Licenciada

CENTER FOR RESEARCH
ON INFORMATION
TECHNOLOGY AND

CUSTOMER RELATIONSHIP
MANAGEMENT

ORGANIZATIONS
University of
California, Irvine
3200 Berkeley Place
Irvine, CA, 92697-4650
www.crito.uci.edu

AUTHORS:
Paul Gray
Professor, Information Science
Claremont Graduate School
and
Jongbok Byun
Claremont Graduate School

March 2001

CONTACT: Paul Gray at paul.gray@cgu.edu

TABLEOF CONTENTS
I. INTRODUCTION
II. HISTORY OF CRM MARKET
Major Vendors
Current Offerings
III. DEFINITIONS OF CRM
IV. DRIVERS FOR CRM APPLICATIONS
Reasons for Adopting CRM: The Business Drivers
Cost Goals
V. THE CRM INDUSTRY
Size of the CRM Industry
Vendors
Technology and Service
VI. INFORMATION TECHNOLOGIES FOR CRM
Key CRM Tasks
IT Factors of CRM Tasks
VII. CONSULTANTS
VIII. RETURNON INVESTMENT OF IMPLEMENTATION
Cost and time
Benefits
ROI of CRM Projects
IX. PRINCIPLES OF CRM
X. CRM ISSUES
Customer Privacy
Technical Immaturity
XI. CASE STUDIES
Amazon.Com
Dell
Volkswagen
Wells Fargo
XII. CONCLUSIONS

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REFERENCES
APPENDIX A BASIC ASSUMPTIONS OF CRMAPPENDIX B COMMON MYTHS OF CRM
APPENDIX C LIFETIME VALUE OF A CUSTOMER
C1. Simple Approach
C2. More Sophisticated Calculation
C3. Effect of Loyalty Programs
C4. Additional Factors to Consider
C5. The Arithmetic of Lifetime Value
C6. Example: Applying Lifetime Value Concepts in Banking
C7. Summary and Conclusions on Lifetime Value
APPENDIX D VENDOR’S WEB SITE ADDRESSES

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Version 3-6
March 23, 2001

CUSTOMER RELATIONSHIP MANAGEMENT
Paul Gray
Jongbok Byun

I. INTRODUCTION
Over a century ago, in small-town America, before the advent of the
supermarket, the mall, and the automobile, people went to their neighborhood
general store to purchase goods. The proprietor and the small staff recognized
the customer by nameand knew the customer's preferences and wants. The
customer, in turn, remained loyal to the store and made repeated purchases.
This idyllic customer relationship disappeared as the nation grew, the population
moved from the farm communities to large urban areas, the consumer became
mobile, and supermarkets and department stores were established to achieve
economies of scale through massmarketing.

Although prices were lower and goods more uniform in quality, the relationship
between the customer and the merchant became nameless and faceless. The
personal relationship between merchant and customer became a thing of the
past. As a result, customers became fickle, moving to the supplier who provided
the desired object at lowest cost or with the most features.

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The lastseveral years saw the rise of Customer Relationship Management
(abbreviated CRM) as an important business approach. Its objective is to return
to the world of personal marketing. The concept itself is relatively simple. Rather
than market to a mass of people or firms, market to each customer individually.
In this one-to-one approach, information about a customer (e.g., previous
purchases, needs,and wants) is used to frame offers that are more likely to be
accepted. This approach is made possible by advances in information
technology.

Remember that CRM is an abbreviation for Customer Relationship Management,
not Customer Relationship Marketing. Management is a broader concept than
marketing because it covers marketing management, manufacturing
management, human resource management,service management, sales
management, and research and development management. Thus, CRM requires
organizational and business level approaches – which are customer centric – to
doing business rather than a simple marketing strategy.

CRM involves all of the corporate functions (marketing, manufacturing, customer
services, field sales, and field service) required to contact customers...