Understand Customer Relationship Management (CRM)

Customer Service Level 3

Understand customers and customer retention

Understand customer relationship management (CRM)

The customer experience:

• The outcome of all interactions between a customer and an organisation and how the customer feels about it.
• Organisations are increasing the amount of time spent managing customer relationships – including managing the customer experience.
• This can be done by evaluating all interactions and touchpoints that a customer experiences when dealing with an organisation. This can have a significant influence on how likely the customer is to be retained by the organisation.

Things to remember about the customer experience:

• A customer experience is not just about a rational experience (e.g. how quickly a phone is answered, delivery timescales, etc).
• A huge part of a customer experience is subconscious, or how a customer feels.
• A customer experience is not just about the ‘what,’ but also about the ‘how.’
• By managing this process an organisation gains valuable insight into how the customer feels. This knowledge can help to inform improvements and increase customer retention.
• How a customer feels about a service is the main influence on whether they will continue to use it.

Customer segmentation

Customer segmentation is the act of grouping customers together who share a common factor or characteristic.

Benefits of segmentation:

• most and least profitable customers can be identified
• marketing can be focused on customers who will be most likely to buy certain products or services
• Relationships with customers can be built by developing and offering them the products and services they want
• products can be improved to meet customer needs

Customer segmentation

Regional factors – town, city, country, postcode

Statistical factors – size, population, growth

Example:

The customer base of a doctor’s surgery can be categorised by postcode as all patients reside in the local borough.

Usage rate – how often do they use the products/services

Motivation – what encourages the customers to buy

Example:

A local coffee shop groups customers by loyalty: all regular customers get additional offers.

Age – customers born in the same year

Income – the spending power of the customer group

Example:

A bank can group customers based on how much money they save per month.

Values – personal standards that are important

Lifestyle – How people spend free time

Example:

A mobile phone company groups customers relating to the social network apps they download.

Understand customer relationship management (CRM)

What is the purpose of customer relationship management (CRM)?

• To build a relationship with customers
• To maximise opportunities
• To gather information and data for analysis
• To log customer details and preferences

What is the scope of customer relationship management (CRM)?

• Customers
• Suppliers
• Owners/investors
• Employees

CRM systems

CRM software was originally evolved around an approach that placed the customer at the centre of everything an organisation does. Recent years has seen CRM become a term to describe IT applications to manage sales, marketing and service. At a base level, CRM is a customer management tool that an organisation uses to coordinate and share information that can inform more targeted processes.

From this organisations can:

• increase customer knowledge
• use the data for relevant marketing
• use the data to identify new customers and monitor turnover and profits.

Benefits of CRM for an organisation

Benefits of CRM for a customer

CRM Systems

• Over recent years the focus of CRM has been driven by the many bespoke software packages available for CRM solutions.
• Organisations can tailor systems to track, monitor and report anything they feel is valuable to the customer and to the organisation.
• The NHS currently uses SystmOne and EMIS WEB.
• This has been a huge development in the integration of patient records. They can be centrally accessed and updated across the NHS trusts that use them.

ACTIVITY: What benefits do you think these systems bring to this organisation?

Understand customer retention

Definition of customer retention:

• The process of keeping existing customers and encouraging them to return to an organisation

• Customer retention is about customer loyalty.
• Loyal customers form the base of a growing organisation and help to give a competitive advantage in the market place.
• As customer choice increases it becomes even more vital to encourage customers to return.
• Customer loyalty and retention can be encouraged from the first point of contact. A customer will choose to return if they feel they are receiving a good service and value for money.

Benefits of customer retention:

• Existing customers are cheaper than new customers.
• It is widely thought that it costs less to keep an existing customer than it is to attract a new one. A recent survey found that 70% of businesses agreed with this.
• Costs such as new customer discounts and expensive advertising campaigns can be reduced if there is a customer base already in place

Benefits of customer retention:

• Satisfied customers become advocates for your organisation
• Customers who are satisfied enough to return to an organisation over and over again are much more likely to recommend it to someone else.
• Positive word of mouth can be very influential in the market place.
• Benefits of customer retention:
• Profit/service usage is increased
• If a loyal customer base uses a product or service repeatedly, profits will increase over the life of the relationship.

Factors that influence customer retention

• price
• products/services offered
• level of customer service
• level of customer satisfaction
• competition
• All the above can help a customer decide whether to use a service again.

Techniques to attract and retain customers

Organisations used varied methods and often use large budgets in order to attract customers to the organisation. These customers can be new or existing. Customers respond to different types of behaviour when deciding to use a product or a service.

Techniques to attract customers

• Price promotions are an easy and visible way of getting a customers attention and enticing them to a product or service.
• The customer is attracted by a low price, an incentive for new customers, a ‘Buy One Get One Free’ offer or similar.
• The organisation still has to work hard to retain these customers as there is nothing in a price promotion that encourages a customer to return.
• Research clearly shows that after a promotion runs its course, customers quickly return to their old buying patterns and sales drop back to normal levels.
• Advertising now has the power to reach us in many different mediums.
• Advertisements reach us through the TV, radio, email, webpages, billboards and post.
• Products and services are also advertised through sponsoring events or TV programs.
• Advertisements often have slogans that customers remember – this helps to plant the seed in a customers mind and relate it the particular product or service being offered.

Techniques to retain customers

Organisations also use additional techniques to retain existing customers

They can:

• develop customer service standards
• develop the service offer
• respond to customer feedback
• continue staff training and development
• offer loyalty discount
• develop customer service standards
• develop the service offer.

Organisations should continually develop processes and service offers to ensure existing customers continue to receive a high standard of service. Customers are less likely to leave the organisation if they are happy with the service received. This can include offering new products and services and increasing the levels of service.

Other techniques include:

• responding to customer’s feedback
• continuing staff development.

If a customer’s feedback is responded to they are more likely to feel valued by an organisation. If a customer’s views are ignored, they are likely to leave the organisation.

Staff development is vital in order to consistently deliver high standards of service. A motivated, trained workforce is a contributing factor in the retention of customers. Customers that receive an accurate, relevant and informative service are more likely to be satisfied.

Techniques to retain customers

Offer a loyalty scheme.

• Loyalty schemes are one of the most obvious methods to encourage customers to continue to use a product or service.
• What loyalty cards are you carrying? It’s likely to be more than you think. Discuss this with the group.
• There are different types of loyalty scheme, including:
• Points card – each time you visit you receive points which translate into money off (e.g. Tesco Clubcard, Boots Advantage Card)
• Repeat usage rewards – the more you use a service the more offers you receive (e.g. Nando’s, Costa Coffee)
• Partner rewards – loyalty is rewarded through other organisations, rewards an be transferred to them (e.g. Tesco Clubcard Exchange)
• VIP rewards – exclusive offers for customers of certain groups within an organisation (e.g. BA executive Club)

Customer loyalty

How do we know if our customers are loyal?

Organisations use the following ways to find out:

• customer surveys to find out usage and habits
• CRM reports to monitor spending and frequency of use.

These methods are both useful in finding out how often your customers use your organisation and how profitable your customers are. This data can then be used to develop strategies for retention.

Customer recovery

• This is a term used to describe the processes used by an organisation to attract previous customers back to the organisation after they have stopped using the products or services.
• Customer recovery can be done in several ways depending on the size, nature and culture of an organisation:

1. customers can be contacted directly
2. new procedures can be implemented
3. incentives can be offered.

Each organisation will look at this process differently.

The one thing that is consistent across all organisations are the factors that need to be addressed before customer recovery can take place.

Understand the measurement of customer satisfaction

Performance data is used in organisations to measure the levels of customer satisfaction. This can be from customer surveys, complaints records, sales reports or similar.

Analysis is done in two different ways:

• qualitative analysis
• quantitative analysis

The method of analysis depends on what is actually being measured.

Qualitative data

This data:

• is descriptive and cannot be measured numerically.
• is useful to find out how people think or feel
• can be challenging to measure, as it is subjective data and is not always formal
• can provide additional depth and detail to statistical information.

Quantitative data

This data:

• is measured numerically
• is used to analyse quantities
• is simple to analyse if the source data is accurate
• relies on amounts or sizes in order to analyse results.

Following data analysis an organisation will set targets for improvement.

These targets and the way they are set depend on several things:

organisational policy

The policy of an organisation may dictate what targets can be set.

A business plan may already contain targets and aims that must be adhered to.

SMART target setting

All targets should adhere to this model.

Organisations use a variety of qualitative and quantitative methods to measure customer satisfaction. Methods are also a mix of formal and informal.

Examples include:

• Customer focus groups
• Mystery shoppers
• Customer surveys
• Complaints data
• Customer comments
• Returns data

Customer focus group

• A group of customers brought together, usually to focus on a particular subject, service or product. This method encourages discussion.
• It can be informal and the opinions of the group cannot be interpreted as hard facts.
• It gives an organisation a real insight into how customers feel.
• This method is particularly useful when trialling new products or services.
• Features: can be informal, subjective and give an insight into feelings.

Mystery shopper

• This is a person that is employed to visit an organisation to pose as a regular customer to assess the service levels without the staff being aware of the real purpose of their visit.
• This method assesses customer service staff in a natural environment and enables organisations to see service levels from a customer’s direct point of view.
• This data is based on an individual experience, but can also be scored numerically.
• Features: Information gathered is natural, accurate and evaluative

Customer survey

• This is direct, formal feedback from customers, using pre-defined questions set by the organisation.
• This can help to gather feedback from a whole customer base and enables simple analysis.
• Organisations can set questions based on the areas of satisfaction they wish to analyse.
• This is probably the mot common method of obtaining customer feedback to measure satisfaction.
• Features: This formal method is focused on pre-defined areas and is simple to evaluate.

Complaints/returns data

• This analysis is focused on customer complaints, to highlight trends in customer dissatisfaction.
• This will only enable low service levels to be highlighted and does not allow for good customer experiences to be analysed.
• This data is formal and can easily be analysed, due to its statistical nature.
• Complaints data is already held by the organisation so the process for analysis is usually simple to implement.
• Features: Simple to implement, focused on dissatisfaction, formal analysis