CRM fits in the CRM landscape - describe the changing character of CRM - list several common misunderstandings about CRM - define CRM - name the constituencies with an interest in CRM - provide examples of CRM deployments in several contexts - describe three models of CRM ## Introduction The expression, 'Customer Relationship Management (CRM)' has been in use since the early 1990s. There have been many attempts to describe the domain of CRM (see Table 1.1 for a sample of these definitions). CRM incorporates a variety of business activities. ## IT Perspectives of CRM IT companies tend to use the term 'CRM' to describe the software tools used to support marketing, selling and service functions of businesses. This equates CRM with technology. The commercialization of CRM software accelerated in 1993 when Tom Siebel founded Siebel Systems Inc. (now part of Oracle). Over the ensuing decades, the market for CRM software has become mature and now includes a diverse array of suppliers. According to a 2022 Fortune Business Insights report, global spending on customer relationship management software applications is projected to grow from US$63.91 billion in 2022 to US$145.79 billion by 2029, at a compound annual growth rate of 12.5%. ## Understanding Customer Relationships **Table 1.1: Definitions of CRM** | CRM is an information industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organised way. | | CRM is the process of managing all aspects of interaction a company has with its customers, including prospecting, sales, and service. CRM applications attempt to provide insight into and improve the company/customer relationship by combining all these views of customer interaction into one picture. | | CRM is an integrated approach to identifying, acquiring, and retaining customers. By enabling organisations to manage and coordinate customer interactions across multiple channels, departments, lines of business, and geographies, CRM helps organisations maximise the value of every customer interaction and drive superior corporate performance. | | CRM is an integrated information system that is used to plan, schedule, and control the pre-sales and post-sales activities in an organisation. CRM embraces all aspects of dealing with prospects and customers, including the call centre, sales force, marketing, technical support, and field service. The primary goal of CRM is to improve long-term growth and profitability through a better understanding of customer behaviour. CRM aims to provide more effective feedback and improved integration to better gauge the return on investment (ROI) in these areas. | | CRM is a business strategy that maximises profitability, revenue, and customer satisfaction by organising around customer segments, fostering behaviour that satisfies customers, and implementing customer-centric processes. | However, expenditure on CRM not only includes ongoing fees for software licences and subscriptions, but also data storage (with about 75% of all CRM data now stored in the cloud). A more recent trend now sees suppliers offering CRM as a service, which means that companies access the service on a subscription basis, without the need to buy separate software licences. Large businesses, for example, banks, telecommunications firms, and retailers, were early adopters of CRM. However, recent growth in CRM expenditure is from a broader array of sectors. Ubiquitous, online access to online CRM tools and support means that CRM capabilities are now easy to access for most organisations. Indeed, small-to-medium enterprises (SMEs), not-for-profits, and government departments all use CRM systems. ## Managerial Perspectives of CRM For managers who look to create sales, or support customers more broadly, 'CRM' refers more to activities than it does to software. Rather than emphasizing IT applications, they take the view that CRM is a disciplined approach to managing the customer journey from initial acquisition to their transition to a high-spending, profitable advocate for the company's brands. While technology certainly plays a role in this process, it is not the main feature of CRM. Instead, CRM equates to a customer management strategy. Through the aggregation and analysis of customer-related data, companies use CRM to assess questions such as: - Which customers should we serve? - What sorts of value propositions should we present to companies? - Which channels should we use to serve our target customers? Well-considered answers to these questions allow managers to design and implement processes, procedures, and systems that integrate diverse activities of the company to provide near-seamless customer interactions. ## CRM and Customer Experience Management Managerial perspectives of CRM have a close association with more recent attempts to manage customer experiences (CX). By understanding CX, companies are more likely to design and implement measures that align with a comprehensive understanding of customers' interactions company touchpoints such as storefronts, new customer-facing employees, websites and technology, and new processes. For example, sales reps can now show product information through tablets that they carry with them. They can easily email clients links to product demo videos. They can also share contact details via online apps. Sales reps can also access CRM technology to gain in-depth client insights in real-time, thus developing customer rapport. There is scope to place orders, to trace the progress of current orders, and to recall earlier orders, all in real-time. CRM allows sales reps to create richer, more efficient CX than has been the case historically. It is also the case, however, that the implementation of CRM may produce poor CX. Customers who prefer personal calls from sales reps might find these disappear in favour of an online sales portal. Self-service through such portals results in a very different CX. Customer resistance, resentment, and churn may result. There is also scope for a lack of a consistent or coherent CX, where parts of the company do not successfully coordinate with one another. Understanding customers' perspectives during the implementation or enhancement of CRM, therefore, is necessary. CX is a major focus for consumer marketing and the provision of government services. By understanding the end-to-end journey from need identification to using the solution in situ, companies enhance their ability to create strategies and offers that truly engage their target customers and promote longer-term loyalty. This involves understanding the value customers extract in using the offer, all the steps involved in getting to that point, and the integration of all the company's online and offline channels to make that journey as easy and rewarding as possible. CX therefore integrates strategic, operational, and analytical CRM to focus on creating the right customer experiences. ## Three Forms of CRM We can resolve the debate between technological and managerial notions of CRM by envisioning CRM in three main forms: strategic, operational, and analytical, as summarized in Table 1.2. **Table 1.2: Types of CRM** | Type of CRM | Dominant characteristic | | ------------- | ------------- | | Strategic | The aspects of company-level strategy that advocate a customer-centric approach to identifying, winning, developing, and keeping profitable customers. | | Operational | The process through which organisations transform customer-facing processes such as selling, marketing, and customer service that create CX. | | Analytical | The integration and automation of customer-facing processes related data into actionable insight useful for Strategic and/or Operational CRM. | ## Strategic CRM Strategic CRM focuses on the development of a customer-centric culture. Central to this culture is the dedication to identifying, winning, developing, and keeping profitable customers. Creating and delivering better value propositions and experiences than those of competitors are core pursues of strategic CRM. A customer-centric culture is evident in the behaviours of leaders, the design of formal systems of a company, and in the common myths and stories. Resource allocations reflect an emphasis on customer value maximization (i.e., increasing customer benefits, reducing customer costs), employee reward schemes align closely with customer value maximization, and customer-related data collection and analysis emphasizes a whole-of-company, integrated approach to managing CX. Many businesses claim to be customer-centric, customer-led, customer-focused, or customer-oriented, but few are. The reality is that it is hard to develop and implement a customer-centric culture since it takes considerable resource investments and dedica-tion to often difficult decisions that help the customer, sometimes to the detriment of the company. PayPal, the online payment service, is an example of strategic CRM (see Case illustration 1.1). ## Operational CRM Operational CRM aims to improve the efficiency and effectiveness of customer-facing business processes and their integration between different corporate divisions or teams, particularly through automation. Many CRM software apps enable marketing, selling, and service process automation to varying degrees (normally depending on the package the company signs up to). Table 1.3 has a brief description of some common applications. We revisit many of these applications in later chapters. **Table 1.3: Operational CRM some applications** | Marketing Automation Tools/Apps | Functions | |------------------------------------------|-------------| | Campaign Management | Allows marketers to use customer-related data to develop, execute, and evaluate targeted communications and offers across multiple channels. | | Event-Based (Trigger) Marketing | Identifies significant events or triggers relevant to the customer as the basis of communications content. | | Marketing Optimization | Targeting communications as precisely as possible to simultaneously maximise effectiveness and efficiency of marketing resources. | | Sales Force Automation Tools/Apps | | | Account Management | Maintains positive relationships with current customers through insight and planned communications. | | Lead Management | Develops new sales leads through analytics and insight, and targeted communications. | | Opportunity Management | Prioritises sales opportunities and applies a workflow to coordinate sales, marketing, and operations activities to convert sales opportunities into new business. | | Pipeline Management | Profiles sales opportunities in terms of the types of products/services in demand, the timing of such demand, and recommends a suitable service approach. | | Contact Management | Maintains records of communications from and to potential, current, and previous customers. | | Product Configuration | Through analytics and insight, recommends a product combination for a target customer. | | Quotation and Proposal Generation | Normally through a structured workflow, the application develops a new proposal or quotation for a specified product offering for a given customer. | | Service Automation Tools/Apps | | | Case (Incident or Issue) Management | Upon receipt of a customer enquiry, creates a record of a customer issue and generates a workflow to coordinate its resolution. | | Customer Communications Management | Includes mechanisms to receive customer messages and to convey information to the customer (such as status updates). | | Queuing and Routing | The system uses algorithms to identify the most efficient set of steps necessary to resolve the customer issue and subsequently allocates the issue (or parts thereof) to appropriate resources. | | Service Level Management | Monitors different service levels according to a set o predefined standards (i.e., 'service standards'), identifies any deviations, and recommends remedies. | Campaign management (CM) tools and/or apps allow marketers to use customer-related data to develop execute, and evaluate targeted communications and offers. CM applications aim to lift customer engagement with the brand – be that a product brand or organisation brand. CM tools and/or apps often include an ability to pre-plan marketing communication activities and to schedule their implementation. This is particularly the case with social media marketing. For example, HubSpot allows marketers to develop content (e.g., blog posts, videos, infographics) and schedule their dissemination among social media platforms. In multi-channel environments, campaign management is particularly challenging. Fashion retailers may have several transaction channels including free-standing stores, department store concessions, a website, home shopping catalogues, catalogue stores, and even a TV shopping channel. Some customers may be unique to a single channel, but most will be multi-channel prospects, if not already customers of several channels. Integration of communication and offer strategies, and evaluation of performance, require a substantial amount of technology-aided coordination across these channels. Event-based, or trigger, marketing is the term used to describe messaging and offer development to customers at points-in-time. An even triggers the communication and offer. Customer behaviours or contextual developments act as the triggers. A call to a contact centre is an example of a customer-initiated event. When a credit card customer calls a contact centre to enquire about the current rate of interest, this is a sign that the customer is comparing alternatives and may switch to a different provider. This even can act as a trigger for the company to make an offer to retain or develop the customer relationship. Examples of contextual events are the birth of a child or a public holiday. Both can compel changes in buyer behaviour, which trigger a marketing response. Event-based marketing also occurs in business-to-business (B2B) market contexts. The event may be a change of personnel on the customer-side, the approaching expiry of a contract, or a request for information (RFI). Real-time marketing combines predictive modelling and workflow automation, enabling companies to make relevant offers to customers as they interact with different touchpoints such as websites and retail outlets. This means it is possible to optimise marketing campaigns to align with customer behaviours. As consumers share more data with companies, and as the company's ability to analyze that data improves, online and mobile marketing increasingly occur in real-time. Through CRM, companies can match customer usage pattern data with customer profiles, and those of similar people, to predict which communication and offers are most likely to generate a desired outcome (often called the NBO or Next Best Offer). E-retailers, such as Amazon, continually refresh recommendations because of customer searches, and Google changes the advertising it pushes to you as a function of your location and search behaviours. Increasingly, MA relies on sophisticated algorithms trained to predict desirable outcomes, be they, to click to the next screen, express interest, buy a product, or make a recommendation. Algorithms can be developed to improve decision making (from the organization's perspective) and scale rapidly. This enables firms to (ideally) add most value to their customers, at least maximise their revenue while minimising cost. It must be noted that algorithmic decision making is under increasing scrutiny and there are demands for organisations to take more responsibility for the assumptions upon which they are built and the unintended consequences of their deployment. ## Sales-Force Automation Sales-force automation (SFA) is the application of computerised technologies to support and manage the sales activities of the company whether these be through customer-facing staff or through self-service channels. The main aim for companies that implement SFA is to optimize resource use. On the one hand, companies wish to maximise their likelihood of ongoing, profitable sales. On the other hand, companies also wish to invest the least resources possible. By using SFA, companies have a means to achieve these outcomes. The selling process involves multiple stages. These include lead generation, lead quali-fication, lead nurturing, needs discovery, proposition development, proposal presentation, negotiation, closing the sale and after-sales follow-ups. Enacting each step can be complex. There is substantial scope for each salesperson (or sales team) to use different approaches or techniques. While this may be fine, it does lead to a series of potential problems. Inconsistent messages can confuse the customer. Poor communication between sales team members can compromise sales leads. There can be differences between sales promises and the ability of the company to deliver. To address these problems, many companies adopt a sales methodology – an agreed framework or process that catalyses a sales effort. Sales methodologies allow sales team members and management to adopt a standardised view of the sales cycle, and a common language for discussion of sales issues. The presence of a sales method is often a precursor to the implementation of SFA. SFA is then useful for a wide variety of typical sales activities. We discuss several of the more common examples here. - SFA allows companies to assign leads automatically to sales personnel for further follow-up. SFA software then allows sales personnel and their managers to track and manage sales opportunities as they progress through the sales pipeline towards closure. - Contact management lets users manage their communications programme with customers. Digital customer records hold customer contact histories. Contact management applications often have features such as automatic customer dialling, the salesperson's personal calendar, and email functionality. - Product configuration applications enable salespeople, or customers themselves, to automatically design and price customised products, services, or solutions. Configurators are useful when the product is particularly complex, such as IT solutions. Configurators are typically based on an 'if ... then' rules structure. The general case of this rule is "If X is chosen, then Y is needed, prohibited, or legitimated or unaffected'. For example, if the customer choses a particular feature (say, a particular hard drive for a computer), then this rules out certain other choices or related features that are technologically incompatible or too costly or complex to manufacture. - Quotation and proposal generation allow the salesperson to automate the production of prices and proposals for customers. The salesperson enters details such as product codes, volumes, customer name and delivery requirements, and the software automatically generates a priced quotation. This functionality often comes with product configuration in what is known as CPQ – Configure, Price, Quote. ## Service Automation Service automation involves the application of technology to customer service operations. It helps companies manage service operations, whether delivered through call centre, contact centre, field-service, web, or face-to-face with high levels of efficiency, reliability, and effectiveness. Service automation software enables companies handle in-bound and out-bound communications across all channels. Software vendors claim that this enables users to become more efficient and effective, by reducing service costs, improving service quality, lifting productivity, enhancing customer experience, and lifting customer satisfaction. Service automation differs significantly across contexts. The first point of contact for service of consumer products is often the retail outlet or a call centre. The company's employees that work at these touchpoints often use online diagnostic tools that help identify and resolve a customer's problem. Several technologies are common to service automation. Call routing software directs inbound calls to the best handler. Technologies such as Interactive Voice Response (IVR) and AI enabled chatbots enable customers to interact with company computers. Customers can input to an IVR system after listening to menu instructions either by telephone keypad (key 1 for option A, key 2 for option B), or by voice. If first contact problem resolution is not possible, the service process may then involve authorising a return of goods, or a repair cycle involving a third-party service provider. Increasingly, firms are deploying Artificial Intelligence (AI) to this process and ever-improving chatbots – robots capable of conversation with customers can reduce costs while ensuring service quality standards. Most large organisations now respond to customer complaints through social media such as Facebook and X (formerly Twitter) in close to real-time. Social media posts by angry customers can pose significant risks to the company. Real-time engagement in the social media conversation enables companies to intervene promptly to resolve the customer's issue before a social media storm erupts. Some companies employ people and/or technologies to watch and respond to tweets and other social media content. However, other participants in the conversation, for example other users of X (formerly Twitter), might also be able to contribute to the resolution of a consumer's problem, through crowd-sourced customer service. ## Analytical (or Analytic) CRM Analytical CRM, also called analytic CRM, is concerned with capturing, storing, extracting, integrating, processing, interpreting, distributing, using, and reporting customer-related data to enhance both customer and company value. Analytical CRM continues its rapid growth due to the proliferation of Big Data sets holding customer-related data. Analytical CRM looks to harness a diverse array of customer-related data from multiple sources. Customer-related data is often accessible in enterprise-wide repositories: sales data (purchase history), financial data (payment history, credit score), marketing data (campaign response, loyalty scheme data), and service data. Data from external sources such as business partners with whom companies have data sharing agreements (subject to customer acceptance) and third-party organisations such as research firms that supply geo-demographic and lifestyle data can complement the internal data sources. These are typically structured datasets held in relational databases. A relational database is like an Excel spreadsheet where all the data in any row is about a particular customer, and the columns report a particular variable such as name, postcode, and so on. With the application of data mining tools, a company can interrogate the data and advance their customer relationship goals. The expression 'Big Data' has been around since 2000, but it's only since 2010 that businesses have been able to manage the large volumes of ever-changing data, which takes many different forms. According to technology giant IBM, "big data comes from everywhere: from sensors used to gather climate information, posts to social media sites, digital pictures and videos posted online, transaction records of online purchases, and from cell phone GPS signals to name a few". Big Data extends beyond structured data, including unstructured data of all varieties: text, audio, video, click streams, log files, and more. The tools for searching, making sense of, and acting on unstructured data differ from those available for data-mining structured datasets. Some technology firms offer 'social CRM' solutions that can help users understand and exploit 'Big Data'. Analytical CRM has become an essential part of many CRM implementations. Operational CRM struggles to reach full effectiveness without analytical information about customers. For example, an understanding of customer value or propensities to buy underpins many operational CRM decisions, thus helping to answer questions such as: - Which customers shall we target with this offer? - What is the relative priority of customers waiting on the line, and what level of service should we offer? - Where should I focus my sales effort? - Which customers are most influential in social media? From the customer's point-of-view, analytical CRM can deliver prompt, customised, solutions to problems, thereby enhancing customer satisfaction and loyalty. From the company's point-of-view, analytical CRM offers the prospect of more powerful cross-selling and up-selling programmes, and more effective customer retention and customer acquisition programmes. ## The Changing Face of CRM Since companies began to recognise the importance of CRM in the 1980s, there has been a gradual and ongoing evolution of CRM. This resembles shifts in managerial practice as well as technological advances. We can think of earlier forms of CRM as CRM 1.0, where companies were the creators and maintainers of customer-related data that informed CRM (strategic, operational, and analytical. . The fact that the company handled the implementation of all CRM-related activities by drawing on its own data and resources meant that CRM 1.0 was 'on-premises CRM. CRM would normally sit in company databases, behind corporate firewalls, and would involve licensed software use. CRM 1.0 did involve the use of data from some external third parties. Market research companies, for example, did supply customer-related data through customer surveys or focus groups. Government agencies were also useful for supplying demographic or geographic customer-related data. Companies could also tap into marketing or management consultations to analyse the data and to produce recommendations. This complemented internal corporate analytics. Analyses tended to focus on several key statistical procedures, such as cluster analysis (for market segmentation), regression (to explain customer behaviour), and Neural Networks and other forms of Machine Learning (to predict customer behaviour) which rely on structured data sets. Over the past 40 or so years, CRM has continued to evolve. One of the biggest changes has been the shift from on-premises CRM to 'cloud-based CRM. About 75% of all CRM data is now stored in the cloud, not on corporate database servers. This means that companies have become comfortable with outsourcing many of the traditional CRM activities (data cleaning, storage, analysis, presentation) to third parties. In return, companies have been able to use external expertise in data science and data analytics without having to invest significant resources themselves. This allows companies to focus on their core competencies, which often do not include CRM. Companies do, however, require internal resources, systems, and processes that allow them to manage CRM-related activities – this is the only way to ensure their investment in cloud-based CRT is worthwhile. The prevalence of cloud-based CRM, or CRM 2.0, coincides with the ability of modern CRM tools and apps to handle broader, more diverse, customer-related data sets and to produce user-friendly insights from them. Analytics for unstructured data such as Natural Language Processing and Video Analytics are now widely available, and machine learning applications such as neural networks and artificial hierarchical processing are available to find meaning in large and amorphous datasets. This means that CRM 2.0 is much more useful than CRM 1.0. We summarise some of the differences between CRM 1.0 and CRM 2.0 in Table 1.4. **Table 1.4: How CRM has changed over time** | Period | CRM 1.0 (1990>) | CRM 2.0 (2010>) | | --------- | -------------- | -------------- | | Customer data sources | Mostly internal corporate siloes | Internal siloes plus external 'Big Data' sources | | Data character | Structured | Structured and unstructured | | Data storage | Corporate Servers | Cloud | | Analytics | Standard multivariate statistics | Standard multivariate statistics plus Artificial Intelligence | | Mobile CRM access | Rare | Common | | Customer interactions | Pre-planned | Realtime | | Dominant CRM model | On-premises | Software-as-a-Service | ## Defining CRM Against the background of the three types of CRM, it is no easy matter to settle on a single definition of CRM. However, we can name several core CRM attributes and integrate them into a definition that underpins the rest of this book. CRM is an 'organisational capability. This clearly denotes that CRM is not just about IT. CRM is a basic business discipline that focuses on managing the company's relationships with customers. An organisational capability amounts to a set of inter-related systems, processes, procedures, and resources. To provide seamless CX, it is necessary for each of these elements to produce a coherent and cohesive means for the company to manage its customer relationships. This is consistent with strategic CRM, which looks to embed customer relationships into the culture of the company. It is also consistent with operational CRM since it acknowledges the systems, processes, procedures, and resources necessary to conduct CRM operations. It is also consistent with analytical CRM in that some of the systems, processes, procedures, and resources are necessary for CRM analytics. CRM 'centres on the creation and maintenance of profitable customer relationships'. This implies that customers go through a series of stages in their relationship with a supplier. CRM practitioners tend to think of customer relationships in terms of a life cycle or journey. The 'creation' phase means that CRM is used to acquire or on-board a new customer. The 'maintenance' phase means that managers use CRM to keep the customer. The qualification that the relationship should be 'profitable' shows that not all potential customers are worth attracting or keeping. Some customers may be so costly to attract that a relationship with them has no chance of turning a profit, equally, the costs of keeping a relationship may prove insurmountable, meaning that it is better to conclude the relationship (ideally in an amicable way). CRM is also about 'the design and delivery of superior value propositions. Companies develop value propositions (offers or offerings) and present and promote them to customers through communication and distribution channels. When customers own or use these offers, they experience value. Companies that succeed ensure that the value customers experience from use and ownership is superior to what they experience from competitors' value propositions. CRM is 'grounded in insights from customer-related data. This element of our definition highlights the essential role of customer analytics and insight – as well as the importance of high-quality customer-related data that underpins these activities. As we outline earlier in the chapter, analytical CRM is a core aspect of CRM in that it produces the outputs (analytics) that inform customer insights. These then guide many CRM-related decisions. Of course, robust analytics and insights rely on customer-related data. Many recent developments in data processing methods and approaches mean that it is now possible to accommodate a broader variety of data and to overcome, at least to some extent, poorer quality data. Such data now originates from multiple sources, so our definition also implies the ability to access a diverse range of customer-related data from multiple sources, to process it (thus improving its quality), to analyse it (through a range of sophisticated algorithms and other analytical techniques), and to produce it in a user-friendly format (and thus render meaningful insights). Given these attributes, we can therefore define CRM: CRM is an organisational capability that centres on the creation and maintenance of profitable customer relationships through the design and delivery of superior value propositions grounded in insights from customer-related data. ## Misunderstandings About CRM As with all major management initiatives, there are several common misunderstandings about the nature of CRM. We outline some common ones below: 1. CRM is an IT system. In the authors' experience, this is the most serious of the misunderstandings. There is no doubt that IT is a necessary enabler of CRM in most organizations, given the need to store, analyse, and distribute huge amounts of data quickly throughout the organisation and its business partners. However, too many managers consider CRM implementations as IT initiatives, rather than broader strategic initiatives. The implication of this is that there is little deference to the actual purpose of the CRM system - to create, build, and sustain profitable customer relationships. Instead, there is a focus on the implementation of the CRM system so managerial conversations tend to concentrate on time, budget, and resource allocations rather than the value that a CRM system can deliver to the company. 2. CRM is the responsibility of the marketing and/or sales teams only. The functionality of many CRM systems centres on marketing and sales process automation. This may allow the company to increase the efficiency and effectiveness of its sales and marketing activities. This then generates more demand for the company's products and services. If the company does not prepare for this, then the outcome is an inability to service customer requirements, thus leading to customer disappointment. Without a coordinated approach to managing sales/marketing activities in line with the company's ability to service the resulting new demand, the company's CRM approach may in fact destroy customer relationships. It is important to recognise that CRM, while involving systems, is a whole-of-company responsibility. 3. CRM automates 'everything'. Many companies embark on the implementation of a CRM system in the hope that it will replace the need for existing resources by automating those roles. For example, the sales automation capabilities of some CRM systems allow companies to compile proposals or quotes for customers and distribute them efficiently. Such systems allow the use of templates for documents, step-by-step 'wizards' that allow sales representatives to follow a workflow to generate pricing, and a distribution mechanism that sends the proposal or quote to the customer after sign-off. While such tools are attractive, there is a considerable amount of work necessary to calibrate them and refine them. The company must also be able to source data, which often requires busy sales professionals to enter data diligently and regularly. Such tools also do not equate to customer relationships. Instead, they can support customer relationship development, but they are not substitutes for good sales professionals practising and honing their craft. Automation both reduces the cost of low value-added routines and empowers customer facing people to deliver exceptional service. 4. CRM is about loyalty schemes. Loyalty schemes are one part of a wide range of customer relationship management initiatives. They are common in many industries such as airlines, food retail and hotels, for example. Customers accumulate credits such as points from purchases. Customers can then redeem points for some benefits at some future time. Most loyalty schemes require members to supply their personal details when they join the programme. Companies then combine this information with purchase records data to help calibrate their customer communications and customer-specific offers. Loyalty schemes allow real-time tracking of customer purchase behaviour. When combined with the other data in the CRM system, companies can then design approaches that result in customer acquisition, retention, and development. A major function of loyalty schemes is to incentivise customer retention. The accumulation of reward points can serve as a barrier for customers who may wish to exit the loyalty scheme. So, while CRM systems and loyalty schemes are both potent tools, CRM is much bigger in scope and capability than a single loyalty scheme. ## CRM Constituencies CRM has a range of constituencies (i.e., stakeholders): - Companies implementing CRM. Many companies have implemented CRM. Early adopters were larger companies in financial services, telecommunications, and manufacturing, in the US and Europe. Medium-sized businesses have followed. The CRM message is reaching smaller companies, other worldwide markets, government agencies at local, regional or national levels, not-for-profits, and new business start-ups. - Customers and partners of those companies. The customers and partners of companies that implement CRM are a particularly important constituency. Because CRM influences customer experience, it can affect customer satisfaction, customer engagement, and customer loyalty. - CRM software houses. Major CRM brands at the time of writing include Oracle, Salesforce.com, Microsoft Dynamics, Adobe, and HubSpot. However, there are hundreds of other players, some of which specialise in sub-disciplines of CRM such as analytics, social CRM, marketing automation, and lead management. There has been considerable consolidation of CRM software developers over the years. IBM has been integrating analytic solution providers as it builds a comprehensive analytical CRM capability, and now offers Watson Campaign Automation. Oracle acquired and integrated many solutions providers into its Customer Experience cloud. - IT vendors. IT hardware and infrastructure vendors provide the technological foundations for CRM implementations. They supply technologies such as servers, computers, handheld and mobile devices, call centre hardware, and telephony systems. - Social media companies. Facebook, X (formerly Twitter), Tiktok and other social media platforms are building enormous communities that generate huge amounts of potentially valuable data about people's preferences, activities, friends, and wants. Technology films are competing to offer clients functionality that enables them to learn from and use social media data for customer management purposes. - Management consultants. Consultancies offer clients a diverse range of CRM-related capabilities such as strategy, business, application, and technical consulting. Consultants can help companies implementing CRM in several ways: systems integration, choosing between different vendors, developing implementation plans, and project management. Most CRM implementations are composed of many smaller projects, for example: systems integration, data quality improvement, process engineering, and culture change. Major consultancies such as McKinsey, Deloitte, KPMG, and Bain all offer CRM consultancy. Smaller companies sometimes offer specialised expertise. ## Commercial Contexts of CRM Companies use CRM in a wide variety in the commercial contexts. We'll consider four contexts: banks, automobile manufacturers, technology solution vendors, and consumer goods manufacturers. - Banks deal with many individual retail customers. They want CRM for its analytical capability to help them manage customer defection (churn) rates and to enhance cross-sell performance. Data mining techniques can be used to identify which customers are likely to defect, what can be done to win them back, which customers are hot prospects for cross-sell offers, and how best to communicate these offers. Data mining can also improve predictions of payment default. Banks want to win a greater share of customer spend (share of wallet) on financial services. In terms of operational CRM, most banks initially transferred service out of branches into contact centres and online; a second wave of CRM innovations have involved banks in delivering service by mobile applications (Apps). This is proving popular with some customer segments but introduces banks to non-banking competitors from IT and telecommunications industries including Apple Pay, Google Wallet, PayPal, Simple, Moven, T-Mobile, and WeChat. Banks have been slow to introduce innovative technologies that digitise the mobile customer experience, allowing these nonbanking competitors to gain significant share of the fee stream associated with retail payments. - Auto manufacturers sell through distributor/dealer networks. They have little contact with the end-user owner or driver. They use CRM for its ability to help them develop better and more profitable relationships with their distribution networks and to help their dealers improve their customer management. Due to their physical separation from drivers, they have built websites that enable interactions with end-users and to generate qualified sales leads for the dealer network. This has improved their knowledge of customer requirements and their capability throughout their distribution network. They hope CRM will enable them to win a greater share of end-user spend across the car purchase, maintenance, and replacement cycle. - Technology solution vendors manufacture or assemble complex bundles of hardware, software, and implementation, sold by partner organisations. Historically, small innovative software developers have traditionally partnered with established companies to obtain distribution and sales. Dell's direct-to-customer (DTC) channel strategy for PC's and Apple's for smartphones have by-pased this practice. This process of avoiding established channels and going DTC is known as 'disintermediation. CRM helps these DTC companies to collect customer information, segment their customer base, automate their sales processes with product configurator software, and deliver their customer service online. Modern solutions are often entirely web/software based so the DTC model is increasingly popular. - Consumer goods manufacturers deal with the retail trade. They use CRM to help them develop profitable relationships with retailers. CRM helps them understand costs-to-serve and customer profitability. IT-enabled purchasing processes deliver higher levels of accuracy in stock replenishment. Manufacturers can run CRM-enabled marketing campaigns that are highly cost-effective. ## The Not-for-Profit Context - The 'Third Sector' The 'third sector, i.e., the not-for-profit community (Charity, Non-Government Organisation (NGO), Education, and Government), includes many instances of CRM usage. Universities wish to keep relationships with alumni, charities campaign to raise income, and government increasingly is interested in changing citizens' behaviour. It is sometimes difficult to translate concepts developed for commercial, profit-centric organisations to the third sector. One key element of strategic CRM is the customer selection and targeting process: there are some customers for whom a business does more, and some customers for whom it does less. Governments interact with citizens, not customers. Governments supply services to all citizens, but typically supply more services to the most vulnerable. Operational CRM solutions can help improve government service delivery. For example