1. CRM can be classified into the two types: operational CRM and analytical CRM. Briefly explain the two types and give an example for each type.
Operational CRM lays emphasis on automating and enhancing the front end business processes. The intent is to constantly improvise the aspects of business that are directly linked with customers, whether direct facing, through data aggregation centers, or online answering and resolving their queries. Automating the marketing, advertising and other service oriented features is the key to successful operational CRM. Different parameters with respect to customers have to be defined for streamlining the strategies.
Example, you want to know how your customers take on the products and services that you are providing them. But, you do not wish to overwhelm them with questions or phone calls asking their feedback. Instead, you facilitate a two way communication channel where in the clients can reach out to you with their questions or enquiries and feedback at their will and suitability.
Analytical CRM caters to operations and analysis carried out at the back office of an organization. The operations which do not have a direct client interaction. Analytical CRM focusses on analyzing the customer data to derive useful information out of it for capitalization of the organization. It facilitates decision making and quality of work by studying patterns and making inferences out of them. With data mining and filtering, the estimations become more and more accurate and strategically coherent.
Example, a telecom service provider company has a host of clients to cater to. They advertise and sell their plans to increase their customer base. They have massive data like gender, age group, frequency of calling, internet usage, sms frequency etc. By carefully analyzing all this information, they roll out schemes which are more likely to be sold. In this case, analytical CRM is applied, where there is no direct communication with the customer, but the patterns are observed and studied and decisions are based upon them.
2. For CRM to be truly effective, what does an organization have to first understand?
Ideally, CRM is a success, if apart from sales; it is also aligned in sync with customer support and marketing. The data needs to be collected within and outside the organization, if relevant. With this consolidated data, the analysts, using an appropriate model need filter out the usable facts and information. This helps not only in choosing the right path by taking the appropriate decision, but also concentrating the focus on formulating marketing strategies and providing support services in a competitive way.
The barriers like any policies, procedures or channels which are becoming an obstruction to providing them an ultimate experience should be eliminated. Support, also includes training it could be giving them an initial quick start with the hands on, technical training, providing them resolutions. Also, for the interface which is provided, smooth approachability is an important criteria here. They should be given the flexibility to express and communicate their problem face to face, call centers, online help centers etc. A very important aspect of this is taking regular feedbacks from the customer about the service, and incorporating them to get better.
3. Which division of a company should run the CRM project?
CRM is not a set of guidelines or principles that a particular department in an organization has to conform to. If you want to achieve the maximum returns and from the business, it is important that CRM and technology are used in conjunction across all business units. Therefore, a single unit should not be held responsible for running and maintaining CRM, but all entities should be an active part of it. However, the approach or strategy may vary with respect to individual unit and be customized accordingly. Because we are depending on technology for implementing CRM successfully, the role of Chief Information Officer becomes inevitable.
4. What industries are more active and what industry is less active in implementing CRM? Why?
Media, Banking, Insurance Pharmacy, Financial Services, Retail, Asset Management, Telecom are some of the industries that have to keep themselves adept with the latest technological advancements and improving their CRM systems. The aforementioned sectors are oriented towards host-client interaction and play a crucial role in planning and decision making.
Areas like agriculture, dairy, poultry, heavy manufacturing industries are behind the curve when it comes to CRM. It is not mandatory for them to be proactive in going extra mile for incorporating CRM in their business. Their business is more conventional than being dynamic in nature. It is governed by a lot of factors and does not really need to involve client response. So, implanting a CRM system might not be a beneficial deal in their case. The farther the industry is away from the end customer, less relevant CRM is.
5. What is the name of Harrahs' loyalty program? Why does Harrahs' loyalty program work when others don't?
The name of Harrah’s loyalty program is Total Rewards. With the inception of this program, Harrah’s sales growth increased exponentially and they were able to save $20 million from their yearly expenditure.
The loyalty program proved to be a revolutionary bliss. Unlike the other conventional counter parts, the program inculcated a sense of being a broader system. IT prescribed that the over-arching goals that the organization aims to achieve will also be helpful in individual operations. They focused on automating their systems that promoted a healthy customer relationship and ensured that their clients were happy and satisfied.
This established an enterprise value in the community and enhanced their customer’s relationships. They contradicted the approach of their flashier counter parts, who chose to invest their money in making their event more grand and spectacular. Harrah formed a coast to coast and integrated it with customer database that gave a boost to their revenue. They opted to put their money in the industry’s pioneer and biggest customer database.
6. Discuss benefits of WINET (3 points)
Once WINet was up, Harrah’s could finally share information across its properties, in real-time, for the first time in its history. If a customer who had just been gambling in Joliet, Ill., hopped a plane to try his luck at the Harrah’s casino in Reno, the employees there would know exactly what the customer did in Joliet and what services to provide.
The company’s 35,000 slot machines now also connect to the AS400 systems, and call-center reps are linked to both the AS400’s and the Unix Patron Database. The AS400s communicate with the Patron Database through a Unix gateway. Analysts in the marketing department use Cognos’ Impromptu query tool to access the data warehouse and use SAS software to do predictive modeling.
But the success of the project hinged on a redesign of the company’s IT infrastructure, which seemed at first an impossible demand. They had to make Harrah’s AS400 transactional systems that supported customer activity in the hotel, casino and event reservations areas at each property communicate with a Unix-based national customer database, called the Patron Database, which would be developed and would contain all of the company’s customer information.
Before the development of WINet, Harrah’s was just like any other casino company. It operated under the assumption that its customers were partial to one particular casino, and its casinos around the country each operated independently and competed with one another. Each had its own player card that was valid only at the casino that issued it, and none of the information systems at these individual sites were integrated with those at other casinos or could even communicate with them.
7. What actions did Harrah's take to prevent competitors from copying the technology that allow its mainframes to talk to the UNIX boxes (2 points)
Harrah’s competitors were only getting inspired by their profit yielding program, but were also making attempt to copy their idea. The completion was emerging and Harrah had to take a step to prevent copying of their mind innovations offensively or defensively. They decided to get the technology that allowed its mainframe systems to talk to Unix Boxes patented. Following that no one would be able to use that idea in their operations.
8. The Cherokee denied Mr. Smith's room reservation request, although it has 183 unreserved rooms for that night, and gave Mr. Smith a free room at another hotel because the Cherokee’s management believes that the hotel’s RM (Revenue Management) system, which makes such decisions, contributes to the hotel’s profitability. Explain how such decision can result in higher profits (4 points)
Setting up differential prices for homogenous capacity is one of the core concepts of revenue management. Intention of doing so is to short list the customers who will be willing to pay more for the same thing. The whole thing is manipulated in a way that it appears the same to the external observer and does not come across as favors.
Segregating the high paying customers eliminates the opportunity cost of filling up the room with a customer who is not willing or expected to pay that amount which matches the client who is willing to bear more cost. Hence, the profitability in revenue management increases many folds.
Cherokee’s innovative and optimum algorithm was devised for deriving the maximum benefit from revenue management proved to be a killer application
9. Discuss at least two weaknesses of segmenting customers by restrictions (4 points)
Segmenting customers by restriction proves to be a wise step in most of the cases. On the other hand, it suffers from some weaknesses too. Two of them are stated below:
- The company’s good will gets affected. The customers may form a negative perception that the company has been biased towards particular high profit yielding customers, which might come across as an unprofessional and unfair.
- Some customers may find or derive creative yet unjustified means or ideas by which they can escape paying money. This can encourage fraudulent cases and cheating.
10. What does RFB1 mean in the Table 1?
The table denoted Cherokee’s customer segmentation scheme. RFB1 refers to “Complimentary room, food, and beverage at level 1, the best rooms and restaurants available. This was given to the customers from whom the casino expected a profit of more than $1000 in Friday event. Such clients were categorized in segment CS0.