last modified: 2018-05-10
CRM: acronym for "Customer Relationship Management"
A CRM is a software used to manage the commercial relationship between a company and its clients.
A CRM is part of the information system (IS) of the firm. The information system designates all software, human resources and procedures devoted to keep track of all info necessary to the business of the firm - from sales to production, etc.
The information system of a firm comprises many other blocks, besides the CRM:
Large companies often integrate these different blocks into an ERP ("Enterprise Resource Planning"), which is an even larger software able to plug different parts together.
The role of CRMs is evolving, and in this lecture we make the case that "big data" has transformed CRMs radically.
To illustrate, we will compare (and caricature a bit) a CRM from 2000 with a CRM of today:
The name of the CRM - Customer Relationship Management suggests a kind of rich, personalized and human touch.
In practice, CRMs where used for more practical purposes:
We must imagine the CRM software as a tool which supported the management of sales, performing these 3 essential functions:
measuring revenues, through the recording of sales transactions.
controlling the performance of the sales persons, by registering which cashier, which employee performed the sale, or at least at which location the sale took place.
recording the VAT ("Value-added tax") collected through sales, which is a legal obligation for tax declaration purposes.
Do you see the customer being catered for in the functions described above? Not really.
The customer was not completely forgotten: CRM are used to run loyalty programs and campaigns:
Loyalty programs afford discounts and special offers to its members.
They increase the share-of-wallet of the company implementing them: the amount of the customer’s total spending that a business captures in the products and services that it offers.
A study performed on the loyalty programs run by 7 major supermarket chains in the Netherlands has found that it increased revenues for the supermarket running it:
On average, a loyalty program enhances the net yearly revenues of a customer by € 163, but the effects vary between € 91 and € 236
source: Leenheer et al. (2007).
Loyalty programs create extra value for the customer as well through the discounts and special offers they bring. But they tend to be limited in their personalization: typically, every customer can enjoy the same offers, even if many of them are irrelevant (discounts on diapers when you don’t have a child etc.).
Customers registered in a CRM with their postal address (after joining a loyalty program) can be sent promotional material and coupons.
Using printed material prohibits the customization to the personal needs of the customers, since a printed catalogue is the same for every recipient.
This decreases the efficiency of direct mail campaigns.
Changes occurring in the past decade have transformed the landscape of the customer relationship. We should realize that:
<iframe width="600" height="371" seamless frameborder="0" scrolling="no" src="https://docs.google.com/spreadsheets/d/e/2PACX-1vR4Kh6Sf0XDOZf1-FU4VznSydrxIRm3NRJfJHIq4KYKGV2_TAtbqoI634NSu9SR0LYk3UihYLvrlHhs/pubchart?oid=412747728&format=interactive"></iframe>