CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

As mentioned earlier, another major component of Enterprise systems is customer relationship management (CRM).

Customer-focused business is one of the top business strategies that can be supported by information technology. Many companies are implementing customer relationship management (CRM) business initiatives and information systems as part of a customer-focused or customer centric strategy to improve their chances for success in today’s competitive business environment.

4.6.1 What is meant by CRM?

 CRM is described as a cross-functional E-business application that integrates and automates many customer-serving processes in sales, direct marketing, accounting and order management, and customer service and support.

 CRM systems create an IT framework that integrates all the functional processes with the rest of a company’s business operations.

 CRM systems consist of a family of software modules that perform the business activities involved in such front office processes.

 CRM software provides the tools that enable a business and its employees to provide fast, convenient, dependable, and consistent service to its customers.

It is important to bear the following in mind:

 It costs six times more to sell to a new customer than to sell to an existing one.

 A typical dissatisfied customer will tell eight to ten people about his or her experience.

 A company can boost its profits 85 percent by increasing its annual customer retention by only 5 percent.

 The odds of selling a product to a new customer are 15 percent, whereas the odds of selling a product to an existing customer are 50 percent

MANCOSA – BCom ITM Year 2 75

 Seventy percent of complaining customers will do business with the company again if it quickly takes care of a service snafu.

More than 90 percent of existing companies do not have the necessary sales and service integration to support E-commerce.

4.6.2 CUSTOMER RELATIONSHIP MANAGEMENT (CRM) SYSTEMS

Further reading

Study Paragraph on CRM Systems on page 241 Bocij et al.

CRM systems are built around a database and when this database is accessed by employees and customers using a website the technology is often referred to as e-CRM. Common applications which would be integrated in a CRM system include:

Customer data collection: This includes personal details such as age, sex and contact address and also a record of purchase transactions undertaken

Customer data analysis: The captured data allow the categorisation and targeting of customers according to criteria set by the firm. This information can be useful for marketing campaigns.

Salesforce automation: The entire sales cycle from lead generation to close of sale and after-sales service can be facilitated using CRM.

CRM programmes typically include:

 Sales. CRM software tracks customer contacts and other business and life cycle events of customers for cross-selling and up-selling.

 Direct Marketing and Fulfilment. CRM software can automate tasks such as qualifying leads, managing responses, scheduling sales contacts, and providing information to prospects and customers.

 Customer Service and Support. CRM helps customer service managers quickly create, assign, and manage service requests. Help desk software assists customer service reps in helping customers whom are having problems with a product or service, by providing relevant service data and suggestions for resolving problems.

MANCOSA – BCom ITM Year 2 76 Examples of business benefits of customer relationship management include:

 CRM allows a business to identify and target their best customers; those who are the most profitable to the business, so they can be retained as lifelong customers for greater and more profitable services.

 CRM enables real-time customisation and personalisation of products and services based on customer wants, needs, buying habits, and life cycles.

 CRM can keep track of when a customer contacts the company, regardless of the contact point.

 CRM enables a company to provide a consistent customer experience and superior service and support across all the contact points a customer chooses.

The three phases of CRM

CRM can be viewed as an integrated system of Web-enabled software tools and databases accomplishing a variety of customer-focused business processes that support the three phases of the relationship between a business and its customers.

 Acquire – a business relies on CRM software tools and databases to help it acquire new customers by doing a superior job of contract management, sales prospecting, selling, direct marketing and fulfilment. The goal of these CRM functions is to help customers perceive the value of a superior product offered by an outstanding company.

 Enhance – Web-enabled CRM account management and customer service and support tools help keep customers happy by supporting superior service from a responsive networked team of sales and service specialists and business partners. CRM sales force automation and direct marketing and fulfilment tools help company’s cross-sell and up-sell to their customers, thus increasing their profitability to the business. The value perceived by customers is the convenience of one-stop shopping at attractive prices.

 Retain – CRM analytical software and databases help a company proactively identify and reward its most loyal and profitable customers to retain and expend their business via targeted

marketing and relationship marketing programs.

o The value perceived by customers is of a rewarding personalized business relationship with “their company”.

MANCOSA – BCom ITM Year 2 77 4.6.4 BENEFITS AND CHALLENGES OF CRM

 CRM allows a business to identify and target their best customers; those who are the most profitable to the business, so they can be retained as lifelong customers for greater and more profitable services.

 CRM enables real-time customization and personalization of products and services based on customer wants, needs, buying habits, and life cycles.

 CRM can keep track of when a customer contacts the company, regardless of the contact point.

 CRM enables a company to provide a consistent customer experience and superior service and support across all the contact points a customer chooses.

CRM Failures:

 Major reason for the failure of CRM systems is the lack of understanding and preparation.

4.6.5 TRENDS IN CRM

Four types or categories of CRM that are being implemented by many companies today include:

 Operational CRM – most businesses start out with operational CRM systems such as sales force automation and customer service centres.

 Analytical CRM – analytical CRM applications are implemented using several analytical marketing tools, such as data mining, to extract vital data about customers and prospects for targeted marketing campaigns.

 Collaborative CRM – CRM systems to involve business partners as well as customers in collaborative customer service.

 Portal-based CRM – Internet, intranet, and extranet Web-based CRM portals as a common gateway for various levels of access to all customer information, as well as operational, analytical, and collaborative CRM tools for customers, employees, and business partners.

ACTIVITY

Attempt Discussion Question 1 on p. 271 of Bocij et al.

MANCOSA – BCom ITM Year 2 78 4.7 SUPPLIER RELATIONSHIP MANAGEMENT (SRM)

4.7.1 What Is Meant By Supplier Relationship Management (SRM)?

Supplier Relationship Management (SRM) refers to all activities involved with obtaining items from a supplier, which includes procurement, but also inbound logistics such as transportation and warehousing.

Procurement is an important aspect of SRM as the cost of materials can represent a substantial amount of the total cost of a product or service. Another issue that has increased the importance of procurement is that the efficient use of automated systems requires a high quality and reliable source of materials to be available. This is also the case with the adoption of production planning systems such as JIT which require the delivery of materials of perfect quality, at the right time and the right quantity.

Figure 4.3: Steps in the procurement process.

DIAGRAM

(Source: Bocij et al, 2008:243)

MANCOSA – BCom ITM Year 2 79 Additional Reading

Study Paragraph on SRM on page 243 and Figure 6.7 on page 243 of Bocij et al., relating to the steps in the procurement process.

Refer to Mini case study “Lloyds TSB Banks on SAP SRM on page 244 of Bocij et al., for a better understanding of e-procurement

4.7.2 Advantages of SRM

 SRM can achieve significant savings and other benefits which directly impact the customer including faster purchase cycle times leading to a need for less material in inventory and less staff time spent in searching and ordering products and reconciling deliveries with invoices.

 SRM enables greater flexibility in ordering goods from different suppliers according to best value.

 SRM allows the integration of the many information systems that are used to cover different parts of the SRM process.

4.7.3 Disadvantages of SRM

 The major barrier to the use of SRM is in the difficulty of linking systems with suppliers whose systems may be incompatible or non-existent.

Additional Reading

For further reading on SRM, study Paragraph on SRM on page 243 of Bocij et al.

MANCOSA – BCom ITM Year 2 80 ANSWERS TO SELF-ASSESSMENT QUESTIONS

1. What is the difference between an enterprise system and an enterprise resource planning