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Two Types of CRM
There are two types of CRM: operational and analytical.

Operational CRM

Operational CRM is focused on the automation of the customer-facing parts of businesses. Various CRM software applications enable the marketing, selling and service functions to be automated. The major applications within operational CRM are as follows:

Marketing automation
Marketing automation (MA) applies technology to marketing processes. Several capabilities are offered by MA software: customer segmentation, campaign management and event-based marketing. Software enables users to explore their customer data in order to develop targeted communications and offers. Segmentation, in some cases, is possible at the level of the individual customer. Unique offers may be made to a single customer at an appropriate point in time.

Sales-force automation
Sales-force automation (SFA) was the original form of CRM. It applies technology to the management of a company's selling activities. The selling process can be decomposed into a number of stages such as lead generation, lead qualification, needs identification, development of specifications, proposal generation, proposal presentation, handling objections, and closing the sale. Sales-force automation software can be configured so that is modelled on the selling process of any industry or organization.

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Sales force automation software enables companies automatically to record leads and track opportunities as they progress through the sales pipeline towards closure. Intelligent applications of SFA are based on comprehensive customer data made available in a timely fashion to salespeople through various media such as desktops, laptop and handled computers, personal digital assistants (PDAs) and cell-phones. Sales force automation software has several capabilities, including opportunity management, contact management, proposal generation and product configuration.

Service automation allows companies to automate their service operations, whether delivered through a call centre, a contact centre, the web or face-to-face in the field. Software enables companies to manage and coordinate their service-related in-bound and out-bound communications across all channels.

Several technologies are common in service automation. Call-routing software can be used to direct inbound calls to the most appropriate handler. Technologies such as interactive voice response (IVR) enable customers to interact with company computers. Customers can input to an IVR system after listening to menu instructions either by telephone keypad (key 1 for option A, key 2 for option B) or by voice. If first contact problem resolution is not possible, the service process may then involve authorizing a return of goods, and a repair cycle involving a third party service provider. Examples of such a process include mobile phones and cameras.

Analytical CRM

Analytical CRM is concerned with exploiting customer data to enhance both customer and company value. Analytical CRM builds on the foundation of customer information. Customer data may be found in enterprise-wide repositories: sales data (purchase history), financial data (payment history, credit score), marketing data (campaign response, loyalty scheme data), service data.

To these internal data can be added data from external sources: geo-demographic and lifestyle data from business intelligence organizations, for example. With the application of data mining tools, the company can then interrogate these data. Intelligent interrogation provides answers to questions such as: Who are our most valuable customers? Which customers have the highest propensity to switch to competitors? Which customers would be most likely to respond to a particular offer?

Analytical CRM has become an essential part of effective CRM implementation. Operational CRM struggles to reach full effectiveness without analytical information on the value of customers. Customer value drives many operational CRM decisions, such as:

a) Which customers shall we target with this offer?
b) What is the relative priority of customers waiting on the line, and what level of service should be offered?
c) Where should I focus my sales effort?

From the customer's point of view, analytical CRM can deliver better, more timely, even personally customized, solutions to the customer's problems, thereby enhancing customer satisfaction. From the company's point of view, analytical CRM offers the prospect of more powerful cross-selling and up-selling programs, and more effective customer retention and customer acquisition programs. Retailer Wal-Mart uses analytical CRM. It collects data from its 1200 stores to identify which segments are shopping, what they are buying and which promotions are most effective. It constantly tries to improve average basket value through effective analytical CRM.

Sources of Reference:
Farncis Buttle, Customer Relationship Management, Butterworth-Heinemann Publishing. You can obtain this excellent book here

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