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Customer relationship management is creating a team relationship among sales, marketing, and
customer support activities within an organization.
Another narrow, yet relevant, viewpoint is to consider CRM only as customer retention in which
a variety of after marketing tactics is used for customer bonding or staying in touch after the sale
is made.
Shani and Chalasani define relationship marketing as “an integrated effort to identify,
maintain, and build up a network with individual consumers and to continuously
strengthen the network for mutual benefit of both sides, through interactive, individualized
and value-added contacts over a period of time”.
The core theme of all CRM and relationship marketing perspectives is its focus on co-operative
and collaborative relationships between the firm and its customers, and/or other marketing
actors.
CRM is based on the premise that, by having a better understanding of the customers’ needs and
desires we can keep them longer and sell more to them.
Growth Strategies International (GSI) performed a statistical analysis of Customer satisfaction
data encompassing the findings of over 20,000 customer surveys conducted in 40 countries by
Info quest.
The conclusions of the study were:
• A Totally Dissatisfied customer decreases revenue at a rate equal to 1.8 times what a Totally
Satisfied Customer contributes to a business.
• By reducing customer defection (by as little as 5%) will result in increase in profits by 25%
to 85% depending from industry to industry.
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An important facet of CRM is “customer selectivity”. As several research studies have shown
not all customers are equally profitable (Infact in some cases 80% of the sales come through
20% of the customers). The company must therefore be selective and tailor its program and
marketing efforts by segmenting and selecting appropriate customers for individual marketing
programs. In some cases, it could even lead to “ outsourcing of some customers” so that a
company better utilize its resources on those customers it can serve better and create mutual
value. However, the objective of a company is not to really prune its customer base but to
identify appropriate customer programs and methods that would be profitable and create value
for the firm and the customer. Hence, CRM is defined as:
Customer Relationship management is a comprehensive strategy and process of acquiring,
retaining and partnering with selective customers to create superior value for the company
and the customer.
As is implicit in the above definition, the purpose of CRM is to improve marketing
productivity. Marketing productivity is achieved by increasing marketing efficiency and by
enhancing marketing effectiveness. In CRM, marketing efficiency is achieved because
cooperative and collaborative processes help in reducing transaction costs and overall
development costs for
the company. Two important processes for CRM include proactive customer business
development and building partnering relationship with most important customers. These lead to
superior value creation.
The basic concept is that the customer is not someone outside the organization, he is a part of
the organization.
Key CRM principles
Differentiate Customers: All customers are not equal; recognize and reward best customers
disproportionately. Understanding each customer becomes particularly important. And the same
customers’ reaction to a cellular company operator may be quite different as compared to a car
dealer. Besides for the same product or the service not all customers can be treated alike and
CRM needs to differentiate between a high value customer and a low value customer.
What CRM needs to understand while differentiating customers is?
– Sensitivities, Tastes, Preferences and Personalities
• Differentiating Offerings
→ Low value customer with potential to become high value in near future
Low
Grading customers from very satisfied to very disappoint should help the organization in
improving its customer satisfaction levels and scores. As the satisfaction level for each customer
improve so shall the customer retention with the organization.
Exploit up-selling and cross-selling potential. By identifying life stage and life event trigger
points by customer, marketers can maximize share of purchase potential. Thus the single adults
shall require a new car stereo and as he grows into a married couple his needs grow into
appliances.
• Increase Loyalty
Loyal customers are more profitable. Any company will like its mind share status to improve
from being a suspect to being an advocate.
Company has to invest in terms of its product and service offerings to its customers. It has to
innovate and meet the very needs of its clients/ customers so that they remain as advocates on the
loyalty curve. Referral sales invariably are low cost high margin sales.
(Fig 2. Categorizing Customers)
#Don’t Pursue.
LowUse Opportunity As It Comes. #Needs In-depth strategic review as
acquisition alone and dissatisfaction later
Low High
could be more harmful
Short Term Acquisition Shouldn’t Affect
Learning from
customers &
Creating prospects
Profits
Acquiring new
Fig.3 5
customers 1
2
Creating loyal
customers
Customer Relationship Life Cycle
CRM facilitates closed- loop customer interactions through all phases of the customer relation life
cycle including:
Business Transaction
Customer Retention
and referrals for new
customers
Customer Service
The Emergence of CRM Practice
The Past:
Looking back at a snapshot history of marketing, we can see the following clear developments
and progression over the last four decades:
• 1960’s – the era of Mass Marketing, when Gibbs SR toothpaste began the first marketing of
this kind with its black and white campaign.
• 1970’s – saw the beginning of segmentation, direct mail campaigns and early telemarketing
(such as publishing)
• 1980’s – where Niche marketing made millionaires of those who were best at it.
• 1990’s – Relationship Marketing. The explosion of telemarketing and call centers, all set up
to develop relationships with customers. The recognition of the true value of retention and
the use of Lifetime Value as a business case.
In addition to this, a number of key marketing concepts can also be used to see where CRM has
developed:
1. The growing de-intermediation process in many industries due to the advent of sophisticated
computer and telecommunication technologies that allow producers to directly interact with
end-customers. For example, in many industries such as airlines, banks insurance, software
or household appliances and even consumables, the de-intermediation process is fast
changing the nature of marketing and consequently making relationship marketing more
popular. Databases and direct marketing tools give them the means to individualize their
marketing efforts.
2. Advances in information technology, networking and manufacturing technology have helped
companies to quickly match competition. As a result product quality and cost are no longer
significant competitive advantages.
3. The growth in service economy. Since services are typically produced and delivered at the
same institution, it minimizes the role of the middlemen.
4. Another force driving the adoption of CRM has been the total quality movement. When
companies embraced TQM it became necessary to involve customers and suppliers in
implementing the program at all levels of the value chain. This needed close working
relationships with the customers. Thus several companies such as Motorola, IBM, and
General Motors, Xerox, Ford, Toyota, etc formed partnering relations with suppliers and
customers to practice TQM. Other programs such as JIT and MRP also made use of
interdependent relationships between suppliers and customers.
5. Customer expectations are changing almost on a daily basis. Newly Empowered customers
who choose how to communicate with the companies across various available channels.
Also nowadays consumers expect a high degree of personalization.
6. Emerging real time, interactive channels including e-mail, ATMs and call centre that must be
synchronized with customer’s non-electronic activities. The speed of business change,
requiring flexibility and rapid adoption to technologies.
7. In the current era of hyper competition, marketers are forced to be more concerned with customer retention and
customer loyalty.
Team Structure
Purpose
Role Specification
Increase
Planning Process Relationship Performance
Effectiveness
Strategic
Financial
Process Alignment
Marketing
Programs
→ Retention
Account Management Monitoring Process
Retention Marketing
Communication
Employee Motivation
Partners
Criteria
Employee Training
Evolution
• Enhancement
The objectives for Marketing Applications offered by a CRM suite are as follows
• Closed- loop Marketing
Improve marketing management and programs with a comprehensive marketing system that
supports planning, campaign management, execution, Internet support and analysis.
Marketing Applications automates the entire marketing process from demand creation to revenue
recognition. Designed specifically for marketing professionals, the application automatically
collects campaign results and tracks campaign effectiveness across different sales channels, by
market segments, and even individual customer results. This level of detail enables marketers to
reduce costs while increasing the effectiveness of their marketing efforts.
• Better Information for Better Management
Implement highly focused, targeted campaigns with better returns on your marketing
investments.
Marketing applications are tightly integrated with the other applications of the CRM suite as well
as the ERP applications. This integration enables marketers to tap into the wealth of data
collected through every customer "touch" with their company whether through field sales, a call
center, or the Web. Without a dependence on simple demographics, marketers will be able to
profile customers based on any number of criteria including sales cycle, payment preference, and
purchase frequency, to tailor messages and campaigns with better accuracy for highly focused,
individualized marketing campaigns.
• Expand Marketing Channels Through
Utilize the power of the Internet to increase your marketing reach and effectiveness. In addition
to supporting traditional marketing and demand creation channels such as direct mail and tele-
business, many vendors are enhancing the integrated closed-loop marketing application through
relationships with several strategic third-party vendors.
The combination of these applications will expand the automation of the marketing planning and
execution process over multiple deployment channels and sales models, specifically through the
Web. By leveraging the Web as a channel, Marketing applications will help companies capitalize
on this rapidly expanding opportunity to reach a larger audience with their marketing campaigns.
The objectives for Service Applications offered by a CRM suite are as follows
• Service Increases Profitability
Create a profit center out of your service organization using operational and customer
information to reduce costs and generate more revenues.
Service application enables organizations to reduce costs by providing a comprehensive closed
loop support and service information management system. Its comprehensive resource
management capabilities enable organizations route the calls to the right agent to reduce call
resolution time. Its enterprise wide customer management ability enables you to reduce billing
time with built-in integration between contracts, warranties, resource usage and the billing
system. Further, with interfaces to customer care, organizations can track total customer contact
history to increase customer knowledge and reduce redundancies and resolution time. Fast parts
rotation enables reduced inventory levels and therefore, reduced costs.
• Service Improves Service Delivery
Create an efficient and effective service business using integrated enterprise-wide information
available in other Front Office and ERP applications.
Many of the features that increase profitability also streamline and improve organization’s
service delivery. Service Applications provides complete support for the aftermarket service
cycle enabling companies to improve response times by sending the right engineer to a field
service call, or improve customer service by routing a support call to the agent trained in
supporting a particular product. The Customer Care features of Service Applications also provide
the customer management information to allow agents to respond to a variety of customer
inquiries during one call without transferring the customer from person to person.
• Service Helps organizations to Delight Customers
Provide enhanced customer care, service and customer information management across your
organization to improve customer satisfaction and loyalty.
With an end-to-end Customer Care and Service Solution, Organizations can achieve a full 360-
degree view of their customer. This translates into better response to customer's needs; an ability
to extend proactive customer management programs as well as have the information at your
disposal to better understand the customer. Service applications also track all product defect
information, which enables organizations to proactively manage customer issues, so that they are
well informed and can also accurately inform customers of service issues. The built-in self-
learning knowledge base enables companies to leverage employee knowledge and achieve skills
transfer, increasing employee retention and reducing customer churn. Additionally, Service
Applications enables organization’s customers to communicate with the company though many
different venues, web, call centers, and directly with Field Representatives, offering customers
flexibility in interacting with the company. This integrated customer contact capability ensures
that the organization’s customers receive consistent service and information, thus reduce his need
to turn to one of the competitors for new products or services.
• Service Helps organizations Differentiate their Product
Distinguish business by offering service as a differentiator using multiple channel
communications with customers, full enterprise wide view of customer information.
As products become commoditized, the next purchase decision customers make is increasingly
based on either the quality of service or the perceived care they receive from the company.
Service Applications by enabling both improved product service, and customer care, help
organization’s provide their customers with a positive experience in dealing with the company,
maximizing the likelihood of additional product purchases.
• Service Applications Grows Company’s "Share of Customer Wallet"
Service Applications help to leverage expanded business opportunities extending beyond
company’s service needs, as well as tailoring the service offering to specifically address any
customer’s needs.
Service Applications provides companies to turn support service into a high return profit center.
Service enables the company to attract new service market opportunities by servicing third party
products with its ability to track competitive products and service repair information. The
Companies can also anticipate their customer needs and proactively build and sell new support
and service offerings. Further, they can tailor Service Contracts individually, by customer, by
product or by business, enabling new revenue streams with customized service. Additionally,
they can also maximize the logistics and costs within their expanding service business with
integrated sales and spare parts forecasting.
CRM Programs
A careful review of literature and observation of corporate practices suggest that there are three
types of CRM programs: continuity marketing; one-to-one marketing; and, partnering programs.
These take different forms depending on whether they are meant for end-consumers, distributor
consumers, or business-to-business customers.
Table 1 presents various types of CRM programs developed for different types of customers.
• Cross-Selling
One-to-One • Permission • Customer Business • Key Account
Marketing Marketing Development • Global
• Personalization Account
Partnering/ • Affinity • Logistics • Strategic
Company- Partnering Partnering Partnership
Marketing • Co-Branding • Joint Marketing • Co-Design
• Co-
Development
One-to-one Marketing
Meeting and satisfying each customer’s need uniquely and individually. In the mass markets
individualized information on customers is now possible at low costs due to the rapid
development in the information technology and due to availability of scalable data warehouses
and data mining products. By using online information and databases on individual customer
interactions, marketers aim to fulfill the unique needs of each mass-market customer.
Information on individual customers is utilized to develop frequency marketing, interactive
marketing, and after marketing programs in order to develop relationship with high-yielding
customers. In the context of business-to-business markets, individual marketing has been in place
of quite sometime. Known as Key Account Management Program, here marketers appoint
customer teams to husband the company resources according to individual customer needs.
Partnering Programs
The third type of CRM programs is partnering relationships between customer and marketers to
serve end user needs. In the mass markets, two types of partnering programs are most common:
co-branding and affinity partnering.
CRM and Related Concepts
Metrics, ROI, Balance Scorecard method, benchmarking are some of the common technique
of KM system evaluation. KM implementation is the key to CRM.
It’s a proven fact that 80% of organization revenues come form 20% of its customers, it becomes
imperative to design CRM solutions keeping in mind these most valuable customers and to
leverage 80% non structured data of about 20% of these most valuable customers.
Just as more tangible corporate assets like computer systems have a finite shell life, so too does
knowledge, it must be available at the right time to be able to act upon it. Retaining tacit
knowledge (derived from experiences, data and documents) means retaining the individual,
which is invariably not possible. It is possible to generate explicit knowledge from tacit
knowledge, but it’s a complex exercise.
•Customer database
A good customer information system should consist of a regular flow of information, systematic
collection of information that is properly evaluated and compared against different points in time,
and it has sufficient depth to understand the customer and accurately anticipate their behavioral
patterns in future. The customer database helps the company to plan, implement, and monitor
customer contact. Customer relationships are increasingly sustained by information systems.
Companies are increasingly adding data from a variety of sources to their databases. Customer
data strategy should focus on processes to manage customer acquisition, retention, and
development.
Call Center helps in automating the operations of inbound and outbound calls generated between
company and its customer. These solutions integrate the voice switch of automated telephone
systems (e.g. EPABX) with an agent host software allowing for automating call routing to agents,
auto display of relevant customer data, predictive dialing, self service Interactive Voice Response
systems, etc. These systems are useful in high volume segments like banking, telecom and
hospitality. Today, more innovative channels of interacting with customers are emerging as a result
of new technology, such as global telephone based calls centers and the Internet. Companies are
now focusing to offer solutions that leverage the Internet in building comprehensive CRM systems
allowing them to handle customer interactions in all forms.
•Systems Integration
While CRM solutions are front office automation solutions, ERP is back office automation
solution. An ERP helps in automating business functions of production, finance, inventory, order
fulfillment and human resource giving an integrated view of business, where as CRM automates
the relationship with customer covering contact and opportunity management, marketing and
product knowledge, sales force management, sales forecasting, customer order processing and
fulfillment, delivery, installation, pre-sale and post-sale services and complaint handling by
providing an integrated view of the customer.
It is necessary that the two systems integrate with each other and complement information as well
as business workflow. Therefore, CRM and ERP are complementary. This integration of CRM
with ERP helps companies to provide faster customer service through an enabled network, which
can direct all customer queries and issues through appropriate channels to the right place for
speedy resolution. This will help the company in tracking and correcting the product problems
reported by customers by feeding this information into the R&D operations via ERP.
Traditional Approach to CRM Web-Enabled & Integration
Approach
Fig 7: CRM – A FRAMEWORK
Telephone System
• Demographic Distribution (by age, sex, education, income, marital status, etc)
• The firm’s best customers and the segment they belong to, products they buy, preferences, habits
and tastes of each segment.
→ Customer personal details such as name, address, family details, education, etc
Delivering the ‘360 view’ requires automation to bring together all the data concerning a
customer. This implies the organisation has to change from:
Present CRM solutions are offered by host of vendors that are to a great extent not industry
specific. While there are some vendors, who have come up with industry specific solutions, the
broad model around which the CRM solutions are built remain the same. Adopting a similar or a
look a like solution across industries is what causes major strain in
servicing a customer.
Typical offerings of the current CRM solutions (such as Siebel, Oracle
Apps or MySap.com, etc) vary from solution to solution. However
typical CRM offerings consist of:
Customer Development Field sales, Tele sales, Internet Sales
eCRM
What is eCRM?
In simplest terms eCRM provides companies with means to conduct interactive, personalized
and relevant communications with customer across both electronic and traditional channels. It
utilizes a complete view of the customer to make decisions about messaging, offers and channel
delivery. It synchronises communication across otherwise disjoint-customer facing systems. It
adheres to permission-based practices, respecting individual’s preferences regarding how and
whether they wish to communicate with you and it focuses on understanding how the economics
of customer relationship affect the business.
eCRM Vs CRM
CRM is essentially a business strategy for acquiring and maintaining the “right” customers over
the long term. Within this framework, a number of channels exist for interacting with customers.
One of these channels is “electronic” – and has been labeled “e-commerce” or “e-business”. This
electronic channel does not replace the sales force, the call Centre, or even the fax. It is simply
another extension, albeit a powerful new one, to the customer. The thrust of eCRM is not what
the organisation is “doing on the web” but how fully the organisation ties its on-line channel
back to its traditional channels, or customer touch points.
•Focus the business on improving customer relationship and earning a greater share of each
customer’s business through consistent measurement, assessment and “actionable” customer
strategies.
1. Electronic channels
2. Enterprise
3. Empowerment
4. Economics
5. Evaluation
6. External Information
eCRM Architecture
The primary inputs to this module are mainly from the eCRM Assessment and strategy alignment
modules. During this stage the company will try and develop a Connected Enterprise
Architecture (CEA) within the context of the company’s own CRM strategy. The following is a
set of technical eCRM capabilities and applications that collectively and ideally comprise a full
eCRM solution:
Any enterprise, which wants to implement CRM solutions can choose from four categories of
solutions
Best of cluster
Selecting an interfaced best of breed approach for pure functionality or a front office application
suite solely for integration limits enterprise choices. Enterprises need to start with a clear picture
of the basic truths of integration, interfacing and functionality. An integrated application suite is a
set of application that employs a common architecture, referencing a common logical database
with a single schema. Some suites are more often interfaced application bundle i.e. a set of
interfaced application from a single vendor containing more than one technical architecture or
more than one logical database- frequently assembled by the vendor through the process of
acquisition or partnership
An alternative approach to suites is an interfaced best of breed solution – an approach whereby
an enterprise selects from multiple vendors a set of applications that must be interfaced to work
together, either by the enterprise, one of the selected vendors or a third party integrator. The
individual applications are not the best in any objective sense. Rather, some enterprises select the
applications because they best meet the particular needs. The challenge of this approach is that,
in some cases, the enterprise fails to complete the necessary interfaces to get the individual
applications working together; consequently, the applications remain stovepipes. Best of cluster
is similar to best of breed except that here best is chosen from the cluster and they are interfaced.
Key requirements for CRM solutions
Some of the functional and technical requirements for CRM solutions are as listed below:
Assessing Need
How do you know your business requires CRM?
It is very easy for a business to get caught in the latest ‘customer trap’ when it is being driven by
the information technology (IT) market. Every business does require CRM; the question is to
what level?
Trends
Many businesses are pushed by the current trend to change their business strategy, especially
around CRM. There are basically three trends that effect a business:
Consumer
The customer is an ever-changing image, to be really successful with CRM you must recognize
the customer trends that are effecting the business.
If a business does not understand a customer profile and the changes that have occurred then it is
not possible to provide true customer relationship management.
Products
It is the business providing the products that meet the changing customer trends. Products need
to be reviewed constantly perhaps enhanced or even removed. Supermarkets are a perfect profile
to look at for viewing ‘product trends’, they constantly add and remove products and they
constantly view customer buying profiles and set out the pattern of the store to meet the strongest
buying trend. This may not always be by using the latest ‘technology’, it could be by just
reviewing shells at the end of the day, but the super market is at the minimum watching for the
two basic trends in CRM.
Technology
Ensure that the business is ready to install the new technologies, is the customer data upto it, or is
it time to start again? Do you need to review every technology being used or just one area. Will it
assist the business, is it going to grow with the business requirements or is the technology just
another ‘trend’? Relationship management should not be an alternative to existing
functions/technology; it could be a logical extension to enhance those in existence, though it
could radically change some of the operational processes.
There are organisational constraints encountered in execution of CRM programs. Mainly they are
as follows:
•A mismatch between resource allocated and service levels desired for building customer
relationship
•Absence of financial business case and ROI for investments in Customer Relationship
Composite Costs
100%
100% Direct Sale
% 50% Unit
of Selling
overall cost
sale
Referral Sale
T1 T1
Time Time
Direct sale
Sale
Unit
No.
Referral Sale
T1
Time Figure 2
Organisational measure of referral propensity can be taken through customer feedback on their
willingness to recommend the product to their friend and acquitances.
referrals.
CRM in select Services
Taj actively participates in product designs and influences service design, wherever necessary.
This has evolved after getting an insight into Singapore Airlines’ customer profile and their needs.
The product is designed to reflect their passengers’ preferences, which are quite different in Delhi
and Mumbai, and on different sectors ex-Mumbai. TAJ Chefs conduct an annual workshop on
Indian Cuisine for Singapore Airlines’ caterers worldwide. Taj staff gets trained at Singapore
Airlines’ catering subsidiary, SATS. Taj Ctareres share a lot of information and can access
technology issues with Singapore Airlines.
Its mission was to create a sense of belonging of the customer to the store and vice versa by: •
Building a special relationship with high life time value Titan customers
• Providing a platform for direct feedback from these valued customers to the
company
Where?
It initially started in 6 showrooms in Bangalore. Today the titan Signet has been extended to 102
World of Titan showrooms across 59 cities all over India
• Showroom Personnel are trained not only in the preparation of the program at the
showroom but also in the finer details of CRM.
• Enrolments in the program are tracked on a monthly basis for each showroom,
along with data on purchases made by Signet members who have returned to the showroom
to buy again.
• Signet operations form a part of the quarterly appraisal for their showrooms, there
by ensuring that they earn more marks on their efficient and effective performance.
• A grievance redressal system is in place to ensure that out valued customers are
responded to within stipulated time frame.
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