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Operational CRM

Operational Customer Relationship Management Systems

TQM graphics Graphics courtesy of NextivaOpens in new window

Whereas analytical CRMOpens in new window creates knowledge for customers, operational CRM creates knowledge about customers. Operational CRM provides information about customers’ demographics, preferences and needs.

Operational CRM automates and improves customer-facing and customer supporting business processes such as selling, marketing and service across customer touch points and channels, and it generally requires the support of analytical CRM.

Operational CRM systems support front-office processes, which are those that directly interact with customers; that is sales, marketing, and service.

Operational CRM, therefore, deals with collecting data, processing transactions, and controlling workflow at the sales, marketing, and services functions.

The two major components of operational CRM systems are customer-facing applications and customer touching applications.

Customer-Facing Applications

In customer-facing CRM applications, an organization’s sales, field service, and customer interaction centre representatives interact directly with customers.

These applications include customer service and supportOpens in new window, sales force automationOpens in new window, marketing, and campaign managementOpens in new window.

Operational CRM systems have many important applications for an organization’s marketing department. For example, they enable marketers to identify and target their best customers, to manage marketing campaigns, and to generate quality leads for the sales teams.

Additionally, CRM marketing applications can sift through volumes of customer data — a process known as data mining — to develop a purchasing profile — a snapshot of a consumer’s buying habits that may lead to additional sales through cross selling, up selling, and bundling.

  • Cross selling is the marketing of additional related products to customers based on a previous purchases. This sales approach has been used very successfully by the world’s largest on-line retailer, Amazon.com. For example, if you have purchased several books on Amazon, the next time you visit the website, Amazon will recommend other similar books you might like to purchase.
  • Up selling is a sales strategy in which the business provides to customers the opportunity to purchase higher-value related products or services in place of, or along with, the consumer’s initial product or service selection.

    For example, if a customer goes into an electronics store to buy a new television, a salesperson may show him a pricey 1080i HD LCD television next to a non-HD television in the hope of selling the more expensive set (assuming that the customer is willing to pay more for a sharper picture).

    Other common examples of up selling are warranties on electronics merchandise and the purchase of a carwash after buying gas at the gas station.
  • Bundling, finally, is a form of cross selling in which a business sells a group of products or services together at a price lower than their combined individual prices. For example, your cable company might bundle basic cable TV, broadband Internet access, and local telephone service at a lower price than what you would pay for each service separately.

Customer-Touching Applications

Corporations have used manual CRM systems for many years. The term electronic CRM (or e-CRM) appeared in the mid-1990s, when organization began using the Internet, the web, and other electronic touch points (e.g., e-mail, point-of-sale terminals) to manage customer relationships.

In contrast with customer-facing applications, where customers deal directly with a company representative, customers interact directly with these technologies and applications. Such applications are called customer-touching CRM applications or electronic CRM (e-CRM) applications.

Customers typically can use these applications to help themselves. There are many types of e-CRM applications. We now present some of the major ones.

  1.    Search and Comparison Capabilities

It is often difficult for customers to find what they want from the vast array of products and services available on the web. To assist customers, many online stores and malls offer search and comparison capabilities, as do independent comparison websites.

  1.    Technical and Other Information and Services

Many organizations offer personalized experiences to induce customers to make purchases or to remain loyal. For example, websites often allow customers to download product manuals.

One example is General Electric’s websiteOpens in new window, which provides detailed technical and maintenance information and sells replacement parts to customers who need to repair outdated home appliances. Another example is Good-year’s websiteOpens in new window, which provides information about tires and their use.

In addition, customers now can view account balances or check the shipping status of orders at any time from their computers or smart phones. If you order books from Amazon, for example, you can look up the anticipated arrival date. Following this model, many other companies provide similar services.

  1.    Customized Products and Services

Another customer-touching service that many online vendors use is mass customization, a process in which customers can configure their own products. For example, Dell ComputerOpens in new window allows customers to configure their own computer systems. The GapOpens in new window allows customers to “mix and match” an entire wardrobe. Websites such as Hitsquad allow customers to pick individual music titles from a library and customize a CD, a feature that traditional music stores do not offer.

  1.    Personalized Web Pages

Many organizations permit their customers to create personalized web pages. Customers use these pages to record purchases and preferences, as well as problems and requests. For example, American AirlinesOpens in new window generates personalized web pages for each of approximately 800,000 registered travel-planning customers.

  1.    FAQs

Frequently asked questions (FAQs) are a simple tool for answering repetitive customer queries. Customers may find the information they need by using this tool, thereby not needing to communicate with an actual person.

  1.    E-mail and Automated Response

The most popular tool for customer service is email. Inexpensive and fast, email is used not only to answer inquiries from customers but also to disseminate information, send alerts and product information, and conduct correspondence on any topic.

  1.    Loyalty Programs

Loyalty programs recognize customers who repeatedly use a vendor’s products or services. Loyalty programs are appropriate when two conditions are met: a high frequency of repeat purchases, and little product customization for each customer.

The purpose of loyalty programs is not to reward past behavior, but to influence future behavior. Note that the most profitable customers are not necessarily those whose behavior can be influenced the most easily.

As one example, most major airlines provide some “elite” benefits to anyone who flies a certain distance with them and their partners over the course of a year regardless of how much they spend. The reason is that, although first-class passengers are far more profitable than discount seekers, they also are less influenced by loyalty programs.

Discount flyers respond much more enthusiastically to the benefits of frequent flyer programs. Therefore, airlines award more benefits to discount flyers than to first-class flyers (relative to their spending).

Perhaps the best-known loyalty programs are the airlines’ frequent flyer programs. In addition, gas stations and supermarkets use similar programs to reward frequent shoppers.

Loyalty programs use a database or data warehouse to keep a record of the points (or miles) a customer has accrued and the rewards to which s/he is entitled. The programs then use analytical tools to mine the data and learn about customer behavior.

Benefits of Operational CRM

Operational CRM contributes to delivering outstanding customer service and experience. Operational CRM technologies allow the company to recognize individual customers and their needs, fulfill orders accurately and on time, make relevant communication and offers, and serve its customers in a responsive and reliable manner.

Operational CRM provides the ICT based support for the employees to perform front office activities better and serve customers efficiently.

In summary, operational CRM systems benefit organizations by allowing them to do the following:

  • Provide efficient, personalized marketing, sales, and service.
  • Get a 360-degree view of each customer.
  • Give sales and service employees access to a complete history of customer interaction with the organization, regardless of the touch point.
  • Improve sales and account management by optimizing the information shared by multiple employees and by streamlining existing processes (for example, taking orders using mobile devices).
  • Form individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits.
  • Identify the most profitable customers, and provide them the highest level of service.
  • Provide employees with the information and processes necessary to know their customers.
  • Understand and identify customer needs, and effectively build relationships among the company, its customer base, and its distribution patterns.
See Also:
  1. Gamble, P., Stone, M. and Woodcock, N. (1999). Customer relationship marketing: up close and personal. London: Kogan Page; Jain, S. C. (2005). CRM shifts the paradigm. Journal of Strategic Marketing, 13 (December), 275 – 91.
  2. Evans, M., O’Malley, L. and Patterson, M. (2004). Exploring direct and customer relationship marketing. London: Thomson.
  3. Kotler, P. (2000), Marketing management: the millennium edition, Englewood Cliffs, NJ: Prentice-Hall International.
  4. Engle, R.L. and Barnes, M.L. (2000). Sales force automation usage, effectiveness, and cost-benefit in Germany, England and the United States. Journal of Business and Industrial Marketing, 15(4), 216 – 42.
  5. Buttle, F. (2004). Customer relationship management: concepts and tools. Oxford: Elsevier Butterworth-Heinemann.
  6. Payne, A. and Frow, P. (2013). Strategic customer management: integrating CRM and relationship marketing. Cambridge: Cambridge University Press, P. 211. See also Payne, A. (2005). Handbook of CRM: achieving excellence through customer management. Oxford: Elsevier Butterworth-Heinemann; Payne, A. and Frow, P. (2005). A strategic framework for customer relationship management. Journal of Marketing, 69 (October), 167 – 76.
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