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Customer Relationship Management: Using CRM to Focus on Customers

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  • 0:05 Customer Relationship…
  • 1:10 CRM Systems
  • 4:37 Operational and Analytical CRM
  • 5:58 The Benefits of CRM to…
  • 10:07 Lesson Summary
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Lesson Transcript
Instructor: Jill Heaney

Jill has taught college-level business and IT. She has a Doctorate in Business Administration and an M.S. in Information Technology & Leadership.

Customer relationship management (CRM) is an enterprise business system that organizations utilize to acquire, enhance, and retain relationships with customers. This lesson explores how CRM helps organizations become more customer-focused and profitable by combining functional processes with business operations.

Customer Relationship Management Defined

Community Medical Center is a small hospital that is hoping to expand. The current business systems at the hospital are limited. Upper management knows they need to enhance their current systems as they begin their quest to grow and become a larger hospital catering to more diverse needs. The hospital decides to harness customer relationship management systems in new and innovative ways.

Customer relationship management (CRM) is a strategy for managing relationships with customers in an organized way. Organizations use CRM to learn more about their customers' wants, needs, and behaviors in order to develop stronger relationships. The main goals of CRM are to attract new customers, retain current customers, and entice former customers to return to the organization as well as reduce marketing costs and lower the cost of providing customer service. All businesses need to attract customers and increase profits to stay competitive, even hospitals. CRM can assist with doing so.

CRM Systems

CRM Systems are information systems designed to support an organization's CRM strategy. A CRM strategy is a game plan implemented by the organization that uses information about customers to gain insights into their wants, needs, and behaviors in order to offer products and services that suit them. Organizations and customers interact with each other in a number of ways. Each and every interaction should be easy, enjoyable, and free from error.

The first order of business for Community Medical Center is to implement a CRM system. Successful CRM systems rely upon two basic elements: identifying customer touch points and consolidating customer data. Customer touch points are the various types of diverse interactions that companies have with their customers. Some of the more traditional customer touch points include telephone contact, direct mailings, and physical interactions. CRM systems are capable of managing additional customer touch points that can occur through the use of popular technologies such as e-mail, websites, and smartphones.

Direct mailings and telephone calls are traditional customer touch points
Traditional Customer Touch Points

Data consolidation is another critical component to a company's CRM efforts. Customer data must be managed properly to build long-term customer relationships. This is very important because repeat customers are the largest generators of revenue for an organization. The CRM system for Community Medical Center will be populated with customer data gathered by the hospital over the past ten years, and it will continue to accumulate data on an ongoing basis. Customer data may include demographic information, health histories, transactions with the hospital, work history, and educational background.

The CRM system relies on a data warehouse that makes customer data available throughout the various functional areas of the organization such as billing, admissions, emergency, surgery, radiology, medical records, pharmacy, and marketing. Data warehouse is a term that describes storing large capacity data, which has new information constantly added, that is easily retrievable, and used solely for decision making purposes. Sharing customer information across functional areas enables the organization to enhance its relationships with customers and make more productive and profitable decisions.

For example, Joe Smith is a long-time customer of Community Medical Center. His personal information, like address, age, weight, past diagnostic tests, and hospital visits, will be consolidated with new information into the CRM system. Each time he comes to the hospital, his information will be updated to reflect changes in personal information and medical history. The hospital can use the information to build upon their current relationship and offer services that Joe may be interested in. If Joe's blood pressure has been high during his last few visits to the hospital, Joe could be targeted for his increased risk of cardiovascular disease. The hospital could encourage him to see a specialist at one of their locations, market their new dietary and exercise plan for preventative care, or share information pertaining to a new high blood pressure medication.

Operational and Analytical CRM

Once implemented, Community Medical Center's CRM system will contain two major components: operational CRM systems and analytical CRM systems. Operational CRM supports front office operations that deal with customer interactions. Customer interactions can include direct sales, call centers, websites, direct mail, and any other method for communicating with the customer.

Analytical CRM refers to customer data analysis and includes all of the business systems that do not directly deal with customers. Analytical CRM systems provide business intelligence by collecting customer data and transaction histories, analyzing and interpreting the data, and then using the information to make solid business and customer-focused decisions.

These systems can generate statistical models of customer behavior and the value of customer relationships over a period of time. They can even forecast the potential acquisition, retention, and loss of customers. Using analytical CRM systems, Community Medical Center could easily determine the most profitable 20% of customers and market products and services that are geared toward their personal needs. They may also reach out to these customers via telephone rather than mail or e-mail for more personalized service.

The Benefits of CRM to the Organization

The primary focus of CRM is managing and improving relationships, differentiation, revenue enhancement, and growing the organization. We've already seen how CRM systems can help manage and improve customer relationships. Differentiation means setting the organization and its products or services apart from the competition, and this can be accomplished through CRM by targeting customers who may be most interested.

For instance, Community Medical Center has developed the best cardiovascular department in the area by hiring the best cardiologists and heart surgeons and using the most innovative and technologically advanced equipment and procedures. They have differentiated themselves, or set themselves apart, from the competition in this area, which can build upon current relationships and generate new relationships.

Revenue enhancement refers to increasing profits by encouraging a greater number of sales transactions. Growing the revenue requires the hospital to treat more customers for a wider range of ailments. They can also increase revenues by offering preventative care and diagnostic procedures. CRM assists in enhancing revenues by alerting current customers and potential customers of services that they may have a special interest in. Creating awareness and targeting customers whose needs match a particular service increases the likelihood they will utilize the service, which is profitable for the organization.

Finally, growing the organization refers to increasing the overall customer base, profitability, and yearly revenues. Community Medical Center has plans to grow and expand into more areas as well as widen the products and services offered. CRM can aid the hospital in reaching more customers, particularly new customers, through tailored product and service offerings, seamless interaction, and sharing product and service knowledge through various customer touch points.

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