SECTION 8.2
cUSTOMER rELATIONSHIP
mANAGEMENT AND eNTERPRISE
rESOURCE plANNING
Customer relationship management (CRM) involves managing all aspects of
a customer’s relationship with an organization to increase customer loyalty
and retention and an organization’s protability. As organizations begin to
migrate from the traditional product-focused organization toward
customer-driven organizations, they are recognizing their customers as
experts, not just revenue generators.
Organizations are quickly realizing that without customers, they simply
would not exist and it is critical they do everything they can to ensure their
customers’ satisfaction. In an age when product di)erentiation is di*cult,
CRM is one of the most valuable assets a company can acquire. The sooner a
company embraces CRM the better o) it will be and the harder it will be for
competitors to steal loyal and devoted customers.
LEARNING OUTCOMES
Learning Outcome 8.4: Explain operational and analytical customer
relationship management.
Customer relationship management (CRM) is a means of managing all
aspects of a customer’s relationship with an organization to increase
customer loyalty and retention and an organization’s protability. CRM allows
an organization to gain insights into customers’ shopping and buying
behaviors. Every time a customer communicates with a company, the rm
has the chance to build a trusting relationship with that particular customer.
Companies that understand individual customer needs are best positioned to
achieve success. Building successful customer relationships is not a new
business practice; however, implementing CRM systems allows a company to
operate more e*ciently and e)ectively in the area of supporting customer
needs. CRM moves far beyond technology by identifying customer needs and
designing specic marketing campaigns tailored to each. A decade ago if you
had a complaint against a company you could make a phone call or write a
letter. Now you can contact people around the globe and voice your
complaint or anger with a company or product. Companies have to listen,
making CRM the primary challenge facing organizations. Organizations are
discovering a wave of other key business areas where it is benecial to build
strong relationships beyond customers. These include supplier relationship
management (SRM), partner relationship management (PRM), and employee
relationship management (ERM).
Learning Outcome 8.5: Identify the core and extended areas of
enterprise resource planning.
Enterprise resource planning (ERP) integrates all departments and functions
throughout an organization into a single IT system (or integrated set of IT
systems) so employees can make decisions by viewing enterprisewide
information about all business operations. Enterprise resource planning
systems provide organizations with consistency. They allow for the e)ective
planning and controlling of all the resources required to plan, source, make,
and deliver goods and services.
The rst generation of ERP systems focused on improving the manufacturing
process through automation, primarily addressing back-o*ce business
processes such as inventory ordering and product distribution. The second
generation of ERP systems extended its reach into the front o*ce and
primarily addressed customer issues including marketing and sales. The third
generation of ERP systems, known as ERP-II, allows a company to compete
on a functional level, adopting an enterprisewide approach using the Internet
to connect all participants in the value chain. One of the biggest challenges
of an ERP system is cost. ERP systems contain multiple complex components
that are not only expensive to purchase, but also expensive to implement.
Costs can include the software itself, plus consulting charges, hardware
expenses, and training fees.
Applications such as SCM, CRM, and ERP are the backbone of ebusiness, yet
most organizations today have to piece together these systems. A rm might
choose its CRM components from Siebel, SCM components from i2, and
nancial components and HR management components from Oracle.
Integrating all of these enterprise systems allows an organization to function
as a single unit meeting customer, partner, and supplier needs.
Learning Outcome 8.6: Discuss the current technologies
organizations are integrating in enterprise resource planning
systems.
The goal of ERP is to integrate all of the organizational systems into one fully
functioning, high-performance system that is capable of meeting all business
needs and user requirements. Of course, this goal is incredibly di*cult to
achieve because businesses and technologies experience rapid change, and
ERP must support mobility, cloud, SaaS, and tiered architectures.
CLASSROOM OPENER
GREAT BUSINESS DECISIONS – Harley-Davidson Begins the
Harley Owners Group (H.O.G.) to Encourage Customer
Involvement
One of the biggest assets for Milwaukee-based Harley-Davidson Motorcycle
Company is its intensely loyal customers. After struggling against Japanese
competition throughout the 1960s and 1970s, the company turned a corner
in 1981 when a group of 13 senior Harley-Davidson executives purchased the
company. Vaughn Beals, the leader, celebrated with a victory ride from the
company’s factory in York, Pennsylvania, to its headquarters in Milwaukee.
The new owners decided to begin the Harley Owners Group (H.O.G) to get
customers more involved with the product. HOG worked. With HOG, the
company was able to key into its greatest asset – the people who care about
the Harley-Davidson company. HOG opened a dialog outside the company
with its loyal customer base and inside the company with its workforce.
In 1993, a little over 10 years after the start of HOG, the company celebrated
its 90th anniversary with more than 100,000 HOG members converging on
Milwaukee for a drive-through parade featuring 60,000 Harley-Davidson
machines.
CLASSROOM OPENER
Disgruntled Customers – Stop Them Before It Is Too Late
When Burger King employees refused to serve a drive-thru customer, the
customer got out of his car and “using his hands, sts and feet as weapons,”
destroyed the drive-up window, causing more than $1,000 in damage.
CLASSROOM VIDEO
Lemonade Stand
This is a short YouTube clip showing a kid’s lemonade stand as the subject of
CRM – good discussion starter on CRM.
http://www.youtube.com/watch?v=YEa_RNSX5Xo
CLASSROOM VIDEO
Mini Cooper CRM
Great video to begin your CRM discussion.
http://www.youtube.com/watch?v=DpFwb4cnTB0
CLASSROOM EXERCISE
10 Cool CRM Developments
With the advent of CRM as a development platform –– think solutions from
Salesforce.com, Microsoft and SugarCRM — customers and partners have
begun to develop some interesting applications. Here are some prime
examples.
http://www.salesforce.com/_app/video/misc/help/Need_Help_Logging_In.jsp
Ask your students for additional examples of CRM developments.
CLASSROOM DEMO
Microsoft CRM Demo
Watch this Microsoft Business Solutions CRM demo for an overview of their
CRM application.
http://www.microsoft.com/en-us/dynamics/default.aspx?
CR_CC=200470741&WT.mc_ID=DynGB_en_us_SEM_GOOG&DYNCRM-SEARCH
&WT.srch=1
Ask your students how they could use Microsoft CRM to help a start-up
business grow and increase sales
CLASSROOM EXERCISE
Designing a Digital Dashboard for a CRM System
Digital dashboards o)er an e)ective and e*cient way to view enterprisewide
information at near real-time. According to Nucleus Research, there is a
direct correlation between use of digital dashboards and a company’s return
on investment (ROI), hence all executives should be using or pushing the
development of digital dashboards to monitor and analyze organizational
operations.
Break your students into groups and ask them to develop a digital dashboard
for a CRM system. Be sure your students have addressed all of the following
in their digital dashboard:
Customers
Sales
Marketing
Customer service
Order entry
Billing
Collections
Credit limits
Shipping
Transportation
CLASSROOM EXERCISE
Implementing a CRM Strategy
Organizations can nd their most valuable customers through “RFM” –
Recency, Frequency, and Monetary value
How recently a customer purchased items (Recency)
How frequently a customer purchased items (Frequency)
How much a customer spends on each purchase (Monetary Value)
Break your students into groups and ask them to form a CRM strategy for a
new company that sells o*ce supplies. Have your students present their
strategy to the class. The strategy should address how to gain new
customers and how to keep existing customers. For example,
The company should create personal promotions for its best customers
The company should target new customers in the surrounding area,
especially business customers
The company should try to buy a list of business customers in the area
from a valid source
The company should advertise in local trade papers, newspapers, radio
stations, and restaurants
The company should track the responses it receives from the various
advertising sources
CLASSROOM OPENER
ERP Failures
Blaming ERP for the “pickle” that many a company who has implemented
ERP nd themselves in is like blaming the CAD package for a poorly
architected building. Like just about everything else, IT-enabling business
processes is about using the right tools for the right reasons and executing.
CLASSROOM OPENER
GREAT BUSINESS DECISIONS – Warren Bu;et Decides to
Invest in Berkshire Hathaway
In 1962, Warren Bu)ett decided to invest in an ailing textile company called
Berkshire Hathaway. Today, the company has a market capitalization of $60
billion, and Bu)ett is recognized as one of the greatest investors of all time.
Bu)ett believes in focused investing and believes that all investors should
look at ve features:
1. The certainty with which the long-term economic characteristics of the
business can be evaluated
2. The certainty with which management can be evaluated, both as to its
ability to realize the full potential of the business and to wisely employ its
cash Sows
3. The certainty with which management can be counted on to channel the
reward from the business to the shareholders rather than to itself
4. The purchase price of the business
5. The levels of taxation and inSation that will be experienced and that will
determine the degree by which an investor’s purchasing-power return is
reduced from his gross return
Overall, Bu)ett uses information from every source to analyze and evaluate
an investment. Without looking at a business from every angle, internally
and externally, including customers, partners, and suppliers, it is impossible
to gain an accurate assessment of the business. If a person could capture
Warren Bu)ett’s “know how” and put it in a data warehouse, they could
make a small fortune.
One of the greatest benets of an ERP system is helping people understand
how the organization is performing from an enterprise perspective. ERP
systems provide organizations with information that was previously di*cult if
not impossible to obtain allowing the organization to perform more e*ciently
and e)ectively. Better performance usually means higher prots, which
pleases stakeholders and investors.
CLASSROOM EXERCISE
SIMULATION: Lemonade Tycoon
Jennifer Nightingale from Duquesne shared this simulation with us that she
uses for teaching ERP – it is excellent!!
http://get.games.yahoo.com/proddesc?gamekey=lemonade
CLASSROOM EXERCISE
Designing a Digital Dashboard for an ERP System
Digital dashboards o)er an e)ective and e*cient way to view enterprisewide
information at near real-time. According to Nucleus Research, there is a
direct correlation between use of digital dashboards and a company’s’ return
on investment (ROI), hence all executives should be using or pushing the
development of digital dashboards to monitor and analyze organizational
operations.
Break your students into groups and ask them to develop a digital dashboard
for an ERP system. Review the digital dashboards in the text. Be sure your
students have addressed all of the following in their digital dashboard:
Accounting
Finance
Logistics
Production
Distribution
Manufacturing
Human resources
SCM
CRM
CLASSROOM VIDEO
Strategy to Align Business and Technology: ERP Video
Solid nancial management is essential to running your business. Enterprise
Resource Planning (ERP) systems support nancial management as well as
other back o*ce functions such as human resources. Although not generally
considered mission-critical, ERP systems must be implemented and managed
properly to provide visibility into operations in a cost-e)ective, Sexible way.
Join featured analyst rm, Gartner Inc. VP and Distinguished Analyst Je)
Comport, and Kirsten Greeneld, Practice Director of Oracle Professional
Services, USinternetworking, Inc. (USi), for a new webcast available now
“Closing the Application Value Gap: Strategies for Aligning IT with Business”
as they examine how organizations are driving maximum benet from their
ERP investments. You’ll also learn the steps that USi client, The Princeton
Review, took to e)ectively manage the ongoing maintenance of its Oracle
implementation while strategically deploying its internal IT resources. Tune
in and learn:
Two exercises to determine whether an ERP solution is right for you or not
Key strategies when implementing an ERP system
How to navigate the balancing act between what to have inside, what to
develop yourself, and what to get from outside the organization
How to get maximum value out of an ERP system
How to make your ERP system “the single source of truth”
CLASSROOM EXERCISE
Analyzing ERP Components
Break your students into groups and ask them to provide an analysis of
Figure 10.14, the enterprise resource planning vendor components. Ask your
students to analyze the di)erent components and from this brief description
rank the vendors from the vendor that o)ers the greatest business
intelligence and strategic advantage to the vendor that o)ers the least
business intelligence and strategic advantage.
CLASSROOM VIDEO
Giant Bicycle
“Before, our customer service department had to get o) the phone, look at
three or four screens, go into a le cabinet, and call a warehouse to track a
shipment,” says Mike Forte, director of strategic information systems at Giant
Bicycle USA. “Now they can see the whole shipment process on the screen,
right at their ngertips.”
Watch this video to see how Microsoft Business Solutions–Axapta (now
Microsoft Dynamics AX) has helped Giant Bicycle USA link four factories and
12 distribution centers, and provided immediate information to their
customer service people.
http://www.microsoft.com/dynamics/ax/product/giantbicycle.mspx
CORE MATERIAL
The core chapter material is covered in detail in the PowerPoint slides. Each
slide contains detailed teaching notes including exercises, class activities,
questions, and examples. Please review the PowerPoint slides for detailed
notes on how to teach and enhance the core chapter material.
