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Customer relationship management 2nd peelen beltman Customer relationship management 2nd peelen beltman Customer relationship management 2nd peelen beltman Customer relationship management 2nd peelen beltman Customer relationship management 2nd peelen beltman Customer relationship management 2nd peelen beltman Customer relationship management 2nd peelen beltman Customer relationship management 2nd peelen beltman
Second Edition Customer Relationship Management Ed Peelen Rob Beltman ‘CRM has gone through many changes and developments over the years But a constant factor is the inspiration Ed Peelen provides by combining solid theoretical knowledge with practical examples and business applications.’ Hans Zijlstra, Head of Customer Insight, Air France-KLM ‘This book recognises the major shortcomings of most CRM books – that is, the focus on the tactical, systems approach to managing customers This book establishes the need for CRM strategies not only to be developed, but to be consistently used as an aid to long-term organisational profitability.’ Dr John Oliver, Associate Professor, The Media School, Bournemouth University, UK ‘This book inspired me during the defining process … of our CRM implementation at PricewaterhouseCoopers in the Netherlands The book kept me on track and saved me from operational pitfalls This CRM “bible” provides vision in establishing the backbone of any company’s CRM programme.’ Gerard Struijf, Chairman PvKO (Platform for Customer-Centric Entrepreneurship), former Senior Manager CRM, PricewaterhouseCoopers, the Netherlands Most businesses know that how they manage their relationships with their customers is vital to their success Yet the field of Customer Relationship Management lacks proper academic coverage Ed Peelen’s Customer Relationship Management is the only comprehensive academic text in English to cover the entire scope of CRM This fully updated second edition cements its position as essential reading for anyone who wants to understand this continually evolving field Addressing the strategic, organisational, commercial and technological aspects of CRM, Peelen brings a social psychology perspective, blending theory and practice to aid a full understanding of the subject The book is geared towards advanced undergraduates and MBA students, but is ideal for anyone taking courses in Customer Relationship Management, Relationship Marketing, Direct Marketing or Database Management Rob Beltman is also a partner at ICSB www.pearson-books.com Front cover image: © Getty Images Ed Peelen is one of the founders and partners of ICSB, a consulting firm in marketing and strategy He was Professor of Marketing at the Centre for Marketing and Supply Chain Management, and the Executive Management Development Centre at Nyenrode Business University, the Netherlands Customer Relationship Management i Contents ii Contents Second edition Customer Relationship Management Ed Peelen and Rob Beltman iii Pearson Education Limited Edinburgh Gate Harlow CM20 2JE United Kingdom Tel: +44 (0)1279 623623 Web: www.pearson.com/uk First UK edition published 2005 (print) Second edition published 2013 (print and electronic) © Pearson Education Benelux and Ed Peelen 2003 Translated by ABK Translations (print) © Pearson Education Limited 2005 (print) © Pearson Education Limited 2013 (print and electronic) The right of Ed Peelen to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988 This edition is translated by Rob Beltman The translation of Ed Peelen: Customer Relationship Management, 2nd edition is published by arrangement with Pearson Education Benelux BV, Amsterdam The print publication is protected by copyright Prior to any prohibited reproduction, storage in a retrieval system, distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the United Kingdom should be obtained from the Copyright Licensing Agency Ltd, Saffron House, 6−10 Kirby Street, London EC1N 8TS The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased, or as strictly permitted by applicable copyright law Any unauthorised distribution or use of this text may be a direct infringement of the author’s and the publishers’ rights and those responsible may be liable in law accordingly All trademarks used herein are the property of their respective owners The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners Pearson Education is not responsible for the content of third-party internet sites ISBN: 978-0-273-77495-2 (print) 978-0-273-77497-6 (PDF) 978-0-273-78107-3 (eText) British Library Cataloguing-in-Publication Data A catalogue record for the print edition is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for the print edition is available from the Library of Congress 10 16 15 14 13 Print edition typeset in 9.5/12.5 pt ITC Charter by 75 Print edition printed and bound in Malaysia NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION Brief contents Preface Acknowledgements About the authors Publisher’s acknowledgements Part I Introduction Customer–supplier relationships Customer relationship management Part II Strategy and organisation CRM as an integral business strategy The relationship-oriented organisation Part III Intelligence 10 xiii xv xvi xvii 32 47 49 67 91 Customer knowledge strategy Customer data management Data analyses and data mining Segmentation and selection Retention and cross-sell analyses Management reporting: measuring, learning and optimising 178 Part IV Marketing (Managing the exchanges in the relationship) 201 11 The customer proposition 12 The relationship policy Part V Channels 13 Multichannel management 14 Personal selling 93 117 135 147 161 203 229 251 253 277 v Brief contents 15 The online environment 16 Contact centre management Part VI CRM systems and their implementation 17 CRM systems 18 Implementation of CRM systems 19 The future Index vi 296 326 349 351 375 396 405 Contents Preface Acknowledgements About the authors Publisher’s acknowledgements xiii xv xvi xvii Part I Introduction 1 Customer–supplier relationships 1.1 1.2 1.3 1.4 1.5 History Description of customer–supplier relationships The dynamic in relationships Networks Conclusion Case study: Collateral trust obligations Questions References 2 Customer relationship management 2.1 2.2 2.3 2.4 2.5 The definition of CRM CRM building blocks Entrance, applications and success of CRM Contents of this book Conclusion Case study: CRM at C Fun Parks Questions References 15 19 26 26 28 29 32 33 36 40 41 43 43 45 46 Part II Strategy and organisation 3 CRM as an integral business strategy 3.1 3.2 3.3 3.4 The nature of the CRM strategy The context of the CRM strategy The results of a successful CRM strategy Conclusion Case study: Starbucks in the US Questions References 49 50 56 59 63 63 65 65 vii Contents 4 The relationship-oriented organisation 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 The challenge and leadership Mission Culture Structure People Communication and information Systems Where we stand? Conclusion Case study: A personal experience: customer focus in healthcare insurance Questions References 67 68 69 71 73 76 78 79 83 85 86 88 88 Part III Intelligence 5 Customer knowledge strategy 5.1 5.2 5.3 5.4 5.5 5.6 5.7 The value of customer knowledge The utilisation of data as an asset From data to customer knowledge Privacy Personal Data Protection Act Information policy Conclusion Case study: Customer knowledge at Center Parcs: a life-long holiday! Questions References 6 Customer data management 6.1 6.2 6.3 6.4 6.5 Customer identification Expanding the size of the customer database Customer profiling Customer data integration Conclusion Case study: Optimisation of addresses for European football Questions References 7 Data analyses and data mining 7.1 7.2 7.3 7.4 viii Experiences with data analysis The analysis process Data mining Conclusion 93 94 98 101 107 108 111 112 113 115 115 117 118 122 124 130 131 132 133 134 135 136 137 141 144 www.downloadslide.com Part VI CRM systems and their implementation not be exaggerated Customers are easily seduced by competitive offerings, switch easily and show little concern for pre-existing relationships We are, as yet, not fully clear on why customers fail to commit for a longer period of time Too often we seek the cause within the customer and believe they are disloyal by nature, without closely analysing our behaviour as an organisation, our offering and the way we have been servicing the customer’s needs Many a CRM project has not been without problems, but has contributed to increased expectations with customers As the company promised a more customer-centric approach, service delivery was halted due to implementation problems Also the actual needs of customers were often misunderstood, the organisation tended to force itself onto the customer and showed little empathy or was too preoccupied with achieving its own targets and benefits It has led to an increasingly large part of the consumer base ‘turning organisations away’ and developing a preference for self-service and companies that are uncomplicated and manage to deliver on promise We see no-frills companies achieve success because they promise nothing more than the bare product and manage to deliver and even sometimes positively surprise the customer on a consistent basis Because organisations are having such a hard time looking at relationships from their own point of view as well as that of the customer, the future prospects for customer–supplier relationships are not too optimistic CRM strategies will have to give even more priority to realising short-term results that are at least attributable to CRM and achievable The goal may be to improve sales or to boost the relationship with the customer Customers should be viewed as assets in which organisations invest when they show a promising return The end of dominance of operational CRM The number of organisations with an operational CRM programme is increasing Processes have been redefined from the customer’s point of view, systems have been implemented and integrated to support all touchpoints of an organisation They are able to identify contact opportunities, make contact in a relevant way, have an on-going dialogue and register data, take proper action in following up the contact and evaluating the effects of the contact In personal sales this is often already a cycle that is mastered quite well by many organisations The telephone often has a closed contact cycle and even on the internet (and not only in mobile applications), the ‘closed loop’ is becoming a reality Customers are no longer ‘lost’ halfway through a process Partners are increasingly being involved in communications networks There are initiatives to develop applications and implement them so that not only intermediaries and agents, but also consultants, wholesalers and even customers themselves have better access to customer data and company resources However, the integration of channels is by no means complete The continuous developments in channels are making it an area that is hard to keep up with Integrating channels requires a very open architecture and an even more open spirit towards how customers would like to interact with the organisation Customer intelligence is on track The main challenges that organisations faced in the area of customer intelligence have been met by the front-runners They have identified the need for customer knowledge as a critical resource to marketing optimisation The importance of a subject such as data quality is seen and placed in the right strategic context Data mining seems to be experiencing a comeback 400 www.downloadslide.com Chapter 19 The future too The overload of customer information makes it almost a prerequisite to success to distil insights instead of collecting data The user-friendliness of data-mining tools is increasing and an increasing number of data warehouses are managed so well that the data processing incurs fewer risks There is good-quality, clean data with a well-managed process to allow the organisation to make active use of it Add to this an accurate description of the problem at hand and all the elements for successful analysis are present Nowadays, there are even modules available that allow the direct insertion of results from cross-sell or retention analysis into the marketing campaign management software There is an increasingly large user base of customer intelligence within organisations Marketers and front-line employees are being joined by strategic planners, who explore the potential to construct the ideal customer and product portfolios of the future and construct growth scenarios When databases are completed with competitor information and general data on the external environment, customer intelligence systems may become more complete market intelligence and eventually, business intelligence systems The new challenge Now that the basic operational CRM system has taken, albeit somewhat rudimentary, shape in most organisations, and customer intelligence is increasingly performing well, more attention can be paid to the way we communicate In a relatively short timeframe, a lot of new ways of communicating with customers have appeared Moreover, a lot of these communication channels are even powering consumer-to-consumer interaction and are consumer-controlled This is a new reality with which organisations have trouble dealing It requires investments in new channels and the willingness to experiment with them The development of social interaction requires special attention It is not acceptable to develop a blog, Facebook page, community platform or viral campaign as an unconnected and ad hoc initiative A social media strategy that is derived straight from the CRM strategy should be at the basis of any social activities the organisation chooses to launch A roadmap should indicate what steps need to be taken in order to implement the strategy, but with a keen eye on the results achieved By its very nature, the social strategy cannot be directed in the same way as a direct-mail campaign It’s about trying to facilitate, not direct, the way in which customers want to engage with the brand The company can try and lead the way, but must be very responsive to the customers’ needs as they become clearer At the same time we wonder how we can take advantage of the benefits of the mobile internet The fact that time, space and matter, the three fundamental components of the universe, are becoming our own building blocks is fascinating It opens up a world of infinite possibilities as we are able to switch to alternate realities where time is of no importance, where space is unlimited and matter is virtual What service possibilities arise to enhance brand value and brand engagement on an individual basis? Because of social media, we need to more than adapt our communication towards customers We need to fundamentally re-evaluate our value proposition We must be responsive to the rules of engagement in the social networks and cannot just be ‘commercially driven’ on that stage The challenge is therefore to develop social CRM to a level where it is connecting an organisation with the social context of its (potential) customer base and allowing it to create value beyond a mere ‘goods for money’ exchange The social CRM strategy will need to be an integral part of existing customer relationships There may be more deeply engaging and more shallow relationships with different customer groups Furthermore, the organisation 401 www.downloadslide.com Part VI CRM systems and their implementation needs not only to adapt to that, but also to explore possibilities to reinforce the bond it has with the community as well as with the individual customer in bilateral relationships An on-going exploration into the required off- and online availability will need to take place and the presence in the virtual realm as well as in the real world will need to be integrated, in order to facilitate the customer experience There is still a lot of room for improvement, which is attainable by looking at sensory stimulation, making use of combinations between the virtual and physical through mobile and digital technology, etc A new culture During the hype period of CRM and e-commerce, the saying was that the customer would be in command However, in reality, the customer was not It has taken some time, but it appears there is a ‘revival’ of this principle and a changing role of buyer and supplier is taking shape It’s not so much about a reversal of control as it is about cooperation and collaboration Co-creation, or collaboration, is the new magic word for the time being, since it is probably a hyped word too ‘Lead customers’ are being actively involved in new product development, and these are the customers who have product requirements that will probably attract other customers over time and therefore are showing organisations how to shape the value proposition of the future Highly satisfied customers are being engaged to act as ambassadors or promoters for the brand and encourage other customers to buy Experienced customers are being called to help other customers, the ‘newbies’, get to grips with the product or service They are acting as a service agent solving many after-sales questions The introduction of many self-service applications is allowing customers to take over roles and responsibilities that traditionally resided within the organisation They can track and trace orders, look at the financial sheets, change their address and communication preferences, etc Traditional walls between the organisation and the customer are being broken down and the distinction between a customer and an employee may even become hard to make This process is not just the consequence of a more mobile and active customer, but also of the search that many organisations have engaged in They have sought to improve the customer experience and asked themselves the question of how customer processes can be matched to the surroundings the customer is operating in How can they explore and go beyond the boundaries of the customer’s own experience and expectations? They realise that they have to provide access to their company resources and let customers compose their own value propositions, rather than to think for the customer They are learning about customer preferences in this way and building customer knowledge They are more open to value creation with a network of partners that may even include competitors, for as long as customers are seeing their needs catered to Take the example of an insurer who needs to assist a customer who has broken down with a car along the highway Instead of the financial pay-out the insurer could make, they turn the experience into something of value to the customer by providing a customised solution in collaboration with a car repair shop, car rental company and maybe even a telecom operator There is a complete mobility solution for the insured person, while all parties involved are expanding their market reach, value proposition or quality They ultimately end up achieving more for the customer at lower costs This requires a different business culture, where we don’t compete against other businesses, but compete in value networks that are ever-changing in composition The classic buyer–supplier relationship is fading and the organisation is moving from a customer focus in the bilateral sense of the word to a more holistic customer experience focus, where experience gives meaning to life and to relationships (Boswijk et al., 2012) 402 www.downloadslide.com Chapter 19 The future 19.3 Conclusion It would be arrogant and foolish to claim to know where the road will take us It is, in a sense, not so much about the final destination as it is about the continuing journey that keeps on urging organisations to stay in tune with the needs and wants of their customer base What provides value will change over the years The value appeared to be, and probably was, in the product many years ago Later on it was in services and nowadays we are beginning to understand that value is actually much more a matter of how the customer experiences the interactions, not just the products and services How we communicate value is also changing New possibilities arise to interact with customers and to learn from them We have struggled for many years to come to grips with bilateral dialoguing with customers, only to find out that the social conversations taking place on open platforms are dominating the way value is created and communicated Likewise we are continuously building our knowledge not only of what customers want but how they want it The challenge of actually acquiring customer data and properly registering it is making way for the challenge of analysing it and gaining insights The challenge now is to expand customer intelligence from a context limited to contact and purchasing histories to one that understands emotional, social and contextual, as well as financial, data The ultimate goal of complete ‘customer intimacy’ or ‘an economy of experiences’ may never be reached, because it is much like a horizon: it shifts as you move towards it What we may consider mediocre relationship management nowadays is beyond anything we could have dreamt of in the 1980s! Thus it becomes a learning journey, but one that should be embarked upon with care Experimenting and innovating are prerequisites to success, but so is demonstrating value creation and achieving tangible results in the process CRM has moved beyond the phase of being a ‘leap of faith’ and is now very much accountable for its contribution to the life-time value of the customer base and organisational growth A balance between vision, strategy, culture and capabilities must be preserved It prevents us from dreaming about a future, without ever truly committing to it It keeps us safe from many frustrations or conflicts, because it creates a sense of direction QUESTIONS Ever since 2005 successes have been reported by organisations There seems to be an end in sight to the period where failures were reported What explanation you have for this upturn or change in CRM fortunes? Collect several examples (three or four) from your own personal experience as a consumer or business customer of organisations that in your eyes are performing very well in the area of CRM What areas will attract most attention in the next few years of CRM? Please illustrate and explain your answer How organisations have to adapt their strategy, organisation and commercial approach in order to meet the changing needs of customers? Please illustrate your answer How can we deal with uncertainty about the future in our CRM strategy and roadmap? 403 www.downloadslide.com Part VI CRM systems and their implementation References Boswijk, A., Peelen, E and Olthof, S (2011) Economy of Experiences, Bilthoven: The European Centre for the Experience Economy Boulding, W., Staelin, R., Ehret, M and Johnston, W.J (2005) A customer relationship management roadmap: what is known, potential pitfalls and where to go, Journal of Marketing, 69, October, 155–66 Payne, A and Frow, P (2005) A strategic framework for customer relationship management, Journal of Marketing, 69, October, 167–76 Peelen, E., Montfort, K van, Beltman, R and Klerkx, A (2009) An empirical study into the foundations of CRM Success, Journal of Strategic Marketing, 17, 6, 449–67 Reichheld, F.F (1995) The Loyalty Effect, New York: The Free Press Tissen, R., Andriessen, D and Deprez, F.L (1998) Value Based Knowledge Management, Amsterdam: Addison-Wesley 404 www.downloadslide.com Index ‘A’ customers 74–5 access to end-users 209 accessibility of organisations 261 account managers and account teams 52, 74–8 adaptive customisation 217–18 address changes 235 ‘adventurous young’ customers, service profile for 233–4 advertising online 312–13 ‘agents’ in direct contact with customers skills needed by 327–8 specialist or generalist 342 ‘aggregation’ function 215, 301 Agile process 386 Agrifirm (case study) 291–4 airlines 222, 224, 257–9, 267 Albert Heijn (case study) 322 allocation algorithms (dividing capacity between market segments) 224 Alpe d’HuZes (case study) 158–9 Amazon 53–4, 206, 214–15, 221, 262, 307, 318 analytics-driven organisations 101 Android tablets and smartphones 207 ANWB breakdown assistance 236 Apple 51, 205, 207 Safari 360 application service providers (ASPs) 369 apps 309–10 Arndt, J ASCI database 60–1 Ashridge mission model 70 association rules 143 automated outbound-dialling 356 automatic call distribution (ACD) 357 ‘B’ customers 74–5 back-office functions 39, 54, 269, 352, 354 Bagozzi, R.P balanced scorecard 80–3, 188, 382 Bales, R.F 10 Bang & Olufsen 51 banking services 26–7, 189, 233, 236, 259, 264, 267, 310, 316 Barabási, A.L 23 Barnes, J.G 59 Bayesian analysis 171–2 Bel, E.J van 104 belonging, sense of 20 ‘below-the-line’ communication channels 255, 262 ‘best-of-breed’ software 369 beta testing 211 Blattberg, G 180 blogs 297, 303–4, 361 ‘blow-ins’ 61 Bol.com bookstore 262, 316 Bonoma, T.V 148–9 Boswijk, A 259–60 bots 338, 361 Brand, Reon 397 branding 25–6 browsers 360 Bruce, L 256–7 Bruhn, M 4–5, 149 bundling for pricing purposes 220 business strategy 36, 49 buzz agents 306–7 ‘C’ customers 74–6 C-formula (Erlang) 334–5 C Fun Parks 43–5 call centres 124, 342, 358 call charges 340 campaign management 365–8, 371 for different types of campaign 365 input to 367–8 selection of a system for 368 Canada Post (case study) 371–3 capacity planning for a contact centre 333–8, 344 car manufacturers 58–9, 210 Carglass (case study) 197–8, 236 case-based reasoning 143 Center Parcs 113–14 ‘certainty seeker’ customers, service profile for 233–4 ‘champions’ 69 chat bots 338 chat sessions 338–9 ChemStation 217 chi-squared automated interaction direction (CHAID) analysis 153–5 405 www.downloadslide.com Index chi-squared test 193 churn see customer churn; employee churn classification and regression trees (CART) analysis 155–6 Cleveland, B 341 close relationships 8–9 cluster analysis 103, 149–51 co-creation 205–15, 402 applications of 212–13 examples of 304 principles of 208–12 techniques and instruments for 211–12 collaborative customisation 217–18 collateral trust obligations (case study) 26–7 commercial web, marketing on 310–21 commercials 233 commitment 12–15, 69 definition of 12 forms of 12–13 social context of 15 communication calendars 244 communication channels governing law on 111 preferences for 106 communication with a customer 38, 70, 76–8 history of 106 communication plans 243–6 community relationship management 303 comparison websites 313 competition in the marketplace 57–8 competitive advantage 59, 205–6 complaints from customers 60, 106, 190, 259, 267 completeness of data 120 ‘complex’ sales 279–81, 288 computer-telephone integration (CTI) 327, 356 confidence levels 193 congruence 77 conservatively-minded customers 263 ‘consultative’ sales 279–88 contact centres 251, 254, 259, 261, 266, 270–3, 320, 326–44, 355–8 aspects of quality 344 capacity planning for 333–8, 344 determination of service level 331–3 key performance indicators 341 management of contact satisfaction 336–41 managing the development of 341–4 support systems for 357–8 ‘contact moments’ 243–6 content management systems 368–71 continuity in a relationship 5, 7, 17–18 control addresses 120 control groups 191–3 406 conversations about organisations 303 structure of and satisfaction with 339–40 see also telephone calls conversion rates in the sales process 285–6 cookie technology 361 Cooper, Alan 104 core competencies 205 corporate culture 68, 72–3 correctness of data 120 cosmetic customisation 216–18 critical success factors 82, 188–90 interrelations between 190 CRM strategy analysis questions for 138 context of 56–9 as distinct from CRM systems 63 nature of 50–6 rewards for success in 59–62 cross-functional project teams 196 cross-over points in channel management 271 cross-sell probabilities 171–3 cross-selling in a convenience store (case study) 174–6 definition of 167 economic significance of 169 over time and within the product range 167–8 time between transactions 169, 171 cross-selling analysis 161–2, 167–74 cross-tables 169 crowd sourcing 206–7 culture 68, 71–3 customer acquisition 181 effectiveness of 97 policy for 232–3 targeting of 230 versus customer retention 186–7, 230 customer asset management 201, 230–2 customer base, quality of 233, 246, 269 customer-centric organisations 36–7, 41, 47, 50 customer churn 61, 63, 114–17, 241, 269 customer contact processes 352 customer data integration (CDI) 130–1 customer experience 259–62, 343 customer identification 118–22, 131, 318 ‘customer intimacy’ strategy 51–7, 63, 84, 107, 331, 403 ‘customer journey’ model (Boswijk) 259–63 customer knowledge 37–8, 43, 135–6, 144, 400–1 at Center Parcs (case study) 113–14 data overload 123 derivation from data 101–7 www.downloadslide.com Index value of 91–8, 112–13 within different types of organisation 100–1 customer lifetime value see lifetime value of a customer; net present value of a customer relationship customer managers 52 customer ownership 74 customer participation in product develop-ment 208–12 continuous feedback from 212 customer performance 182 customer pyramid 74, 231, 281 customer relationship management (CRM) building blocks of 36–9, 47, 112 case study (C Fun Parks) 43–5 choice of strategy for 379–80 definitions of 33–6 disappointing performance of 43, 349, 375–6, 391, 400 embedding of 382–4 future prospects for 396–403 and information technology 351–2 initial projects of 380–1 international or cross-division projects 388–91 key principles of 100 as a long-term strategy 86 operational programmes of 400 optimal implementation and execution of 188–9 organisational forms of 76 phased expansion of 381–2 preliminary assessment for 376–8 project management 383–8 project planning 385 proportion of projects that are successful 41, 69 range of 378 return on investment in 60–1 ‘road-map’ for 378–83, 401 selection of software for 369–70 technocratic approach to use of the term 40, 353 vision of 378–9 see also CRM strategy customer retention 40, 61, 161–7, 174, 186–7, 230, 318 versus customer acquisition 230 customer satisfaction 69, 287, 331, 339–43 return on investment in 59–60 customer–supplier relationships classification of 6–8 different views of phases in customer value 106 calculation of 180–5, 197 and customer selection 281–2 effect of marketing activities on 179–85 influence of data quality on 98 for large accounts 184 non-economic 185 for small accounts 183 customisation 53, 70, 204–7, 225, 318–19 of CRM 102 see also mass customisation ‘DART’ principles 208–10 data analysis 135–41 data as distinct from information and knowledge 93 utilised as an asset 98–101 data maintenance 125–6 data management 100–1 data mining 136–7, 140–4, 400–1 data protection 108–11 data quality 131 cost of 94–5 definition of 119–21 earnings derived from 97–8 waste resulting from deficiencies in 95–6 data sources 126–30 external 127–30 internal 126–7 data warehouses 362–5; see also marketing data warehouses database architecture 122 database management 100, 107, 112 database managers 122 database marketing, organisations oriented towards 100 databases 117–18, 126, 358, 363–4 expansion of 122–4 external 130 use of 78, 91, 94, 102, 106 Datavision Technologies Corporation 218–19 decision trees 143, 187–8 deep-selling 168 defensive strategy 55–6 Dell Computers 50, 205, 262 demand curves 223 de-marketing 233 ‘democratisation’ of production 215 dependence in a relationship designers, role of 212 Devicentis, J 280 dialogue with customers 208–9 Dickens, Charles 220 407 www.downloadslide.com Index differentiation between customers 57, 222–3, 264–5, 318 ‘dilution’ of market segments 224 direct marketing (DM) 97, 152, 186 discounts 220, 371 discriminant analysis 151 distribution channels and costs 316–17 division of labour 78 divorce 240 documentation information systems (DIS) 358 Dodd, P.S 25–8 Dwyer, F.R 16–17 dynamic content management systems 337 dynamic pricing 220 easyJet 50 e-commerce 214–15, 219, 319–20 economies of scale in production 216 Economist Group 389–90 Edison, Thomas 51 efficiency marketing 71 80:40 rule 214 e-mail 336–8 embedding of CRM in the organisation 382–4 emotions and emotional intelligence 10–11, 72 empathy 16, 72, 76–7 ‘Empathy Map’ 238–9 employee churn 342 employee satisfaction 79–80 engaging experiences online 313–14 enterprise relationship centres 326–7, 341–2 enterprise resource planning (ERP) 269, 352, 369 Erlang, A.K 334–5 European football 132–3 ‘events’, categorisation of 104–5 evolutionary computation (EC) 142–3 expectations of customers 314 experiments and experimental settings 190–3 eXtensible Markup Language (XML) 359–60 external validity of an experiment 191–3 Facebook 107, 123, 261, 297, 307, 312 facial recognition technology 107 favour as an aspect of the sales process 280 FedEx 316–17 Fiat 213 financial management 80 ‘first-time fix’ rate 341 fixed data 124 Foa, U.G and E.B 9, 15 Ford Motors 50 formula managers 270 Fornell, C 59 408 Forrester Research 310, 319–20 Fournier, S 84 fragmentised analytics organisations 100 front-office systems 353 Frow, P 34 future prospects for CRM 396–403 fuzzy logic 298 ‘gadgets’ 362 Galileo positioning system 299 Garbarino, E Gartner Group 34 Gates, Bill 27 Gentle, M 376 geographic information systems (GIS) 128–9 Geyskens, I 11 Gillette razorblades 219 Gilmore, J.H 216 GlaxoSmithKline (GSK) 304 global financial crisis (since 2008) 41 Godin, S 112 Google 107, 214–15, 312, 360 Chrome 360 Earth 255–6 Picasa 298 grocery industry, cost structure of 317 Grönroos, Christian group formation 24–6 growth paths 54–5 Gummesson, Evert Gupta, S 62 Hagel, J 54, 107 Håkansson, H happiness, forms of 11 ‘hard’ criteria 79 hedonistic post-materialism 129 Heskett, J.L 79 Hewlett Packard 307, 355 Hinds, R.A honesty 11 Horovitz, J 73 human behaviour, change in 397–8 Hunt, S.D 11 hypertext 359–60 Hypertext Markup Language (HTML) 359–60 IBM 73–4, 210, 213 ‘ideal’ customers, over-reliance on 230 iDEAL standard 316 identification errors in data 95–6 IKEA 260, 338 www.downloadslide.com Index incentives for customers participating in co-creation 211 for staff 79, 272, 281–2, 288–9 individual customers, allocation of income and expenses to 179–80 individualised value propositions 37, 201, 203, 207, 216–25 industrial revolution 40 ‘influencers’ 306, 308; see also opinion leaders information as distinct from data and knowledge 93 information gain chart 164–5 information policy 111–12 information superhighway 311 information systems 290 information technology (IT) 38–9, 43, 78, 211 and CRM 351–2 and sales performance 289–91 infrastructure for CRM 356 ING Bank 267 innovation phasing and organisation of 211 see also user innovation ‘Innovation Wheel’ of multichannel strategy 257–8, 268, 271 instant messaging 361 insurance industry 59–60, 402 Intel 51 intelligent agents 361 intelligent data systems 121–2 interaction patterns 24–5 interaction process analysis 10 interactive voice response (IVR) systems 357 intermediaries between customer and supplier 58–9 internal validity of an experiment 191–3 International Marketing and Purchasing Group internet analysis 319–20 internet data 141 Internet Explorer 360 internet forms 123–4 internet resources 20, 33, 38, 54, 105, 107, 209, 219–21, 225, 254, 296–9, 358–62 internet security 361 internet telephone and television 362 interpersonal relationships 5–6 IP (Internet Protocol) addresses 359, 361 iPhones 298 iPods 205 iTunes 214 Johnson, M.P 12 Johnson, M.S Jonker, J 362 K-means analysis 150–1 Kahneman, D 260 Kaplan, R.S 80–1 Keiningham, T.L 14 King, Stephen 220 KLM Blue Lab 308 Knexus 298 knowledge as distinct from data and information 93 knowledge management 195–6, 343, 358 Kozinets, R.V 25 KPN Telecoms 273–4 Kraljic, P 278 Krishnan, M.S 219 Krugman, Paul 27 Kumar, V 62 ‘labelling’ of customers 281 Lacoste brand 233 lead customers 207, 211, 402 lead generation 288 leadership of change 69 learning organisations 193–6 ‘legacy’ systems 39 LEGO Factory 210, 304–5 ‘Lego-lisation’ of products 204 leisure industry 55 ‘leverage’ situations 281, 288 Levitt, T life events 235–40 context of 236–8 impact of 235–6 link with relationship policy 239–40 lifetime value of a customer 52, 56, 63, 69, 74, 79, 81, 124, 179–90, 230, 233 limitations as a measure 182 related to marketing effort 185–90 LinkedIn 308 Linux software 207 list brokers 123 location of customers 255–6 logistics service providers (case study) 246–8 ‘long tail’ distribution strategy 213–15 drivers of 215 on the social web 307 ‘lookalikes’ 130 love ‘low involvement’ products 74 ‘loyal loss-generators’ 186 loyalty 18, 25, 57–8, 61–2 definition of 13 Loyalty Profiles (company) 185 Lutron Electronics Company 218 409 www.downloadslide.com Index M-commerce 362 McDonald’s 50 McKenna, Regis 35 management reporting 178 market order, change in 397–8 market research 102–3, 209 organisations driven by 100 marketing, definition of marketing analysis, results of 357 marketing data warehouses 126 marketing service concepts 152, 157 marketing strategy 43 mash ups 359 Maslow, A 398 mass customisation 216–19 mass individualisation 204–7 mass marketing 179 mass media 255, 262 mass production 216 matchcodes 121 ‘maturity’ of an organisation 101 Mayben, J 341 ‘member-get-member’ promotions 189–90, 246 mental models 194 Mercedes 51 ‘mercenaries’ 308 Meta Group 33 metadata 139 metrics, use of 272 Microsoft Internet Explorer 360 middleware 353–4, 371 Mika, P 298 mission 69–71 mobile marketing 309–10 mobile technology 266, 296–7, 300–1 Moore’s Law 397 Moorman, C 11 Moorst, A van 326–9 moral commitment 12 Morgan, N 60 Morgan, R.M 11 ‘motivaction’ 127–9 motivation of participants in co-creation 211; see also incentives multichannel management 253–7, 269–72 avoidace of unhealthy competition between channels 272 organisation of 269–70 performance measurement for 271–2 multichannel strategy 190, 255–73 adaptation of 257–62 benefiting from 257 business case for 268–9 410 combination of channels in 256, 262–6 customers’ use of channel mix 272–3 goal of 255 integration of 266–8 lack of progress with 273 needs, hierarchy of 398 ‘negative’ customers 263 net present value (NPV) of a customer relationship 5, 69–70, 179 net promoter score (NPS) 14, 59–60 Netherlands, the 96, 106 Netscape Navigator 360 networks 19–26 neural networks 141–2 new products 51 niche products and niche markets 215, 307 Nike 51, 205, 219, 225–7, 256 Nocera, Joseph 27 Nordic school of relationship marketing Norton, D.P 80–1 Obama, Barack 302 offensive strategy 55–6 offering to a customer 201 Old Spice 306 Oliver, R.L 13 one-to-one marketing 84, 315, 318–19 online analytical processing (OLAP) 364–5 online communities 19, 298 online forums 361 online transmission processing (OCTP) systems 363 open-source software 207 operational excellence 50–5, 63, 331, 380 opinion leaders 25; see also ‘influencers’ opportunity identification 366 optimal allocation of resources 186–9 optimal service level for a contact centre 332–3 organisational change 68–9 organisational structure 73–6 origin-and-destination matrix 163 Osterwalder, A 238–9 outflow analysis 163 outsourcing 343–4 Panak, J 73 Pareto-optimal business rules 171–2 Paris Miki 217 ‘parking’ of customers 244 partnership relationship management (PRM) 354 ‘passers-by’ 61 Payne, A 34 www.downloadslide.com Index Peacock, P.R 141–2 Peelen, E 17, 69, 77–8, 81, 96, 100, 263 penetration probabilities 172–3 people, importance of 76–8 Peppers, D 318 performance measures for contact centres 341 in a multichannel environment 271–2 for the sales process 285–7 permission marketing 112 personal commitment 12 Personal Data Protection Act 108–11 personal selling 251, 277–8, 290 personalisation 315 ‘personas’ 104, 151–2 Philips (company) 242–3, 308 Pigneur, Y 238–9 piloting of CRM 385 Pine, B.J.H 216 planning issues in sales process management 288 podcasts 298, 361 Poeisz, T.B.C portals 313 ‘positive’ customers 263 postcode segmentation 127–8 power distribution between customer and supplier Prahalad, C.K 204, 208, 219 precision pricing 119–21, 225 predicting the number of telephone calls and staffing needs 333–6 price elasticity, measurement of 221 price premia 219 price sensitivity 221–3 price tailoring 221 pricing policy 219–25 prioritisation 201, 268 privacy policy 107–8, 113 problem formulation for purposes of analysis 137–9 process-based approach to sales 284–5 Procter & Gamble 212–13 product development techniques 212 product leadership 51, 53, 55 productivity in sales processes 290 profile errors in data 96 profiling 124–30, 151–2, 157 profits, ‘unfair’ 60 purchase opportunities 245 purchasing situations 278–81, 291 queries 364 ‘quitters’ amongst customers 165–6 Raaij, W.F Rackham, N 280 Ramaswamy, V 208 random sampling 139 Rayport, J.F 107 real-time marketing 35 Really Simple Syndication (RSS) 361 recent frequency monetary value (RFM) model 152–4 reciprocity in a relationship 8–9 recommendations from customers 14, 59–60, 215, 269 Redeman, E 96 registration on websites 123–4 Rego, L.L 60 Reichheld, Frederick 14, 40, 59–62 Reinartz, W 62 relational databases 363 relational marketing 4–5 relationship data on customers 118, 131 relationship development, influence of marketing communication on 246 relationship life-cycle 17, 201, 240 relationship marketing 40, 70 optimal allocation of resources to 186–7 ‘premature death’ of 84, 86 relationship-oriented organisations characteristics of 69–71 culture of 72–3 current state of development of 83–5 quality of 78 relationship planning 367 relationship policy 201, 229, 233–46 for different market segments 233–5 for different relationship phases 240–3 and life events 235–40 translated into contact moments 243–6 relationships in general dynamics of 15–19 nature of phases in development of 16–18 primary and secondary repeat customers 62 research questions 137–9 resource allocation to different phases in the customer relationship 187–8 to relationship marketing activities 186–7 response gain charts 156–7 revenue management 222–4 reward systems see incentives 411 www.downloadslide.com Index risks from involving customers in co-creation processes 210 in multichannel organisation 270 perceived as being associated with certain products and services 263 from precision pricing policy 221, 225 Ritz Carlton 52 Robeco Direct 103, 244 Rogers, M 318 Rooy, Pieter de 55 Roubini, Nouriel 27 Rowe, W.G 59 rule extraction algorithm technique (REAT) 168 sales performance improvement of 287–9 and information technology 289–91 sales process management 283, 291 sales processes 282–90 desirable characteristics in 283–4 and information systems 290 management of 285–9 value added in 284 Salesforce.com 369–70 salespeople 19, 195, 277–82, 288–91 allocation of customers to 282, 291 and information technology 290 rewards for 281–2, 288–9 roles and functions of 278–81 threats to jobs of 290–1 training of 288 Schans, W.M van 318 scripting tools 357 Scrum methodology 386–8 search engines 311–12, 360 segmentation of markets 106, 127–9, 147–57 behavioural 152 criteria for 148–9 goal of 152 research on 152–7 techniques of 149–51 with a view to non-customers 231–2 self-analysis 20 ‘semantic web’ 298–9 semi-automatic e-mail answering 357 service-oriented architecture (SOA) 39 service profiles for different categories of customer 233–5, 246 service–profit chain 79–80 ServQual measurement Shapiro, B.P 148–9 shared vision 195 412 ‘share-of-wallet’ calculations 127 Shell (case study) 392–4 Shiller, Robert 27 simulation for purposes of capacity planning 336 Sinha, R.K 25 situated experience 20 Smart cars 219 ‘SMART’ objectives 383 Smith, John 68 SNS Bank 144–5 social competency 76–7 social CRM 35, 401 social exchange theory social groups 303, 397–8 social identification 25 social media 19–21, 26, 123, 206, 255, 261, 397, 401 social network analysis (SNA) 22–4 social networks 19–22, 26, 209, 251, 297–8, 312 social position of an individual 19 social practices theory 20 social psychology 16 Social Readjustment Rating Scale 235–6 social web 301–9, 321 consequences for marketing 301 marketing approach on 308–9 role in customer–supplier relationships 302–8 socialisation 19–22 Socioconsult compass 127–9 sociograms 23 ‘soft’ criteria 79–80 SOS International 236 specialist service providers 205 Starbucks 63–4, 307 statistical techniques 140 ‘stayers’ amongst customers 165–6 Steenkamp, J.E.B.M 11 steering committees for CRM 382–3 ‘strategic’ sales 279–81, 285–7 stratified random sampling 139 streaming media 361 Street, R 256–7 stress caused by life events 237 Strogatz, S.H 23 Structured Query Language (SQL) 363 Suit Supply 219 supermarkets Swatch 51 ‘switching costs’ for customers 69 systems approach to innovative co-creation 212 T-Mobile 166–7 t-tests 193 www.downloadslide.com Index team learning 195 technological progress 397–8 technology, role of 205 telecom providers 264, 266 telephone calls 329–40 predicting the number of 333–4 quality of 329–31 routing of 336 Thompson, S.A 25 360-degree view of a customer 131 threshold curve method of capacity allocation 224 Tolboom, M 13 top management, role of 71, 136, 320 ‘touch points’ 262, 267, 343 Toyota 54 tracking and tracing of customers 271 traffic building 311–13 traffic management 356–8 training needs 288 transaction history of a customer 106 transaction marketing 4–5 ‘transactional’ sales 279–81, 284–8 Transmission Control/Internet Protocol (TCP/IP) 359 transparency of sales processes 210, 282–3 transparent customisation 216–18 Treacy, M 49–50 trust 11–12, 15, 69, 352, 280 definition of 11 see also collateral trust obligations Twitter 261 tyre manufacture 204 ‘unbundling’ of an organisation 54 unconditionally positive attitudes 77 underground economy 215 uniform product codes 220 UPC (company) 303 user-generated content (UGC) 206 user innovation 207 validation sets 140, 165 ‘value disciplines’ 49–54 value perception 119 van den Berg, Sander 166–7 variable data 124 Verbeke, W 246 vertical integration 205 video conferencing 362 viral campaigns 305–6, 321 visualisation 140–1 voice-over IP (VOIP) 356 voice recognition and voice response systems 339, 352–5 Voice XML 356 waiting times 261–2, 329–30 Wal-Mart 50 Watts, D.J 23, 25–8 ‘weak ties’ 23 Web 2.0 technology 297, 361 Web 3.0 and 4.0 technology 297–8 web browsers 360 web care 303 Weber, M 209–10 webmining 141 websites 296, 310, 314–17 content of 314 design and usability of 314–15 and fulfilment 316–17 and payment systems 315–16 and personalisation 315 Webster, F.E Jr Webster’s Dictionary 298 ‘Welcome’ calls 189, 244 widgets 362 Wiersema, F 49–50 Wikipedia 206, 215, 298 wikis 298, 361 Wilson, H 256–7, 264 Wolfs, Gerard 102 Wordpress 297 workflow management 358, 368 worldwide web 296 evolution of 297–301, 321 see also commercial web; social web Wunderman, Lester 52 Wurtz, W 376 YouTube 206, 261 Zappos (case study) 345–6 Zeithaml, V.A 413 www.downloadslide.com ... Executive Management Development Centre at Nyenrode Business University, the Netherlands Customer Relationship Management i Contents ii Contents Second edition Customer Relationship Management Ed Peelen. .. customers is vital to their success Yet the field of Customer Relationship Management lacks proper academic coverage Ed Peelen s Customer Relationship Management is the only comprehensive academic text... students, but is ideal for anyone taking courses in Customer Relationship Management, Relationship Marketing, Direct Marketing or Database Management Rob Beltman is also a partner at ICSB www.pearson-books.com