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Customer Relationship Management

1.1 INTRODUCTION Welcome to this course on Customer Relationship Management. Let us assure you:

You will enjoy learning this most "happening" area of Business today. You will be able to successfully conceptualize, implement and operate CRM in your organization.

CRM - Customer Relationship Management is at present the most evolved form of marketing. Hence it is important to learn the fundamentals of marketing first. You will then be able to appreciate and learn CRM in a better way. Marketing is a very exciting field in which you have a wide scope to apply your creativity and imagination. It is the most vibrant area of business. Interestingly, it is evolving fast and changing by the day. Thus it makes for a very challenging and satisfying career. In this chapter you will be introduced to the absolute fundamentals of Marketing and CRM. A detailed study of this chapter is very crucial to your understanding of CRM concepts which have been explained in the following chapters. This you can say is the foundation necessary for CRM. 1.2 CONCEPT OF MARKETING Before we go ahead, let us begin with an activity. You will have quite a few activities to do as we go along. Write your answers / explanations in the space provided and then move ahead. If in doubt you may want to go back, read a little and refresh your understanding.

$ Activity A;
What comes to your mind when you hear the word 'Marketing' ? List out whatever that you may think of: For example, it is the selling of goods. It involves advertising your product.

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Introduction to Customer Relationship Management

Marketing Definitions: "Marketing begins much before a product is manufactured and it never ends". Philip Kotler "Aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself". Peter Drucker "Selling focuses on the needs of the seller. Marketing focuses on the needs of the buyer. Selling is preoccupied by the seller's need to convert his products into cash.Marketing with the idea of satisfying needs of the customers by means of the products and the whole cluster of things associated with creating, delivering and finally consuming it". Theodore Levitt "Identification, Stimulation and Satisfaction of consumer needs at profit". Stephen Page In order to understand marketing let us now try and explore it in more detail. ,
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How about taking one definition and exploring, analyzing and synthesizing it together? You will agree that the following definition is one of the shortest yet most comprehensive definitions of marketing. " Identification, Stimulation and Satisfaction of customer needs at profit". When presented differently it may be written as: Identification Stimulation Satisfaction of customer needs @ profit.

Let us explore the meanings of the major words. The dictionary meanings that you can find are: Identification= Stimulation= Satisfaction =

Customer Relationship Management

Now let us think what these words and the definition as a whole might mean to a marketer. "Identification of customer needs" means understanding what exactly they are looking for. What is their expressed or unexpressed need at any given point of time. JSZ Activity B; Imagine that you are involved in your company's marketing activities. What are the ways in which you could try to identify the needs of your customer?

Since we have decided to deal with this marketing definition together, the following are some of the ways of identifying customer needs. Do you agree with them? Market survey/research. Customer feedback and complaints. Observing customer interactions. Discussions with customers / customer panels. Involving customers in product/service design.

Stimulating customer needs is making him/her aware of your offering and inviting them to try your product. >er Activity C; Think of ways you may use to reach, inform and promote your product or service to your customer:

Unit 1

Introduction to Customer Relationship Management

Here are our suggestions, tally them with your list.

Advertisements Sales promotional offers Public relations activities Publicity campaigns Word-of-mouth publicity

'Satisfaction of customer needs is achieved by giving a quality offering at a reasonable price. It is when your product/service meets the customer's expectations, that it satisfies him/her'. This completes our joint exploration of the marketing definition given by Stephen Page. Here we must clarify a very basic point about marketing - no amount of great marketing effort will succeed in promoting a bad product or service in the long run. JS$ Activity D; Take the Marketing definition given by Peter Drucker and write down your own understanding in the space given below.

1.3 CORE CONCEPTS OF MARKETING You have seen some select definitions of Marketing at the beginning of this unit. These definitions and the theory of Marketing are based on the following core concepts which are essential to your understanding.

1. Need 2. Want 3. Demand

Customer Relationship Management

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4. 5. 6. 7. 8. 9.

Value and Satisfaction Product Transaction Exchange Market Target market

10. Marketing 11. Marketing mix. JS$ Activity E:


Find out the Dictionary meanings of the following words and write them down here:

12. Need = 13. Want = 14. Demand = 15. Value and Satisfaction = 16. Transaction= 17. Exchange= 18. Market = Now let us look at all of these concepts :
1. Need: A need is an absolute necessity essential to maintain life. It is a state in which a person feels deprived of something. For example, food, clothing, shelter. (Roti, Kapada aur Makan) Human needs may be further divided into two types:

19. Physiological/Biological needs 20. Psychological and Sociological needs

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Introduction to Customer Relationship Management

Physiological needs include food, clothing, shelter, air, water and sex. Sociological needs include a sense of belonging, love, friendship and affection. Psychological needs are those of self-respect, self-actualization or realization of one's own potential. In short, a need is something which we cannot do without. Our entire life is spent trying to satisfy our (and our family's) needs. We have ever changing and multiple needs. 2. Wants : Wants are the desire for specific need satisfiers. If you are starving then a meal (or any meal) will suffice to satisfy your basic physiological need for food. If you have money you may have to decide how to satisfy your need, i.e. to have a pav bhaji or to eat a burger. What you choose depends on a number of factors such as your age, income, lifestyle, friends, personality, relations, habits etc. A want is the expression of how you would like to satisfy your needs./Need=Food. Want= a burger (for a young, urban school child) Depending on all the factors mentioned here you may decide to satisfy your needs or may decide to wait. Marketing plays an important role in influencing our prioritization of needs and the manner in which we decide to satisfy them. i.e. how our needs are expressed as wants. 3. Demand: Wants become demand when they are backed by ability and a willingness to buy. Here the words 'ability' and 'willingness' both are important for a marketer. It is only when the customer is ready (willing) and capable (able) to pay the price to fulfil his want that a demand is created. Thus when a person is willing and able to purchase a car, only than will he fulfil his want by purchasing one. The sum total of such people will create a demand for cars. 4. Value and Satisfaction: While writing the meaning of value, you must have written: Value = Worth, Utility, Desirability. Value in marketing can be interpreted as below: Value is the total worth of what a customer gets in exchange for a price paid for a product or service. The choice of a particular product/service guides the concepts of

Customer Relationship Management >

value and expected satisfaction. During the process of manufacturing, distribution and retailing of products a significant value gets added. A personal computer is primarily made of a number of components and parts made of metal and plastic. The total cost of this metal and plastic is a negligible amount of the final price paid for the PC. However at each step of manufacturing, till the final assembly and software input, a significant value is added to make the PC worth its value.

& Activity F;
Imagine that you are a parent of a child who has just passed her 5 th standard examination with flying colours. As a surprise you decide to gift her a PC that she has always wanted for her very own. What value and satisfaction will your child and you gain out of this product?

5. Products: People satisfy their needs and wants with products. Aproduct is therefore 'anything' (any offering such as goods, services, experiences, events, places, organizations, ideas etc.) that can satisfy a need or want. A brand, on the other hand, is a product / offering from a known source/organization. This 'brand' carries many mental associations and images that have been created over time in the consumer's mind. All companies work towards building strong, everlasting brands.

6. Transaction: Price Buyer Goods/Services Fig 1.1


The illustration given above explains the concept of a transaction. It is a give and take. You as a customer pay a price (usually money) and get some services or product

Seller
in return.

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Introduction to Customer Relationship Management

7. Exchange: Transactions, as we discussed above, consist of a trade of values. Transactions and Exchange are the essence of marketing. Marketing happens when one social unit (a person or an organization) decides to exchange something of value with another social unit. Exchange is a give and take of values which goes beyond mere products and money transaction. For example, MRF a tyre manufacturing company, supplies tyres to Tata Motors, which is a car manufacturing company. Between MRF and Tata Motors a transaction of money and products (tyres) happens but more value than this is exchanged during a long term relationship between them. This relationship can be explained by fig. 1.2 below: Money Tyres Feedback/Suggestions Pre & Post Sales Services

MRF

Information Exchange Timely Delivery / Quality Replacement Possibility of Co-branding Possibility of jointly developing a futuristic tyre for future cars

TATA MOTORS

Fig 1.2

Customer Relationship Management

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The example we have discussed here is a B2B (Business to Business) example but the same applies to B2C (Business to Consumer) transactions. We as customers develop a bond with a product / brand or the company and over time exchange much more than just money with them. The mutual trust and value transaction is at the core of any successful exchange. And 'exchange' as we have already said, is at the core of marketing and hence at the core of customer relationship management.

8.

Market:
A market is a lot or set of potential customers with needs and wants, who are able and willing to bring about an exchange to safety their needs and wants. Many believe it is simply the total set of present and potential customers, who have a need or want for the basic product. Keeping this in mind, the market for a bicycle and automobile manufacturer would be the same - all those people who have a need for transportation. At this point it is necessary to remember that not all the customers in a market for bicycles / automobiles are ever going to buy your products. Markets have also been interpreted as below:

A trading place. Collection of buyers and sellers. A system of exchange. Total demand.

All these interpretations will be interchangeably used in this as well as any other marketing or CRM book. It is important to clarify certain terms which will be often used in this book. Product will be used as a generic term to describe what is being offered / marketed.
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This could be a product, service, idea, person, or place. Customer is the individual or organization that actually makes the purchase decision. Consumer is the individual or organizational unit that actually uses a product.

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Introduction to Customer Relationship Management

For example, the Purchase department (customer) takes the decision to purchase a machine which is used by the production department (consumer). Parents (customer) purchase toys and children (consumer) play with them. Retailers or shopkeepers (customers) purchase goods from the distributor to sell them to individuals who purchase goods for their own use or their family use (so these individuals again may be customers/consumers). 9. Target Market: A marketer cannot usually even dream of satisfying every single customer in a market. Either the market is simply too huge in size (as in the almost global market for toothpaste ie.everyone who has a need for clean teeth=everyone!) or each customer has different tastes and preferences as they come from different income / occupational / educational / social / geographical backgrounds and therefore will not be satisfied by a common product. Marketers therefore turn to a process of segmentation. They identify and study distinct groups of customers from within the market who might prefer varying products. They choose one/more of these groups (which in nature are more homogeneous than the huge heterogeneous market) to concentrate on. They will usually choose the 'segment' which offers the greatest opportunity. This is known as their target market.Refer to fig 1.3 given below:
Market : Everyone who needs clean teeth; literally everyone with teeth! Segment 2:Those who need fresh breath too. Segment 37 : Those who need clean teeth through a purely herbal toothpaste. Segment 12 : Those who need clean teeth + no cavities, no plaque, clean gums.

Fig 1.3 : A few segments within the market for toothpaste. Each segment is a sub-sect of the Market. The chosen segment = your target market.

Customer Relationship Management

10. Marketing: 'Marketing is a social process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others.' 'Marketing management is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, services to create exchanges that satisfy individuals and organizational goals'. Philip Kotier. 11. Marketing Mix: Marketers need a specific strategy once they have identified the target market they want to do business with. Their success will depend on how well and how effectively they are able to build and nurture mutually satisfying relationships with these chosen customers. The marketing mix is the set of marketing tools and decisions that the company uses in order to achieve its marketing objectives in its chosen target market. These are broadly classified into 4 major areas, called the 4P's by McCarthy: Product, Price, Place, Promotion. You will read more about this later on in Unit 4. 1.4 DEVELOPMENT OF MARKETING PHILOSOPHY_________________^ Production philosophy (Key word = Quantity): This philosophy is the oldest concept.lt guides the manufacturer and assumes that the consumer will favor only those products which are produced in great volume, are widely available and reasonable in cost. It believes that marketing is managed through managing production .It achieves cost reduction through a maximization of output. The management focuses on improving their production and distribution efficiency. For example, production of basic necessities like medicines, sugar, and food grains, as also products like public utilities. Product philosophy (Key word = Quality): This philosophy assumes that customers will favour the product which offers innovative features, best quality and optimum performance. Hence management concentrates upon achieving product excellence and spends considerable energy, time and money on research and development. This kind of situation may lead to a condition called 'marketing myopia'. It means a colored or crooked perception and understanding of marketing and a general shortsightedness about the business. This is due to a more than necessary focus on the characteristics of the product at the cost of the customer and his actual needs. The quality here is as per the manufacturer's perception and customers may not actually want it.

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Introduction to Customer Relationship Management

For example, Ponds blackhead remover strips, Maybelline six-hour fragrance nail polish. (What is the fun in having fragrance only for six hours, the young and dynamic girl who constitutes your target market may wonder?) This concept may become a narrow concept, as manufacturers may not bother to see whether their consumer's needs are satisfied with the existing products or not. But over the years this philosophy has been quite popular with many organizations and most innovations have stemmed from here. Selling Philosophy (Keyword = Hard sell or push): Consumers if left alone will not purchase enough of the organization's products.Hence an aggressive selling and promotional effort is required. Here the management believes that a talented and dynamic sales force will be able to bring in more customers. Hence the focus is on creating an energetic sales force and supporting them with the necessary promotional effort. Unfortunately in the past many organizations went so aggressive in their selling that salespeople got a bad name. Also with time the customers became smarter and did not fall for the salesperson's pitch / presentation. Marketing (Key word = Pull): Selling is only one part of marketing. "Aim of marketing is to make selling superfluous .The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself."

Peter Drucker
An organization is said to follow a marketing approach when it tries to understand its customers' needs and wants and puts this learning into developing products / services that deliver satisfaction. Marketing approach begins and ends with the customer. Customer is thus at the core of marketing. It is the customer's viewpoint that is the most (rather only) important viewpoint. All the departments of an organization work together to be able to meet and satisfy the customer's needs and wants. " Marketing is the idea of satisfying needs of the customers by means of the products and the whole cluster of things associated with creating, delivering and finally consuming it."

Theodore Levitt

Customer Relationship Management

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Selling and marketing are two distinctly different approaches to business. You will find both the schools of thought discussed below.

21. Selling focuses on the needs of the sellers. 22. Selling is preoccupied with the seller's need to convert his products into cash. 23. Marketing focuses on the needs of the buyers
xT Activity G: Can you remember the last time when a salesman really tried to 'hard sell' a product to you without understanding your needs? Explain this incident in your own words.

1.5 DIFFERENCE BETWEEN SELLING AND MARKETING______________


Till this point we have learned what marketing is and also the core concepts of marketing. Let us now check the difference between selling and marketing. This is important because at times people, including some executives, often confuse selling with marketing and use the terms synonymously. Remember, selling is but a small part of marketing. Marketing is a larger phenomenon. When a company makes a product and then tries to sell it, it is a selling approach. Imagine company 'A' is in the business of manufacturing pencils and wishes to diversify into pens. It sets up a state-of-art plant to make the best quality pens and persuades its existing customers as well as new customers to purchase them. Imagine that company 'B' is also in the business of pencil manufacturing and wishes to diversify into pens. Company B institutes a market study in order to understand the needs of its target market in relation with 'writing instruments' (This is the identification we have learnt of in our

5)

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Introduction to Customer Relationship Management

marketing definition). It tries to explore what the competing companies are offering their potential customers. Is there any gap in the customers' need and the existing alternatives? How are the pens being sold and distributed? What are the expectations and requirements (needs and wants) of the middlemen? On doing a detailed study and estimating the market in terms of its exact requirements, company B then institutes a Research and Development effort to develop a 'Pen', which will satisfy customer needs more adequately than its competitors. Which company, A or B, do you think has more chances to succeed? No prizes for the right answer! Company B obviously has the right approach to business. This is the marketing approach. Understand the customer so well that your product/service fits his needs and sells itself! Table 1.1: Difference between Selling and Marketing SELLING MARKETING

24. Concept: Customers if left alone will


not purchase enough of the organization'sproducts. An aggressive selling and promotional effort is therefore required.

29.

25. Selling starts with the seller. It is


preoccupied with satisfying the needs of the seller.

Concept: "Aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself." Marketing starts with the buyer. It focuses on satisfying the needs of the buyer. Emphasis is on the identification of a market opportunity. Seeks to convert customer needs into products. Emphasis is on fulfilling the needs of chosen customers. Views business as a "customer satisfying process" or "profit-making process through customer satisfaction". Concerns itself primarily and truly with the "value satisfaction" that should flow to the customer from the exchange.

30.

26. Emphasis is on "saleable surpluses"


available within the organization and quickly converting them into cash.

31.

27. Views business as a "goods producing


process" or "merely profit making process".

32.

28. Overemphasis on "transaction" aspect


rather than the "Value satisfaction" which is an inherent part of the exchange.

33.

Customer Relationship Management

SELLING
6) Seller's convenience dominates the
formulation of the "marketing mix".
7)

MARKETING
34. Buyers determine the shape of the
"marketing mix".

The firm makes the product first and thenfigures out how to sell it and make profit.

35. Customers determine the product. The


firm makes the total product offering to match and satisfy the identified needs of the customers. In short, the product is the consequence of marketing research efforts.

8)

Emphasis on staying with the existing technology and reducing the cost of providing production. 9) Costs determine price.

36. Emphasis on innovation in every sphere


of the business .On better value to the customer by adopting the most innovative technology.

37. Consumer determines price; in turn the


price determines the cost.

10) Transportation, storage and distribution 38. They are seen as vital services to be are perceived as mere extensions of the provided to the customers, keeping the Production function. convenience in focus. 11) Emphasis is on "somehow selling". No coordination among the different functionsof the total selling task and distribution. 12) Selling views an exchange with the customer as the final goal.

39. Emphasis is on developing an


integrated marketing approach which cover would product, promotion, pricing and physical distribution i.e. all the aspects of the business

40. Marketing views customers as


the very purpose of the business. It is the customer's point of view, which is important. The organization aims at establishing a "life-long" relationship with the customer.

Introduction mance Function/ to Customer Relationship Management Researc Philosophy h and development

Fig 1.3 : Selling v/s. Marketing as company orientations 1.6 CUSTOMER @THE CORE OF MARKETING AND CRM Development of Marketing Management Philosophies Marketing. Towards Relationship

The history of formal marketing management philosophy is not too old. Marketing management as a business philosophy was theorized around the 1960s. Thanks to many authors, thinkers, businessmen and managers, marketing theory is evolving and is metamorphosing (to change in form) into a very meaningful business concept. Marketing is changing its patterns like a kaleidoscope (tube in which patterns are produced by the reflection of pieces of colored glass as the tube is rotated). You hold it towards the light, turn it and you see innumerable and vivid patterns emerging. The same happens with marketing. It is ever- changing but the similarity between a kaleidoscope and marketing ends here. Marketing is changing meaningfully in relation to the product, market segment, customer psychographics (psychological characteristics), geo-demographics (geo = geographical and demographic = study of the statistics of birth, death, disease etc.) and many other aspects. It is evolving for the better and is becoming proconsumer. Every business must have its customer at its core nucleus or else it has "no business to be in business". "Think customer, dream customer" is the crux of marketing today.

Customer Relationship Management

We have seen and studied the marketing concept and how it has come a long way from the production to the marketing concept .Let us now move ahead and understand the competitive edge developed by adopting customer relationship management (CRM) over marketing. It is said that CRM is the most evolved form of marketing today. Let us now see how the CRM concept is different and better than the transactional or conventional marketing concept. Transactional marketing: Transactional marketing (which we have learnt till now) is about winning customers and building market share. This is done through knowing customer needs, market research, reaching customers (promotion) and satisfying customers (productservice and after sale service). It creates the need, the want, and makes the sale. Relationship marketing: Relationship marketing (which is an important part of CRM) is to understand, develop and retain a customer in the long term. It is a marketing process in continuation as a perpetual (continuous) activity. Customer retention is the focal point. It works to develop mind shares. It builds the bridge with target consumers. It goes one step ahead. Marketing plans the sale and makes it. Manufacturing fulfils it. Service services it. But who is in charge of the entire process and who takes the total responsibility of creating a positive experience for the customer? Relationship marketing is the answer. CRM is the answer. Let us now have a quick look at the differences between transactional and relationship marketing:

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Introduction to Customer Relationship Management

1.7 DIFFERENCE BETWEEN TRANSACTIONAL MARKETING AND RELATIONSHIP MARKETING Table 1.2: Transactional marketing v/s. Relationship marketing
Transactional marketing 1 . Focus is on the sale (usually a single sale). 2. Orientation is on product features i.e. what your product offers. 3. Short time focus. 4. Moderate or discontinuous customer contact. 5 . Concern of the marketing department. 6. Little emphasis on customer service. 7. Some commitment to meeting customer expectations. Thus transactional marketing gives emphasis on individual transactions. On successful (or unsuccessful) completion of a transaction, the marketer moves on to get a new buyer and generate another set of transactions. A buyer is interested in the best possible 'value' and the seller in revenue from the exchange. Little emphasis is given to customer service and long-term relationship building and management. We have seen till now that customer focus, customer service, customer relationship, customer care and all these aspects related to customers cannot be a Relationship marketing

1 Focus is on repeat business and . customer retention.


2 Orientation is on product benefits . i.e. what your customer gets.

3 Long time focus. . 4 Extensive or continuous customer .


contact.

5 Concern of all the functions of an . organization. 6 High emphasis on customer service, . satisfaction and delight. 7 High concern for meeting or exceeding . customer expectations

functio long-term customer relations. This begins n of a with an organization which is outward particul focused, and inward looking. ar depart ment. It has to be at the heart of the organiz ation. CRM is about develo ping a custom er centric approa ch and develo ping the organiz ation to be custom er centric and to create positiv e custom er experie nce .CRM means retaini ng and develo ping

Cu sto mer Relati on shi p Man ag ement

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Jg% Activity H; The accounts/finance department is an internal department in any organization. List out 5 reasons why it is important for the accounts/finance department to be customer focused.

There are different ways by which an organization can drive it's business towards success in the market. Look at the important ways given below: a) Technology driven: Here the technocrat is mostly at the helm (position of control) of the organization and technology becomes the core of the business .It is the technology that plays an important role when the customers evaluate it against rival products. b) Product driven: Product driven companies are those who differentiate themselves over the competition based on their products or offering. If the product is unique may be it is an ideal solution but over time it is bound to get copied and become vulnerable to competition. Product driven companies rely on products to keep the customer. This approach is not sufficient to take care of the vagaries of the complex market. c) Price driven: The cost, price and profit become the key words in the business proposition. It is always on the basis of price that the organization competes, but this does not necessarily create 'value' for the customer. History has shown that a company cannot go far using this approach. The price-performance proposition is what matters for the customer. d) Customer Driven: An approach central to CRM: Customer driven approach is at the core of CRM. It is about primarily understanding customer needs on a continual basis in order to foster a relation with them, to know them, to understand them, to share their concerns and to be sensitive to their needs by developing products and services which meet and exceed customer requirements.

1.8

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Introduction to Customer Relationship Management

Being customer focused is also about developing a two-way communication (dialogue in contrast with the monologue of mass marketing). Communication must flow in two ways on a continual basis and should be structured in such a way that the organization enhances its customer knowledge and the customer learns more about the organization. Communication with the customer is also about creating an impression. This happens through various 'Touch points' like contact with a salesperson, retail outlet, call center, contact center, website etc. All these touch points (often called contact points) create a lot of opportunities for the organization to gather information about the customer. It is necessary to properly store, structure and analyse this customer information (or customer intelligence), so that it can be used effectively in order to enhance the relationship. Customer driven approach (i.e. CRM) has to be a clearly defined strategy with a vision and purpose. It must have clear goals, plans and targets. CRM as a philosophy should permeate throughout the entire organization from top to bottom.

1.8 NEED FOR CRM________________________________________________


Through the customer driven approach, which we have discussed above, we have already entered the all-important area of CRM i.e. customer relationship management. Let us now look at certain definitions of CRM. 1) CRM is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. CRM = customer relationship management. CRM = continuous relationship management. CRM=comprehensive relationship management.
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2) CRM is the establishment, development, maintenance and optimization of long-term mutually valuable relationships between customer and organization. Successful CRM focuses on understanding the needs and desires of the customer and is achieved by facing these needs at the heart of the business, and then integrating them with the organization strategy, people, technology and business processes.

Customer Relationship Management

3) CRM is the process of creating and maintaining relationships with business customers or consumers. CRM is the holistic process of acquiring, retaining and growing customers. CRM emerged out of relationship marketing especially after the advent of the Internet and advanced telephony. However, now CRM has grown to include online and offline relationship management. It would be appropriate at this point to also define relationship marketing: "Relationship marketing is the consistent application of up to date knowledge of individual customers to the product, to service design, and to communicate interactively in order to develop a continuous and long term relationship, which is mutually beneficial."

Tony Cram
"The power of relationship management" We have seen that marketing as a theory and practice is constantly evolving and today the most evolved form is that of CRM. The reasons why marketing is evolving, and evolving fast, are as below: Customers today are also evolving. They are becoming more aware, getting exposed to different cultures and servicescapes^ becoming more knowledgeable and more demanding. Also across economies, the political and legal support systems are becoming more proconsumer. Another aspect related to the consumer is her changing lifestyle. People are changing jobs faster, they are more mobile, comparatively more progressive and flexible. Products and services, as a differentiator in today's markets have also reduced in their impact as products do not remain unique for long. This is because any successful product or service will lead to the emergence of many similar products and services. This ofcourse is beneficial to the consumer. However, it makes life difficult for the marketer. A long term and sustainable solution can be sought through CRM. Competition is also getting fierce in every sphere of activity. Every organization is looking for an edge over others. CRM can give this edge because it is a holistic approach. Today the cost of poor customer care is very high. One of the many studies in this area shows that on an average an organization has 20% customer defections every year, which

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Introduction to Customer Relationship Management

means 20% of its customers are lost every year and this is primarily because of poor customer service. CRM makes good business sense. This can be explained very simply: The ratio of acquiring new customers to retaining old customers is 5:1. This means you will have to spend 5 times more resources, efforts, and time in order to get new customers. This explains how important it is to retain your important customers. We have seen in our definition of CRM that retaining customers is an important aspect of CRM. A study estimates that a 5% increase in customer retention translates up to a 25% to 125% increase in profitability in the B2B market. There is another reason why retention is less costly than acquisition. Retention reduces sales and marketing costs. Higher response rates to promotional efforts yield more profits. Salespeople can be more effective when they know their customers well. Also, because customers are loyal to, and knowledgeable about the organization, they know whom to contact in case of any problem. Thus there is less cost incurred to serve a loyal customer. We have already established a need for learning and understanding customers. Customer feedback and customer complaints is a valuable resource for developing customer understanding by an organization. It is observed that 1 in 30 dissatisfied customers complain. It is important to develop active listening towards customer complaints. Indeed, feedback and customer learning are yet another important aspect of CRM. It is observed that one satisfed customer speaks to, and gives references to, 3 of his friends. However, a dissatisfied customer shares his dissatisfaction with 13 other prospective buyers! The Internet magnifies this, says Jeff Bezos, founder ofAmazon.com "If you have an unhappy customer on the Internet, he doesn't tell his 6 friends, he tells his 6000 friends!" This happens as technology aids consumers to be connected with people they haven't even met through e-mail, chat, news groups and personal web pages etc.

Customer Relationship Management

1.9 BASIC ELEMENTS AND KEY CONCEPTS OF CRM _____________________________________________________________ Basic Elements of CRM

41. CRM as a competitive strategy. 42. Customer satisfaction and loyalty. 43. Relationship: selection and retention. 44. Customer service and service marketing. 45. Database management and application. 46. Sales force Automation (SFA). 47. Implementation of CRM.
These are the basic elements or essentials necessary to implement CRM. Following is a brief description of these basic elements: 1) CRM as a competitive strategy- a strategic view: CRM is both a philosophy and a function. It is hence required to look at CRM as a strategy. It is necessary to develop a vision, culture and a clearly targeted plan in order to achieve success in CRM.

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Introduction to Customer Relationship Management

) 2) Customer satisfaction and loyalty: The customer is at the core of CRM. Customer satisfaction and exceeding the customer's requirements, that too on a continual basis, I will create customer loyalty. Customer loyalty will emerge only through the proposition | of mutual benefit.
48. Relationship: selection and retention: It is not possible to serve or to develop a relationship with each and every customer in your target segment. Hence selection becomes very crucial. It is advisable to select and retain certain customers in order to develop a long-term relationship. 49. Customer service and service marketing: Understanding the service we offer (which may be a stand alone offer or part of a product) is important to understand and absorb the intangible element of CRM. Transformation of customer service to customer care is important.
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5) Database management and application: Collecting customer information and creating a meaningful database is fundamental to CRM. How will you write letters and E-mails without having your customer's postal address and e-address? Such simple and yet basic questions need to be answered.
1

6) Sales force Automation (SFA): Sales and services are the functions which work | closely with the customers. You as a CRM initiator will be able to learn about your customer through Sales Force Automation. Ofcourse, SFA is also about automating the sales and sales management process in order to give efficient and effective service to the customers and consumers. 7) Implementation of CRM: This is not exactly an element of CRM but a very essential aspect of CRM. Hence it is included here. A successful implementation, monitoring and evaluation are very critical for CRM success. You will notice that all the elements of CRM are covered in detail in the following chapters I along with examples and activities. Make sure you proceed ahead only after completing a given activity. Take the time required for the activity (and the field activity in some cases), register your observation and then resume your reading. Kev Concepts of CRM 1) Comprehensive strategy. ^ 2) Acquisition.

Customer Relationship Management

50. Selection. 51. Retention. 52. Partnering. 53. Interactive communication. 54. Technology + people. 55. Mutually beneficial long-term relationship.
In order to understand CRM, it is important to understand the key or core concepts of CRM. You will observe that together they help to develop the basic philosophy and practice of CRM.

56. Comprehensive strategy : CRM at one end links itself to SCM (supply chain management describing a long channel stretching from raw materials to components to final products that are carried to final buyers) and customer service and customer care at the other end. This makes it a comprehensive strategy. 57. Acquisition: This is about prospecting i.e. finding the future potential customers and converting them to use/apply your products/services. Using effective promotion methods, a prospective buyer can be acquired. It is about developing a new customer as well as converting a competitor' s customer into your own. 58. Selection: You must have heard the English cliche 'You can't please all the people all the time'. This applies to business as well. You may not be able to serve and satisfy each and every customer. Not all your customers will be willing to develop a long term relationship with your organization. So whichever way you look at it, selection is very important as organizations would not like to waste time, energy or money trying to woo unproductive customers. 59. Retention: On selecting the right customer, it is required to offer a product + service proposition that meets and exceeds customer requirements. Only when the customer is satisfied is retention possible. 60. Partnering: This takes the buyer-seller relationship to a higher level. Here both of them co-create the service or product which is happily used or consumed by the customer. Partnership is about constantly striving to create better value for each other.

Unit 1

Introduction to Customer Relationship Management

61. Interactive communication: Meaningful communication should always be interactive in nature. Can you imagine communicating with your friends without interacting? This applies to any business relationship also. A clearly planned and focused, two way, interactive communication is the very essence of CRM. 62. Technology + people: CRM is often misinterpreted as a technological tool. Well, CRM is offered as a technology by various CRM software vendors. But unless this technology is integrated with the people element, it is difficult to reap success. 63. Mutually beneficial long-term relationship: This concept seems self-explanatory and so we shall deal with it through an activity.

J$ Activity I: Write the meaning of the following words.


64. Mutual =____________________ 65. Benefit =_____________________________________________________ 66. Relationship =_________________________________________________

After doing this, write your own explanation of this concept (mutually beneficial relationship) in the space given below. Base this on a satisfactory / delightful relationship you may have /you may dream of having with an organization you regularly interact with.

1.10 SUMMARY You have just learned that CRM is an extension of Marketing. CRM has worked upon the core concepts of marketing and also at the same time has taken the concept further in order to make it more complete - Customer centric and Business wise. It is the sheer advantage of CRM theory that can give you a competitive advantage in the long run.

Customer Relationship Management

In this chapter you have studied the basic concepts of Marketing and have related this learning to the key concepts and basic elements of CRM. It was also important to learn the basic theory of selling and marketing; because all these are business concepts related with and interdependent on each other. 1.11 SELF-ASSESSMENT QUESTIONS Ql. Define the following: 67. Marketing 68. Transactional marketing 69. Relationship marketing 70. CRM 71. Consumer 72. Customer g) Product

and satisfaction of customer need at Q2. Fill in the blanks: a) profit is marketing. b) The ratio of acquiring new customers to retaining customers is-------------Q3. Match the pairs: 73. Selling Philosophy 74. Production Philosophy 75. Marketing Philosophy 76. Product Philosophy a) b) c) d) Quality PuD Push Quantity

Q4. A parent purchased a toy for his child. Identify who is me customer and the consumer here.

Unit 1

Introduction to Customer Relationship Management

Q5. TrueorFalse: , a) Identification of customer needs and understanding of customer needs is not important. *; b) Price driven approach is the core of CRM.

77. Selection of loyal or target customers is important in CRM. 78. Selling is a small part of marketing.

1.12 CASE STUDY: REFCO-SIFY


' Refco-Sify Securities India is an online portal and offline trading company whose transaction volumes run into several crores every day. A combination of its homegrown system and Microsoft CRM helps Refco-Sify manage interactions with its clients.

The Need
The trading platform is available to the customer over the Refco-Sify Website and through its floating sales force. As a trading organization, Refco-Sify also considers it important to address customer queries. The company has a customer service desk that can be approached via e-mail or telephone. With multiple channels of access, and a wide range of actions available to the customer, tracking transactions with every individual used to be difficult using Excel or Outlook. Besides, the customers began to expect the kind of response that top-notch BPO's offer. To address this need, Refco-Sify considered applying a CRM solution. It decided that a combination of its homegrown system and the Microsoft CRM would probably work best.

The Solution
The goal was to address the high attrition rates at its customer service desk, and provide aconsolidated view of interaction history for each client. To deal with attrition, Refco-Sify put a knowledge center in place. This way the customer's history would be available to an employee answering a telephone call or query. The representative would be able to answer all the issues raised by the customer. The advantage of this approach is that every time a

Customer Relationship Management

new person joins the team, he does not have to go through any major training. Every interaction with a client is fed into the system, so whoever deals with the customer is adequately informed and prepared. The company doesn't use analytics, but a rollout of consolidated computer analysis based on client information, is expected in the future.

The Service
People have raised issues about the security of Outlook, but according to Chandiramani, this is not an issue for them. The Microsoft CRM application has a single super user who can access logs and general system information and manage the system. For end-users there are agent logins that have distinct role definitions for the extent of permitted access based on the individual, group or organization.

The Benefits
The result of the CRM deployment, (even before the analytical part) has been satisfying for Refco-Sify. Here are the advantages of the system, according to Chandiramani:

a)

Quality monitoring:
Any manager can randomly take a client trail and question a salesperson regarding his actions.

b)

Less training time:


Every time a person leaves the organization and is replaced by a new employee, no special IT training sessions are required for the newcomer.

c)

Professionalism:
Agents handle customers in a professional manner, as there is no communication gap in their understanding.

d)

Knowing the pulse of customers:


The company can capture the thought process of customers and provide customized services. For example, if a person does not want to be called on the cell phone, and wants to interact only by mail, then the CRM software warns the tele-caller before he calls the client.

Unit 1

Introduction to Customer Relationship Management

I e) Business process reengineering: ,<,,- Based on the feedback collected, and to ensure that the solution is integrated and used optimally in the organization, Refco-Sify has redesigned some of its processes. Among them are some forms that previously required too many customer signatures ,'If and were cumbersome. Changes have now made life easier for the company, and for its customers.

f) Bottom line:

!
s

;t According to Chandiramani, Refco-Sify's turnover has increased several times over ;_, since the implementation of the CRM, and some credit obviously goes to the new 4j system.
:

(Adopted from: http://www.nerworkmagazinemdia.coni/2(X)505/coveretory04.shtrnl) ACTIVITY:


79. Visit the Microsoft website and collect information on Microsoft's CRM software. 80. Identify Refco-Sify's competitors and find out if any CRM initiatives have been taken by them. Compare this with the Refco-Sify experience as given in the above case. 81. Develop a detailed note emphasizing the "Need and Benefits of CRM."

Customer Relationship Management

2.1 INTRODUCTION The customer is at the core of marketing and CRM. The importance of customers and understanding customer needs is an aspect of CRM that needs to be understood well and embedded deep into the culture of an organisation and its business philosophy as well. To understand a customer well one must begin with studying customer complaints and customer feedback. This helps you to understand your customer and also to read your organisation better through its customer feedback. This then lays the foundation required to develop the skills and communication patterns necessary to develop loyal customers and to create customer delight. It is necessary today to look at customer care in a better and brighter light rather than merely looking at the limited aspect of customer service. After creating this foundation of organisational learning, the organisation can begin its journey towards developing a full-fledged CRM initiative. ' 2.2 TYPES OF CUSTOMERS "Customers are customers! Demanding as always. You keep giving more, they keep asking for more."
w

A meaningful give-and-take makes for a great exchange and this exchange leads to building satisfactory relationships. Let us now understand more about this demanding customer. What is she like? What does she do? What are her needs and wants, tastes and preferences? Customers generally can be divided into different groups using 2 approaches:

4.

82. Industrial Market B2B (Business to Business) 83. Consumer Market B2C (Business to Consumer)
In order to understand these two types better, let us look at their characteristic differences which are given below: Characteristics of Industrial Markets (B2B)

5.

84. Fewer buyers 85. Larger Buyers

Unit 2

Customer Satisfaction and Loyalty

f 3. Geographically concentrated 4. Derived demand < 5. Long negotiation period j 6. Relatively high value
86. Multiple buying influences 87. After sales services

1. Fewer buyers: the numbers of buyers are comparatively few/small in an industrial market. For example, there are around two dozen automobile manufacturers in India who will need to buy engine oil, where as engine oil considered as a consumable item would be bought by lakhs of vehicle owners. 2. Larger buyers: Business buyers buy products in larger quantities. t For example, a big organization employing 10,000 employees may need about 50007 6000 loaves of bread everyday in their canteen. An individual or a family may purchase only 1 or at the most, 2 loaves of bread everyday. 3. Geographically concentrated: Industrial markets are normally concentrated in a specific geographical region due to the raw material availability, skilled labour availability, etc. For example, the IT industry is concentrated at Bangalore, Pune and Hyderabad due to the easy availability of computer educated manpower and the infrastructural facilities offered by these state governments. 4. Derived Demand: A small percentage change in the customer market leads to a major demand shift in industrial markets. For example, a good monsoon may result in a higher demand for consumer goods such as Television sets. This will increase the demand for material and component parts used in the manufacturing of Television sets. 5. Long negotiation period: Since the decision in a B2B market is often complex, and involves large amount of money, it takes longer time and involves several negotiation meetings.

Customer Relationship Management

For example, you feel thirsty, walk into a shop, purchase a mineral water bottle and happily walk out. An organisation's purchase manager, deciding on a drinking water system for a plant spread over a huge geographical area, and catering to a couple of thousand employees, will definitely make his decision only after studying and comparing several options and offers.

88. Relatively high value: Organisations buying commodities/services obviously would be involved in purchases that run into thousand, lakhs, and sometimes, crores of rupees. 89. Multiple buying influences: There are different departments in an organisation that are involved while buying materials and other products. Finance, stores and purchase are just afew of them. Each is involved in a different manner.
For example, the members of a family may decide on a TV set for their family. However TV sets to be installed at a newly renovated railway station, would be a decision that would involve the administration, finance, maintenance, public information and other departments of the Railways. 8. After sales service: Organisations will obviously take a keener interest in the functioning of their products at the customer's factory/store. For example, a refrigerated storage system at an International Airport will require elaborate and regular after-sales-services. The airport authorities may enter into an Annual maintenance contract (AMC) with the supplier of this refrigerated storage system, who may even appoint an engineer, who would be based at the Airport at all times to ensure smooth functioning and immediate repairs.

Characteristics of the Consumer Market (B2C)


Let us now look at an individual customer who buys for herself or her family. Individual buyers, unlike organisations, are more varied and colorful in their relationships with organisations selling them products. The entire population is so heterogeneous in their backgrounds, tastes, preferences, income availability, desire to use credit facilities, peer group, personality etc. There are many ways of classifying them. You may segregate them on the basis of demographical characteristics (age, gender, income earned, marital status, education, occupation, children, religion etc.), geographical characteristics (staying in urban/rural areas, weather and climate etc.), socio- cultural characteristics, (lifestyle, leisure and recreational

Unit 2

Customer Satisfaction and Loyalty

habits, food habits, shopping behavior, fitness involvement etc.) or even product related characteristics (brand loyalty status, frequency of purchasing, volume of purchases, knowledge of products, knowledge of customer rights etc.) Some organisations also follow other ways of classifying customers. Given below are a few types you may find interesting:

90. The Friendly buyer 91. The Negative/Pessimist 92. TheProcrastinator 93. Mr.'Know it all' 94. The Dealer
1. Friendly buyer : You can recognize them at the first glance, with the smile that wishes you. They like to be liked, will tell you a joke or a story and generally would like to have a longish conversation with you. You may think that they would be easy customers to deal with. Not at all. This friendly customer usually gets overwhelmed with his own stories and may carry you down the chatting path. You need to be (of course) friendly with this customer, but show your firmness and your assertiveness. Do not get carried away. Remember while you swap a story or two, that entertaining him is not your goal, but making a sale is. Being communicative and focused is the answer in this relationship equation.

$ Activity A:
Observe a friend who is a salesperson. List down what you feel are 3 good and 3 bad habits that he has. Good Habits Bad Habits

The Negative/Pessimist: He is the one who will keep cursing and complaining. He is miserable and keeps complaining a lot; often about those things which are beyond his or your control. He is inclined to almost always see the black side of

Customer Relationship Management

things. While developing a relationship with this customer, you will have to be sympathetic. Don't go overboard, of course, and don't ever argue. For example, a buyer complains to you of the recession. Agree and then tell him how your product/service is selling well inspite of the recession and how your company (if it is true; and it should be because you have adopted the CRM approach) is doing better than the competition. 3. The Procrastinator: She is the one who always looks as if she is almost ready to buy and never does. She is never able to make up her mind and always puts things off for tomorrow. It is not out of some fear but usually is a part of her psychological make-up. You will observe that such people normally need reassurance from friends and also let others take decisions for them. It is probably this lack of confidence in their ability to make the right decisions, that makes them hesitant. The solution here is to become friends with them, make them feel comfortable with you, so that they can trust you and help them take decisions.

95. Mr. 'Know it all': They appear super confident and act as if they know everything. They usually look down upon most people and consider sales-service people to be 'lower-life forms'. You may get irritated, but don't forget, he is your customer. To deal with such customers follow a golden rule. Never ever openly disagree! Remember that they don't always know everything. Instead, flatter him and compliment him on his knowledge (of your product/service) and slowly carry him towards making a purchase. 96. The Dealer: She is the one who loves to make deals and negotiate a hard bargain. She wants the best price, best service and best delivery. She is a tough negotiator.
For example, she may be a purchase manager for a 5 Star hotel. She will fight to get the best rates for the cleaning chemicals you supply, will get a good quantity discount, free delivery, maximum credit period, free training for her

h o u s e k e e pi n g st af f a n d th e n w il l a s k y o u, " w h at el s e c a n y o u gi

ve?" While dealing with the 'dealer', you should be able to identify their weak spots .Mostly they hate wasting time, tend to be always in a hurry, hate to go back on their word and have a strong sense of pride. You will have to use these observations to the best of your ability and develop your understanding about the customer (both at the macro level and micro level) to fine-tune your offering to the customer's profile and need. Remember CRM needs a closer understanding of customers.

f I

Uait 2

Customer Satisfaction ana* Loyalty

2.3 CUSTOMER DELIGHT IS A MUST CUSTOMER SATISFACTION IS NOT ENOUGH___________________________________________________ Today's organisations are facing more competition than ever before. At the same time, they are also facing customers who are more assertive and demanding than ever before. Winning customers by out performing competition becomes a tough job. In the end, the organisation that does a better job at convincing and reassuring customers that their products suit them best, wins. Satisfaction is a question of perceived performance and expectations. Customers are dissatisfied if performance is less than expectation. They are satisfied when performance matches expectation, and they are delighted (the highest degree of satisfaction & pleasure) if performance exceeds their expectation. An advantage of having delighted customers is that they do not easily switch from your brand to another. They tend to develop an emotional bond/relationship with your brand, as well as

your organis ation. The key to generat ing high custom er delight, and therefo re loyalty, lies in making them enjoy the whole experie nce of buying and using your product . Custo mer satisfac tion is meetin g the custom er needs. Custo mer delight is exceedi ng the custom er's

expectations. In customer satisfaction, the organisation has a procedure to deliver adequate customer service. However this clearly is not enough in today's competitive scenario. While understanding marketing in the context of CRM, we have already learnt that marketing is about identifying and satisfying customer needs! Thus a satisfied customer is an output of your marketing process. While this is essential, it is not enough. You as a CRM believer must go beyond customer satisfaction and work for customer delight. That 'wow' effect! Customer delight is more a matter of integrated actions that happen before and after the customer places an order with your organisation. Customer delight is an experience. It just happens! No, we do not mean here that customer delight 'just happens' without any efforts. Rather, it happens through a combination of meticulous efforts and a creative approach. The background is set in such a way that the organisation is in synch with all the departments, and people representing them are focused on customer needs, and as a result, delight happens.

g Activit y B;
Read the followi ng passag e and study the diagra m (Fig.2. 1). Imagin e that you visit a restaur ant and you experie nce a wonder ful combin ation of 'service plus product ' and say 'wow'! You are delighte d.

Unit 2

Customer Satisfaction and Loyalty

2.4 CUSTOMER SATISFACTION MEASUREMENT In order to execute the ultimate customer care, and create customer delight, it is important to measure customer satisfaction. Just like the 'Zero defect' concept, a 'Zero defection' concept has been explained by Fredrick Reichfield and W. Earl Sasser Jr. (Ref. Harvard Business Review sept-oct 1990.) It speaks about retaining all your customers. No customer leaves you because of some reason such as your product was not good, your services were bad, your delivery took time, there was a quality problem... so on and so forth. It says that everything should be in place and you should actively (and proactively) manage the relationship with customers. 'Zero defection' happens when your customer retention is 100%. The Customer Satisfaction Index should be studied periodically and regularly, followed by remedial changes if necessary. Refer to Table 2.1. Organisations must not only monitor their own performance in providing satisfaction, but also their competitors' performance in these areas. You may be good, but if your competitors are better, then you need to change. There are 4 broad methods usually used to monitor customer satisfaction. Theyare: . ;
;

97. Complaint and suggestion systems. Many restaurants and shops give forms for customers to fill up as they are leaving. Some also have hotlines, web pages and email. 98. Customer satisfaction surveys. Usually less than 4/5 percent of dissatisfied customers will officially complain. (Refer to Fig.2.3) Most just switch brands, so questionnaires that ask about repurchasing intentions really help. 99. Ghost shopping: Experts pose as customers and actually experience the entire shopping process. They experience first hand the treatment you usually give customers. 100. Lost customer analysis: Try and contact customers who have stopped buying or have switched brands. Find out why.

Of course, remember, you must operate on the logic that higher level of customer satisfaction and delight should be delivered within the constraints of the organisation's available resources.

Customer Relationship Management

Table 2.1: Satisfaction Index Form

42

Sr. No. 1

Aspects

Range o

Approva

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Unit 2

Customer Satisfaction and Loyalty

'

"

& Activity C: Study the customer satisfaction index form given above that was designed by an electronic component manufacturing company. Which aspects according to you are the most important in order to create customer delight?

2.5 A PARADIGM SHIFT FROM CUSTOMER SERVICE TO CUSTOMER CARE _______________________________________________________________ You have already seen that customer delight needs to be created instead of only trying to satisfy the customer. Here is yet another approach unraveling the nuances of CRM. Customer service is about giving facilities and services that the customer asks for, or delivering service that is expected in today's competitive world. Most products require additional or long-term support from the organisation. These traditional services include delivery, installation, lessons-in-usage, instruction manuals, repairs and maintenance, etc. For example, you will usually receive 3 free servicing coupons after you purchase a car. Customer care (and also customer delight) is going beyond the 'expectation checklist'. Customer care is being proactive in developing relationships with your customer. We will understand 'retention' in the next chapter but we all know that "Good customers are worth keeping for life". Every single day organisations spend time, energy and money thinking of new ways in which they can satisfy customers and retain them. Ultimately, it is just like a war out there. Organisations compete with each other and now the war is on all fronts - from the kind of products they produce to the experiences customers have before, during and after the purchase.

Customer Relationship Management

Unit 2

3. 2.

1. Customer c

Emphasis on

Focus on lon

Enables resp Commercial L T F C C

Supportive m

under querh Devel ane-r many have i Talkt mustl value: its

ali i G

J V 1 1
W

Unit 2

Customer Satisfaction and Loyalty

understand his concerns and needs. Try to explore and understand the customer's queries and doubts so as to bring him closer to the car that you are offering him. 2. Develop a 'prime club' of the customers who purchase a particular brand and develop an e-newsletter. This newsletter can carry out contests, rallies, free check ups and many such creative initiatives. They help customers to reinforce their belief that they have made the best decision, and that their car and the company is the best. 3 . Talk to your customers through a customer perception study. Customer feedback must be an ongoing process. It has to be a perpetual activity. Remember, the customer values your gesture of asking them about their opinions regarding your product and its allied services. Great services can create a great experience and customer delight. Every company is selling a car -you must try to sell the experience of buying a car and enjoying it!
D

Visit a nearby car showroom. Be a silent observer of:


103. The salesperson making the sale. 104. The delivery process.

Write down your observations on both the activities in the light of what you have learnt about customer service, customer satisfaction, customer care and customer delight.

&> Activity E;
Read the article reproduced below and write a note on your understanding of issues related to Telebanking in CRM. (Adapted from The Times of India, 18th Sep. 2002 -by Rajeshwari Singh)

Tearful Telebanking
In the good old days, telebanking was straightforward. You rang up your bank, told the teleoperator your name, account number and your requirement. The teleoperator would
45

Customer Relationship Management

ask for your address as a counter-check, and then gave you the required information. The whole procedure hardly took a couple of minutes. Recently, my private sector bank introduced 21st century telebanking. As per the brochure, a customer could not only get details of his/her account, but also order cheque books, account statement and bank drafts to be home delivered. Needing an interest-credited certificate for income tax purposes, I decided to try out the new system. I dialled the bank's number and a recorded female voice (RFV) answered. "Welcome to XYZ bank's telebanking service. To continue, please press hash". I pressed hash. 'To continue in English press eight, for Hindi press nine", RFV went on. I pressed eight. "If you are an existing customer, press one; if not, press two", said RFV. I dutifully pressed one. "For account-related information, press one; for interest rates press two; for information on loans..." I hurriedly pressed one. "Kindly enter your 11 -digit account number followed by hash", commanded RFV. I did as ordered. "Now enter your four-digit telebanking code if you have received it; otherwise press star", RFV went on relentlessly. Since I had received my code, I faithfully entered it. "The balance in your account is Rs. 12,430", RFV intoned. "Thank you for using XYZ bank's telebanking services". "I don't want my balance", I shouted." I want a certificate of interest." But it was too late. The phone had been cut off. Grimly, I dialled the bank's number again and went through the whole rigmarole, only to be told what my bank balance was, for the second time. A third try produced the same result. My blood pressure had gone up by at least 20 points, but I had made no progress whatsoever. "One last try," I told my selfthrough gritted teeth. Before beginning to dial again however, I tried to analyze the system, and decided that the best place to break this vicious cycle, was at the point where I was supposed to enter my telebanking code, so instead of entering the four-digit code, I pressed star. "Kindly wait", said RFV. "You are being transferred to a telebanking executive". Haifa minute later, a real, live, non-recorded voice came on line." How can I help you?" I was about to scream"Oh you beautiful, wonderful human being," but decided against it.

Unit 2

Customer Satisfaction and Loyalty

"I need a certificate..." I began slowly, my senses yet to come to grips with my good fortune.

2.6 CUSTOMER LOYALTY_______________________________________


Inahighly competitive world where there are literally hundreds of brands to choose from, it is difficult to ensure that your customer remains loyal to you. A loyal customer is what every organization strives for - he is happy and satisfied with your product and services, is more than satisfied with the experience of shopping with you and believes you suit his needs better than any other rival. In short, he believes he will continue to be happy if he buys your product and does not feel the need to "look around". Customer loyalty will be created if:
105. You understand your customer and his/her needs. 106. You create experiences to meet and exceed the customer's requirement. 107. You are better at doing this than the competition. 108. The customer believes that you are worth developing a relationship with.

If you develop, plan and implement all the parameters of CRM correctly, loyalty will (almost automatically) happen. Merlin Stone and Neil Woodcock in their book "RELATIONSHIP MARKETING" argue that loyalty is a state of mind and behaviour in the following ways:
47

Customer Relationship Management

Table 2.3 : What Loyalty means

Loyal attitudes, beliefs and desires

Loyal Behaviour

I trust you more than I trust your competitors I understand you more than I understand your competitors I feel at home with you more than with your competitors You understand me better than your competitors do I want to learn more about you, but I don't really want to learn more about your competitors I want to tell you more about myself, but I don't want to tell your competitors I want to know what you can do for me but don't want to know what your competitors can do for me I want to buy more from you than from your competitors (or most strongly, I don't want to buy from anybody but you) When I have problems with your products, I know I ought to let you know but I don't bother with your competitors I believe that you'll deal with this problem well, but I am not so sure about your competitors I believe you treat me specially because I'm a good customer of yours

Buying from you Buying more from you Buying exclusively from you Terminating other supply arrangements Checking product availability first with you, asking you for information Paying attention to your information (through media, face-to-face, etc) Giving you information on my characteristics and needs Dedicating resources to managing the relationship with you Joining your club Carrying the symbol (card) of your club with me Responding more strongly to your incentives, promotions etc Recommending or even publicly advocating you to other potential customers Notifying problems to you Notifying successes to you Paying you in time Adjusting my buying/usage procedures to fit yours in a crisis / emergency.

Unit 2

Customer Satisfaction and Loyalty

2.7 SOFT SKILLS AND IMPLICATIONS FOR CRM. "A recent study of 400 CRM implementations world wide concluded that 25% of the CRM failures were due to variations in line-level training and support". DICK LEE (Customer Relationship Management)

You have already seen that everybody in the organisation has to be customer focused. However, in addition, this customer- facing staff has to have a distinct set of soft skills. This is because soft skills are the backbone of communication to and from the organization, and right communication is the key to maintaining and building relations. Here is a list of selected soft skills, which need to be inculcated amongst all employees and especially those that are in direct contact with the customer.
109. Talking 110. 111. 112.

Listening Positive attitude Service attitude

e) Assertiveness i) Enthusiasm g) Confidence a) Talking : Simple, clear, audible, honest talking is essential for a CRM representative. You are a salesperson for an organisation 'X'. But for the customer you are the organisation itself, or at least you represent the organisation 'X'. Hence, your talking has to meet the basic requirements of communicating the right message to the customer. It is very important to have the right tone, voice, variation, and language while you speak. It is also important to seek feedback as you speak.

Customer Relationship Management

J&$ Activity F:
Imagine that you are a contact person at a gymnasium or a fitness centre. Prepare a sales pitch (oral presentation) you will make when you get an enquiry in person or over the telephone. Your sales pitch should be of 10 lines and 3 minutes duration. After writing it, read it again, improvise and practice it. May be you could try it out on a friend to see how effective you are.

b) Listening: It is said that, "You have 2 ears and 1 mouth and they should be used in that proportion." Listening is an absolutely essential ingredient of good communication. We often come across people who do not listen, but pretend to listen. Ask yourself and ensure that you are not one of them. During conversations, listen. When you ask questions, listen. What people, and especially what customers say is important as it tells you their feelings and opinions. It is the key to understanding them and building strong relationships. Here are some clues to improve your listening:

113. Stop talking! 114. Ensure that the other person knows that you want to listen. 115. Observe verbal and non-verbal messages. 116. Recognize his/her feelings and emotions. 117. Ask questions and clarify whenever necessary. 118. Listen with sensitivity and
respect. "His thoughts were slow, His words were few, And never made to glisten.
50

Unit 2

Customer Satisfaction and Loyalty

But he was a joy, Wherever he went. You should have heard him listen." Author Unknown. c) Positive attitude: It is important that all employees, especially those dealing with customers have a strong positive attitude. They must look at life with optimism and believe that things will be better. They must have an ability to look at the sunny side of J things. Unless you have a positive attitude towards your personal and professional life, it is difficult to have empathy and see things from your customer's point-of-view. A silent question to be asked while recruiting customer facing people is' 'whether he/ she will be part of a problem or of a solution?" Also, ongoing training in developing the right attitude is a must. d) Service attitude : Positive attitude with customer care at the helm is known as a service attitude. An attitude which loves to see people getting happy and being part of creating this happiness. Here you instinctively wonder about ways in which you can make a positive difference in your customer's life. The positive and service attitudes are very much a part of an individual employee's psychological make up and also part of the organisational culture. Much also depends on how the individual serving the customer operates within a unit. Their interactions, motivation, team spirit and communication help in creating that "customer care " effect we have discussed above.

JB$ Activity G;
Visit a nearby restaurant and observe the waiter who operates with a "That is not my table" attitude. Interview the manager of the restaurant regarding reasons for this attitude. Write down your learning. (You will have to be careful in handling this delicate situation as you are pointing out somebody's mistake.)

Customer Relationship Management

e) Assertiveness : Often being assertive is confused with being aggressive. But assertiveness gives a positive shade to your communication. A grid on related human behavior can be drawn as below: Submissive Assertive Fig 2.2

g)
Aggressive

f)

Being submissive is allowing others to violate your own rights. Being aggressive is suppressing or violating another person's rights.
r

simpl y apolog ising. Aggre ssive: Count erargu ing with the custo mer and trying

Being assertive is when a person stands for his own rights, without violating the rights of other people. All too often an irate or complaining customer receives an aggressive response from the Customer Service Representative (CSR). What is required is assertiveness, in addition to empathy for the complaining customer. Let's say an irate traveler is very upset at the late arrival of a luxury bus at the destination and is complaining loudly. The driver's response could be: Submissive: Accepting the customer's complaint without any response and

to prove the delay is not his fault.

ons and of the best effort he made, and also promising to take extra care to avoid delays in the future.

Enthusiasm: Enthusiasm is infectious. If you are enthusiastic, your customer will be enthusiastic too. If you are passive, the customer cannot be expected to fall in love with your product. Enthusiasm springs from the service attitude of a CSR, who positively is determined to please his\her customer. He is determined to create delight through his interaction with the customer. Assert He also believes that he is offering the customer the best he has, enjoys his job, enjoys interacting with customers and is willing to work to make the ive: Apolo customer a little happier. gising and then remind ing the custom er of the bad road conditi

1.

Unit 2

Customer Satisfaction and Loyalty

g) Confidence: A customer has to have faith in the competence of the organisation and the employees they are dealing with. This faith is partly developed due to the confidence shown by the employees in their communication and behaviour. If your communication is positive, the customer will definitely feel that he is in safe hands. Everybody working for an organization must have a minimum level of product, service, process, delivery and after-sales service knowledge. It would look very strange if an employee cannot explain the basic function of their organisation. Customers would then believe that the employees are ill-trained and this reflects badly on the organisation. Confident employees speak well and are able to infuse customers with confidence too. Just like enthusiasm, confidence too is infectious. 2.8 CUSTOMER FEEDBACK ___________________________________________________________________ Initiating and following a CRM philosophy requires an in-depth understanding of the customer and all his/her requirements, tastes, preferences, problems and desires. It is imperative therefore, that you spend time and energy learning more about your customer so that you can tailor your products to fit. Customer learning can happen primarily through customer feedback and hence it is called the First lesson of CRM. Customer feedback can come in different forms but is usually generated under three basic types as given below:

119. Positive feedback 120. Customer perception study 121. Customer complaints
1. Positive feedback: Customer appreciation of your company's products, service and quality is a matter of pride and happiness. Positive feedback reinforces your belief in your company and your offering. It tells you what you are good at. You should actually look at it as motivation to further improve your performance. More the positive feedback you have, more is the opportunity for you to create customer delight, develop loyal customers and retain them for life. Also, remember that positive feedback is a potent tool while making your product presentations and negotiations.

Customer Relationship Management

jgf Activity H;
Speak to an interior designer you know and ask him/her when he/she was last complimented by a client. Was it a written or verbal appreciation? If it was written, get a photocopy of it for your notes/reference.

2. Customer perception study:


For effective CRM you have to have better customer knowledge. You also have to keep updating this knowledge and use it in mcdifying/refining/redefining your offering. Only then will your product or service create a resonance with the customer's need wavelength and help you enrich your business prospects. Customer perception study can be done in the following ways:

122. Formal s'tudy 123. Informal study 124. Observations 125. Focus group
a) Formal study: You may employ an internal committee or an external consultancy firm to institute a formal customer perception study. It will be involve setting proper objectives, defining a particular aspect to study, a particular segment/sub segment, buyer behaviour, new initiatives or any such business aspect. Sample size, method of study and modus operandi will be defined. At the end of the study a detailed analysis and report is presented that can work as an input to develop future strategy. b) Informal study: Any formal study as mentioned above has its place in developing business understanding. However, one should not overlook the informal ways in which you will be able to learn about your customer, because as they say "reading

Unit 2

Customer Satisfaction and Loyalty

between the lines" will help you learn about your customer. This insight may not be generated in a formal study format. Lets say, you are a manager/owner of a modern retail store such as a shopping mall. You decide that you will personally make it a point to speak daily to at least four of your customers in person, to ask their opinion about your offering, merchandise, people, service and facilities. This can be done in an informal manner when customers are waiting in the queue or at the bill counter. c) Observations: Another low cost and matter-of-fact way to study your customer, yet extremely useful. In fact it scores above the others because you can see the customer in his/her natural behaviour, as he is unaware of being noticed. At the petrol pump you observe how customers use waiting time. You observe that one in seven vehicle drivers get down and clean the windshield. Can you institute a CRM initiative and have a boy clean the windshield using proper cleaning tools, absolutely free? This person also acts as a silent salesperson and promotes your car cleaning facility to the customers. Will it create delight and be a positive surprise? Yes! Is it generated through a simple technique of observation? Yes! d) Focus group: It is a commonly used marketing research method. A group of existing/potential customers are invited for a brain storming group discussion, which you formally guide them through. Focus groups often generate good insight into customer psyche. 3. Customer Complaints: Before even beginning to think about a CRM initiative, you must have one notebook/folder on your LAN network that stores customer complaints. A person or department must be in charge of registering, maintaining, updating and reviewing customer complaints. Remember you must welcome complaints. Why? "* Look atFig.2.3. It is said that only 1 among 29 dissatisfied customers actually attempt to register his/her complaints. Most dissatisfied customers simply switch brands if they have a choice. Some continue to buy your brand, but are

co nt in u o us ly se ar ch in g fo r a be tte r o ne .

55

Customer Relationship Management

POTENTIAL CUSTOMERS

SATISFIED CUSTOMERS NOT - SO - SATISFIED CUSTOMERS DISSATISFIED CUSTOMERS /CUSTOMERS\ ( WHO j

XCOMPLAIN/

Fig 2.3: Percent of customers who complain

The indifferent attitude towards customer complaints is understandable because we all identify ourselves with our company, product and people. The criticism implied in a complaint [ violates this sense of identity. You should however welcome customer complaints as they give you an opportunity to:

126. Understand the customer. 127. Correct the situation. 128. Sell more in the future. 129. Pro veto the customer that you care.
Yes, it is possible to improve your selling prospects if you handle customer complaints effectively. Addressing customer complaints is a part of corporate philosophy. Here is a suggestion on developing a customer friendly complaint handling policy.

How to word a corporate complaint handling policy


1. All customer complaints are to be considered bona fide. We do not make any assumption about complaints or complainers until we have had a chance to investigate Do not downgrade complaints, even in your mind, simply because the complainer doesn't use good grammar, speaks with an accent, etc.

Unit 2

Customer Satisfaction and Loyalty

2. We appreciate complaints. Even though a customers manner may be brusque or crude, he or she is actually doing us a favor by complaining. We would rather have an angry customer contacting us directly rather than some outside agency, where the repercussions might be far more damaging. In handling complaints, therefore, we ;, should not only thank customers for letting us know about problems, but also thank them for giving us the opportunity to solve them because the customer who doesn' t complain may go to some other place without even warning us in advance.

130. The customer who complains cares. In the same light, we know in advance that the customer who complains is almost always a customer who cares about us as a firm and would like to keep on doing business with us if we give a reasonable response to his/her complaint. This doesn't mean we will retain every angry customer simply by being responsive to his or her complaints. But it does mean we'll get a reasonably good crack at it. 131. Complaint as leverage. You will quickly find that some customer who calls or writes with complaints may actually be taking advantage of an error on our part and shortly will be asking us for special price concession or other "compensations" for our failure. This is legitimate business strategy on our customer's part and should not be a signal to downgrade or sidetrack the complaints. Complaints of this type will be forwarded to designated departments.
5. Time value. Complaints have time value for us as well as for our customers, and it is our policy to receive all complaints as quickly as possible, consistent with reasonable verification procedure. (Adapted from World Executive Digest, Feb. 1990.) 2.9 SUMMARY In this chapter you have learned the preparatory elements of CRM such as customer types, customer service, customer satisfaction measurement, customer delight, soft skills necessary and the importance of learning through customer feedback. In the previous chapter you learned the difference between Transactional Marketing and Relationship Marketing. On similar lines, it is only by learning the difference between customer service and customer care that we understand the intricate nuances of CRM. This helps in a finer understanding of CRM and why it is an evolved form of Marketing.

Customer Relationship Management

2.10 SELF-ASSESSMENT QUESTIONS


Q1. What are the approaches by which customers can be divided into different groups? Q2. What are the different characteristics of industrial markets (B2B)? Q3. What are the different types of customers? Q4. True or False:

132.
him.

Arguing with the negative buyer is the best way to solve a problem with

133. Soft skills are the backbone of communication and communication is the key to maintaining and building relationships with customers.
Q5. Fill in the blanks a) Customer care is.......................in developing relationships with your customer. b). Being................is the right attitude to handle customers.

2.11 CASE STUDY: CULTURE OF SERVICE: GENERAL ELECTRIC


GE's most complex and intimate relationships develop in the large capital goods businesses (jet engines and medical systems). In these situations, the initial purchase price ranges from millions of dollars to hundreds of millions of dollars. Despite these intoxicating numbers(just imagining the commissions is enough to make you dizzy!) GE encourages its executives to look beyond their initial sales and consider the long-term value of customer retention to the company's bottom line. Although GE probably won't be auditing your wardrobe in the near future, it's jet engine businesses regularly perform what could be called "wing audits" to determine the exact needs of airline customers. The relatively small number of customers (there are only 300 airlines around the world) makes this monitoring process highly manageable. Additionally, the purchasing cycles of these customers are usually well known. So it's not difficult to project sales revenues with reasonable certainty. What's less easy to foresee, however, is the strategic value, or what we call lifetime value, of this customer base. This is where things get interesting. You just can't bolt a jet engine to a wing and forget about it. For the sake of both safety and economy you've got to maintain the engine in a superb condition. Jet engines are

Unit 2

Customer Satisfaction and Loyalty

subject to continuous maintenance. From the customer's point of view, the expense of maintaining a jet engine is far more significant than it's initial purchase price. The vendor has a similar perspective- it's far more profitable to maintain a jet engine, than it is to sell a jet engine. In fact, most of the jet engines are steeply discounted, sometimes to the point of being sold at cost. There's simply no such thing as a short-term relationship between a customer and a vendor in this sector. Breaking off the relationship poses serious consequences for both parties. To maintain this relationship, GE has developed high value extranets for it's large capital goods customers. Anyone who buys a GE jet engine now knows that critical information is just a mouse click away. The latest Federal Aviation Administration (FAA) directives, as well as any new safety bulletins, are posted on a special extranet designed exclusively for jet engine customers. Blueprints, wiring diagrams, modifications and schematics can be accessed from the extranet site. In some cases, engine problems can be diagnosed inflight with the aid of sensors capable of beaming real time performance data to service personnel on the ground. Spare parts can be ordered over this private network, which allows customers to monitor their shipping status. This feature alone saves airlines tens of thousands of dollars, since it enables them to make decisions based on real time knowledge instead of hunches and intuition. In the old days, the salespeople in GE were trained to act like elephant hunters. They'd go out on a game hunt, find a big customer and bring back a half-billion-dollar order. Nowadays, for example, the pricing on jet engines is so brutal that they're sold almost at cost or even lower. So the money has to be made in parts or service. As a result, they have large service operations around the world that they didn't have a decade ago. The people leading those operations have changed too. Today, they have shifted some of their top talent into these service operations. They want to focus their resources into these service operations because they've become very valuable profit centers for them. Their aircraft engine service is now as important a business as their jet engine equipment manufacturing operation. Klaus Huber, director of European sales for GE's aircraft engine division, doesn't mince words when talking about the role of one-to-one relationships in building long term profitability. "What happens after they buy your product is everything. In this business you can't leave people in the lurch. Because they will never come back to you again." Lufthansa is Huber's largest account. Huber's success as a manager is based on his ability to maintain a steady stream of communication between GE and Lufthansa. A small squad of GE technicians and engineers, assigned to the Lufthansa maintenance shop, provides "elbow-to-elbow" contact with their client. While this "live-in" arrangement guarantees daily exchanges between the jet engine maker and its end-users, its only part of the

Customer Relationship Management

relationship process. In addition, Huber manages the overall relationship with the help of a formal entity called the 'customer team' (CT). The CT is composed of representatives from various specialities such as sales, customer support, technical services, parts and repair. "All of us talk together on the phone every day. We make sure everybody on the team knows what the customer's needs are. We make sure we're servicing those needs. And we look for new opportunities to serve our customer." Over the years, customer-driven behaviors have played a major role in the success of the aircraft engines division. During the 1940s and 1950s, GE provided aircraft engines solely to the military. In the 1960s the company saw an opportunity to sell to the commercial aviation market and differentiated itself largely by establishing a more customer-friendly environment than its competitors. Today GE is a leading provider of the jet engines used on wide-body aircraft, the most lucrative part of the commercial market. Huber embodies an interesting synthesis of Jack Welch's concept of the "boundaryless" organization and a fully integrated, one-to-one enterprise. Here mission-critical information flows seamlessly across divisions. "When a problem happens, we don't argue about who's at fault," says Huber. "If the plane isn't flying, our customer is losing money. We know the clock is ticking, so we go in and fix it, no argument. Responsiveness is the name of the game." Extranets have also been designed for customers of GE's medical systems business. GE can remotely track the operational status of its medical systems worldwide, 24 hours a day. An imaging device in a Boston Hospital will be monitored during the day by GE j technicians at New York. When the New York team's shift is over, it hands it over to a f team in Tokyo. 8 hours later, a team based in Paris takes over. When the shift is through, New York picks up the ball again. Smart sensors alert the technicians to any variance in the machine's operation. Based on the machine's known performance characteristics, the technician will diagnose and troubleshoot the problem. In most cases, they are able to alert the operators at the hospital before the hospital even notices that something's wrong. If necessary, they will dispatch technicians to the scene to fix the problem before the customer has even asked for help. This is what they mean when they say, "We're using information to build intimate relationships with our customers". This is where it becomes tougher for the competitors to match them. What GE feels is that today customers are seeking relationships, not products.

I
(Abridged form of case studies from Itol Marketing by Don Peppers and Dr. Martha Rogers)

Unit 2

Customer Satisfaction and Loyalty

Activity:

134.

Based on a web search, find out about the competitors of GE's aircraft

engine division.

135.

What do you understand by Welch's "Boundaryless organization"?

136. Explain how communication and relationships are at the core of business between GE and Lufthansa. 137. Visit a nearby modern hospital and enquire about the customer service they get from their medical equipment providers. Think of how CRM can help the hospital improve their efficiency and performance.

61

Customer Relationship Management

3.1 INTRODUCTION The fundamentals of CRM speak about 'selection' and 'retention' as two important aspects. Selection is the process of selecting the right customers who are most suitable to your business and, of course, are commercially profitable. Retention is a benefit of developing a long-term relationship with these sets of selected customers. Remember, the mutuality (give and take) is most essential in this relationship. While engaging in the processes of selection and retention, CRM uses technology and CRM tools like Customer Bonding and Customer Lifetime Value (CLV). All along in this book we have emphasized that the people or human element of CRM is the most crucial. Relationships are at the core of this people element. Retention and relationships go hand in hand. 3.2 THE BACKGROUND ____________________________________________ Let us take a flashback 200 years back. Consider 2 villages, one in India and the other in Europe. The baker in Europe and the potter in India would be almost parallel examples of entrepreneurs. The baker would bake biscuits, cake, bread and other bakery items for villagers. Similarly, the potter in an Indian village would make earthen pots for families in the town. The baker in the European village would know exactly the quantity of bakery items required by each of the families, would know their tastes and preferences, if they liked sweet, crispy, salty, well-roasted, assorted packing, so on and so forth. Thus, the baker would customize each basket for a particular family, often giving home delivery for customer convenience. On the home front here, the potter in our Indian village would also understand and remember the individual needs of different families. He would then make pots as if they were made-to-order. People, on receiving these pots, would feel a definite delight. Don't you think that both the examples given above are classic cases of relationship marketing and CRM? However you may argue about the relevance of these examples in today's world. You may say that the market 200 years ago and that of today has no comparison. You could argue that 200 years ago the market was limited to the village and hence it was possible, for the baker in Europe and the potter in India, to customize their offering, but today's markets are mass markets. Is this approach viable and feasible today?

Unit 3

Relationships and Retention

Let us see one more example and you will probably get the answer. ' The National Bicycle Company, Kukuba, Japan makes bicycles and exports them all over the world. The specialty of the National Bicycle Company is that a customer can choose out of 1,13,21000 models posted on their website and select one for his/her need. The order placed over the Internet is fulfilled within two weeks anywhere in the world. Markets have expanded but technology also has progressed. Today technology can be of great help in taking the buyer-seller relationship to much higher heights. It is very much possible to create that one-to-one effect similar to the potter and baker of the past. This is called a "segment of one." In unit 3.7 of this chapter we will discuss more on the aspect of Technology in Relationships'. /& Activity A; Visit the following websites and study the customized products offered by them. Write a note on the products on offer and the process of dealing. You may choose any other website if you prefer.

138. www.barbie.com 139. www.chemsta)iop..cota.

"is

3.3 WHY SELECT CUSTOMERS?__________________________________


You are by now familiar with the basic elements of CRM: Relau'onsWp-selection-retention-muruaHty-long-teim-partneringinteractivecorran and technology plus people. We have also said that CRM is a long-term initiative which takes time and resources to implement. Obviously then, selection becomes very crucial because you would not want \vtt\am disloyal or wrong customers. You want to keep the right customers. (The right customers are also looking for the right organization!) , ,.

65

Customer Relationship Management

You want to retain the best of your customers and serve them to the best of your capabilities. This means you are creating a set or segment/s of right customers for your organization. In the next topic you shall learn the concept of segmentation. Selection is a key principle of CRM because the tough reality of business is that it is hard to meet and satisfy all your customers all the time. It thus becomes essential to prioritize the customer and his/her needs. It also makes business sense because survival requires an ability to meet the most important needs of the most important customers. You then create a competitive advantage by meeting the needs of the customer in such a way that: a. b. c. Your competitors are not able to meet this need. You are better at identifying and satisfying this need. Both you and your customer see potential in each other to develop a longer, mutually beneficial relationship. .

$ Activity B;
We are born with family and relatives, but we choose our friends. Think of two of your closest friends. Write down why you think you are friends with them.

Let us remember some important benefits of selection: a. b. c. d. e. f. It reduces cost. ' It increases profits. Your cost benefit ratio looks upwards. It helps create goodwill for your organization.
L

It gets you good word-of-mouth publicity. It improves the possibility of greater customer satisfaction and loyalty (Retention!)

Unit 3

Relationships and Retention

3.4 SEGMENTATION "Allmen are equalbutsome are more equal than others " is a criticism on democracy. Sad but true. (The feminists may criticize this since it only refers to 'men'. Remember not to have a gender bias while referring to your customer in your communication. Respect the fact that 50% or more of your customers are women!) In business we have already said that some customers are better than all customers. Selecting these set or sets of customers is segmentation. It assumes that the population of customers is heterogeneous and some will buy more, will buy more frequently, will pay by cash, will have the power to influence the buying decisions of others. So it does not make business sense to treat all customers equally. Hence segmentation as a process helps identify the most profitable customers that you can develop relationships with. A segment is a group of existing or potential customers who share common characteristics that make them different from other groups of customers. The car market may consist of: (Refer back to Fig 1.3) a. The luxury car segment. b. The family car segment. c. The sports car segment. While a basic need for transportation may be common for all segments, different customers will want a different kind of car, given their different backgrounds, need for status, convenience, income etc. Thus each of these segments may buy different brands of cars. These differences will be of price and payment terms, shopping at different locations, being influenced by different media, differences in quality / accessories requirements, status symbol needs etc. Segmentation is the process of dividing the customers into segments so as to be able to understand a chosen segment, and serve it in a better (right!) way. Segmentation can be done on the following bases:
For B2C: Consumer markets segmentation :

1. Geographic: - Nation, region, city, urban, semi-urban, rural, climate-based. 1 Demographic: - Demography is a statistical study of human population and includes the bases of age, gender, family size, income level, occupation, education, religion etc.

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Customer Relationship Management

3. 4.

Psychographic: - Social class, personality, and lifestyle. Behaviour: - Rate of use, occasion of use, loyalty, benefits sought, product experience etc.

Radio Mirchi, or most of the FM channels today, target urban youngsters with a modern lifestyle who seek a particular experience and relate to the overall personality of FM generation. Their Caption: "Mirchi Sunne Wale rahe Always Khush ". In this example, different geographical, demographical and behavioral bases together combine to define a segment or target market for Radio Mirchi.

For B2B : Industrial market segmentation: 140. Demographic:- Industry type, company size, company type. 141. Operating Variables: - Service input required (high or low), light/heavy users, level of technology based. 142. Purchase Approaches:- Centralized or decentralized purchasing policy. 143. Situational Factors:- Special application, urgency, order size.
5. Personal Factors:-Attitude to risk, companies with similar values, loyalty. Please refer to Figs. 3.1 and 3.2 given below that explain the segmentation process

STEP 1 Defining The Market

STEP 2

STEP 3 Narrowing Down The Choices

Identifying Segments

STEP 4 Picking the Winners

STEPS

STEP 6

Developing the Plan of Attack Staying Ahead

Fig 3.1: The Market Segmentation Process

1. Who are our customers?

Unit 3 Relationships and Retention 2. What product / service will meet the target segment needs and offer us a sustainable competitive advantage?/ capability and processes ^develop and implement solutions effectively?

Fig 3.2:

The aim of a segmentation process is to achieve and fulfill a target segment for your company. Customer driven strategy questions are the basis on which you should begin defining your target market. And defining your target market (selecting the right customers to serve) is the key to effective CRM. # Activity C: Study the diagrams given below and answer the question that follows.
Market For Sales/Marketing Training Workshops

n
AA

oo

Fig 3.3: A Variety of segments / customers requiring training workshops

Customer Relationship Management

Fig 3.4: Company A

Fig 3.5 : Company B The dark portion depicts the training workshops offered by the companies. Company A offers one advanced programme for all the segments. Company B offers 5 training programmes to suit individual customer segments. Which company has effectively segmented their market? Why do you say so?

Unit 3

Relationships and Retention

3.5 SEARCH FOR LOYAL CUSTOMERS The search for loyal customers is an important and never ending process. Each organization would love to be able to identify and select the most loyal of their customers. But the question that haunts them is, "How do I recognize loyalty in a customer?" Some indications/pointers to look for the loyalty element in your prospect are given below: Your existing customer references

Those who approach you based on the recommendation of one of your previously satisfied customers, are usually a good prospect. It is better to have reached or contacted a new customer through a personal reference rather than through an advertisement or promotional program. "Satisfied customers are the best y^ advertisements an organization can ever have". Those who buy based on factors other than merely price

I Price promotions aimed at wooing customers based on your lower prices can be I dangerous because customers who come to you for a 5 % lesser price, will probably move to another supplier offering them a 7.5% reduction. So in the long run it is better to look for customers who value better quality products and services and are interested in long-term relationships. The Customer in the next lane is better than the one on the island of Timbuktoo!

This may seem like a common sense statement but it is definitely true. There will definitely be a better comfort level, a more secure feeling, and the likelihood of continuity when you deal with a local customer. There will also be the added benefits of higher-level of recommendations and references for you. It surely makes more business sense to search for local and loyal customers. It certainly costs less in terms of selling efforts and servicing as compared to reaching out to customers in a different I state or country.
M

Customers looking for higher level of customization More customized the product, less likely is the customer to switch to anybody else. Customization is costly, but then loyalty also is valuable. Organizations therefore should look for customers who are looking for more customization or personalization. They may remain more loyal to your organization than others. They will definitely value and appreciate the services you are providing and will get used to this personalised attention.

Customer Relationship Management

The customer requiring more services

> ,

Look for opportunities to give pre-sales and post sales services to your client and you will see how your prospect prospers into a potential customer. The more you cater to your customer and the more you are able to offer him in terms of extra services and enhanced service quality, the more is the probability that he will be bound to you. He also will never be satisfied with what your rivals are offering. Activity D : Imagine that you are a salesperson selling educational books to institutional libraries. Make a list of pre and post sales services that you could offer your customer so as to ensure 'delight'.

3.6 ESSENTIALS FOR A MEANINGFUL RELATIONSHIP _______________ "Making the initial sale is definitely important but selling by itself is not enough. In today's service-technology oriented market place, future sales increasingly depend on creating and maintaining a close buyer-seller relationship".

Theodore Levitt
A relationship is a bond. It is the visible and invisible element of that understanding, respect warmth, care, and mutuality that helps to build a bond of relationship. It is like buildinga rope that is made of a number of thin threads neatly entwined together. In an individual and commercial context relationships play a crucial role. Commercial relationships with internal and external customers are based on moral, ethical, legal and plain business sense. Successful companies build strong, long-lasting relationships with all the people and organizations that they come in touch with.

3 Unit 3

Relationships and Retention

; Jg$ Activity E;
Imagine that a family is temporarily separated. The father is in India and the mother is in the United States working on a software development project. How will they remain in touch with each other?

STEP 1: - Surely you must have listed out the following ways of keeping in touch:

Letters, E-mail, SMS, Fax. Telephone / web phone. Internet chat. Sending photographs, Greetings/e-greetings. Gifts parceled/couriered/through friends and relatives.

STEP 2: - Think of all the other things they can do to keep in touch. Apply your imagination and creativity. Now lets take our example further. The family in India know their mother loves a particular lemon pickle made by an Aunt of theirs. They take the effort of requesting their Aunt to make a special batch of pickle, pack it nicely and send it through somebody (hoping that customs do not object to it.) Imagine the mother's joy when she gets her unexpected surprise! This is the challenge that CRM professionals must accept. Can they make a difference to their customers lives? Remember, if you are not in touch with your customer they are likely to forget you. The CRM mantra for relationships therefore is KIT (Keep In Touch).

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Customer Relationship Management

ctivity F :
Assume that you are working for an advertising agency and you want to develop a continuous flow of information to your existing and future (potential) clients. List out the reasons/occasions for which you could write letters / E-mails to them.

3.7 TECHNOLOGY IN RELATIONSHIP


In this book we have discussed that a combination of Teleconnectivity and the Internet helps us keep in touch with customers. The careful and sensitive use of technology can help you create an illusion of personal service to a customer even if you are half-way round the globe. A customer calls a hotel for booking and the computerized system helps the customer contact person to recognize the customer (if she is a past customer) by name. Even though the customer knows it is technology at work, she will feel happy. Simple recognition makes people feel good. Small things matter a lot. And CRM means paying attention to the details because it is often the small things that matter when you are building a relationship.

Use of technology for CRM communications:


We have learnt that Tele-sales and Tele-Marketing are two important aspects of CRM that use technology. The following technologies are used in making CRM operational: ;

Telephony system and equipments: - Tele calling, Land lines


Networking technologies: - LAN, MAN, WAN, Videoconference.

Wireless connection technology: -PDA, ipod and mobile.


Internet: - POP 3, E-mail system, websites and online customization.

Unit3

Relationships and Retention

v "" '''''

Computer-hardware: - Remote access servers, Sun Microsystems. Computer-software: - SAP, sales logix 2000. Automation technologies:-ATM

All these technologies help, in fact they make it possible for organizations to remain "connected" at all times to their customers. Without this technology it is difficult (but not impossible!) to implement a CRM philosophy. 3.8 CUSTOMER DEVELOPMENT PROFILE Let us begin this section with an activity. JS$ Activity G; Two competing publishers of diaries have consistently maintained a 20% market share over the last 3 years. Diaries are bought in bulk by companies to give as gifts to their customers and employees. Their sales statistics is given below:

144. Company A has a sales ratio of 90:10 i.e. 90% business comes from the old customers and 10% business is achieved from new customers. 145. Company B has a sales ratio of 50:50 i.e. 50% business comes from the old customers and 50% business is achieved from new customers.
Which company, according to you, is a good marketing or CRM company? Why?

Now, consider your answer against the background we have discussed in Unit 1 that the cost of acquiring a new customer is 5 times that of retaining an old customer. Refer to the diagram of a leaky bucket shown below (Fig. 3.6). Businesses are like leaky buckets. They keep losing customers. As you can see, more the leaks in a bucket, more is

Customer Relationship Management

the filling effort required. And filling, or getting new customers, is a costly affair. Hence it makes sense to retain a customer over a longer period.

Positive Forces That Plug Leaks : 146. Highly Motivated Staff. 147. Good Relationships With Main Customer. 148. Excellent Record Of Deliveries. 149. Quality That Is Second To None. 150.
Drops/customers moving away to a rival Actual T .eve! of \ Success \

Quick Response To Customer

Requirements.
1 Required Level / of Success /

o
0 Fig 3.6 : Business is like a leaky bucket
Retention of customers may not always be enough. It is also necessary to develop your buyer seller relationship to a higher level. There are two popular approaches to achieve this. The first, customer development profile is explained here and the second, level of customer bonding is explained in section 3.9. Customer development profile is easily explained by the following diagram (Fig. 3.7):

Unit 3

Relationships and Retention

Advocate Supporter Client Customer Prospect

jI

Fig 3.7: Customer Development Profile

Let us now look at these levels : Level 1. Suspect: This is the preliminary lead a business develops. A remote possibility that a person or company may or may not become your potential customer. You may come to know about a new restaurant 'x' through an advertisement, a hoarding or some passing reference made by your colleague. So far as the restaurant is concerned, at this stage you are a 'suspect'.

Level 2. Prospect:
Aprospect is a potential or a likely customer who may actually become your customer. At this level of prospect, your chances of gaining a particular customer are better than with the suspect. Somebody close to you recommends the new restaurant 'X' to you strongly and you try to get more details as to its address or landmark. You may call up the restaurant and check up if they have a table reservation facility. You become a prospect i.e. a prospective or potential buyer.

Level 3. Customer:
When a prospect actually makes the purchase and an initial exchange of goods/services

Customer Relationship Management

against money takes place, he/she becomes a customer. The first experience (good or bad) is felt. The seller has made the first sale to this new customer. You visit the new restaurant 'X' with your family or friend and enjoy your first experience there. You become a customer.

Level 4. Client:
When the customer regularly starts buying from the same organization/supplier he/she becomes a client. Whenever a need for the particular product/service arises, he/she goes back to the same supplier. Obviously, the customer is totally satisfied. If he/ she was partially satisfied or dissatisfied, he would not even become a client (a regular customer).

The food quality, the ambien ce, the decor, the light, the service, music and everyth ing is so good, so perfect at the restaur

ant 'X', that you start visiting it regularly. Every time you have an opportunity to go out for a meal, restaurant 'X' is at the top-of-your mind. You also start speaking to your friends about restaurant 'X', and end up becoming an informal ambassador for the restaurant within your social circle.

Level 5. Supporter:
Loyalty at this level is very high. The customer identifies very closely with the brand and the product/service. He creates a very positive word-of-mouth. At every single opportunity he recommends and refers the brand to everybody. The customer also starts becoming 'immune' to other rival offerings. He will also be more willing to forgive the brand if something goes wrong. He may also justify the organisation's activities in the face of criticism. The customer does not remain a mere client, or regular customer, but becomes a strong supporter.The organization at this stage has an opportunity of partnering with the customer. Restaurant 'X' now realizes your value. It is far greater than the amount of money you are actually spending at 'X'. You start relating very closely with 'X'. Very shortly, you will study CLV - Customer lifetime value. Do remember this restaurant 'X' example when you study it in section 3.10.

Unit 3

Relationships and Retention

Level 6. Advocate : The buyer-seller relationship is now at it's ultimate level. The organisation has a strong proponent. The mutuality of the relationship is now two sided and they both appreciate each other and have value and respect for each other. Fig 3.7 shows us that the bond between the buyer and seller gets stronger as one goes up the customer development profile. At the Advocate level the bond is the strongest. The bonding gets stronger and richer, which means it is very difficult for competitors to get introduced. Beyond the client level, it soon becomes a difficult-toimpossible zone for the competition. CRM professionals are entrusted with the responsibility of ensuring that all their prospects move up the levels and ultimately settle at the highest level of being advocates for the organization and its brands. *3 9 LEVELS OF CUSTOMER BONDING______________________________ You have seen how customer development moves from a prospect level to an advocate level. It is the total experience of an organisation, and the brand, that makes this development happen. In CRM, it is important to know the 'how to do it?' angle of customer development. This section on customer bonding explains how one can enhance the bond with our customer over the different levels. Customer bonding provides the framework for understanding retention strategies. It presupposes the following: a. Careful selection of customers has been done. b. Quality of the product/service has been adequately proven. c. Customer's evolving needs are regularly monitored over time. d. Strong customer knowledge is established. |. TFour levels of bonds exist between your organisation and your customer: Level 1: Financial bonds. Level 2: Social bonds.
7Q

Customer Relationship Management

Level 3 : Customisation bonds. Level 4: Structural bonds. Let us now look at these bonds. Refer to Fig. 3.8 which has been adopted from Zeithal andBitner's 'Services Marketing'. Level 1: Financial Bonds

a. b.

Mass among Joint Shared Personal Volume I. Excellent Bundling Integrated Continuous .Financial And Service Customer IV. Anticipation/ Structural III Customisation customisaton Customers Investment Processes Relationship Quality Social Frequency And Information Relationship Bonds Cross and Value Intimacy Innovation Bonds bond And Selling Rewards System Equipment

Fig 3.8: Levels of Customer Bonding Loyal customers are given financial incentives, such as lower prices for the greater volume they purchase, or for the longer period they deal with an organisation. The more you purchase, better is the price you get, or, if you are a regular buyer, then you get a price advantage over others. Frequent flyer programmes offered by Airlines reward the regular traveler with financial benefits and special rewards. The Annual Maintenance Contract (AMC) signed by a computer hardware vendor is always less than the sum total of 12 visits multiplied by per visit fees.

Unit 3

Relationships and Retention

Financial incentives primarily play with the 'price' element of the marketing mix. It is however, prone to two dangers: a. Customers quickly get used to it. b. Competitors easily copy it. In such a situation the firm loses its advantage. Financial bonding has a major limitation in developing long-term relationships unless it is combined with other relationship strategies. The next step here is to work on bundling and cross selling. For example, an Airline may club the frequent flying financial rewards with a hotel booking or taxi rental service. This helps in getting customers a bigger incentive in the form of added benefits. So the frequent flyers get good rates from the Airline, discounts on a particular hotel booking, plus a discount on a car rental. Both the organisation and the customer are now happy. CRM is all about this. 'You win I win' business transactions. Lets take a look at another example to make clear this level of bonding. A 'Green club' supplying organic vegetables and fruits, assures its annual members a supply of certain vegetables and fruits at a uniform price all through the year. This is a 'stable price' benefit for taking the annual membership and making a commitment to purchase vegetables and fruits from 'Green club' over the entire year. In the conclusion of Level 1 - financial bonding, we now understand that unless the customer sees an increased value being provided, these retention strategies will not be successful in the long-term. & Activity H; Open the yellow pages directory for your city and enquire with at least 3 hotels, about the discounts they can offer if you book 2 double bedrooms for a period of 6 months at a stretch. Normal Rate Discounted Rate

Hotel 1: Hotel 2:
Bl

Hotel 3:

Customer Relationship Management

What does this tell you about the different hotels?

Level 2 : Social Bonds


Between two competitors, when all other things are equal, success comes to the organisation that is much closer to the customer. 'You tend to deal with people you like' is so very true and hence relationship building becomes the basis of social bonding. A relationship that begins with financial incentives can be taken to a higher level through a process of social bonding. The first step in developing the social bond is recognising the name of a person and remembering it, with the help of technology, if necessary. The customer should never remain just a faceless token number or registration number. ,i A chartered accountant may go through his 'Client Dealing History' , which has all the relevant personal details, and past interactions with the client before a meeting with him. The client feels comfortable due to this genuine interaction and believes that his matters are in safe hands. An industrial products company periodically conducts a 'Relationship Audit' of the salespeople with their set of customers. Higher the rating the salesperson gets, higher are the incentives he gets. This interpersonal bonding can be very successfully used in a B2B scenario. Organisations can nurture this bonding by forming a 'Loyal Customer Club' . You will agree that the social bonds are more difficult for competitors to copy unlike the price incentives. Thus a combination of financial plus social bonds makes retention strategies more effective. Fig.3.9 shows how relationships blossom when the organisation and the customer are more in synch with each other.

Activit I ;
Imagine that you are a salesperson for any Fast Moving Consumer Goods (FMCG) such as toothpaste, biscuits, oil, etc. You work on a particular route every day and visit a number of retailers on that route.

Customer Relationship Management

Level 3 : Customisation Bonds


What your neighbourhood tailor always did for you (stitch a trouser to your size), now Levi's does on a mass scale. It is an Internet based mass customisation model in which you are required to enter your size in the prescribed form on www.levi.com and get a pair of jeans delivered within a specified time frame. Customisation is one-to-one! A solution designed for you, to suit your individual requirements. Mass customisation employs technology, organisational processes and structures to customise the product or service to suit individual customer needs. Customisation bonding is developed through an intimate knowledge of individual customers in developing products to suit his/her requirements. Customer loyalty then becomes an inherent part of the exchange that takes place. A regular business visitor to a town has decided upon a particular hotel to stay at. Some of her reasons are:

151. She almost always gets one of her preferred rooms. 152. She is welcomed by her name at the reception and occasionally the manager also wishes her by name. 153. She gets her type of' strong coffee' without any special requests or followup. 154. She invariably gets her favourite newspaper and weekly magazine to read without asking for it. 155. She gets a very special discount on the room rent, a discount on food, and also on the taxi she hires for her business visits. 156. Occasionally, she gets her morning coffee with a simple bouquet of flowers as a surprise. 157. The receptionist, room boys and bellboys are very courteous and respectful in their behaviour.
Of course, she knows that the hotel uses a computer to remember her needs and requirements. But she is happily surprised to see that they regularly update this database. She is a businesswoman and she loves the professionalism and the personal touch of the service she gets at this hotel. Do you see any reason why she would ever want to discontinue this bond with

theho telV In fact, she feels that her bond with the hotel is gettin g richer over the past 3 years that she

Uniu3

Relationships and Retention

has been visiting the town. This is how the 'people plus technology' elements of CRM help an organisation build a strong customised bond with their customers. In this case, the customer is already at a level of being a 'supporter' (remember the levels of customer bonding). The competitor will have to run harder, and harder and yet will find it difficult, if not impossible, to woo your customer away. Level 4: Structural Bonds Structural bonding is that intimacy in your relationship with the customer that he actually becomes a part of your structure. It is a symbiotic relationship - which develops, nurtures and grows together. It helps the organisation and its customer to grow together. In gardening the grafting process occurs when two different stems are tied up, merge with each other and grow together. This grafting is what structural bonding is all about. What works for a gardener, works for a company and its customer too .It is the partnering, collaborating and sharing of values, beliefs, systems, structures and databases that helps both to grow mutually. We can see the same logic applied to enhancing relationships with business associates also. I.1 Consider a modern format of a shopping mall. A cosmetics company decides to start a shop-in-shop in this mall in order to give 'advice on skin beauty'. Over a period of time it is seen that this beauty center helps increase the 'footfall rate' in the mall (footfall rate is the number of people visiting the mall daily/weekly). Similarly, as more and more people visit the mall, more are the prospects for the cosmetics company. Gradually the cosmetics company and the mall management start sharing their customer database and individual customer needs to develop cross-selling opportunities for each other. In the process, both the mall and the beauty centre are benefited. The relationship grows. In the end, the customer is benefited in the process, because she gets more than what she expected in the form of products and service.

Let us look at another scenario.


Company XYZ is in the business of selling 'Exhibition solutions'. Their foldable exhibition kits are light in weight, easy to assemble and can be easily carried from place to place. It becomes a good solution for organisations that regularly participate in exhibitions in different cities. Company XYZ develops a corporate kit for an Industrial client 'LMN'. Satisfied with their product and service, LMN gives a repeat order for three more sets. Once again happy and satisfied, LMN decides to give one set each, to all its 13 branch offices all over

l<

Customer Relationship Management

India. With the close interaction and intimate knowledge of their customer, XYZ senses that managing these kits is not going to be so easy for LMN. It offers a 'service solution' for maintenance and storage of these kits for a monthly fee. LMN agrees because it would save them the cost of maintenance and damages of the kit. Also, they can rest easy knowing that the experts at company XYZ are taking care of their kits.XYZ wins a service contract. LMN wins a trouble free solution to its maintenance problem. Both nurture this relationship with great effort.

3.10 CUSTOMER LIFETIME VALUE


You have now learnt about

sele ctio n, dev elo pm ent and rete ntio n of the cust om er. Als o the imp orta nce of sele ctio n and rete ntio n is elab orat ely disc uss ed in this cha pter . It is imp orta nt to sele ct

and retain your best customers. The best customers are those who really like to involve themselves in 'exchanges' with your organisation. They like to do business with you, they do not always haggle over the prices, they do not buy only when a special promotion is on, they give feedback, they eagerly participate in new product development, they suggest new product / service ideas, they are loyal to you for a lifetime. Obviously not all of your customers are like this. Hence those who fit the bill are your best customers. You as a CRM person must be able to recognise such customers and know their importance to your organisation. Understanding Customer

Life tim e Val ue (CL V) is a tool to esti mat e the lifet ime val ue of you r cust om ers . CL V tells you whi ch of the cust om ers are wor th kee pin g for life. CL V also tells

you which customers to target and retain, and which customers to ignore. To understand this term, let us clarify a few points about the term 'Value'. You must have certainly come across the term "Value For Money" (VFM). Value is the price of something. But value is more than price. It is the customer's perception of the worth he/she receives on paying a price 'x'. You may keep saying that your products have many benefits and features, but your products are

reall y wor th the valu e you r cust ome r perc eive s in usin g / poss essi ng the m. A sim ple equ atio n for valu e can be: Val ue = Ben efit s rece ive dBen efit s exp ecte d

The score of this equation could be negative, positive or neutral.

Unit 3

Relationships and Retention

Only when the score for the value is positive, can you say that you have delivered a value proposition to your customer. Value is a concept central to CRM and CLV calculation, which gives you an estimate of a customer lifetime value. Customer lifetime value is the total business generated by a customer over his/her purchasing lifetime. Therefore, CLV=Average annual purchases by a customer x Number of active purchasing years. Let's see if we can make this simpler for you to understand. An organisation 'X' making Water treatment plants, purchases valves from organisation T. 'X' makes 15 water treatment plants per annum and needs valves worth Rs. 10 lakhs on an average per plant. Now, the CLV of organisation'X'is: CLV of'X'=Average annual purchase x No. of active purchasing years. Therefore CLV of'X' Rs. 10 lakhs x 15 (no. of plants) Rs. 1,50,00,000 1,50,00,000 x 12 'f ' CLV of'X' = = 18,00,00,000 Rs. 18Crores.

Now this tells us how important'X'is to'Y'! /^Activity.?; Afamily of four purchases Rs. 1,8007- worth of household items from a neighbourhood grocery store. Imagine a lifetime of 40 active years that this family will keep purchasing from this shop. Here we have assumed,

158. 159.

No. of purchasing years = Average annual purchase =

Customer Relationship Management

Calculate the CLV of this family for the grocer.

Relationship value:

We have already said in Unit 1 that CRM is important because: Every satisfied customer brings at least 3 more customers. Every dissatisfied customer creates at least 11 other dissatisfied customers. For the example of organisation 'X' given above, multiply the CLV by 3 and you will get the relationship value. Multiply CLV by 11 and try (!) to write down the figure of the losses organisation T would incur if it loses 'X'. Remember, if you lose a dissatisfied customer, you lose much more than the annual business that customer brought in.

Whatnext?
You now know the importance of CLV. What you need to do is: a. b. c. Explain the CLV concept and its importance to your employees/colleagues. Involve your employees and colleagues in CLV calculations for your important and selected customers. Devise a preferential treatment for your customers with high CLV. For example, when a high CLV customer dials your call center, try and give him a priority over other callers. Develop promotional programs specially for valued customers at different levels of CLV. Relationships are about mutuality. Start giving more to the customers who give you more!

d. e.

Unit 3

Relationships and Retention

3.11 SUMMARY your customer. You have studied in this unit why it is important to select the best of your customers and nurture a long-term relationship with them for mutual benefit. It makes good business sense to offer the best to your customers so as to create value for your organization and Once you identify your best customers it becomes important to know and understand the importance and nitty-gritty of developing a meaningful relationship, luu nave seen that customer development profile and customer bonding levels are a means to developing loyalty through meaningful relationships. Technology can be effectively used i

((WfllltlllCe Speed, efficiency and customer convenience.


3.12 SELF-ASSESSMENT QUESTIONS Ql. Define the following:

160. 161. 162.

Segment Segmentation Value

! Q2. What are the different levels of customer bonding? j Q3. Do you think segmentation is important? Why? Q4. What are the different indications of a loyal customer? Q5. What is CLV? Why is it important? Q6. Yes/No: a) b) If a customer is attracted towards you because of a lesser price, would you call him a loyal customer? In the customer development profile, the Advocate level is the strongest bond.

Q7. Draw a diagram of a customer development profile.

Customer Relationship Management

4.1 INTRODUCTION Service today is an essential element of marketing of any company; be it in Product or Service business. It is not possible to ignore the importance of service in today's business context and it is almost inseparable when you talk about CRM. Hence here we are devoting an entire unit discussing it in details. You will learn in this unit the difference between product and service and will be able to plot your organizations product over the product -service grid. This helps in understanding the tangibility or intangibility of the offering in order to develop the right kind of marketing mix. It tells you, which of the 7 Ps of extended marketing mix are important for your business and how to go about developing it. The service-marketing triangle you will learn in this unit is very fundamental to understanding the people element of CRM. The characteristics of Service are also important to understand its usability in your marketing and CRM programme.

4.2 PRODUCTS AND SERVICES Definition of Products:


"A product is anything that can be offered to a market to satisfy a want or need. Products that are marketed include physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas."

Philip Kotler
"Any offering to consumers, which either solves problems or provides benefits, including add-ons (e.g. guarantees)."

Stephen Page Definition of Services:


"A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product."

Philip Kotler
"Services are the economic activities that create value and provide benefits for customers at specific times and places as a result of bringing about a desired change in - or on behalf ofthe recipient of the service." ;

Christopher Lovelock I

Unit 4

Services Marketing and CRM

"Services are identifiable, intangible activities that are the main object of transaction designed to provide want-satisfaction to customers. By this definition we exclude supplementary services that support the sale of goods or services"

Stanton,Etzel and Walker.


A product is a tangible entity. A product is one that can be seen, felt, tested (and tasted, as in the case of food items) before purchase. For instance you can have a test-ride of the two- wheeler you are about to purchase. You can see the finish, color and gauge the quality of the vehicle before you actually make up your mind and decide whether to buy or not. A service on the other hand is intangible. It is an act, a process, a performance and an experience. It happens over time, across space and between people. A service cannot be tested; you cannot have a sample of it or try it out as you would a product. For instance, when you attend a musical program, say an orchestra, it is that enjoymentthe experience created by music, by sound, by the artists, the stage decor, the hall arrangements, the lights, the environment and even the other viewers that delights you. This experience is a service delivery that takes place between the producer (the music company) and you (the customer). While studying the difference between Products and Services it is important to know that because the customer cannot see the service, the marketing of services poses more challenges to the marketer.

Table 4.1: Difference between Products and Services

S.no.

Products

Services

2.3. 4.
5.

Ownership is transferred from seller to buyer. Products are generally concrete. Products can be resold. Products can be demonstrated before the purchase. Products can be stored.

Ownership is not generally transferred. Services are intangible. Services cannot be resold. Services cannot be demonstrated (usually) as they do not exist before purchase. Services cannot be stored.

9 7

Customer Relationship Management

S.No. 6.
7.

Products
Consumption is preceded by Production. The seller produces the products he/she sells. Between the company and the client there may be an indirect contact.

Services
Production and Consumption coincide. The buyer/client takes part directly in the creation of services. A direct contact between the company, or its representative, and the client is necessary.

8.

$ Activity A;
List any 3 products and 3 services you are familiar with. Note the benefits you receive from them on purchase: Products 1._______ 2._______ 3._______ Services 1._______ 2._______ 3._______

4.3 PRODUCT-SERVICE GRID On understanding the difference between products and services you may have noticed that products and services are inseparable in many cases. They are part of the entire offering made by the manufacturer or marketing organization. The mixer you use in your kitchen is a product, which needs after sales services. Air transport is a service which cannot exist without a product i.e. the airplane. Thus products and services based on their tangibility (i.e. visibility) element may be plotted on a Product - Service Grid. This grid is a continuum which reveals the degree of the product- service mix a commodity/brand may have. The continuum moves from left to right revealing a movement from a pure tangible product to a hybrid (mixed) offering to a pure, intangible service.

Unit 4

Services Marketing and CRM

Pure Product Mineral Water Soap Airline


?*

Hybrid Offering Hotel

Pure Service Consultancy Education

Fig 4.1: Product -Service Grid ' & Activity B : Prepare a product service grid for all the products and services you have listed out in activityA. Pure product Hybrid offering Pure service

4.4 IMPORTANCE OF SERVICES TODAY


You are a forward-looking person and have a good vision of the future. You know that CRM is going to be a vital ingredient in tomorrow's organization. Hence, you have opted for this course on CRM at the Symbiosis Centre for Distance Learning. It is an Educational service being availed by you. Can we say that you have opted for this course in order to become a 'better professional' ? Of course we can! This precisely is one of the reasons why services have gained an importance in our lives today. Today many such services are available to fulfill the evolving needs of the consumer. (It will be worthwhile to bring your attention to an important aspect. As you will shortly learn, one of the characteristics of a service is 'inseparability'- the Service provider (SCDL) and the service receiver (You) participate in making a service, CRM learning, happen! Thus your active participation in this learning process is a must. It is in your interest to religiously attempt the activities, and case studies given in this book. So remember, it is partly up to you to make this learning successful! Let us now look at why services are gaining importance in the new economy. The major reasons for services becoming prominent are:

163. 164.

Products have reached a state of saturation. Time is a scarce commodity.

Customer Relationship Management

165. Freedom is the key. 166. The need for organizations to be more efficient. 167. The need for organizations to be more effective. 1. Products have reached a state of saturation.
A TV is a TV is a TV! Whatever new features may be added and new technologies adopted, a TV will always remain that (idiot!) box which caters to our entertainment needs. Look at the dozens of brands available in the market. It is very difficult to choose one out of them on the quality aspect since most of them are almost at par, as far as technology goes. What can perhaps differentiate one television from another is the service offered by them. The customer friendly customer service representative who listens to your problem, understands your needs and repairs / corrects it promptly, is the one whose brand means more to you. Similarly, let's take an example of an industrial product such as a bearing. When all bearings look equal, 'SKF' as a brand stands out in the crowded market because of its unique pre-sales and post -sales service. The customer education offered by them in selecting the right bearing, the right fitment, maintenance, repairs, monitoring, testing, analytical and many other services, help them gain a competitive edge. SKF listens to customers better than their competitors do.

2.

Time is a scarce commodity:


'Pace' has become the key word in our lives. Nobody has enough time for anything or anybody. Our whole world moves at such an accelerated speed that it is imperative that we keep up with it. Today consumers are ready to pay extra for products that help them save time or utilize it better. Parents need day care centers (creches) to look after their children so as to have more time for their professional life, and yet be secure that their children are well looked after. Dry cleaning services, plumbers, electricians, and many other such services have grown tremendously in this decade and will continue to do so.

inn

Unit 4

Services Marketing and CRM

'

> '

More and more affluent, urban consumers are comfortable buying services that add to the quality of their lives. For example, beauty health spas/parlours, dance classes, art of living and meditation classes are all flourshing.

3. Freedom is the key :


Freeing up personal time, business time and saving in overheads are the key elements leading to growth of service industries. Freedom from worries has lead organizations to outsource i.e. buy services from external agencies. It makes business sense to outsource many non-core activities. Phillip Kotler calls them 'virtual organizations' or as Charles Handy says, a 'box of contracts'. By outsourcing activities that are not core activities, organizations focus on what they are good at.They can concentrate on their core competencies. Apart from freedom, outsourcing also helps in reducing an organization's overheads. In consumer markets, more free time for consumers means more time for leisure. This automatically will lead to the purchase-consumption of a variety of products and services that will help the consumers enjoy their leisure time.

& Activity C;
Why do you think organizations will reduce their overheads by outsourcing?

4. The need for organizations to be more efficient:


We have just discussed how and why outsourcing helps. It is logical that the noncore activities, which are being performed by an outside specialist vendor would be more efficient. The vendor would supposedly be more competent and thus more effective in work performance, giving timely delivery etc.

Customer Relationship Management

Activity D : Till yesterday tourism was a luxury affordable only by the rich. Today the middle class is not only traveling frequently for business, but also for pleasure. Please visit a few travel agents and also go through newspapers, magazines, radio and T. V advertisements in order to collect information on the travel offers targeted at the middle class. Describe the services offered by various agencies/ organizations in this respect.

5.

The need for organizations to be more effective: As outsourcing is being carried out by a more capable person or organization, it is likely to be more effective. It is definitely more value for money.An external consultant would be unbiased and more experienced to handle organizational problems in a particular functional area.

4.5 CHARACTERISTICS OF SERVICE You have so far understood the difference between a product and a service. Let us now strengthen this understanding by learning the typical characteristics of a service. What makes service offerings different and why are they more difficult to market? The characteristics of services are also referred to as the '41's:

168. Intangibility. 169. Inseparability. 170. Inconsistency. 171. Inventory.

Unit 4

Services Marketing and CRM

Let us now look at these characteristics briefly. 1. Intangibility n *

A Service is intangible (invisible). It means services cannot be seen, touched or tasted before purchase. It is not like an apple, which you can see, inspect, feel and then purchase, and maybe even return, if rotten. Imagine you have to send a parcel by courier to your friend in another city. You may take the help of speed-post or a courier (service) company. It is possible to experience *.' I this service (the act of taking the parcel from you to your friend) only when it happens. 'J However it is possible to see the tangible elements of service i.e. the courier company's office, the packing material, forms, bills, computers and people. & Activity E; Identify and list out the tangible and intangible elements of the following products. Tangible elements Intangible elements

a. A Petrol Station.......................................................................................... b. AFitnessClub........................................................................................... c. A Dry Cleaner ...................................................................................... d. A Police Station ................ 2. Inseparability various Soap as a product is manufactured at the factory and reaches us through vai !uced channels. This is not the same as with a service such as a haircut. It is both prod and delivered simultaneously and you feel relieved, fresh, younger and better. Remember, seeing your face in the mirror after a nice haircut and a clean shave is the experience of a good service. Inseparability has 3 aspects : to exist. a) The service provider and the service receiver have to be together for the service The service and its service provider are inseparable. All the elements of a service work together to make a service exist.
fOPYtet

172. 173.
r

Thus customer participation is an important element of service delivery.

Customer Relationship Management

3. Inconsistency
Inconsistency is also known as variability or heterogeneity

The same service provided by different people at the same time or at different times may not be exactly similar. Even the same person giving the same service over time may be different. For example, the experience of Doctor A and Doctor B treating a single patient X may be different. Also the same Doctor 'A' treating patient 'X' during early, morning hours may be different from tired, late night hours. This is the inconsistency of a' service'. Very often we get good service at a particular restaurant, and we go there again only to be badly treated or return not-so-happy. Why does this happen? It is important to note here that services are variable also because no two customers are exactly the same in terms of their needs or responses. You have just seen that a service provider and a service receiver are inseparable. They together make (or break) the service.

g$ Activity F;
Surely during your school or college days, you had (at least!) one teacher you remember with great respect. You always thought that this teacher and his/her subject were inseparable. Explain this inseparability.

4. Inventory
This is also known as perishability. Services are acts which happen over time. They cannot be stored. Services cannot be stored, stocked, saved, resold, or returned and hence they are considered perishable. Particular movie tickets, which are not sold on the day of viewing remain unsold forever. It is not possible to store these unsold seats and use them in the next show.

Unit 4

Services Marketing and CRM

This is different from the soap which remains unsold on the store shelf today, only to be sold tomorrow or next week.

JS$ Activity G;
Think of a book, poem or movie which you experienced more than once. Why do you think you discovered or enjoyed different aspects/angles of the same book/poem/movie each time?

Implication of Service Characteristics to CRM. Understanding the 4 Fs or the characteristics of service is very important to sendees marketing. Any business which plans to implement CRM, will have to take a serious view of the service element of its offering. For a product or a service company, understanding their 'service' will give them a definite advantage over their rivals. The service provider needs to understand that the characteristic features of services do create difficulties in establishing a meaningful dialogue with the customers. And unless one is able to communicate/reach them, how can one hope to create a two-way dialogue, which is at the core of CRM? You can easily see that Intangibility, Inseparability, Inconsistency and Inventory are typical characteristics of services, which pose difficulties in their marketing and in developing a CRM process. Because a service is Intangible

How does one show it / demonstrate it / promote it? How to 'tangibilize' the 'Intangible' service?

Because a service is Inseparable Service quality and thus customer satisfaction is also dependent on the customer who participates in order to make the service happen.

Customer Relationship Management

Because a service is Inconsistent Standardization becomes difficult and so also mass production. It has to have a decentralized operation in order to cater to varying customer needs.

Because a service is Perishable It is impossible to 'stock and sell.' It is a 'real time' happening. Forecasting of demand, building and meeting capabilities is a real challenge.

4.6 MARKETING MIX AND THE EXPANDED MARKETING MIX Marketing as we have already defined is the: "Identification, stimulation and satisfaction of customer needs at profit". Let us further analyze this definition:

Identification of need is understanding the customer requirement and uncovering her need. This will help in developing an offering (a product or service) to meet this need. Stimulation of need is about reaching the customers, communicating with them and inviting them. In essence, it is about creating an excitement regarding your product / service in the customer's mind. Satisfaction of need is to be able to successfully satisfy customer needs and deliver to his/her expectations.

Marketing performs in an environment which is always changing. Thus the customer's needs that we have discussed above are also ever changing. Marketing activities have to change in relation with the changing environment and changing, or rather, evolving customer needs, hi order to appreciate this process of change, marketing activities are divided in four basic elements, which together are referred to as a marketing mix. The four elements of the traditional marketing mix are: *

174. Product 175. Price

Unit 4

Services Marketing and CRM

176. 177.

Promotion Place

Definition of Marketing Mix: $ "The elements an organization controls that can be used to satisfy or communicate with customers". ';. "The combination of elements in an organization's offering (a product or a service) to the market". It is important to note here that the marketing mix is a 'mix' of various elements and hence itimplies:
178. 179.

that all these four elements are inter-related. that all the four elements are dependent on each other for success.

For any given market segment, an optimum marketing mix is normally recommended. This means mixing the elements in a proper proportion so as to get a desired result. Marketing mix is thus rightly called 'a demand-impinging' (increasing, enhancing) tool of marketing. It helps creating and increasing the demand for a product or service. Let us now discuss the elements of the marketing mix: 1. Product: We have already defined a product as: "A product is anything that can be offered to a market to satisfy a want or need". Thus it can be a product or a service. It is the basic offering made to a chosen customer group. The product is often considered the most important element of the marketing mix. Features of the product should match the benefits desired by the customers. Also, the product should be able to meet the customer's changing needs.

Customer Relationship Management

"

'':

" ''

'

The product has an identity or personality of its own. Say 'Walkman' and what comes to our mind is a small, convenient, music box - a very personal way of enjoying music. The brand name, packaging, labeling, manufacturer's name, after sales services etc. all add to the personality of a product.

2. Price:
Price is the money's worth of a product or service. Price is worked out after considering the costs, profit margin, competitive prices and the concept of 'right price' for the customer. Price also is a subjective matter i.e. a particular price may be very high for customer A and the same price may be reasonable or even low for customer B. The product or service quality has a role to play here in the differing perceptions of price. Different segments get attracted to different price and quality levels. This is called the price-quality relationship. Price is the only element of the marketing mix that brings in revenue. All other elements lead to expenses that need to be incurred by the organization.

JS$ Activity H:
Develop your own understanding of the 3 important terms given below:
a

Cost = ---------------------------------------------------------------------------------------

180. Price =--------------------------------------------------------------------------------------181. Value =--------------------------------------------------------------------------------------3. Promotion: Promotion is the means of communicating a product or service availability and suitability to the target market. (A target market is the group of customers the organization has chosen to cater to and for whom products will be created.) It means both giving information and incentives to the customer to purchase a product or service. Advertising gives information and also educates the customers. A sales promotional campaign (e.g. Buy one get one free) is a definite incentive to purchase now or to purchase more. I

Unit 4

Services Marketing and CRM

Promotion is a combination of various activities / elements.These are often known as the tools of promotion. Together they constitute the promotional mix.
. .; --;'.

.', ,

1. Advertising 2. Sales Promotion 3. Direct marketing and E-commerce

182. 183. 184. 185. 186. 187.

Internet Public Relations Personal selling Sponsorship of events/programmes Point of purchase (P-O-P) displays and events Supportive Communications (eg.calendars,caps, mugs, Tshirts,

branding etc.) 4. Place: (Remember P = D i.e. Distribution in a marketing mix) It is through distribution that products reach customers and consumers (Hope you remember the difference between a customer and a consumer, Unit 1) It includes physical distribution and channels of distribution. Physical distribution is the moving of products from the producer to the consumers. It includes - Transportation, Warehousing and Storage, Order Processing, Inventory Control and Logistics. The channels of distribution are the organizational routes through which the ownership of goods or services flows from producers to consumers. Some decisions made here would involve the choice of retail outlet, functions to be performed by these intermediaries and efficient delivery systems. >& Activity I; For any brand of your choice, write down 2 decisions / activities which you feel the organization has made in order to market the brand successfully.

Customer Relationship Management

The Expanded Marketing Mix


The Marketing Mix, or the 4 P's of marketing explained above, is the traditional marketing mix put forth by American Professor Jerome McCarthy. While this 4 P's model is argued to be suitable for all products, it may not be sufficient for all service offerings. A service, we have seen, is different from a product. The characteristic differences of services are due to its 41's. i.e. Intangibility, Inseparability, Inconsistency and Inventory. So the 4 P's model needs to be expanded for services due to its 4 Fs. Hence 4 P's become 7 P's by the addition of 3 P's, as suggested by Booms and Bitner. The additional 3 P's are:

Physical Evidence Process People

Physical Evidence:
When people buy intangible services they are actually buying into the confidence created by the service provider. It is important then to know the aspects that create this all-important confidence. A very important contributor in confidence building is Physical Evidence. Physical Evidence is the total set of place, people, publicity material, symbols, design, layout, the signage, and all that a person can see while visualising the service. It is the tangible aspect of service, the physical environment in which the service is delivered. In short, "the personality" of a service offering is it's physical evidence. For marketers of services it is important to create a positive impression through its physical evidence. For example, the physical evidence of a management institute would include its spacious building, a garden, its pathway, its board or signage, its office area, its furniture, its layout of facilities, its notice board, posters, banners etc. It is the total atmosphere created at the institute which would motivate the students to learn. Thus the tangible clues and atmosphere created by the organization will influence the customers decision to go in for a particular service or not.

Unit 4

Services Marketing and CRM

& Activity .T:


Imagine you are looking for a creche or a day care facility for your kids. What are the visible clues you would look for when you visit a creche?

S& Activity K;
Remember the last time you visited a restaurant. List out five positive and five negative attributes of physical evidence that you noticed/experienced there: Positive Attributes 1.____________ 2.____________ 3.____________ Process : The process is the actual act of producing a service. (Remember a service must be co-produced by the provider and the receiver). It is the flow of activities needed to create and deliver a service. The effectiveness of a process depends on how it helps customers to use and participate in it. The organization offering the service process should also help save money. For example, self-service means fewer waiters in a restaurant and the ability to involve customers in creating/enjoying the experience at a more reasonable price. The process should help both the customers and provider to make it easy to do business. The Process can either be standardized (an ATM) or customized (an Interior Designer) depending upon the nature of the service and customer expectations from it. 2. 3. 4. 5. Negative Attributes

Customer Relationship Management

It will be clear from this explanation that the Process and the Physical evidence that people experience are very closely linked.

People:
Services, as we know are activities / processes that involve people. Thus people form an important element of the expanded marketing mix. Incidentally, people also includes other customers. Let us take an inside- out view here and talk of the people employed by the service providers. If physical evidence is the personality of a service, then people are it's 'soul'. Employees and service providers play a vital role in the marketing of their services. The level of contact with customers varies depending upon the nature of the service, whether it is time intensive, skill intensive or machine intensive. Front line and support staff must have the right attitude, interest and enthusiasm in order to make the service experience worthwhile for the customers. Through the interaction with employees, customers get experience and develop a perception about the service. j It is very often the smile on the delivery boy's face and his promptness and correctness that will make customers happy. We have already learnt that the service provider and the service are inseparable. A good trainer / motivator and good training content are necessary to empower employees with the right skills and attitude to satisfy customers. Hence selection, induction, training, motivation and rewards all play a very important role. It is put very well by Bill Marriot of Marriot Hotels, "How can we have happy customers without happy employees?" This is discussed in greater detail in the next section.

Unit 4

Services Marketing and CRM

4.7 SERVICE MARKETING TRIANGLE AND THE IMPORTANCE OF PEOPLE IN CRM _______________________________________________________________

In our understanding of services we have till now established that:


Products and services are different. Services are intangible. Importance of services for product and service business. 4 Ps are insufficient and 7 Ps are necessary. 'People'element of service is very critical.

All the above, clubbed with the fact that understanding and meeting (or exceeding) customer needs brings a great challenge for the service marketer. The marketer has to go beyond the understanding of conventional marketing and be able to perceive and operate over a wide range of aspects. Some major challenges confronting a service marketer are:
188. Designing of services: Since a service is a performance subject to different aspects (not necessarily controllable by the marketer), designing of services is a big challenge. 189. Quality of service; The delivery of a service is also dependent on the customer' s participation. Also it is a function of various characteristics put together along with the customer's expectations. Thus, measurement of quality is difficult to define. 190. Tangibilizing the service; Unlike products, showing or demonstrating a service is difficult. (You can have a sample of sweets, but how can you possibly have a sample of your marriage party?) 191. Fluctuating demand: Your capacity for providing services is fixed. Also the service is perishable. Add to this the fluctuating aspect of it. An afternoon show of a movie may have fewer viewers than the evening show or weekends may have more rush than the week; The number of seats however remain the same.

e) Standardization of service; Services happen between different people at different times in different situations. The people and situation elements make it difficult (if not impossible) to standardize the service.

Customer Relationship Management

f) Motivating and involving people; We have already said that the people involved may make or break a service experience. It is thus a great challenge to motivate people to be enthusiastic and empathise with customers. The service-marketing triangle in Fig 4.2 shows a path to the service marketer to handle the challenges we have discussed above. It shows the relationship and linkage between the 3 main elements of service marketing - Company, Customers and Employees. At Barista there are front end and support staff. Their main coffee maker is called the 'Brew master' which is a nice way of elevating the importance of your employees. Three types of marketing take place between these 3 elements:

Company to customers: External marketing Company to employees: Internal marketing Employees to customers: Interactive marketing
Company

Customers

External Marketing

'.f
Interactive Marketing Employees.

Fig 4.2 : The Service Marketing Triangle


Let us now look at these briefly: External marketing: It is the promise a company makes to a customer about their service and its delivery. External marketing uses all the elements of communicating and reaching the customers through advertising, sales promotion, selling, merchandising etc.

ii
1:1

Unit 4

Services Marketing and CRM

We have also seen that Physical evidence, People and the actual Process of service delivery also make some promises to the customers. External marketing thus creates an opportunity to develop a 2- way communication dialogue and interaction with the customers.

Internal marketing :
. . , , . , _ . -. ' ' '^' t-fP";

Here it is very necessary to apply marketing concepts to your own employees. if You should be able to first convince or market your concept to your own employees and enable them to deliver the service to the customers. For this it is important to identify and fulfil your internal customers i.e. your employees' needs. You will have to ensure that your employees have the necessary skills and capabilities, tools and motivation to deliver the promise you have made to your customer through External marketing. It becomes very crucial to take note of the following aspects:
M

Selecting the right people. Educating, training and developing them.

Having a proper HR system in place. Good internal communication.


' Creating a vibrant and receptive team. Internal marketing is thus a key to meeting the promises made through external and interactive marketing. Interactive marketing: Service flows from people to people. The delivery or the actual service experience happens between people (service employees) and people (customers). Interactive marketing thus means keeping the promises made by External marketing and completing the servicemarketing triangle. It is through the "moments of truth" that happen during customer interaction, that the service delivery is made.

4.8 RELATIONSHIP BETWEEN ITES SERVICES AND CRM


Let us look at another phenomenon occuring in the service sector, which has a close link with CRM. Rather, it is the front end of CRM.

Customer Relationship Management

ITES means IT-enabled services. It is that sector of the Information Technology (IT) Industry that aims at providing various services through the use of IT. ITES sector includes services ranging from call centers, claims processing, medical transcription, eCRM, SCM to back-office operations such as accounting, data processing, and data mining. ITES has given that much needed intelligent and customer friendly edge to CRM. Today customer response is speedier due to technology and the new forms of services that have emerged. These services aptly address the complex business situations of today. Let us look at some industry statistics before we go ahead:

From Rs 7,100 crore in 2001-02 to Rs 81,000 crore in 2008. From 106,000 employees in March 02 to 2 million employees in 2008. From 1.4% of GDP in 2001-02 to 7% in 2008 (IT services plus ITES). Forex inflows to increase ten-fold from $6.2 billion in 2001-02 to $60.72 in 2008 (IT services plus ITES).

The largest player, General Electric, to increase employee count to 20,000 by

2005.

Customer care, Human Resources and Payment services will constitute 70% of longterm ITES potential. ITES is expected to account for 37% of the country's software and services export segment by 2008.

ITES are widely used by the following sectors: Banking and finance, insurance, e-commerce, software, telecom, media and entertainment, retail and airlines. ITES definitely creates values for these and many other businesses. The level of value added by ITES depends on the range of services offered, ranging from standardized and simple infrastructure services (network management, secretarial services, etc) to specialized and complex workflow management (customer research, product design, inventory management, etc). Based on the ownership structure and geographic distribution of clients, KPMG classifies ITES businesses presently operating in India under two categories:

116

Outso urcin g servic es or Outlo catio n servic es.

Unit 4

Services Marketing and CRM

Outlocation services are for captive use by companies while outsourcing services are through a third-party service provider. Multinationals, such as GE that invested in remote services as captive facilities for worldwide group operations, have adopted a primarily outlocation focus. ITES started with outsourcing of low-end services like claim processing and back office operations. But today it has become a prominent movement with the major proportion of IT funds going into these activities. One example of high end ITES is the use of technology to build differentiation in the customer response analysis. Companies like Wipro BPO, Daksh, 24/7 and Epicenter are doing just this. A few others like E Serve and Global are trying out integrated global delivery models. They are offering different services across multiple geography-based delivery facilities with multiple language, multiple skills and redundancy also built into the model. You can now relate this example with the soft skills discussion we have had in the previous unit. At a broader level, we see that ITES is becoming a major CRM tool which will enable people to deliver results. While implementing CRM in your company you should look for ITES partners who can culturally relate to your organization and your customer profile. The ITES support system should be closely linked and built along with your customer support services. When you use ITES effectively for CRM it becomes an important tool to create customer delight. Then the call center does not merely remain a call center, but it becomes a Customer contact center.

In this unit you have studied the important aspect of product - service difference. You have seen how service today forms a vital aspect of customer expectation and customer satisfaction. Service has its own personality and characteristics which are distinctly different from the product persona. You as a savvy CRM implementer will have to give serious thought in applying this service knowledge to your business in order to develop the CRM edge your business needs. The people element of CRM is also emphasized in this unit, as well as in this book and rightly so. Relationships can be managed by technology alone; but then organisations face the danger of making their service look automated and hopeless. It is the people who can, by using technology, develop a long-term business relationship with customers.

Customer Relationship Management

4.10 SELF-ASSESSMENT QUESTIONS


Ql. Define the following:

192. Product 193. Service 194. Marketingmix 195. Internal marketing

196. External marketing 197. Interactive marketing


Q2. Aproductisa..............entity and a service is a..............entity. Q3. What are the 4I's of service? Q4. List out the four elements of the traditional marketing mix. I Q5. Which are the different activities that could be involved in promotion? Q6. List the 7 P's of service. Q7. Draw the service marketing triangle. Q8. Is the making of 'roomali roti' in a restaurant a part of the process or a part of the Physical evidence? Q9. A waiter in a restaurant is a . (service aspect or salesperson) '

118

4.11 CASE STUDY: WOCKHARDT HOSPITAL AND HEART INSTITUTE When IT touches the heart
What puts Wockhardt Hospital and Heart Institute (WHHI) a step ahead of other

hospital 's elCU, which monitors the patient's progress 24x7, and secondly, it is WHHI's CRM s? For solution, which helps to reach the right doctor at the right time. one, it's When you aim to build a world-class hospital, you need world-class processes in the hospital place. Keeping this goal in mind, and to give patients better value for their money, WHHI was

Unit 4

Services Marketing and CRM

.-,,.,.

looking for a solution that would allow the hospital to manage its patient and staff details' database efficiently. It also needed to ponnect specialists to the hospital network so that the doctors could monitor their patients even from afar. The WHHI IT team, which consists of four people, found that the most suitable solution was to put in place two inter-linked systems. The foursome considered a CRM solution (custom-made to the hospital's needs) and a network linking what they termed 'elCU'. This system connected the patients' monitors to a RAS (Remote Access Servers) accessible' over the Internet. The CRM system WHHI put into place not only helps identify the right doctor for the right occasion, it now also generates reports. Plus it can sort categories of patients so that the hospital has now been able to start clubs for people with similar experiences.

The beginning
To develop and maintain a special relationship with doctors, patients, and corporates, WHHI required an easily manageable system that would catalog all the required details. Moreover, a narrowing difference in service levels at hotels and hospitals internationally, made Vishal Bali (Vice President Operations, WHHI) believe that CRM is required to create an ambience of efficiency. The CRM implementation was also required to track feedback so as to generate a patient satisfaction index.

Thesolution
To meet these requirements, the hospital approached an organisation called "Think Ahead,' which conceived, developed and implemented a CRM application to specifically meet the demands of WHHI. The implementation generates feedback reports, occupancy reports, average length of stay, waiting and discharge reports. While all these reports were being filed even earlier, the solution has helped maintain and update all the reports on a daily basis, obviating any chance of delay. The accuracy rate of the reports has also seen a new high as a result. More importantly, the CRM solution has automated relationship management. It has resulted in the creation of the Happy Hearts' Club, a group of people who have undergone similar heart surgeries at WHHI. At the forum, patients share their experiences and sometimes also learn from each other. The CRM solution also automatically forwards newsletters and relevant information to keep in touch with doctors and patients. Bali explained the importance 119 of this routine task:

Customer Relationship Management

"Hospitalization should not be seen as an episode, but as a patient hospital relationship. It may not be a one- time transaction."

e-Hospital
Besides the CRM system, WHHI has developed an elCU. The elCU consists of ICU monitors placed by the side of the patient's bed. These are connected to a Windows 2000 Server that is linked to RASs .The RASs can be accessed over the Internet via a 2 MBPS line. The elCU allows doctors to consult specialists in life and death situations. A resident doctor can consult a senior consultant while at the operation table and the CRM solution helps contact the most suitable consultant for a given case. This way all decisions can be collaborative. Furthermore, in case of a smaller problem, the doctor is not required to rush to the hospital. The remote system also means that every patient has 24X7 coverage from his/her doctor. 'I e-Visit
n

WHHI's association with 'Think Ahead' led to other creative initiatives too. The first was the Virtual Family Visit. Relatives and friends can visit any patient online in a virtual patient room. The system is capable of transferring audio, video, text, and images. Similarly, WHHI was also able to initiate a tele-medicine program. These are video links established at medical colleges in the relatively less developed parts of India. The doctors at WHHI use this link to address classes in these colleges, as well as to make routine follow-ups on chronic patients. !

Security issues

With so much data available over the Internet, it is natural that information security would [ be a major concern. To secure its network, the WHHI IT team has set up a hardware and , software firewall. The hardware blocks unauthorized access and the software firewall acts as an active state packet filtering firewall. The Total Internet Security Suite scans inbound and outbound network traffic.

Cost factor
Overall, the implementation cost for WHHI was close to Rs 2 million according to

B ali . Pe rh ap s th e le ve l of au to m ati on an d im pr ov ed eff ici en cy du e to thi s sy ste m co ul d be us ed to es ta bli sh th

e sy ste m' s Re tur n on In ve st m en t (R OI ). H o w ev er, Ba li do es no t lo ok at it

2) 3) 120

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Services Marketing and CRM

from a profit perspective, but rather as a 'Staying-in-Business' investment. According to him, as the standards for hospitals improve the world over, Wockhardt must set a standard in India. (Adopted from:http://www.networkmagazineindia.corn/200411/casestudyO 1 .shtml) Activity
198. Think of a situation in the recent past when you or a close relative or friend were hospitalized. List out the technological interfaces that the hospital offered it's patients. 199.

Design a 2 page feedback form to study patient satisfaction at a hospital.

200. Conduct a Web search on "Medical tourism in India" and write a detailed note on WHHI's stand on CRM as a 'staying-in-business' investment.

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Customer Relationship Management

5.1 INTRODUCTION
Today we are all as consumers, overloaded with information. Too many sources, too much information and too little time is our modern dilemma. Life will be no different for you as a marketer or as a CRM initiator. Data keeps pouring in from all directions. You have to intelligibly sort out this data, analyze it, develop information from it and create knowledge and wisdom. Further, it is your responsibility to use this knowledge for creating effective CRM strategies and implementation. An intelligent and effective database management is the backbone of any effective CRM initiative. It is just not possible to implement meaningful CRM without having data and data management in place. As you will see in this chapter, data by itself is meaningless; knowledge generated out of it, if used in the proper context, becomes meaningful and helps organizations reap the benefit of CRM.

$ Activity A;
~3

Read the story given below and answer the question given after that. The Purina Story Nestle Purina PetCare Company knows with certainty that Purina websites and online advertising increases off-line buying. How? Through a carefully conducted study of integrated online and off-line behavioral data. Switzerland-based Nestle S. A purchased the Ralston Purina Company in December 2001, gaining a full line of dog and cat care brands such as Friskies, Alpo, Purina Dog Chow and Fancy Feast. The firm manages over 30 branded websites serving the following markets: consumers, veterinarians/veterinary schools, nutritionists/food scientists and breeders/other enthusiasts. Nestle started its inquiry with three research questions:

Are our buyers using our branded websites? Should we invest beyond this branded website in online advertising? If so, where do we place this new advertising?

124

Combining comScore's representative panel of 1.5 million Internet consumers and knowledge Networks frequent grocery shopper panel of 20 million households, they generated 50,000 consumers belonging to both panels. Researchers created three experimental cells from these panel members, two receiving Purina O.N.E. banner

Unit 5

Data Management

advertising as they naturally surfed the Internet. A low-exposure test cell with 1 to 5 exposures, a high-exposure test cell with 6 to 20 exposure and a control cell with no ads. Banner ads were randomly sent as exposure cell subjects viewed Web pages anywhere on the Internet. Next, the firm surveyed all cell members to assess Purina brand awareness, purchase intent, and advertising awareness. Finally, the researchers compared survey results with off-line buying, as measured in the knowledge Network panel. Nestle's marketers were very interested in the study's findings. At first, banner click through was low (0.06% on average). Second, when study participants were asked 'when thinking of dog food, what brand first comes to mind?' 31 % of both exposure cell subjects mentioned Purina. In contrast, only 22% of the no exposure subjects mentioned the brand; this clearly showed the advertising effect. Further, 7% more of the subjects in the high-exposure group mentioned the brand as compared with those in the low-exposure group. Next, researchers reviewed the internet panel's website viewing habits for those who purchased Purina products and determined that home / health and living sites received the most visits from these customers. This helped the firm decide where to place their banner ads. Among those, www.petsmart.com and about.com would be great ad buys (www.comscore.com and Moore and Hunter speech at the advertising Research Foundation Annual convention and Research Infloplex, April 2002) (Adopted from E-Marketing by Judy Strauss, Adel El-Ansary and Raymond Frost) Now that you have read about Purina's experience, explain in your own words the importance of data and data analysis.

5.2 DATA, INFORMATION AND KNOWLEDGE_______________________


Data is raw. It is just a bundle of facts and figures. Data simply exists and has no significance beyond its existence. It does not necessarily have meaning by itself. For example, in a computer a spreadsheet generally holds data. 125

Customer Relationship Management

Information is created by using data, by giving it a meaning or by giving it a relational connection. This 'meaning' can be useful in making decisions. For example, a relational database makes information from the data stored within it. Knowledge is acquired when information is analyzed and synthesized. It is the learning created out of the meaningful information which may be put to some use or application. Understanding and wisdom is created out of the knowledge gained. Let us simplify this further by taking an example. Data: It is raining. Information: The temperature dropped by 15 degree C and then it started raining. Knowledge: If the humidity is high and the temperature drops substantially, the atmosphere is unable to hold moisture and so it rains. It rains due to interactions that happen between raining, evaporation, air currents, temperature gradients and changes in the atmosphere. Let us see yet another example. Data: In the age group of 0-6 years, Harayana and Punjab states have a sex ratio of 1000: 820 i.e. 820 women against every 1000 men. Information: In these two prosperous states women in the age group 0-6 years are reducing in numbers. A serious imbalance is being created in the sex ratio of men and women. Knowledge: Thanks to sex determination tests (which actually are illegal) female foeticide and infant mortality is found among girls in the age group of 0-6 years. There is a pressing j need to take strong legal steps and educate the populace. This relates to the larger unfortunate reality of the lower status given to women in our Indian society and the related issues of higher dowry etc.

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Unit 5

Data Management

Collected

Diagnose Problems

Data is

Processed Analyzed

Information is created and ~* used to

Plan and Strategize

Control the business

Fig 5.1: The Data - Information Process 53 TYPES OF DATA AND SOURCES OF GENERATING DATA. Data is generated by organizations on a regular basis. The responsibility of providing marketing decisionmakers with relevant, up-to-date information is that of Marketing Intelligence. Marketing Research, apart of Marketing Intelligence, deals with systematically designing, gathering and analyzing data and information from around the world that is (or may be) relevant to a specific marketing problem facing the company.

Marketing Research gathers data of 2 types: a) Primary data: is the data gathered for a specific purpose or for a specific research project. For example, a market study of needs, wants and requirements of people ^ traveling by the interstate luxury bus service in Maharashtra. b) Secondary data: is the data which has already been collected for some other purpose, maybe by someone else and which already exists somewhere. For example,a research report (already available) on bus travelers done by the government of Maharashtra last year. Remember: "Secondary comes first and Primary comes second".

127

Customer Relationship Management

I;

This means when you want to have data or information on a particular issue, you should first search for this data with the already existing sources. Only if the secondary data is not available or not enough to generate knowledge and make decisions, should you spend time, energy and money to generate fresh primary data. Sources of data: 2 types of data sources exist:

201. Internal data 202. External data

1) In te rn al da ta: da ta th at is av ail ab le wi thi n th e or ga ni zat io

n. This data may be in the registers, records, printed material, on the computer, in CDs, on the server and various different forms of documents. For example, the customer database contains details of previous purchases, contact names, telephone, fax, email number and complaints, if any. It is often observed that this internal data is overlooked and when a need arises data is searched for outside. This is like reinventing the wheel. You must begin with a look into this internal data / information and collect and gather it together. This data often is spread out in different departments / divisions of the organization and may take a little time to gather. You may find it tedious, but it costs the organization almost nothing. 2) External data: external data is the data available outside your organization, mostly in a published and printed form. It may be available in different forms and formats. So you will have to pick the relevant information selectively for your use.

Different external sources are very useful for getting market information and are listed here. a) Published data:

203. MRS: National Readership Surveys 204. NCAER: National Center of Applied Economic Research 205. Economic Times Research Bureau

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206. 207. 208.

Kothari Industrial Directory CMIE: Center for Monitoring Indian Economy Bombay Stock Exchange Directory

209. Periodicals and newspapers like Business World, Business Today, Business I India, Economic Times, Financial Express 210.

Thompson Urban/Rural Index

9) The Marketing White Book-Business World b) e-data: ,, The Internet is a vast resource. Today the information available on the Internet is 5 enough for one to keep surfing for an entire life time and it would still cover only a '' small fragment of it. \ Some listings of e-data are:
\

211. 212. 213. 214. 215.

Database on CD- ROMs Internet discussion / special interest groups Search engines, free websites Subscription websites, FTP (File transfer protocol) sites E- newsletters, E-books, E-zines(electronic magazines)

fig.5.2. given below shows us the relation and significance of data in creating a knowledge base and using this knowledge base to take decisions in marketing and CRM.

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Customer Relationship Management

Data Drives Strategy


INTERNAL DATA SECONDARY DATA
INFORMATION: consumer behavior.competitive intelligence.environmental data etc.

J J
^~
T

^-> ___

jdl" Customer/

I Prospect base I

iC

^^~

Marketing knowledge
1

~_^ ----

J ^ ^ Tier2 Marketing Mm. CRM

Tierl Segmentation Targeting Differentiation Positioning

f w Performance Metrics

Fig 5.2 : Source To Database To Strategy (SDS Model)


Adopted from: E-marketing by Judy Strauss, Adel el-Ansary, Raymond Frost

5.4 QUALITY OF DATA _______________


Data, although not perishable, does not stay fresh. Over time data may become useless if it is not updated. Checking the validity of data is very important. Obsolete or inadequate data will lead to errors in decision making. At the simplest level, a customer may change his postal address, e-address or email id which periodically needs updation. This is called the maintenance of the database.

Quality of data depends on: 216. Dependability of the source of data. It is important to consider different option^ to | pick data from and select the right ones. 217. Whether it contains all the elements of information.
Name, address, telephone number, email, fax, designation, department, industry' segment etc.

1. 2. 3. 4. 5. Note Incas

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Data Management

,r ,^, f, ,,

218. Customer contact staff should be trained and equipped to maintain good quality of data. 219. Timely data updation based on the type of industry requirements. The life of data can be determined and reviewed for periodically updating it.

5) The manner in which data is stored and available for retrieval. JS$ Activity B; If you are an executive, pick up 5 visiting cards of customers whom you have not visited for the last 3 years. Call them up and check the following:
220. Company name. 221. Their department and designation. 222. Address / telephone nos. / fax / email / website. 223. Business of the company / diversification, if any. 224. Changes in the top management.

Note your observations on what exactly has changed over the last 3 years. In case you are not working, you may do the same activity for 5 of your friends / relatives.

From a CRM point of view, you will appreciate the importance of correct data. Imagine a scenario, where as a salesperson you urgently need to contact someone or need information on some product/process, and are hindered in your task by outdated/incomplete data. The success of a company depends on how accurate its database is.

5.5 DATA MINING

131 _______________________'__________'__________

Data mining derives its name from the similarities between searching for valuable information in a large database and mining a mountain for a vein of valuable ore. Both processes

Customer Relationship Management

require either sifting through an immense amount of material, or intelligently probing it to find where value resides. Data mining, or knowledge discovery, is the computer-assisted process of digging through and analyzing enormous amounts of data and then extracting meaning out of it. Data mining tools predict behavior and future trends, allowing businesses to make proactive, knowledgedriven decisions. Data mining tools can answer business questions that traditionally were too time consuming to resolve. Data mining (DM) definitions are derived from the interaction of three activities:

225. A body of scientific knowledge accumulated through well-established disciplines, such as statistics, machine learning and artificial intelligence. 226. A technology evolving from high volume transaction systems, data warehouses, and the Internet. 227. A business community forced by an intensive competitive environment to innovate and integrate new ideas, concepts and tools to improve operations and data quality.
A thorough scanning (or mining!) of reference material reveals a wide variety of definitions. Let us look at a few:

Data mining is:


The search for relationships and global patterns that exist in large databases but are hidden among a vast volume of data. Sets of techniques used in an automated approach to exhaustively explore and bring to the surface complex relationships in very large data sets. The process of finding previously unknown and potentially interesting patterns and relationships in a large database.

Companies in a wide range of industries (including retail, finance, healthcare, manufacturing, transportation and aerospace) are already using data mining tools and techniques to take advantage of historical data. By using pattern recognition technologies and statistical and mathematical techniques to sift through warehoused information, data mining helps analysts recognize significant facts, relationships, trends, exceptions and anomalies that might otherwise go unnoticed.

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Data Management

'?' .'-.'/..''' :

Data mining techniques are the result of a long process of research and product development. This evolution began when business data was first stored on computers, continued with improvement in data access, and more recently, generated technologies that allow users to navigate through their data in real time. Data mining takes this evolutionary process beyond retrospective data access and navigation to prospective and proactive information delivery. Data mining can be used in two ways: a) to improve the internal business functions and b) to address the company's relationship with its customers. Most efforts are being made to understand customer behavior and adjust a company's products and services accordingly. Let us now do an activity which will take you into the most important topic of Data mining:

S& Activity C;
Read the passage given below and answer the questions that follow: We reproduce here an extract from Computer World that is interesting: Dick's supermarkets uses data-mining tools from Data Sage, Inc.Massachusetts to gather purchasing-history information from shopper's scan cards. The company then uses this data to identify product relationships and customer buying patterns. Kenneth L. Robb, senior vice president of marketing at the Platteville, Wisconsinbased BrodbeckEnterprises, Inc.(which operates the eight-store supermarket chain )talked to Computer World about the project.

What has data mining done for Dick's supermarkets?


"It has made us smarter about our customers - and as smarter marketers, made us more efficient in our marketing and merchandising investments."

What's the basis of a good data mining program?


You have to establish the integrity of your data because that's important to the decisions you'll make. For us, that means getting our customers to use their scan cards with each purchase so that we have good and thorough data about what goes on in our stores.
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Customer Relationship Management

How do you get them to use their cards and what kind of response rates are you currently getting?
We developed several incentive programs for using the cards. We have given away prizes such as lawn mowers and computers. Currently 90 percent of our total store sales are captured by these cards.

Are there some general things you've learned about your sales?
We discovered that 45 percent of our customers represent close to 90 percent of our volume. Using this information, we can offer the best discounts to the best customers so that we deliver value to those customers who represent the bulk of our business.

What else have you learned?


We looked over one and half years' worth of data and displayed the top product correlations. In our stores, we found a high correlation between yogurt and granola bars and also pie filling and canned milk. We placed a display of granola bars adjacent to the yogurt and measured a 60 percent difference in sales between the new display and the regular display in the stores.
(Source: Dick S. " Data mining" Computer World, March 29, 1999.)

Now, answer the following: 1) You have to establish the____________of your data because_____________.

228. What percent of customers represent how much percent of business at Dicks? _________________________________________.Why? 229. What was responsible for the 60% increase in sales?

134

You will find it useful to relate this activity with the detailed case given to you separately at the end of this chapter, which is based on the real life situation of application of data management at Dick's supermarket - one of the classic examples of successful CRM.

Unit 5

Data Management

Examples of Data Mining Applications:

A pharmaceutical company can analyze its recent salesforce activity and its results to improve targeting of high-value physicians and then to determine which marketing activities would have the greatest impact in the next few months. The data needs to include competitor's activities as well as information about local health care. The result can be distributed to the sales force via a wide area network. The ongoing, dynamic analysis of the data warehouse allows best practices from throughout the organization to be applied to specific sales situations. A credit card company can leverage its vast warehouse of customer transaction data to identify customers most likely to be interested in a new credit product. Using a small test mailing campaign, the attributes of customers with an affinity for the product can be identified. Recent projects have indicated more than a 20-fold decrease in costs for targeted mailing campaigns over the more conventional approaches.

A diversified transportation company with a large direct sales force can apply data mining to identify the best prospects for its services. Using data mining to analyze its own customer experience, this company can build a unique segmentation pattern by identifying the attributes of high-value prospects. A large customer packaged goods company can apply data mining to improve its sales process to retailers. Data from consumer panels, shipments and competitive activity can be applied to understand the reasons for brand and store switching. Through this analysis, the company can select promotional strategies that best reach their target customer segments and enhance retail activity.

You must have notic ed that each of these exam ples has a clear com mon grou nd. They lever age the know ledge about custo mers to reduc e costs and impr ove the value of custo mer relati onshi ps. Thes e orga nizat ions

can now focus their efforts on the most important (profitable) customers and prospects, and design targeted CRM strategies to best reach them. 5.6 DATA WAREHOUSING_________________
;

__________________

A data warehouse (DW) comprises of a computing system which is used to store information regarding an organization's activities in a database. The database design favors reporting on and analyzing the data in order to gain strategic information and to facilitate dedsion-making.

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Customer Relationship Management

A database may hold large volumes of information, which sometimes may be arranged in smaller, logical units called 'data marts'. The conventional database systems use highly normalized data formats so that they execute transactions and queries as fast as possible, within minimum time and space. Data warehouses are usually accessed (queried) via "data marts", which are purposespecific access points to, or sub-sets of, the warehouse. Data marts are designed to answer the probable queries of a given kind of user. Normally a data warehouse does not store current information on an individual business activity. It is often used for the collective processing of all the business units across a company. Computing in data warehouses is often referred to as Online Analytical Processing (OLAP) in contrast to Online Transaction Processing (OLTP) which is used for normal business activities. Data from Enterprise resource planning (ERP) systems and other related business software systems is imported into data warehouses periodically for further processing. The following diagram gives an example of an integrated customer database in a data warehouse.
Internet Marketing based Research / data Web// / Response Statistical Past Call Customer financial center information complaints to feedback data Previous order Integrated Database related feedback data promotional available e.g. observations Product invoices returns through / noted buying behavior programmes. external payment sources details.

Fig 5.3 :

Integration of Database
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Data Management

Why is integration of data necessary? Imagine that you have just purchased a gift for your sister through a web site say www.giftforu.com. When you receive the delivery of this gift you realise that the size of the product as mentioned on the particular web page is not the same as the gift you received. You write an email complaint to the company and seek an explanation. You get no reply to your 3 consecutive emails. You are obviously frustrated. Over and above this, on the very next day you get a call by a sweet speaking lady who says, " Good evening Sir, I am calling on behalf of giftforu.com. We have revised our products in the gift section and would like to invite you to visit our site for your requirements". Imagine your response and your feelings! But remember, while working as a CRM initiator you are quite likely to make such a mistake. It can be easily avoided by integrating the data as shown in Fig 5.3 Don't you think the case discussed above makes a strong point for an integrated database management? Data warehousing can effectively give solutions to such cases and avoid distortions that occur across the different media dealing with customers. The example discussed above is not a rare one. Aleading U.S.firm in Market and Technology research, 'Forrester Inc' puts forth the following observations in its report of June 2000 titled " The Customer Conversation": Only 37% of respondents knew if they shared customer information with other divisions /departments of their organization. Only 20% could tell if the customer had previously visited the company's website. Only 23% of CSRs could see a customer's web activity. This situation can definitely be improved if effective database management exists in the company. Please refer to Fig. 5.4. 5.7 DATABASE MANAGEMENT AND CRM We shall now focus more sharply on the relationship between database management and CRM. Data warehousing is about the integrated data stored and available for you to interpret and take decisions on different business activities.

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Customer Relationship Management

DECISION MAKER BUSINESS INTELLIGENCE

DATA MINING DATA EXPLORATION STATISTICS, QUERY REPORTING

BUSINESS ANALYST

MANAGERS

DATA WAREHOUSES DATABASES

DATA ARCHITECTS DATABASE ADMINISTRATOR

138

Fig 5.4 : Data levels and usage interactions


Data mining is about delving deeper into the data to get to the crux of the matter. It is

for this data. reason Most marketers understand the value of collecting customer data, but they also realize that the challenges of leveraging this knowledge to create an intelligent, proactive pathway data mining back to the customer. Data mining technology and techniques (for recognizing and is also tracking patterns within data) helps businesses sift through layers of seemingly unrelated called data for meaningful relationships, where they can anticipate (rather than simply react 'Knowl to) customer needs. edge Customer Acquisition: This type of application involves finding customers who discove previously were not aware of the product, who were not candidates for purchasing the ry' ie. products (for example, baby diapers for new parents), or who in the past have bought to from a competitor. Data mining helps segment prospective customers and increases the discove response rate that an acquisition marketing campaign can achieve. r knowle Customer Retention: Customer 'churn' is another significant problem in many dge industries As you have seen in the previous chapters, it is far more cost- effective to from a retain existing customers than to secure new ones. It is desirable to identify customers huge who are likely to change services to a new provider (your rival)and to offer them sea of incentives to not do so.

Unit 5 ft

Data Management

The customer's historical data contains information that can be extremely valuable to retention specialists. Historical data holds usage patterns and other important customer characteristics that can be used to identify satisfied and dissatisfied customers. We need to identify which customers renewed their services with us, which did not renew their services and what incentives could be offered to both groups. A Predictive model can then be built to predict customers who will not renew their services and make recommendations about the most effective incentives that may be offered. Campaign optimization: In most marketing organizations, there are many ways to interact with the customers and prospects. There are multiple communication channels (direct mail, telemarketing, E-mail, the Web,etc) that can be used. Managers will need to take a set of offers and set of customers, relate them to the characteristics and constraints of the campaign, and determine which offer should go to which customer, over which channels, and at what time. The key to satisfying customers, optimizing their experience and thereby, quite possibly their loyalty, lies in understanding their individual preferences. Today's customer relationship is based on mass customization rather than mass production. What one customer may consider "attentive" customer service may be deemed unsatisfactory/ oppressive by another. Being able to recognize the differences between these two types of customers and making effective use of such information remains a challenge. It is challenges like this that data management techniques are uniquely well suited to address. 5.8 TELEMARKETING AND TELESALES_______________________________ You already know that selling is an integral and important part of marketing. Similarly, teleselling is an important part of telemarketing. . .

Telemarketing involves using the telephone for marketing our products and services.Or in otherwords, Telemarketing involves all the marketing activities done over the telephone including:

230. Understanding customer needs and perceptions. 231. Promoting a product or service. 232. Selling a product or service. (Tele-selling) 233. Customer satisfaction feedback. 234. Keeping in touch / Courtesy calls.
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Customer Relationship Management

Telemarketing is a discipline in itself. It uses telecommunication equipment and a network to get closer to customers and develop better interaction with the customer. It is a means of developing a continuous dialogue with the customers.

Key concepts of telemarketing :


A key principle of CRM is to be in a constant dialogue with the customer, developing an information flow both ways, to the customer and from the customer. This is about developing a series of' conversations' with customers over the telephone. Often these conversations are to be supported with letters, brochures, emails, salesperson's visit or customer visits to showrooms or websites. For example, Yellow Pages directories often use telephonic prospecting of customers followed by a salesperson's visit for space-selling (getting advertisements for printing in the directory which is the main source of Yellow Pages revenue). Telemarketing includes the following activities in order to achieve its objectives: ,

I)

Information activities: 235. Enquiry generation: Cold calling or bund calling to customers in order to generate enquiries.(A blind / cold call is when a phone call is made at random to a telephone number without knowing much (or sometimes without knowing anything!) about the person called). 236. Enquiry screening: Finding out how serious the customer is in his purchase intent. 237. Customer and/or market research: Finding out more about customer perceptions and opinions. Getting feedback such as checking the effectiveness of an advertisement or promotional campaign. 238. Giving customized advice: Acompany can help its customers get better information on formalities and steps in availing of the product and its services. Abank may assist customers to avail of a new loan facility.

140

II) Developing and enhancing relationships:

a) C a ll h a n d li n g : I n c o m i n g c a ll s o n i n f o r m a ti o n r e q u e s t s o r c

omplaints can be handled by trained tele-executives.

Unit 5

Data Management

. - .

239. Creating selling opportunities: By lead generation, seeking appointments or by cross-selling / up- selling. (Refer to section 6.4 also) 240. Building loyalty: By listening to customers or by meeting a need for more information, a company can make customers happier by listening to their suggestions. Keeping in touch with them also helps.
'.'$

d) Better account management: Being in touch is being closer to the customer. This ; helps in understanding a particular account or group of accounts better. I Developing close contacts with customers helps prevent a competitor'sentry into our customer's world.
5.

HI) Other activities:


241. New customers: Developing new customers in a particular segment or extending coverage of the existing market. 242. Regaining the customers: Getting back lost customers. Sometimes customers forget to come back to you simply because you were not in touch with them. 243. Improving overall quality: By being more professional, being more communicative and being available to the customers at all times, the overall quality of customer satisfaction increases.

Tele selli ng: is an integ ral part of tele mar ketin g. As it is an imp ortan t aspe ct of tele mar ketin g we shall briefl y touc h on it.

& Activity D: Contact an advertising agency and have a discussion with the accounts manager / executive /client servicing executive regarding his/her job profile.How important is keeping in touch with customers and how does he/she do it ?

141

Customer Relationship Management

'

^- ;

Selling we have already learned is:

Finding prospective customers. Identifying their needs Motivating them to buy your product/service.

Selling when done over the telephone is teleselling. However today this can be linked to a web based model. You may have a teleselling executive developing a list of prospects .You may then send specific information /brochures/direct mails through email or by post.The follow up and sales closing may be done by the same teleselling executives. It is essential for this executive to have the right combination of soft skills (explained in unit 2) in order to be effective

$ Activity E;
Imagine that you are working on generating a list of prospective customers for a "Water proofing" service Company. What will you do? Prepare a list of questions you will ask the prospects when you call them up.

5.9 SUMMARY

142

In the introduction to this unit you have read that Database management is the backbone of any organization. You have also learnt the concept of data, data management and the modern day techniques of data mining and data warehousing.

For CRM, which speaks about selectin

g and retaining good customers, the importance of data goes without saying. It is the absolute crux of the whole business of CRM. Data is like a river which looks and feels good when it is flowing; the moment it ceases to flow, ii stagnates. Data updating on a regular basis is an absolute must. By regularly updating the data and creating information and knowledge from it, one can effectively leverage the value of data. Data is definitely worth its weight in gold - if harnessed properly.

Unit 5

Data Management

5.10 SELF-ASSESSMENT QUESTIONS


Q1. Define the following:
244. 245. 246. 247. 248.

Data Information Knowledge Primary data Secondary data

then gener ates speci al offer s on a "justintime" basis.

Q2. Draw a diagram of the data collection process which creates information and knowledge. Q3. What are the different sources of data? Q4. What are the different sources of e-data? Q5. Write down the full forms of NRS,NCAER and CMffi. Q6. Fill in the blanks: a) ................is producing knowledge and discovering new patterns to describe the data. b) Today's customer relationship is based on ..................rather than mass production.

5.11 CASE STUDY: KNOWING THE CUSTOMER. DICK'S SUPERMARKETS _____________________________________________________


Ken Robb has a secret. The secret is that he knows pretty much what his customers intend to buy when they go shopping. That, along with a reputation for superior service, is Dick's supermarket's primary defense against lower priced competitors and category killers. Data Vantage, a software product developed by relationship marketing group (RMG) of Connecticut, sifts through Robb's scanner data to predict when his customers are likely to repurchase specific products. The system

143

Customer Relationship Management

ft!

144

How it works : Custo mers who spend $25 or more per week at Dick's are sent a custo mized shoppi ng list every two weeks . The list is a comp osite derive d from the custo mer's purch ase histor y and curren t offers, deals or disco unts from manuf acture rs.

Customers can bring their list with them when they shop or leave them at home. When the customer gets to the counter register, the clerk scans the list (which is imprinted with a bar code) or the customer's regular savings club card. Either way, any special offers on the list are automatically redeemed and the customer's purchase history is updated for the next list.Dick's supermarket also relies on customer-specific information to aim tailored promotions at its most valuable customers across a variety of categories. For example, users of nonaspirin products such as Tylenol could be divided into 3 groups: users of a national brand,users of the store brand and brand switchers. Within each of these groups, customers could be tiered into 3 subgroups based on low, moderate or high usage. Usage is a proxy for the customer's long-term value to Dick's within the category. (In just this one category, there are six "modules," yielding a total of nine different types of customers-more than enough to drive a mass-customized marketing campaign.) If the supermarkets goal, for instance, was to con vert Tylenol users into store brand users, Robb would save his most aggressive campaign for heavy users because they offer the most potential value. Heavy users would be offered deeper initial discounts than low and moderate users. The promotions would be timed to coincide with each customer's unique buying cycle, which Robb can predict with reasonable accuracy by analyzing the customer's purchase history. "Customers think this is great because the shopping list is a reflection of what they buy. If they have a dog or cat, they are getting dog food or cat food offers," says Robb. To minimize the damage that a discount will do, manufacturers fund most of Dick's discounts. As part of the overall package, the manufacturers get access to highly detailed sales information (with names taken out) processed by Relationship Marketing Group, which not only supplies the software but also mines the scanner data. The first task for a marketer is to identify and differentiate customers, and so in the retail category, a frequency marketing program like the one offered by Dick's supermarkets can be an indispensable aid. It provides individual customers with the incentive to "hold up their hands"every time they go into the store, to get their discounts. The actual mechanics of a frequency marketing program also provides a great platform for interacting with customers, either in the mail, or at the register counter, or even on the web. But here's the danger. Frequency marketing is a tactic for producing individual customer information and interaction, not a strategy to make customers loyal especially not in the face of a similar promotion from a competitor. To cope up with this, Dick's supermarkets customize the treatment of each individual customer. Then, as they collect more information

Unit 5

Data Management

about any single customer, the treatment of that customer can be tailored more and more specifically, giving the customer a kind of collaborative investment in the service that Dick's supermarkets is giving to him. In addition, (to the extent possible,) such a program should include not only highly tailored discounts but also such nondiscount incentives such as recipes, weekly meal plans, tips on product usage, health and nutrition information, expedited checkout lanes and even home delivery services. Never, never forget that the goal of marketing is not to give stuff away. Remember even giving away is mutual. In the short term, immediately after launching a loyalty program, it's easy to forget this. You might be deceived into thinking that giving stuff away has made your customer loyal. But when your competitor launches a similar program, and your customers can now get discounts at either storethen what do you do? Who wants a bunch of customers who are always looking for discounts? All you will have done is train your very best customers to look for price offers. So, remember what puts Dick's supermarkets on the short list of good marketing practitioners: Robb uses the information he obtains from his customers to offer them an incentive his competitors can't easily duplicate, because the incentives are tailored to each customer's individual preferences and purchase cycles. The more a customer shops at Dick's, the more specifically tailored that customer's benefits will be, and the more incentives there will be to remain loyal. This makes it a very hard program to compete against.
%-;

Robb thinks of this information as his little secret. "In most situations," he says, "If your competitors want to know your pricing, they come into your store and check the prices on the shelves. Or they look at your weekly advertisement. But with this shopping list, your competitors have no idea what you are doing, because everybody gets a different list!" (Abridged form of case studies from Itol marketing by Don Peppers and Dr. Martha Rogers) Activity 1. Go to a popular supermarket and try to find out the ways they attract their customers and ensure their retention.
249. Find out the different perceptions the consumers have regarding discounts for any 3 145 products and services of your choice. 250. Do you agree that competitors cannot easily copy Dick's discount policy? 251. Write down 4 lessons you learnt from this case.

Customer Relationship Management

6.1 INTRODUCTION
Sales and services are the two functions of any organization which are integrated the most with the customer or the customer's organization. Sales and service people are your company's 'touch points' with your customers. It makes a lot of sense to automate this customer contact process in order to give better information and service to your customers. Thus Sales Force Automation is a process and technology which when applied to your organization creates benefits for both your organization and your customers. \ Let us begin this chapter with an activity. '

A Typical Day For A Xerox Salesperson


You are responsible for your sales coverage, time, and budget. Help is available and you'll have plenty of marketing and service support; but you're expected to work independently, without constant direction. Your day is devoted primarily to customer contact. Potential customers may phone the branch and ask to see a Xerox representative. More likely, however, you will acquire customers by making appointments or by visiting businesses to meet the decision makers. discuss their needs, and offer solutions to their problems. As part of your position, you' 11 make product presentations, either at the Xerox branch office or at the customer's office. You will also spend a fair amount of time on the telephone, following up leads. arranging appointments, and speaking with managers in a variety of businesses and organizations. In working with customers, you'll need to solve a number of problems. Which Xerox product best fits the customer's needs? How do Xerox products compare with the competition? Should the machine be purchased or leased? What's the total cash outlay and per copy cost-for the machine or it's services? How should the product be financed? Where should the machine be placed for maximum efficiency? What training is needed for employees? How can Xerox products meet future office needs? You'll also be engaged in a number of customer support activities, such as expediting t product deliveries, checking credit, writing proposals, and training customer employee in the use of the product. You might also refer customers to other Xerox sales organizations and make joint calls with representatives from these organizations. Each day will bring you new challenges to face and problems to solve. Your days will be busy and interesting. |

148

Adopted from: Selling by Charles Futrell

Unit 6

Sales Force Automation

f Activity A: Read the description of the Xerox salesperson given above and list out as many sales activities as you can.

6.2 SELLING AND THE SALES PROCESS _______________________________________________ ^ ^ ^ _ _ _ _ _ Let us look at a definition of selling:

Identifying qualified buyers who will purchase your product or service. Selling yourself and your company image to those potential buyers. Through a process of identification of needs and wants, agreeing upon a course of action that is profitable to both parties."
Frank Salisbury. Selling means "helping people buy". As mentioned in the definition above, you have to identify the right customer, make an impression (that you can satisfy his requirements) and be able to convert this opportunity into business for your organization. & Activity B; Think of a major purchase you have recently made. For example, a motorbike, furniture, computer etc. Apply the selling definition and explain how it applies to the salesperson who sold you that particular product or service.

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Customer Relationship Management

SalesPreliminary Firm lead information - Schedule sent. meeting (if required). ^ Prospect-plan for enquiry Approval by Management, if necessary. The following figure shows you the follow- up. Fig 6.1: The Sales Process sales process: Sales process Opportunity identified i r Lead allocated i r Prospect contacted i r Prospect qualified Sales activity

>

=C

>

=C

i r Solution identified

> = >

i r Order placed

150

You must have observed in Fig. 6.1 given above that selling is related to the salespersol and the sales process is related to the organization.

Unit6

Sales Force Automation

The sales process is a function that starts with identifying opportunities in the market, and results into converting a lead into business. A lead is a future prospect that may or may not become your customer. In sales and marketing literature you will often find that a lead is also referred to as a 'cold prospect' or a 'suspect'. In short a lead is the seed of an opportunity in the future. For example, a sales executive working in a level control and automation company reads in the local

n e w s p a p e r a b o u t a m e g a t o w n s h i p c o m i n g u p i n

on e of the su bur bs. He / Sh e tak es the cut tin g of thi s arti cle, giv es it ap arti cul ar ide ntif ica tio n nu mb er an d file s it for fut ure ref ere

n reliminary communicati A on / enquiry from the l future e customer. a Incidentally, d prospecting is a term used in b selling, which e means c 'finding new o potential m customers.' e At the stage s when a lead becomes a a prospect, the customer p need or r requirement o gets defined s in proper p terms. When e your c organization t gets an enquiry, your w job as a h salesperson e is to offer the n right solution for the y customer's o requirements u . Customers will evaluate g competitive e offers and t will decide in favour of the s vendor wno o gives them m the best value e for their money. p

6 . 3 F A B

A P P R O A C H __________________________________________________________________ Y o u w i l l n o t i c e t h a t a s a l e s p e r s o n

wh o is abl e to un de rst an d sel lin g an d the sal es pr oc ess in a bet ter wa y, ha sa bet ter op po rtu nit y to su cc ee d in get tin

g th CRM, we shall now m look at the o FAB approach: r e AFAB o selling r technique is d the most e powerful r technique s and f successful o salespeople r use it h regularly. i Here the s salesperson c relates a o product's m benefits, p features and a advantages n to the y customer's . needs. He I brings about match n a o between r needs + d products. e r This t technique is o r referred to as e the FAB l technique a (feature, t advantage and e benefits). t a. h i These are s explained w briefly : i

Pr od uc t fe at ur es : In cl ud e th e ph ys ic al an d fu nc tio na l ch ar ac ter ist ic s of th e pr od uc t. Th es

e us ual ly wil l inc lud e the fol lo wi ng: Si ze, Sh ap e, Co lo ur, Ta ste , Fl av ou r, Q ua nti ty, Vo lu m e, Q ual ity, Us es, Te ch no

lo gy us ed , D eli ve ry m od e, Te r m s of pa y m en t, Se rvi ce s, Pr ic e, In gr ed ie nt s an d Pa ck ag 151 in g.

Customer Relationship Management

answers the 1 This 5 question, "What is our 2 product? "But buyers are more interested in the benefits rather than the features.When the

s al e s p e rs o n o n l y d e s c ri b e s t h e f e at u r e s, t h e c u st o m e r t h i n k s t

o himself, "So what? How do I benefit? How does this help me ? " The product's advantages: It is the performance characteristics of a product that describe how it can be used or how it will help the buyer. The chances of making a sale are increased by describing the product's advantages to the customer. In this the salesperson has to prove what he is saying. He should be prepared enough to substantiate any product / service claims that he makes. Training helps salespeople become capable of sharing their product / service knowledge with the customers and putting forth the advantages of their offering against that of the competition.By mastering this selling technique, sales will increase. The product's benefits: Buyers are mostly interested in benefits which they are going to receive. The technique answers the question, "what's in it for me ? " The salesperson has to describe the benefits rather than just the features and advantages.

It is i m p o rt a n t t o m e n ti o n b e n e fi ts i n t h e s a l e s p r e s e n t a ti o n . It is

also necessary to follow this order-Features followed by Advantages followed by Benefits. The FAB sequence allows you to easily remember this order. FAB should be at the core of our selling process and thus becomes a vital element of CRM. When a customer is looking for a product or service, she is actually looking for a solution. Customers do not necessarily want pressure cookers, they are actually looking for a means of faster cooking. Thus when you offer a product or service to your customer, she thinks," What's in it for me? How does this product offer the best solution to my problems?" Let's take an example.
* ^-s <- j>" * * - ' , . -

F e a t u r e :

P c r e e r s t s i u f r i e c a c t o i o o k n e . r A d h v a a s n t a a n g e I : S I I t i

s b o e f t t a e r g s o a o f d e t q y u a n l o i r t m y s . a Benefit: Customers get a safe cooker, n uninterrupted faster cooking, longer life, less d failures, better quality of life, happier families.

Unit 6

Sales Force Automation

This is nothing but the FAB approach.

s e l l i 6.4 CROSSn SELLING, UP-SELLING g AND DESELLING a n Cross-selling is y offering your customer a o basket-full of r related products/servic a es along with l the main l product/service o that is being f sold. Imagine you are a salesperson selling gardening material at a garden-center that sells saplings and assorted gardening tools. When a customer selects 15 different varieties of plants, you understand from her that these are for the new pots she has recently bought for her balcony garden. You have a possibility of t h e f o l l o w i n g :

2 5 2 .
G a r

denin d lling. g tools. u The lady will n actually thank you when she g starts working in her garden. She now has all the m right a ingredients and n tools at hand to be happy with u her gardening r work.

253. F
ertiliz ersmacro and micro nutrie nts.

e Thus cross 254. G , selling makes business sense eneral and also CRM pestic h sense. ides. )A note of 255. M caution - don't go overboard in may add a or couple of items osssti You cross-selling, to the list. the demarcation ck/s. line between 256. H cross-selling angin and hard selling become Nmay g o very thin. You baske walso do not want to become too ts. t pushy or the 257. S h customer may i get and irritated. s Accept it bags. gracefully, if a i g s customer says 'No' and sticks ) c to her original r shopping list. 1 C o 5 s 3 o s w s e

Customer Relationship Management

Up-selling: '"'' Up selling can be explained by redefining one of the selling definitions we have seen previously: Selling, we said is, "Helping people buy". Up Selling is, "Helping people buy more from you". It is about looking for opportunities for selling more to the same customer. Imagine you are a sales engineer of a company manufacturing magnetic separators. (A magnetic separator is a device used to separate ferrous impurities from the raw material and is used in various process industries. A magnetic separator is a very useful device for the food industry). You develop a new customer who manufactures food-making machinery. You had been selling one magnetic grid (separator) per machine. (A total of 50 separators per annum.) You go a little further and speak to the customer's customer and understand that in spite of using your separators, the end-user still gets some impurities in the final product. You work with your own Research and Development and Engineering team and develop a unit of two grids to be fitted at two important points in the machine, thus ensuring near 100% purity. You convince your customer (the machine manufacturer) with the right facts and figures. You just did Up-selling!! Your order from the same manufacturer is now 100 separators per annum instead of 50 only. De-selling : You guessed right! De-selling is 'no-selling' or 'negative selling.' In simple terms, notto-sell! Actually, we can easily term this as CRM selling or an ethical marketing approach to selling. For example, a customer goes to a chemist and asks for a 50-gram tube of skin ointment. The chemist is a CRM man- he knows this customer and also knows that his son has recently got fractured while playing football. He says, "Is it for Amit by any chance?" The

154

Unit 6

Sales Force Automation

customer says "Yes"! So the chemist says," Do not take 50 grams, take a 25 grams tube. It would be sufficient. 50 grams would probably be a waste". What would you call this? Sheer stupidity ? Selling half of what the customer is asking for? Surely by now, you are a 60 % CRM person (having nearly completed the 6th unit) and you will appreciate this approach. The chemist with his 'deselling' gesture has created a unique value / place for him in the customer's mind. This is the mind share that marketing literature speaks about.

h a r d s e l l i n g c o n c e p t ( ! ) . B u t y o u

w i l l u n d e r De-selling is a s concept exactly t opposite to the a

nd, as you work in the field of CRM and marke ting, that hard sellin g as a conce pt hardly lasts in the long run. What does last is the conne ction you forge with your custo mer. (Har d sellin g= sellin g by hook or by crook / high press ure sellin

g ales management is a / sequence of activities that f guides managers o creating, r in implementing c i and evaluating sales n the g program for an organization. p e The important o p sales l e management tasks are as

y e a r ' s s a l e s i n

r e t l o below: a b 258. Analysis u t y i ! and planning. o ) 259. Organizi n ng. 6 . 260. Recruit 5 ment and S ASelection. L E261. Training S 262. Motivati w i t h

s a l e s M on. A p N263. Control. e A o Analysis p G1) E and l M planning: e E A sales , N manager is T expected t _____________________________________________________________________ to analyze e the S r previous

r i t o r y , p r o d u c t s , m a r k e t s e g m e n t s e t c . B a s e d

s e a n a l y s e s , a n d t h e o n g o i n g m a r k e t

rom various sources, a sales manager evolves a sales plan for the coming year.

f e e d o b n a c t k h e f

1 5 5

Customer Relationship Management

.'/

264. Organizing: This is the implementation of the sales plan. Successful sales management needs an effective implementation in which the sales manager balances the customer requirements and the organization's capabilities. At this stage various sales strategies are implemented and later may be modifed based on the market response. 265. Recruitment and selection: This is an important aspect of sales management. It is absolutely important to appoint the right kind of people in sales and support functions. A good salesperson will make a territory flourish and will achieve targets. However the wrong person may damage the present and future potential of the territory and the image of the company. Hence the recruitment and selection becomes very crucial. You will remember that especially for service businesses (as discussed in Unit 4), recruitment and selection is far more crucial because interaction between the salesperson and customer is most crucial in developing, retaining and upgrading customers. 266. Training: Similar to recruitment and selection, training too is an important aspect of sales management. To put it in the words of a Senior Vice-President of a software marketing company, "Many salespeople under perform not because they are not capable, or their product is bad, but simply because they are ill-trained".
Training is done in 3 major areas: A: Attitude. K: Knowledge. S: Skills.

Again depending upon the product / service and market combination, the proportion of A+K+S needs to be customized and fine tuned.(Refer to section 7.5 also)

267. Motivation: In simple terms, motivating a salesperson means creating an urge 'to get out and get going'. Motivation for the salesperson can be both positive and negative. Positive motivation includes monetary incentives, sales commission, performance certificate, appreciation and recognition that create a positive frame of mind. Negative motivation could be in the form of possible transfers, penalties, reduced sales incentives, demotion etc. It is often said 'People perform much better under pressure'. Motivation is often about creating the right kind of pressure and the right environment. 268. Control: Feedback and modifications are the sub-functions of sales management control. It is about evaluating the performance against a predetermined target and taking the necessary remedial steps periodically. Depending upon the type of business, the periodicity of the sales review and control could be either daily, monthly, quarterly or even annually.

156

Unite

Sales Force Automation

2 6 9 . I t h e l It is said that p Sales Force s Automation was the first t element initially h e developed for CRM. Even c today SFA o remains a vital m element of p CRM. a n SFA is a y technological tool to help i n salespeople acquire and c r retain customers. It e a helps in s reducing e administrative costs and c provides a u good basis for s t account management. It o increases the m selling chances e for the r r salesperson and e ensures more t business for the e company. n ff t This helps in i two ways: o

6.6 CONCEPT AND ELEMENTS OF SALES FORCE AUTOMATI ON

n and s s profit S s. T 2e 270. C 2 u 2 s 2i t 2 o Ln m e e r t s m g o e t ur b s e e t t e n d r i oe n w t f o a r m l i a t ol i o o : n k , b 1 e t a) t t e r p R r t e o d hd u e c u t

c t i o n

i n

c o s t

o f

s e l l i n g :
The cost

o f m a i n t a i n i n g a s a l e s f o r c e i s a m a j o r p o r t i o n o f t h e t

otal cost of selli ng. It is thus logi cal that orga nizat ions seek to redu ce the cost of selli ng. SFA is one of the solut ions. Inde ed, impl eme ntin g any SFA soft war e is a costl y affai r. This spre

ads over a certain time frame and is evaluated on the gains created due to increased sales force productivit y and better customer informatio n. It thus becomes a costsaving initiative over the long term.

1 5 7

Customer Relationship Management

For example, a computer hardware selling company maintains detailed records of enquiries received. It follows through each enquiry till an order is received or is lost. This part of SFA leads to an increased order book by at least 7%-8%.

2) Increased revenue:
We have already said that SFA implementation is a cost incurring process. But it has to be looked upon as an investment and not as a cost. Investments are supposed to create better profitability in the present and the future. With SFA, this is what happens. A knowledgeable and empowered salesperson is in a better position to close the sale. SFA is thus a vital tool to increase productivity and revenues.

^ Activity C;
"Visit the website www.sfa.com and generate a detailed note on the offering there:

158

3) Easy availability of customer information:


In any organization there is a particular process by which an incoming order is processed. Different departments (sales, commercial, manufacturing, purchase, R&D, etc) are involved in the fulfillment of this particular order. These multiple departments may have an interest in viewing the customer status at any given time. A single window that pops up due to SFA becomes very handy and usable for different interested departments. This creates a kind of universal view of all the data available, to all the departments, at all times, pertaining to one particular

cu st o m 4) er. Y ou wi ll

agree that more knowledgeable employees, mean more confident employees who are in a better position to serve the customer.

Increased sales force mobility :


Thanks to improving infrastructure and increased competitive activities, salespeople today are always on the move. More fieldwork is the need of the day. With the help of a modern laptop and a cell phone, with internet connectivity, it is possible for a salesperson to get real time information about a particular account / segment / product

Unit 6

Sales Force Automation

Wit hout SFA , it is alm ost imp ossi ble to satis fy the gro 5) Meeting win increased g customer need expectations : s of cust 'Yen dil ome maange rs. more' is the catch L line to explain the e everdemanding t consumer today. More the u customers demand, s more the companies will have to provide n (remember if you o don't, w somebody else will) and for this l SFA becomes an absolute o must.

/ an order. You will agree that this will greatly equip a salesperso n to be able to deal with and satisfy customers better.

ok at m 1 the ) differ ent elem ents of SFA: 276. A


ctivity

sales process, as we have discussed above, means activity manageme nt.

A c t i v i t

It is about leading the mana sales y process in geme a sophisticat nt ed way, m from lead 277. T a generation erritor to order n booking. It y is very a important mana that an g order geme smoothly e flows nt m through 278. C the sales e process, ontact with due n checks mana applied, t internal or geme external : nt feedbacks Man given, and 279. L modificatio agin ns made, if ead g the required.

Acti vity man age men t help s in bette r plan ning for effe ctive cust ome r man age men t such as appr oval by cons ulta nts or prod uct dem onst ratio ns. It is an acti vity whi ch is tran spar

e n t t o i n t e r n a l c u s t o m e r s . T h i s h e l p s i n b e t t e r c o o r d i n

ation and unde rstan ding betw een vari ous depa rtme nts. For exa mple , a soft ware firm may be work ing on an impl eme ntati on of ERP (ente rpris e reso urce plan ning ) soft ware for a cast alloy com pany . A

customer requiremen t study (CRS) is going on. Two department s of the customer's company are very slow or are noncooperativ e in defining their specificatio ns. With the use of proper activity manageme nt, it is possible to track the dealings in the software implementa tion process. Imagine the scenario without Activity manageme nt/ SFA Software. The Sales 1

5 9

Customer Relationship Management

department would have blamed the implementation team, and the implementation team would have blamed them back! Other departments would amusedly watch the fight!

$ Activity D:
Visit any small sized or medium sized product / service company and study their order processing method. Write down the steps of their order process in the space given below:

160

2)

Territory management:
A sales territory is a group of customers or a geographical area assigned to a sales person. The territory may or may not have geographical boundaries. For example, HNW (high net worth) customer segments may be handled by a relationship manager in a private life insurance company. (High net worth are the people paying very high annual premia and would be geographically spread across the country).

F r o m a s al 3) e s m a n a g e m

ent point of view, territory management is important to know and analyze a particular territory for its profitability and future potential. It is also possible to create an effective sales environment where the sales representatives can be linked to the specialist at the Head Office (like the product manager or an industry expert).

Contact management:
Contact management is that area of CRM that can track the where, who and why of a particular client. Here a salesperson would be interested in details such as:
t

Where the client is based i.e. location. Who forms the DMU (i.e. decision making unit or group of people involved in t he decision making process) in a particular organization or family.

Unit 6

Sales Force Automation

Why the customer is considering our offer over the competitor's or vice versa. The strengths and weaknesses of your company vis-a-vis your competition is very important for you to know the opportunities and threats that you may face.
i t;

Contact management helps you to do exactly this. Here are some more activities included in contact management: * Maintain the prospecting activities under proper heads like cold calls, telemarketing follow-ups, etc. <t View the list of prospective customers at any point of time.

Segment your contacts by their industry/territory. Maintain the daily log of all sales executives. Calculate the average time spent on each contact/customer. Schedule your activity with proper prompts and reminders.

Organize your contacts by the probability of purchase. (ABC analysis: Amost H important, B-Less important, C-Least important)
etc. Forecast the expected orders. Schedule yourself for the next follow-up time and date. Track down the expected sales from an executive vis-a-vis his target. View your contact list based on any key field like areas, zone, products

Al lo ca te co nt ac ts to sa le sp eo pl e ba se d on th eir se ni or ity an d ex pe rie nc e.

Forecast the demand for any product/model. Know, by a click of the mouse, the status of a contact (open/close/abandoned/ suspect etc). Track the number of calls made in a day and prospects generated. Calculate the conversion ratio of contacts into prospects into customers. Analyze the prospects in a particular territory/ segment. Facility of making notes pertaining to a particular customer.
k

Check for number of follow-ups required to close an order.

161

Customer Relationship Management

Jl

CSR action

\
Explain repairs to customer Diagnose problem

^ >
Request field service Close out call

A
Dispatch service engineer

Enlist product specialist

162

Fig 6.1: SFA in action 4) Lead management:

L ea d m an ag e m en t is

also referred to as 'pipeline management' or 'opportunity management'. Using lead management a salesperson can follow a definite approach to convert an opportunity into an order. This leads to a refined on line sales process Lead management also helps in tracking the source of an enquiry.
'ft'

It helps a salesperson if he knows whether an enquiry has been generated by a salesperson, advertisement, exhibition or website etc. This helps in the future planning of the company's promotional mix too. Effective lead management implementation gives a long-term edge over the competition.

Unit6

Sales Force Automation

Some lead management activities are listed below:

e n q u i r y .

Capture

enquiries received in a systematic and scientific manner.

S c h e d

Check for

duplication of enquiries.

Examine

the source of the u enquiry being captured. l e

Calculate f o r n e x t Attach the f o

the business generated from each source.

Assign an

identification number to the lead.

product of

interest with the l

low

o up action along with date and time. T R B S

ollow ups to be maint ained in a partic ular seque nce to create transa ction histor y.

iew

V 163

instan tly the status

Customer Relationship Management i

Discuss the problems faced, issues of concern, time availability, formats, access mechanism and related matters. Involve key people from sales teams in the process of information gathering, product selection, training and implementation. Let SFA become an important tool for sales personnel appraisal and review.

*-i

6.8 SUMMARY____________________________________________________ *'


While approaching this unit we started with the basics on selling. For those of you who are already practicing executives it may be very basic information, yet it is the basis for SFA. SFA was one of the first elements of CRM that was developed and offered to organizations in western countries in order to improve their customer contact activity. FAB is fundamental to selling and hence to SFA. You will now have to think how you can develop SFA for your products and your organization and make it an active element of CRM for you. The elements and essentials of SFA are discussed in detail for better understanding of the SFA concept. Contact management and territory management are the front-end tools of effective CRM which come in handy to sales and service people.

6.9 SELF-ASSESSMENT QUESTIONS


Ql. Define the following:

_____________________________

280. Selling 281. Cross selling 282. Up-selling 283. De-selling

164

284. Sales management


Q2. Draw a diagram of the sales process.

Unit6

Sales Force Automation

n g

Q3. Fill in the blanks: ''.

ng leadi ng to a n d

285. Sal incre


es process is a ased customer loyalty.

d e s e l

function Q that starts with T opportu nities in the market. r u e / F a 4 .

l i n g

286. SF
A

a r e s y n o n y

increasin l gly focuses on cultivati ng and improvi s e :

287.
Hard selli

h ae m a n a g e m e n t ? Q Q t 5a .s k W s W h a t 6 .

e ele me nts of SF A? Wh y is it imp orta nt for CR M? 6 . 1 0

n di

s a l e s p e r s o n ' s

m rp eo vr it ea w n .t

a p p r a i s a l

h ao tf

a as ra el e ts t h r e

C A S E

lier of busin ess deskt ops and" serve rs. You are now on your way to meet one of your bigg est custo mers , Mr. Shar ma, the Chai rman of Neo n Logi stics. You are expe cting to get some more busin ess from Neo n Logi

s to his office. He seems Y pretty tense otalking to one uof his staff members. aWhen he r sees you, he r dismisses his i employee vand asks you eto sit down. a Today he is t not interested in placing t any order. He hexplains to e you that it's been more bthan 28 uhours since i their work l came to a dstandstill. i The server is nnot working g properly and three PC's a have gone n down. He d and his people have t been on the a phone to k your e customer support t hcenter since e the breakdown e occurred, but l nothing has e been done.

a b o u t t h i s , M r . S h a r m a " y o u s a y , a s y o u

s t r i v Your face v a betrays your e t surprise. "No o one told me t r

o rec all any SM S or voi ce mai l me ssa ges you mig ht hav e rec eiv ed. Yo u try to offe r so me exc use s, but he is not in a mo od to list en to any thin g and

165

Customer Relationship Management

SCENE 2:

"

'

You are a supplier of business desktops and servers. You are now on your way to meet one of your important customers, Mr. Sharma, the Chairman of Neon logistics. You are expecting to get some more business from him today.

En route to his office you turn on your PDA (Airtel BlackBerry) which begins beeping. The screen display reads " Urgent! Customer problem. Neon logistics server undergoing problems, three PC's down. Service team sent. Working on the problem." You arrive 15 minutes early at his office and decide to go and have a look at the situation. There you find your service team busy in repairing the problem. They tell you that the server has been repaired. The work on the desktops is also on the verge of completion and should not take more than an hour. One of the desktop's hard disk was having bad sectors and has been replaced. All the files have been recovered successfully. Relieved, you take the stairs to Mr. Sharma's office. He appears in the doorway and sees you in. "Don't worry, Mr. Sharma, everything is under control and your system will be back in action within an hour", you say. He looks at you and smiles," I knew it would," he says. " I believe our workload is increasing day by day and we probably need to upgrade the existing server and also have a standby server. How soon can you do it?" Thirty minutes later, you leave his office and head towards his EDP department where your service team has been working to ensure the system is back on track. As you walk towards the parking lot, you realize you're leaving behind a relieved customer and you are confident about increasing your order bookings too. Activity:

290. Develop an explanatory note of scene 1 and scene 2 in your own words. 291. List out the reasons why the salesperson in scene 2 is confident of getting a new order from Neon Logistics. 292. Discuss how the elements of SFA probably helped the sales process in scene 2.

166

Customer Relationship Management

7.1 INTRODUCTION
What is the most difficult part of CRM? The answer is surely, "Making it happen!" Implementing CRM and making it a reality is the real challenge and the purpose of any CRM initiative. When would you say that CRM exists in your organisation? CRM exists when:

293. Your customer is more than satisfied; she is delighted. 294. Your customer attrition rate is minimal. (Thus, you are retaining select customers.) 295. The bottom line improves: your profits multiply.
Implementing CRM is more, much more, than simply installing the CRM software. Implementation starts with questioning the basics of your business, defining your business, redefining your strategy, setting up plans, implementing and evaluating CRM as you go along. It is very important here that your employees own the CRM initiative because they are the ones who are going to actually implement CRM. Otherwise CRM just remains a board level rhetoric and a revenue drain. Your organization speaks a lot about it, spends a lot on it, but the pipeline at the end is dry. The culture of CRM may not get imbibed in the organizational ethos, if you do not seek employee commitment and participation.

&$ Activity A;
Read the following dialogue carefully and complete the activity given below: Scene: Canteen of an automobile dealer. Time:13:OOHrs. Situation: Sales / Service / Technicians are having lunch at the canteen. Background: A high end CRM software has been installed at the dealership as a part of the overall CRM initiative taken by their principal (an automobile manufacturing company, the leader in the 4 wheeler market). The new system has been set and CRM software installed for the past one month. Abbreviations used: Sales department employees Service department employees Technicians SA1, SA2. -SE1,SE2,. -TE1,TE2,.

170

Unit 7

Implementing a CRM Programme

The dialogue: SA1: Why is the delivery of vehicle 2978 getting so much delayed? TE1: We cannot clear it unless we clear the technical docket and enter it in the new software to get the delivery note. It is taking time. SE1: Why do you want to discuss all these jobs during lunch? Why spoil our mood? SA2: Do we have a choice, SE 1 ? Customers are complaining. What is the use of this new Customer Relationship Management software if it annoys the customer? TE2: Try to understand the increased procedures involved. And we do not have a separate person to do the data entry. SE2: You are telling us as if it is a cakewalk for us. Do you know that we service 65 to 70 vehicles every day and have to make 20 entries per vehicle? 70 x 20 ! Count that! SA3: But what is the use? Why do they install such systems and increase our workload? TE4: Do you know that since the last 6 months the preparation on this CRM software was going on at the EDP department? Why didn't they involve us early on? SE3; Worse, my colleague who does the entry job, lacks basic computer skills. He always comes to me for help. Why can't they have a training and orientation for folks on such new systems? SA4; Do you know the latest joke? They say that CRM is going to help us in sales, in increasing our business! But how? Last 7 years I have been in automobile sales, and I have never seen any such magic working. Assume that the CRM initiative fails at this automobile dealer. According to you what are the probable reasons for it's failure?

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Customer Relationship Management

7.2 STRATEGY AND PLANNING FOR CRM


The Consulting firm Gartner Incorporation has identified eight building blocks used by world-class organizations to reach excellence in CRM. They are: Vision: Leadership, Market position, Value proposition. | Strategy: Goal, Objectives, Segments, Effective interaction.

'

Value experience for the customer. Organizational collaboration. Processes: Customer life cycle, Knowledge management. Information: Data, analysis, one view across channels. Technology: Application, Architecture, Infrastructure. Metrics: Retention, Satisfaction, Cost to serve. (Ref: "Eight building blocks of CRM: A framework for success." by John Radcliff)

Gartner Incorporation further adds, "A CRM strategy is not an implementation plan or road map. A real CRM strategy takes the direction and financial goals of the business strategy and sets out how the enterprise is going to build customer loyalty. The objectives of a CRM strategy are to target, acquire and retain valuable customers to achieve corporate goals". Your vision, strategy and subsequent planning of CRM implementation have to be such that it seamlessly integrates all the areas of business that touch the customers. It is about integration of people, process and technology. Your CRM strategy must have a well-developed, integrated program that facilitates relationship building. It is important that you strategize for CRM in such a way, that all the departments and individuals are oriented to understand where the company is going, what is the new objective and how it is relevant in today's business scenario. Beth Leonard (VP, Database marketing for Verizon communications, a Fortune 500 company) suggests obtaining solid answers to the following enduring questions in order to serve as a basis for developing vision and strategy for CRM initiatives.

172

Unit? Who are we as a company? Who are our customers? Which ones do we want to interact with individually, and which ones can we mass communicate with?

How do we want to structure our CRM portfolio around these customer groupings? What are our delivery channels and touch points? How do we form a collaborative relationship with our customer so that the benefits exceed the risk of their leaving?

Given below are the steps to develop the road map or CRM infrastructure for your organization. 1 . Define a vision of integrated CRM. Understand what services and products you want to offer your customers and how you want to track customer interactions. It's critical to look at the whole relationship with the customer and not limit yourself to a stovepipe view. 2. Understand the customer. How does he/she use the existing products and services you offer? What is good or bad about the current process from the customer's perspective? 3 . Develop a business case. Analyze where you currently stand and where you need to go. Do not use technology as an excuse for inaction. There will always be technical weaknesses. 296. Evaluate current readiness. Determine your company's position relative to the competition. Assess the ability of existing sales and service infrastructures to gain and retain existing customers. 297. Establish the CRM strategy and specific objectives. Adopt strategy consistent with the overall company strategy. Involve marketing, sales, and service departments, and understand how each deals with customers. Ask about current and future product and sales offering. 298. Evaluate appropriate applications with an uncompromising focus on the ease of doing business. Ensure that the application meets the strategic direction of the firm.

L o o k at th e a p pl ic at io ns fr o m a n in te gr at e d vi e w p oi nt .

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299. Take the customer's view, not the product or account view. After selecting an application, ensure that the process redesign will benefit and help retain the customer. 300. Identify and target quick wins. Set aggressive and realistic milestones. Accomplish attainable objectives early in the process to build support and ensure completion. This allows you to implement incrementally and successfully. Celebrate your successes along the way. 301. Put the ownership of the end-to-end project in the hands of a single manager. Partner your team members with experienced business leaders and developers who understand how to deliver and deploy integrated applications. 302. Implement in stages. Due to the cost and complexity of CRM, a staged approach will offer a greater chance of success and allow for continuous evaluation of strategy. Also, challenge the solution. The usefulness and benefits of a CRM strategy constantly change in the real world. Be ready for it. Be proactive about change. 303. Be sure to create a closed loop CRM environment goal. The goal of the CRM strategy is zero leakage of information. As customers contact the company, regardless of channel, purpose, or outcome of the interaction, make sure it is captured. 304. Finally, create concrete measurement goals. Through ongoing measurement and continuous improvement, you will be able to monitor the project and ensure its success. 7.3 CRM READINESS CHECKLIST_________________________________ A CRM Readiness Checklist for Success :

174

Okay, so now you have a vision. And you're well on your way with your CRM business plan, and you can even itemize the financial benefits CRM will deliver. But how will you know when you're ready?

Table culture, as well as existing infrastructure. 7.1 below repres ents a CRM Readi ness Check list. It poses a numbe r of import ant questi ons that will allow you to score your CRM readin ess and make the necess ary impro vemen ts so your project can hit bull's eye. Notice that many of the factors involv e

Unit 7

Implementing a CRM Programme

Table 7.1: CRM Readiness Evaluation Metrics


Readiness Factor 1. Targeted business users display an understanding of CRM and accompanying benefits. Explanation Are the people slated to use CRM after it's deployed aware of its intended improvements? A bonus: Are they enthusiastic about them? Not only must executives understand what CRM means, they should also understand its value proposition and be able to articulate it consistently. And they should understand which corporate objectives depend on CRM. The business areas most in need of CRM should be identified, along with the projected deliverables. Staff members in the trenches, irrespective of their need for more customer intelligence, aren't enough. Someone in top management should be lobbying for CRM, be willing to tie his goals to CRM, and even be willing to back it with adequate budgets. Are there other people within each candidate business unit who will support or help deliver a CRM project? Are these people in the majority? Management should be able to tie CRM and its benefits back to the company's competitive goals and understand how CRM can help differentiate customers. If the company has a list of strategic objectives, those objectives should be customer focused and thus supported by CRM.

t Management displays an understanding , of CRM and the accompanying ,| benefits.

3. CRM application opportunities are identifiable. 4. A business sponsor exists for each discrete CRM opportunity.

305. Obvious stakeholdership (subject matter


expertise, targeted end-users) exists for each discrete CRM opportunity.

306. Client has expressed a need for market


differentiation (or similar strategic objective).

7. Communicated strategic initiatives can be supported by CRM

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8. Stakehol ders can articulat e projecte d CRM benefits for each discrete opportuni ty.

a data wareho use or centrali zed databas e.

9.

Stated opportun ities can be improve d with customer -related data.

10. Projecte d data sources are highly regarde d for data accurac y and integrity.

11.

Crossfunctiona l customer data exists in

B us in es s sp on so rs or m an ag e m en t sh ou ld be ab le to de sc rib e th e ta cti ca l bu si ne ss im pr ov e m en ts th at ca n

be de li ve re d by C R M . T he C R M o p p or tu ni ti es be in g di sc us se d m us t be ab le to be su p p or te d an d

/ or improved with clear, consolidated customer data. (In other words, process improvement s aren't enough.) Where will the customer profiles and segments originate? If those systems aren't trustworthy, no one will trust the

ultimate CRM applications. A data warehouse containing consolidated customer information from around the company will jumpstart any CRM program and will decrease the infrastructur e costs.

12. Organiza tion currently shares a crosssection of informati on requirem ents.

14. Questio ns of data ownersh ip across the company are either nonexist ent or easily resolved .

13. The client is already engaging in some sort of custome r different iation or segmenta tion.

H as da ta sh ar in g be en in sti tu ti on ali ze d al re ad y wi th ot he r sy st e m s? T hi s is a po sit iv e si gn , pa rti cu lar ly

if th e in iti al C R M pr oj ec t ev ol ve s to w ar ds en te rp ri se C R M . If c u st o m er se g m e nt s ar e al re a

dy being identified, there is an understandin g of customer differentiatio n, which makes CRM much more culturally palatable. In addition, certain existing segmentation or analysis process might be leverageable.

Are specific departments willing to share their data with the rest of the company? Is the management willing to enforce this? Missing pieces of the customer puzzle could jeopardize an entire CRM program.

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15. Business units and IT staff agree on CRM ownership boundaries.

The extent to which a department wants to "own" CRM is the extent to which politics will get in the way of productivity. There should be firm boundaries for who does what. Executives should understand, not only that CRM involves a significant investment, but also that additional funding might also need to be reserved. Access to complete customer data should trigger business efficiencies. Management should be aware that along with more data and process changes, job roles might change and new skills might be needed. Successful CRM projects are "top down," meaning that they are driven by business need. Once understood, business requirements and their relative impact should drive CRM implementation priorities. If employees such as salespeople and CSRs have more information, it follows that they can be more self-directed. Accountability should be maintained as employees are given more freedom, the focus being on ultimate improvements in customer satisfaction and revenues. Staff members who readily adopt CRM technologies and processes, and who participate in their ongoing improvements should be awarded. Staff members who refuse to adopt these improvements can be considered "saboteurs." Penalize them in some way.

16. Executive management has an expressed commitment to fund CRM related activities.

307. Client agrees to modify


business processes as a result of CRM.

308. There is willingness to sustain


the organizational impact of CRM (for example, reorganization or additional staffing).

309. A general

understanding of requirements-driven development exists among both business and IT stakeholders.

20. Management is willing to empower key customer-facing staff based on increased information and improved processes.

21. Management is willing to implement incentives or modify employee compensation to encourage CRM adoption.

17 7

Customer Relationship Management

22. No decisions have been made about potential CRM technology solutions.

Beware the tail that wags the dog: are stakeholders communicating CRM requirements based on a product demo or sales pitch? Assumptions about specific technologies can risk overspending on CRM.

310.

Business sponsors and stakeholders have an understandin g of the differences between CRM and other programs (such as business intelligence, ERP, or data warehousing). IT staffing infrastructure is in place to support CRM.

ongoing budget to support continued development and maintenance.

311.

25. There is consensus that CRM is a process and not a one-timeonly activity.

26. Business and IT stakeholders understand that CRM requires any

Even the most astute managers lump CRM together with data warehousing. Other key business solutions that involve information technology might very well connect with and be funded separately from other initiatives. Although CRM might leverage skill sets and knowledge from other IT areas, it should be planned as a discrete IT activity with dedicated implementation staff.

Like other large corporate initiatives, CRM is an ongoing process that grows and improves over time. Because CRM is a process, it requires an ongoing budget. Beware the lumpsum CRM allocation... it probably won't cover all necessary CRM functionality.

yo ess with the following rating scale: , ur 4: This statement is very C descriptive of our environment. 3 : R This statement is largely M descriptive of our environment. 2: rea This statement is partially din descriptive of our environment.

17 Part of readiness assessment involves 8 alloting weightages to specific factors in


the evaluation ( based on the results of the interviews conducted. (For example, if top management is advocating an enterprise CRM initiative, the existence of cross-functional customer data [ would receive a higher weightage.) Regardless of weights, you can gauge I

unit 7

Implementing a CRM Programme

1: This statement is not at all descriptive of our environment. For example, in the table shown below a specialty retail client scored his assessments. Go through it and then read on to find out how ready he is.(His scores have been underlined)

1 2 3 4 1 2 3 4 1 2 2 4
3

312. Targeted business users display an understanding of CRM and accompanying benefits. 313.
Management displays an understanding of CRM and the accompanying benefits.

1 users) 2 3 exists 4 for each discrete CRM opportunity.

314.

CRM application

6 Client has expressed a need for market differentiation opportunities are identifiable. 1 2 3 4 (or similar strategic objective).

315.
for each discrete CRM.

A business sponsor exists

316.

Obvious stakeholdership (subject matter expertise, targeted end

1 Communicated strategic initiative can be supported by CRM. 1 2

2 3

3 4

317. Stakeholders can articulate projected CRM benefits for each discrete opportunity. 318. Stated opportunities can be improved with customer-related data. 319. Projected data sources are highly regarded for data accuracy and integrity. 320. Cross-functional customer data exists in a data warehouse or centralized database. 321. Organization currently shares a cross-section of information requirements. 322. The client is already engaging in some sort of customer differentiation or segmentation.

1 2 2 4 3 4

1 2 3 4 1 2 3 4 1 2 3 4 3 4

17 9

Customer Relationship Management

1. 2. 3.

Questions of data ownership across the company are either nonexistent or easily resolved.

3 4

2 2

3 4

Business units and IT staff agree on CRM ownership boundaries. 1 Executive management has an expressed commitment to fund CRM-related activities. 2 1 3

3 4 2 4

323.

lient agrees to modify business processes as a result of CRM. 1

324. There is willingness to sustain the organizational impact of CRM


(for example, reorganization or additional staffing). 1 2 3 4

19 A general understanding of requirements-driven development exists among both business and IT stakeholders. 1 2 20 Management is willing to empower key customer-facing staff based on increased information and improved processes. 21 1 2

3 4 3 4

Management is willing to implement incentives or modify employee's compensation to encourage CRM adoption. 1 2 325. No decisions have been made about potential CRM technology solutions. 1 2

3 4 1

3 4 326. Business sponsors and stakeholders have an understanding of the difference between CRM and other programs (such as business intelligence, ERP, or data warehousing). 1 2

24 IT staffing infrastructure is in place to support CRM. time only activity. 1 2

3 4 25 There is consensus that CRM is a process and not a one


76

26 Business and FT stakeholders understand that CRM requires an ongoing budget to support ongoing development and 1 2 maintenance. Total Readiness Score:

180

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Implementing a CRM Programme

328.
Segm ent the intern al custo mers and

You can now interpret the result, using the following scoring metrics:

104-85: Suggests your organization is ready to begin implementing a CRM project with minimal infrastructure enhancement and is confident of a high degree of sponsorship. 84-73: Suggests your organization should solidify it's infrastructure, skill sets, and expectations but should expect to launch a CRM project in the near future. Planning should begin for a proof-of-concept.

addres 72-50: Suggests your organization should refrain from embarking on CRM until the s technology infrastructure, data ownership, or cultural and political issues are issues resolved. Sponsorship should be cemented and staffing enhanced at this time. concer 49 or below: Your organization has not expressed a firm business justification ning for CRM, or must perform a major overhaul of its staffing and/or systems. them. Another readiness assessment should occur after the identified improvements have been made. (Adopted from THE CRM HANDBOOK by Jill Dyche)

7.4 DEVELOPING THE ORGANIZATIONAL MINDSET FOR CRM In addition to working on conceptualizing and making your organization ready for CRM, you must also work on the organizational preparedness. This is about developing a consensus, a common understanding on CRM initiatives, because CRM changes primarily how you deal with your customers and more importantly, how your customer deals with you. The willingness by employees to embrace change, adopt new methods, follow new systems, take responsibilities and don a new mindset are the absolute essentials in implementing CRM successfully. For example, a salesperson habituated to rush from one call to another, is now responsible for customer information and making a 'call report'. Developing an internal marketing program: Following are the steps to achieve effective CRM implementation:

327. Set clear objectives to achieve and communicate them.

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Customer Relationship Management

3.

'

Use a range of media to get the message across - email, print, multimedia, presentations, write-ups, bulletin boards and one-to-one. Use professional communication agencies if your budget permits.

I
1
Martha Rogers , a foundi ng partner of a leading CRM consult ancy firm, Pepper s and Rogers Group says," You strive to be a custom er focuse d compa ny, but your face to the custom er is manne d by individ

329. Be creative and use an innovative approach in tackling this innovative concept called CRM. 330. Arrange training and orientation programs on CRM, its importance and use. 331. Sell the idea to your employees. Let people realize the importance and own the responsibility to implement it. 332. Involve people in the decision making process. 333. Middle managers are the key to CRM implementation since they act as a bridge between CRM plans and implementation.
9. Let them know and understand, "What's in it for

them." 7.5 TRAINING OF EMPLOYEES

uals who just don't get it." You have already understood why the 'people' element in CRM is most crucial. It is the people and their capabilities in dealing with customers that personify the relationship you have with your customers. Also, what you offer (whichever product or service you are in) is similar to your competitors. How you offer it, makes the difference. Training starts with setting clear goals for your employees and communicating them effectively. This should help them to set their own standards. While planning this training activity, remember the three pillars necessary for effective CRM implementation: On setting clear goals, training rests on three pillars:

334. Attitude 335. Knowledge 336. Skills

,-.,,, ~;,,r

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Implementing a CRM Programme

1. Attitude:
It is possible, with enough resources and time, to give people the requisite knowledge and necessary skills, but unless they have the right attitude to use the knowledge or skills, the entire training exercise is futile. 'The right attitude' to deliver CRM is already defined in Unit 3. Relationship & Retention' of this book. Having a service attitude and actually creating value for your customer and for your organization matters the most in CRM implementation. One school of thought on behavioral training says, "Behavioral training should be a requisite for all customer contact staff." Another school believes, "You cannot hope to change people's behavior. The best you can do is make people aware of the effect their behavior has on other people". Remember, both your positive and negative behavior has an impact on other people. Attitude is made up of beliefs that are formed by past experiences. It is definitely a long-term process to change behaviors, the beliefs and thus attitudes and this is especially true while dealing with customers. Attitudinal training has to do with self-awareness. The more opportunities you create for customer contact people to understand and examine closely their style of ?. communication, and their overall demeanor, the greater are the chances that they will 1 embrace new ideas.

2, Knowledge:
Knowledge is the basis for performing any job. Knowledge of your products, your company, your customers, the market, your competition, and of course, newly adopted CRM initiatives is necessary to perform well. Knowledge is also important because a lack of it creates diffidence in your employees. You empower them with knowledge and they are more confident to deal with people to tackle the customer situations, in order to create a positive experience for your customer. As for the knowledge and training on the CRM package or software, it is a good idea to make it a part of your contract with the vender to take up the training and orientation of your employees. Your vendor knows his product the best and having done your requirement mapping, can effectively train your staff 183 to effectively handle CRM.

Customer Relationship Management

3. Skills:
This deals with the tactical aspect of training and developing your staff in the way they perform their activities. Some of the questions you can ask yourself here are: How does your salesperson work on prospecting (finding a new customer), or on time management and territory planning? How can you train your call center staff on language responses, frequently asked questions (FAQ's), use of the telephone and other instruments and handling customer objections? Luckily, training and development by itself is a growing business area. There are many consultants / trainers and organizations that offer customized training inputs for employees. Many organizations also have in-house training and development faculty who can tailor their inputs to serve CRM well.

7.6 EMPOWERING EMPLOYEES FOR RESPONSE MANAGEMENT


The people to people element of CRM has been emphasized strongly in this book. Your people (employees) have to meet and exceed the expectations of the people (customers). This is possible when your employees are empowered to take decisions and attend to customer queries or problems satisfactorily. It is often observed that the staff who manage customers are usually capable of much more than they are asked to deliver. The reasons they do not deliver more are: a. b. Not motivated enough. Never been asked to deliver greater satisfaction.

c. Not empowered enough to make their decisions on the spot and solve customer queries. Empowering is about giving responsibility plus authority to your employees. If your employees are capable, and are given responsibility and authority, they take pride in executing their jobs (the eternal pessimists may be however excused and shown out of the organization!)

184

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On the other hand, when people are capable but are not given responsibility or authority, they tend to get demotivated about their job. It may reflect in their attitude and behavior with other employees and even worse, with the customers. You may complain about the staleness of cake you purchased from a renowned bakery. The employee at the counter says, " We do not have a return policy on the cake. I am sorry but I really am not able to help you." The problem here is both with the system of having a returns policy and also the matter of empowering the front line employee on taking decisions in such cases. You have already learned that a dissatisfied customer is a great opportunity to correct the situation, regain her confidence and ensure more sales. Another important aspect about empowerment is that people prefer to perform their best with progressive challenges.

E m p o w e r i n g p e o p l e w it h r e s p o n s i b il it y a n d a u t h o r it y s h o

uld be a gradu al proces s. Your staff may need to learn what works , and what does not work, throu gh their experi ences. Traini ng and mento ring also helps in a big way. Empo werin g thus is an impor tant facet of CRM which helps peopl e to

t the customers at the a touch point, the r k "moment of truth". e e m 7.7 STEP IN r IMPLEMENTING e e CRM s n p The entire CRM o t n implementation is s i divided in three major b aspects. s i l 337. CRM Planning t i e t - steps 1,2,3, and 4. y p 338. CRM f o Implementation r steps 5 and 6. 7 t 3 h e 3 i r 9 i n t e r a c t i o n s
.

S T E P 1 S

C R M

M e a

t r a t e

w i s t h u

gy Ma kin g and Bus ines s Pla nni

strategy defines the de overall direction and business alt planning required at the wi both departmental level the th and organizational level. at This includes identifying th departmental requirements and e relating them to the co overall flow of the organizational rp process. A suggested layout for a business or plan is given below:

ng : at A e

CR le M ve

initi l ativ an e has to be a strat egic deci sion , to be d ali gn ed wi th the co rp or ate ob jec tiv es. Th e

1 8 5

Customer Relationship Management

340. (Re) Definition of your business. 341. Corporate objectives. 342. Situation analysis. 343. Objectives to be achieved through CRM. (What?) 344. Strategies to be followed. (How?) 345. Schedules. (How exactly, when?) 346. Budgeting. 347. Control, update and review. 348. Communicating the plan. STEP2 Defining CRM Requirements : It starts with questioning the organizational need for CRM. On getting a positive answer both, on the need as well as the organizational readiness for CRM, the process should begin. Requirements are the issues concerned with improving your customer satisfaction and applying the new customer learning to your organizational processes. STEP 3 Architecture/Program Design : This step is about identifying the business processes that the CRM product will support.lt involves a listing of specific functions necessary to be implemented. It addresses two major issues: What technologies and processes do we have in place that will be affected by CRM implementation? What are the additional requirements necessary to make CRM work? STEP 4 Technology Selection : Section 7.8 in this chapter will discuss this issue in detail.

186

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STEPS Process Integration :


This process involves the construction and customization of a CRM product to suit your organizational need. It involves an integration of business processes with the CRM product Also the technological features of the CRM product helps in refining the business process. The end-user feedback in the process integration is important, when the development process flows from the Alpha to Beta version.

STEP6 Actual Delivery :


At this stage the corporate IT infrastructure is leveraged to dispatch the CRM software to business users who are supposed to use it. For example, in a webbased SFA tool, the application may be announced via e-mail and activated through the passwords given to individuals.

STEP? Evaluation :
Section 7.9 deals with this topic.

7.8 TECHNOLOGY IN CRM IMPLEMENTATION_______________________


STEP1
Strategy Making And Business Planning

^ >

Defining CRM Requirements

= Architecture/ Program
Design

Technology v Selection

i
STEP 6

CRM Planning STEP 7 STEPS Evaluation

* =

Actual Delivery

i Measurement

< =

Process Integration

s, --------

Actual Implementation

Fig 7.1: Steps in implementing CRM


187

Customer Relationship Management

The approach of this book is of giving a slightly lesser importance to the technological aspect of CRM. This is a prevalent trend in contemporary CRM thinking the world over, and rightly so. A majority of the CRM failures today have happened because users have perceived CRM to be primarily technology / software. "You install it and everything will fall in place!" Sadly, it will not. It cannot fall in place by itself. It needs to be supported by non-technological aspects. CRM today is at a stage where it can look back critically, analyze the mistakes made in the past, and chart a path for the future. Once you decide upon your organization's requirement, you will have an ample choice of technology offered by various vendors. A detailed list of CRM providers in India is given for your ready reference in Appendix C. Having said this, the discussion on 'Technology In CRM' is important for two reasons:

349. To operate in a mass market era, and to be able to give customized offerings is impossible unless you have the right technology installed. 350. Technology is fast becoming a part of our day-to-day life, our culture and our corporate culture.
CRM technology providers can be classified as under:

351. ERP providers. 353. Exclusive CRM service providers.

352. Non-ERP solution providers like PLM, SCM, having an element of CRM in it. 354. CRM for niche segments, web-based businesses, FMCG, Pharmaceuticals etc.
It is necessary that the technology tool you select to implement CRM is aligned to: a. b. Your corporate strategy and objectives Your existing processes and systems

CRM will require an organizational change to adopt it to your business culture. It is here that the technology choice becomes very crucial because CRM cannot evolve in a vacuum. It has to be a felt need, an initiative that merges into the organization.

188

In other words, it can be termed as "Requirement driven CRM". Fig 7.2 given below explains this further:

Unit 7

Implementing a CRM Programme

Define the Requirement

Define the Functionality

CRM Product Selection

The need / problem

The business Process

Support the functionality and need

Fig 7.2: Requirement driven CRM Technology


Two important considerations are essential in adopting the technology for CRM: a. b. Gap analysis Return On Investment (ROI)

Gap Analysis - An 'as is' process study of the existing functions. This is compared with the system configuration of the service provider. The two processes are superimposed on each other to find the gap. The lesser the gap, the better is the supplier. ROI - It is the financial analysis of the cost: benefit proposition of installing CRM. The ROI discussion can be related with CRM metrics, which we are going to discuss shortly. While selecting the requirement driven CRM, it is important to establish a level of cross functional consensus in which people participate from the beginning of the program and have a say in deciding and implementing it. A word of caution here: Involving cross-functional teams is a must; but this at times becomes a hurdle in itself. The conflicting interests may work against each other and against CRM. An automation solutions company is deciding to have CRM installed. Automation systems are always need based and are designed to meet the customer's needs. This company is into solid material handling automation solutions. The issue being discussed concerns the lead tracking part of CRM. The question is, how to decide the efficacy of the sales department? The sales department says, " It is the number of leads generated by us. Look at the dozens of leads remaining unaddressed due to the incapability of other (often engineering!) departments". The engineering department responds, "What is the point in generating an enquiry which is not in line with our offering?

18 9

Customer Relationship Management

What matters is how meaningful the enquiries that are generated are". In such a situation, no CRM programme will have a solution. The higher management or the PMO (project management officer) has to take a stand in such situations. Higher management definitely has a longer-term vision of the company needs and requirements and can decide what it wants to have and how it wants to orient the company. On listing the functional requirements, you also need to list out your technical requirements to ensure that the CRM product works in your company' s specific environment.

Following are the areas to be considered while deciding the technical requirements: 355. System integration & connection requirements: Ability of the CRM tool to integrate into the organization's existing technology infrastructure comprising of hardware, software and networks. 356. Process requirements: the ability of the product to support and control required operations in terms of data volumes, number of users, support of data systems and back up. 357. Security requirements: the products ability to limit user access, the ability to provide limited data to non-company users, password encryption etc. 358. Reporting requirements: the ability to give the company user required reports to meet their information needs. 359. End user suitability requirements: the ability to have a common CRM portal and also to have a custom home page for every / select end users like "My CRM". It may also provide facilities to end users on pictures, photographs, screen-prints, graphics etc.
While selecting a vendor and evaluating him, you must also find out more about his offering.

190

Follow product dealt with customer data volumes similar to ours? ing is a list of some import ant questio ns you need to ask your CRM vendor s: 360. W
hat major CRM functio ns does your produc t provid e?

361. H
ow has the produc t evolve d?

362. H
as your

Unit 7

Implementing a CRM Programme

363. Is your product web-based? Or does it have a facility to extend its accessibility over the Internet? 364. Will your product be able to work with our existing relational database (RDBMS) or data warehouse product? 365. Is it possible to link other systems such as SAP or Oracle to your product? 366. Does your product have a development toolbox to provide functionality or industry oriented templates? 367. Does your product provide both OCRM and ACRM? What is the linkage between the two? 368. How much time does it take to implement your product? 369. Does your company help us implement the product or do your partner companies do that? Who are these partners? 370. List of your existing customers, their names and contact persons, especially those clients having applications similar to ours. 371. How many of your existing customers use standard software and how many of them use customized software?
The answers to these questions will help you to choose the most suitable CRM vendor for your requirement. 7.9 EVALUATING CRM PROGRAMMES _________________________________________________________________ _ _ "That which cannot be measured, cannot be achieved." Every CRM programme has to be evaluated with certain periodicity in order to understand the positives and the shortfalls. It also helps in refining the CRM programme to suit the CRM requirements of the organization and its environment. At times CRM planning and implementation is executed in such a way that it incorporates provisions for future measurements. Imagine that you are a fishing net manufacturer. Your CRM has been automated to

convey the custom er's compl aints directl y to the R&D depart ment, thereb y makin g them availab le for analysi s and correct ion. The reducti on in custom er compl aints leadin g to an increas ed numbe r of satisfie d custo mers makes a clear metric s for CRM results.

191

Customer Relationship Management '

CRM implementation is a gradual process and it shows results as it moves ahead on its life cycle. This speeds up as your people start getting familiar with the technology and new business processes. Given below are the CRM metrics to be measured over the customer life cycle with your organization: 1. Acquiring new customers:


2.

Cost of acquiring (getting) new customers. Customers acquired through references or affiliate programmes. Campaign response or conversions. Recovery - retain the customers who would have otherwise been lost.

Retention:


3.

Customer attrition rate: reduced or increased. Percentage of customer retention. Cost: benefit of retention over acquisition.

Growth:


4.

CLV calculation of particular customers. Average order value- increase or decrease. Annual sales growth (average) for repeat customers. Loyalty programme effectiveness - sales increase over time. Conversion of low value customers to high value in numbers.

Service:

Customer satisfaction ratings over time. Number of customer complaints over time. Analysis and type of customer complaints. Time to answer customer enquiry through different media-telephone, e-

mail, letters,etc. 192 Increase in sales of product/service.

Unit 7

Implementing a CRM Programme

5. ^

Channel effectiveness :
Comparative enquiry generation and closing of orders through different channels like salespeople, dealers, franchisees, website, etc. Sale of the product on partner websites. ,

You can apply some or all of these metrics to your organization to examine the CRM effectiveness.

7.10 SUMMARY____________________________________________________
You have already seen in this unit that implementing CRM is about creating change and an urge in your organization to become customer centric. The technology and the process play second fiddle to the far more important people element of CRM. The training, motivation and empowerment of people, particularly your customer contact staff, is an absolute essential for CRM. The CRM readiness checklist given in this unit is a comprehensive way of judging whether your organization is ready to take up the challenge of getting into the CRM mode.Once you are sure that your organization is ready, you can start the implementation process of CRM. A good product or service, sound process, technology and able people are some of the important baseline requirements to begin with a CRM initiative. Unless you have the CRM metrics in place, it is not possible to judge if you are going in the right direction. CRM evaluation has to be in place and predefined before you begin your CRM journey.

7.11 SELF-ASSESSMENT QUESTIONS ___


Ql. What are the eight building blocks put forth by Gartner Inc.? Q2. Write any 3 steps which you think are important to check an organization's CRM readiness. Q3. Write any 5 steps important for developing an internal marketing programme 193 for CRM.

Customer Relationship Management

_, and. Q4.

. are the 3 important aspects of training for CRM. Q5. What are the 3 important stages in defining

requirement driven CRM ?

7.12 CASE STUDY: DOMINOS PIZZA INDIA LIMITED


Dominos Pizza India Limited is a Pizza retail company spread across 85 locations in 22 Indian cities. Their sales model is take - away and deliveries (deliveries accounting for about 70% of their business). Their main focus is to acquire, retain and increase the value of their customers.

Scope and Purpose


The sales module gives a bird's eyeview of their customers. It holds complete customer information including all transaction history. Dominos has grouped customers based on user specified criteria so as to target campaigns at select groups. The Campaign management module is used for planning, executing and analyzing campaign results. Apart from this, the module would also provide a detailed analysis of sales trends and customer behavior over parameters such as time, hour of day, customer segment, order value, order frequency etc.

Interrelated Systems
The Point of Sale (POS) is located at the store. The Customer Service Representative (CSR) takes the order through a Clipper / FoxPro Bases system, in use since Dominos started operations in India. It primarily holds customer information such as Name, Phone Number, Address and Location (Delivery Area / Sector as defined by Dominos). Data transfer is one way i.e. from POS - SLX and subsequently in the next phase it would be a 2 way email system: APOP3 email system would send out emails.

Functional requirements a) Customer Management


Information from the POS is brought in by Batch Data Import and data such as the Last order date, Total order value, Order Frequency, Average ticket value etc are calculated. This is used to classify the customer based on customer inactivity, order value, etc to run campaigns to get further business from the customer.

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b)

Campaign Planning Campaign Planning includes deciding the campaign objective, period and target segment. The system generates a list of customers on whom the campaign is to be run. This is generated either by running a query on the database (complex queries) or by using the data mining capabilities of the software. The data mining software assigns a score to each customer, the score indicating the probability of the customer responding to the campaign. This is done using Response Models built using results of previous campaigns. Once the campaign period / objective/target segment / offers and communication channel have been decided, the same can be entered into the system to create a campaign. A campaign can consist of different offers. Each offer can be run using a different communication channel. For example, direct mail, email or telephonic call.

c)

Campaign Execution Campaign execution is in the form of: Direct Mailers - The system generates labels for the customers who are the target customers for a campaign offer. Coupons are managed outside the SalesLogix system. The labels, with the address of the customer, are put on the offer coupons and posted to the client. E-mails -Templates for email offers are created and stored in SalesLogix as Word documents. These templates are used for sending personalized emails to the customers. Mail merge will be done and the SalesLogix integrated with the email system at Dominos will send out the email. Tele-Calling - The SalesLogix system will generate a list of customers (with name and telephone number) which is handed over to the call center. The responses for all the above communication channels are captured in the POS and are then imported into the SalesLogix system. The responses are recorded as orders booked against the campaign. Only a delivered order is considered as a response to a campaign. SalesLogix however, provides the functionality to capture other forms of response, and can be used at a latter stage as and when the requirement arises. The response is captured in order to perform effective post campaign analysis.

195

Customer Relationship Management

d) Post Campaign Analysis


The system would be able calculate the net profit from the campaign. It is calculated from the actual sales during that period. Incremental sales are the additional sales over the baseline sales that have occurred due to the campaign Baseline Sales = Sales during any predefined period e.g. same period of the previous year, or previous month, period in which a similar campaign was run, or any such period during which no campaign was run. The system allows the user to select the campaign and a "baseline period." On selecting the "calculate option," the system would then display the following to the user:

Actual Sales Incremental Sales Over Baseline Period Average Ticket Value Total Cost of Activity Gross Contribution Net Profit/Loss From Campaign

e) Analysis and reports


Sales trends, customer and buying behavior provide important decisionmaking criteria for the managers. The system would provide the ability to analyze sales, costs, campaigns, customer behavior etc in a user-friendly manner using Seagate analysis. These would focus on understanding the customer well and will also help to achieve improvements in the system like response to the menu, opening of new stores, extension of delivery areas etc. Apart from this, information would also be used to achieve a higher response rates for future campaigns. The following Business Measures are available to the managers to analyze data. Sale Value, No of Pies or Side items, No of Orders, Average Ticket Value, and Food Cost

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The parameters are: Time, Customer Category, Geographical area, Product, Customer Segment, Campaign redemption

f) Post Implementation Findings


CRM gave Dominos a 360 degree view of their customers. Information such as the frequency of order break up of sales over the various dimensions was not possible in . the past. The ability to plan future campaigns, based on the results of customer behavior of previous campaigns is now possible. (Adopted from: Sonata Information Technology Limited) Activity:

372. Go through the expanded marketing mix (7P's) of marketing as discussed in Unit 4. Derive a 7P's explanation for Dominos pizza. Which 'P' according to you, is prominent in Dominos' marketing programme? 373. Write a detailed note on the implementation of CRM at Dominos Pizza.

;*<

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Customer Relationship Management

8.1 INTRODUCTION
From understanding the fundamentals of CRM to the implementation of CRM, you have come a long way in understanding this exciting subject. As expressed in the previous chapter, it is expected that after you complete this course you would be able to successfully implement CRM in your organisation. In this regard, it is important for you to understand why there are more failures in CRM than successes. What are the pitfalls and myths surrounding CRM? What are the mistakes that are made while conceptualising and implementing CRM in an organisation? The theory and practice of CRM is ever emerging. It will be worthwhile to study these new trends and concepts. CRM if implemented effectively, can give a strategic competitive advantage to your organisation.

8.2 EMERGING TRENDS IN CRM________________________________


Well, at the beginning of this study of emerging trends in CRM, we need to look at and understand two main approaches to CRM. These approaches are:

374. Operational CRM (OCRM) 375. Analytical CRM (ACRM)


Let us now look at them in detail: 1. Operational CRM: Operational CRM can be termed as front end CRM. Operational CRM is about developing and automating the process of 'Touch-Points' with customers. Touch points are the contact points an organisation has with its customers. These could be incoming or outgoing touch points. Incoming touch points occur when customers visit your exhibition stall, visit your website or register a complaint at your retail outlet. Outgoing touch points are the introductory e-mails you send, letters you write and tele-selling calls made by your call center.

200

Operational CRM is an ERP like system, which streamlines the communications to and from the customers.

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Effective CRM Today and Tomorrow

The Company

4
4

Letters/ E-mail t Fig 8.1: Operational CRM 'Touch-Points' Call Centre Operational CRM channelises and integratesh the communication with the customers. It helps you increase the frequency and effectiveness of your Exhibition/Events the services rendered to a communication. However, it does not optimise customer. Web-Site

-4

Operational CRM has a possibility of being integrated with the financial and human resources Direct-Selling planning (ERP) applications. The typical functions that can be integrated into it are customer service, order management, invoice /billing, sales automation software and HR software. t Customer Feedback
Retail outlet ----------

2. Analytical CRM (ACRM):


4 -------------

Analytical CRM actually analyses the customer data of your organisation in fc. order to develop better customer insight. Analytical CRM is termed as the 'Back Office' or Strategic CRM. ACRM involves the capturing, storage, extraction, processing, interpretation and reporting of customer data to relevant decisionmakers for redefining business actions, processes and strategies. It uses technology and new business processes in order to create meaningful customer information and knowledge. 201

Customer Relationship Management

Study fig. 8.2 to understand the concept of analytical CRM.


Refined Business Actions

Business Intelligence Analysts

sales

Call center

Process Improvement

tr
Integrated Database
Customer Feedback

Information

Business Systems
Billing

Accounts Provisioning
receivable

202

Fig 8.2: Analytical CRM: Understanding the Customer. (Adoptedfrom: "The CRM Hand Book" by Jill Dyche)

Analyti uses a data-mining concept based on varied sciences such as statistics, artificial cal intelligence, psychology and analytical tools to mine through an ocean of customer CRM and market data and develop business intelligence. It relates and integrates customer helps knowledge with different facets of CRM such as attrition probability, customer you lifetime value, customer/segment profitability and cross selling opportunities. It develo also collaborates with OCRM to couple customer communications data with an p a analytical process. critical insight Let's say a customer contacts your organisation in person, over email, through your require website or at an exhibition. A detailed analysis of all these customer contact points by d to using ACRM makes it possible to derive the most preferred contact channel for the customer. Future communication and transactions with this customer can be enhanced take better through this preferred channel. decisio Both OCRM and ACRM are important approaches to CRM, which develop a onens. It to-one understanding and communication with your customers.

UnitS

Effective CRM Today and Tomorrow

"

, <r .-.,..

A few of the trends positively influencing the future path of CRM are given below:

376. Customer centric convergence. 377. Small and Medium Enterprise opportunity. 378. CRM in emerging economies. 379. Web based and real time. 380. h-CRM= HRM + CRM = Human response management + Customer relationship management
f) CMR-Customer Managed

Relationship. Let us now look at these briefly:

a)

Customer centric convergence:


We have already discussed that being customer centric is the basic requirement of CRM. The CRM technology and architecture is getting advanced and developing capabilities of being integrated with other organisational systems like Supply Chain Management (SCM), Enterprise Resource Planning (ERP), Inventory management (IM), Sales Management Software (SMS) and Accounting Automation (AA). The future trend is about CRM acquiring a larger platform to accommodate and integrate all the organisational systems like SCM, ERP, IM, SMS, AA and many more. The convergence of all the organisational systems into CRM will help develop a customer centric eco-system. This will make a genetic change, a DNA level convergence where all processes are integrated, the IT architecture is uniform, the interaction and the results are real time. The open standards are no longer proprietary but will be able to speak (communicate) with any application; not just application to application but organisation to organisation. For example, the CRM system of company A may be able to speak to the ERP system of company B and the IM system of company C, in order to fulfill a particular requirement of it's customer. A customer-centric convergence of technologies will bring in an integrated process that will be transparent enough to exhibit, provide and receive data within and outside the organisation and is accessible to any one who is permitted to 203 access it.

Customer Relationship Management

b)

Small and Medium Enterprise opportunity (SME):


CRM initiatives till date have been limited to larger corporations due to the complexity and costs involved in CRM implementation. However the next big opportunity is with the SME sector. The Gartner group says that in western markets, "Only 15% of SMEs have functional e-commerce and 5% of SMEs have e-commerce solutions, plus barely 10% of them use email marketing." You can easily imagine (based on this) what could be the state and future for CRM in the SME sector in India. For SME's there are two main concerns - Price and ROI of CRM. Today vendors are simply concentrating on a modular approach by addressing the issues of concern for SME's. However, the market is maturing fast to get the entire CRM in place with the SME sector. We will see a sales management system or lead tracking system as a need based solution in the SME sector in the near future. Some of the issues and concerns for SME's today are:

Sales forecasting is done by a crude method. Mostly based on the pipeline sales being entered in an excel spreadsheet which is routinely updated. Little attention paid to Partner Relationship Management (PRM). Customer attrition is happening. Customers are joining competitors but nobody knows, or interprets why they are leaving. Nobody has an idea how valuable their customers are.

All the above, and many other issues, can be effectively addressed by a CRM software and methodology implemented in SME's.

c)

CRM in emerging economies :


Compare the statistics given below: In the emerging economies 10 to 60% of the customers targeted in welldesigned CRM based campaigns, sign up for the product or service being offered.

204

In the developed markets only 5 to 20% of the customers targeted likewise may sign up for the offer.

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Effective CRM Today and Tomorrow

'

"

'

'

In the developing markets, customers are still not exposed to unsolicited mails, sales calls and Spam. Rather the personal attention in these markets could be a novelty. Although the gap between the developing and developed market needs is bridging fast, the timing is just perfect for CRM initiatives in emerging economies. The companies who begin early with CRM initiatives can have a pioneering advantage at this stage.

d)

Web based and real time:


Today the biggest hurdle for Internet, and thus for e-CRM, is the quality of hardware available at the customer end, and the speed of communication. Advances in hardware technology and availability of broadband services are changing it for the better. Imagine you are a senior executive installing a CRM - People soft application in Singapore for a online trading company, drawing data from SAPBW data store in Paris and simultaneously monitoring customer behaviour online in Boston. All this is possible and happening real time and is of course, web based.

e)

h-CRM = HRM + CRM


It must be noted that the best CRM system in the world won't solve problems an Airline has if its employees are not so courteous. A bookstore will not have great customer retention when special requests for a specific book are grossly ignored. A restaurant where the waiter stares at a customer who complains of a not-so-crispy Dosa... so on and so forth. Thus technology, rather only technology is not enough for successful CRM. People play a vital role in the success of CRM. Ultimately software is only successful if the right people handle, use and support it. h-CRM is one of the emerging answers to this problem. "h-CRM is all about people: Customers and employees. And there is only one objective: .

Build life long relationships with them. h-CRM = HRM + CRM = Human Response Management + Customer Relationship Management.

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Customer Relationship Management

Human response management (HRM) is a concept introduced by Prof. S. K. Chakraborty of EM- Kolkata. According to him, "Human beings are the only resource that can respond." Ranjan Banerjee, Director, Renaissance Management Consultancy, Pune says, "The sad thing about CRM is that it has been packaged as a technology solution, thereby dehumanising a lot of personalisation that CRM must bring in".

DELIGHT

206

LEADERSHIP

Fig d from h-CRM by Kallol Das How 8.3 : does h-CRM work? The 381. Lead People: Customer care and employee care are not departments. They hCR M MO DEL
A d o p t e are attitudes. Only a strong leader can change the attitudes of management towards customers and employees. Relationship building is all about immediate pains for longterm gains. It needs a lot of patience. Only a leader can bring about this transformation in mindsets and balance sheets.

382. Delight people: Relationships are cemented only when promises are fulfilled, or better still, when over delivered. This creates a happy customer and happy employees. which creates good business as well. 383. Inspire loyalty: Relationship building needs an investment of time and efforts. All relationships are not equally profitable. You have to focus on those relationships which are profitable, or which have great profit potential. And then strengthen those relationships so deeply that no outside attraction can shake those bonds.

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Effective CRM Today and Tomorrow

f)

CMR- Customer Managed Relationship : Till now you have studied all the important concepts of CRM. Here is a quote, which looks at CRM critically. Read it carefully and then understand the concept of CMR. "It's not holy, roman or an empire. There's a certain degree to which CRM is not about the customer nor is it about relationships- at least not how it's practiced now. Marketing automation is fine, but it's not about the customer. Most marketing automation is about cost and speed. Selling efficiently is not about the customer. It's just about leveraging your resources. Value maximization, in terms of figuring out which of your customer segments are going to deliver the most top or bottom line, that's not about the customer. So lots of the benefits that are claimed for CRM are really benefits that accrue to the enterprise, but have nothing to do with the customer." (Adapted from " Great expectation" Annual CRM roundtable, Direct, March 15, 2002.) Many proponents of CMR say that CRM will cease to exist as it is today; the only reasonable approach is CMR - Customer Managed Relationship. CMR is not about launching yet another campaign, and it is not about formulating one more promotion. It is much more, even more than the sum of database marketing, targeted advertising, collecting information about customers, and offering new services. It is about creating an experience, personalising the interaction with the individual customer, in ways directed by the customer, and thereby developing relationships. Paul Greenburg, executive vice president of LiveWire Inc., talked about this customer empowerment in CRM at the speed of light. Look at table 8.1 given below and study the differences between CRM and CMR.

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Customer Relationship Management

Table 8.1: CRM v/s CMR CRM CMR

The company is in control. Makes business better for the company. Tracks customers by transaction. Treats customers as segments. Forces customers to do what you believe
they'll want.

The customer is in control. Makes business better for the customer. Understands customers unique needs. Treats customers as individuals. Let's customers tell you what they care
about.

Customers feel stalked. Organised around products and services.

Customers are empowered. Organised around customers.

208

Adopted from 'Why CRM doesn't work' by Frederick Newell

g )

omer Experience Management: The firm centric view is rooted in the belief that firms create value over and above the inputs, that they add further value through processes and people, and then deliver that to customers. In this view, the customer is outside the value chain, and is assumed to be passive - relegated to the role of a 'Consumer'. That view is not yielding results like before. For one, the customer is far better informed, connected and empowered than before. Competition has also become more global, more intense. There is a technology and industry convergence. There are new competitors in categories where they would not have otherwise been. Like Apple or Starbucks in music. In a boundary-less space with so much competition, what does differentiation mean? New features and options are not enough. These can be imitated. Due to the fragmentation in the value chain, all companies have access to a global manufacturing capacity. All this begs a fundamental question: going forward, where will 'value' come from and how will companies create competitive advantage? The answer lies in customer experience. So far, customer experience was the last thing companies worried about. But as the individual, and not the firm, becomes the center of gravity in the process of value creation, the firm's role will change. It will have to start with experience as the basis of value, and help individuals construct an experience that is of value to them, instead of the classic approach of developing products and services.

C E M

C u s t

Unit 8

Effective CRM Today and Tomorrow

For example, take Apple. The success of its iPod lies in the fact that Apple understood and focused on the 'user experience'. Working 'backwards' from there, the company designed the interface - right down to the scroll wheel - to create a compelling experience of accessing and listening to music. Beside the physically 'cool' design, this meant paying a lot of attention to the underlying software that lets individuals scroll through their library quickly, construct playlists on the go, or simply use defined playlists. Then, through iTunes, customers can download over 400 million songs, after listening to a sample of the songs. Moreover, at the Apple stores, individuals can download songs through iTunes, and get answers to questions such as, "how do I get music into my ipod?" The Apple store is a learning environment, besides serving as a sales environment. They have what they call a 'genius bar', a desk where knowledgeable Apple employees encourage customers to ask questions and experience products and services with their help. Consumers from Apple user groups also support the learning experience at the store. Similarly, other companies must move beyond products and services to 'experience environments' that focus on the interactions between customers and their products, employees and processes. The companies that build a capability to continuously engage customers through these experience environments, and cocreate experiences of value with their customers, will be successful. (Adopted from 'Business world' 1.08.2005 Interview of Mr. Venkat Ramanswamy)

8.3 CRM BY ANY OTHER NAME_________________

'

CRM is being called different names by different authors. Here is an attempt to put forth some of the acronyms of the CRM concept. This should help clarify the terms for you.

384.eCRM (alternatively e-CRM): eCRM refers to "Electronic" customer relationship management or, more simply, CRM that is web-based. For instance, when you log on to golf-retailer-chipshot.com to see if they've shipped your new titanium driver, that's eCRM at work. 385.ECRM: Somewhat confusingly, many experts and publications are using ECRM, (alternatively coined ERM), to refer to "enterprise" CRM, meaning a CRM program

th at sp an s an en ter pri se -w id e vi e w of a cu sto m er. (Y ou m ay w an t to sp ell ou t en ter pri se C R M to av oi d an y

confusion with electronic CRM.)

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Customer Relationship Management

386. PRM: "Partner Relationship Management" allows a company to manage its alliance partner and reseller relationships to provide customers with the optimal sales channel while streamlining the sales process. Determining incentives for various web referral sites, based on the profitability of the customer they send your way, is one PRM tactic. 387. CCRM:" Collaborative CRM "denotes a situation in which a customer can interact directly with the organisation, usually through the web. Dell, for instance, allows customers to choose their own workstation components, essentially designing their own PC's. 388. SRM: "Supplier Relationship Management" resembles PRM in that it focuses on keeping external vendors happy, but SRM limits its focus to actual suppliers. Often operationally focused, SRM helps companies evaluate and categorise suppliers for given projects to optimise supplier qualification and selection, thereby streamlining the supply chain. 389. mCRM: "Mobile CRM" suggests the provision of data to customers, suppliers, and business partners via wireless technologies. 390. xCRM : You're bound to see other letters preceding the CRM acronym, and the "x" is simply used as a placeholder for the other CRM hybrids to come! 391. e-partnering: e-partnering is an all-encompassing system which is a combination of strategy, processes, e-tools and methodology. 392. ERM: "Enterprise relationship management" is a solution that enables the enterprise

210

to mation for the end goal of long-term customer satisfaction, increased revenues, sh and higher profitability. ar e 8.4 CHANNEL RELATIONSHIP MANAGEMENT co m You will find in CRM literature that the word 'channel' is used in two different ways: pr a. Channels of communication with the customers. eh en b. Channels of distribution. si ve , u pto da te cu st o m er , pr o d uc t, co m pe tit or an d m ar ke t in fo r

Unit 8

Effective CRM Today and Tomorrow

a. Channels of communication with the customers:


It is important to optimise the channels of communication with the customers. The goal of marketing automation in CRM is to offer the right message to the right customer at the right time. For example, a person who has recently become net-active and has started using online banking services would prefer to be emailed on a new offer by the bank. Whereas a person who has taken VRS (voluntary retirement scheme) will enjoy visiting his neighborhood bank and will be delighted when the branch manager offers him a cup of coffee.

>gT Activity A;
List out the ways in which a bank can communicate with its customers.

b. Channels of distribution:

....;...

Peter Drucker says, "To be able to anticipate changes in the distribution channel and where and how customers buy, one has to be in the market place, has to watch the customer and the non customer ".
Another author says, "A distribution system is a key external resource. Normally it takes years to build and is not easily changed... it represents a commitment to a set of policies and practices that constitute the basic fabric on which is woven an extensive set of long-term relationships". Thus the central message is to remain close to the market and channels in order to be effective, both in business and in Partner relationship management (PRM). PRM is one in which an organisation, in order to streamline the sales process, allows channel partners, dealers, distributors, resellers to provide 'Customer Convenience' in obtaining a product.

211

Customer Relationship Management

The META group research firm identified the following advantages of PRM:

Helps create a single selling experience across multiple organisation boundaries. Helps increase market share and overall brand loyalty. Helps in synchronizing, optimizing and understanding sales and demand across channels.

It is important to understand that managing partners is far different and more complex than managing a sales team. Each partner belongs to a different geographical area, different set of values and systems. It is about the difference of organisational and social culture between your organisation and your partner organisation. Thus, the way you allocate time and resources in developing PRM for partner A, may be different from that allocated to partner B. Given below is a detailed offering of PRM software by Partnerware, so that you can understand it well.

Partnerware's total channel experience (TCX)


In February 2002, Partnerware officially shed its skin and entirely rebuilt its company. They dropped their ASP business model and the "one software fits all" approach they had that meant out-of-the-box functionality with tools for customisation and a hosted solution. They got new management and a new product line called TCX. They phased out their 20 ASP customers and are attempting to convert them to TCX. Their enterprise business model is built around providing a solution (not hosted) that could be fully customised to the business process of the application purchasing company from the beginning. They built this offer around an enterprise Java beans XML-complaint architecture for easy communication and transaction via the web. In other words partnerware is now partnerware: The sequel. They have two offerings-TCX foresight and TCX insight: TCX Foresight: TCX foresight is a service and a set of configuration tools that involve a workflow engine and a rules processor. Partnerware partner work with the client to identify the business processor that makes the client's company work. During the consulting

II

III

212

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Effective CRM Today and Tomorrow

stages, they actually benchmark the client company's existing system and processes against business objectives. If they find a broken set, they help reconfigure those processes so they become functional. An implementation would be consulting in combination with the identification of the workflow and the configuration of the business rules to the process via the rules processor. Depending on how dysfunctional this environment is, the configuration could take between 90 and 120 days, and has been known to be as short as 60 days in a few cases. TCX Insight: These are the actual applications that are implemented following the planning through the foresight services. Configurable workflow definition: This is the tool for creating the workflow that is mapped to the various modules. Partner profiling : This module links the brand holder's corporate objectives to the actual performance of individual partners. Partner Acquisition: This creates the criteria for the partner programs. Then as potential partners apply, see how well they score against those criteria. If they score well, they are partners. If not, they are not partners. Lead/opportunity Management: This is one of the golden modules for the partners. It is a closed loop lead management system that covers everything from lead generation and distribution through opportunity management and follow-up to closing. Funds management: Another golden module, the funds management module handles the administration of marketing funds. It takes multiple factors into account in the allocation process including program types, partner types, and revenue targets by expertise, budgets, discounting structures, and disbursement rules. Knowledge management: It is the tool for reporting and analysis. Customisable queries and reports: This is exactly what it sounds like. It can produce customised reports and answer specific queries in real time. Their website: http//www.partnerware.com.

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Customer Relationship Management

$ Activity B :
'Visit the website of partnerware and collect information about the various projects executed by the company.

8.5 MYTHS ABOUT CRM________________________________ _ _ ________ There are plenty of myths and false stories about CRM. Often organisations believe them and are unhappy when CRM does not achieve what they thought it would. Have a look:

393. Install the latest CRM software and your company will definitely see growth in the business. 394. CRM is a Technology tool. 395. The more modern and complicated the CRM software, more is the chance of it becoming a success. 396. CRM is Database Marketing. 397. Product / Service shortcomings will be taken care of when CRM is installed. 398. It is the ultimate answer to all business and marketing problems.
Understand that CRM is not a magic wand. Simply implementing it does not miraculously change the company into a successful company. It is very important that the company and all the employees understand that CRM involves a lot of hard work, dedication and commitment

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8.6 CAUSES OF CRM FAILURE Marketing has evolved from 'Database marketing' into 'Relationship Marketing' into 'CRM'! Like it happens to most theories over time, the pitfalls get more evident. CRM of course has its share of criticism and for good reasons.
399. itself.

It helps the development of the theory and practice of CRM to redefine

400. All companies would be worried if they spent a lot of money on some solution and it did not work. But you should be clear on one important point. CRM as a concept is not a failure.The wrong perceptions/practices and faulty implementation has reduced the success rate of CRM.

Let us now look at some of the common causes for CRM failure:
401. 402. 403. 404. 405. 406. 407. 408.

Treating CRM = Technology+Automation. Large scale systems with long-term promises are better. Old organisational mindset. Lack of CRM understanding. Poor strategy and planning. Lack of skills essential for CRM. Inefficient or inappropriate software. Lack of commitment.

Let us now look at these in more detail: sly md 1. Treating CRM= Technology + Automation; This tendency to focus on Information Technology (IT) rather than customer care is one of the most common problems. In many companies CRM is being introduced and implemented by the IT or EDP department with very little or no co-ordination with sales, marketing and customer service. A Vice-President of a company when questioned on his company's CRM initiative, very confidentially replied, "Well, we are doing very fine with CRM- we have outsourced it!"

Customer Relationship Management

There are many companies who feel that an IT- heavy, expensive version of CRM software will help them. These companies spend their time and efforts in building perfect databases and acquiring modern modeling skills rather then developing the right mindsets.

409. Largescale systems with long-term promises are better : Many companies get locked up in the maze called CRM. They attempt to install all the elements of CRM simultaneously such as CRM data warehouse, ACRM, campaign and channel management. But installing and tying up all these element is very time consuming and difficult to integrate. Instead, an incremental, module by module approach in establishing CRM is preferable. Here the employees get a chance to learn fully each phase and then move on to the next. 410. Old organisational mindset: A study by CRM-Forum detailed the significance of nine different causes of failure of CRM initiatives:
Organisational change Company politics and inertia Lack of CRM understanding Poor planning Lack of CRM skills Budget problems Software problems Bad advice Others

29% 22% 20% 12% 6% 4% 2% 1% 4%

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None of these causes suggest any external reasons for a CRM failure. With 29 percent of failures caused by problems with organisational change, it's clear that the most difficult step for customer-based initiatives is the cultural change required. Conventional marketing suggests that a product manager or brand manager be at the helm of the marketing activity. This is purely an organisational point of view. CRM suggests "a segment manager" to be the hub of the marketing wheel. This clearly is a customer's point of view. But for many companies, conventional product management is so entrenched in the culture that they may wear a CRM cap but CRM wisdom

does

not become a part of them.

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Effective CRM Today and Tomorrow

Hence it is an absolute must to make a company genuinely customer-centric. It is about 'Change management' at the heart of the entire organisation's culture. While it is important to have an exchange of information with the customer, it is also necessary to have this exchange of information within the organisation. A clear purpose must be established and a transparent implementation should be carried through to CRM. 4. Lack of CRM understanding: A holistic understanding of CRM is a must. It does not help to have a one-sided view or elemental thinking of CRM. Some companies think that CRM is a technology and miss out on relating it with strategy; some companies i think that CRM is cross-selling, up selling, selling.... some companies think it as an extreme form of segmentation! This confusion obviously means that they cannot implement CRM genuinely. Poor strategy and planning: Many a company fails in developing a clear vision, goal, strategy and planning that is needed for CRM. Strategy is to business what a compass is to a navigator. Goals are broad statements about where you want to reach. Objectives/plans are specific measurable actions that will support your strategies. For instance, Sales and Marketing objectives could be:

5.

Increase sales and marketing efficiency. Increase sales in volume and value per territory. Increase sales of products per purchase. Increase customer loyalty and retention.

Poor strategy and planning may result in CRM addressing the wrong issues.

6.

Lack of skills essential for CRM :


People are people and people are biased. They tend to think based on their experiences in the past. And many managers have grown up following the 'selling' and' marketing' school of thought. For them, it becomes difficult to change to a new and different CRM challenge. So it is important that the company installing sophisticated CRM tools, also have trained and motivated men and women to implement it. It needs a new orientation and training to create

of fe ri n g s b as e d o n c u st o m er n e e d s a n d to d e v el o p c us to m er ce nt ri c st ra te gi

es.

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7.

Inefficient or inappropriate software : Sometimes the CRM software provider does not meet the customer's need. This should definitely be the last thing to happen. It may be either inappropriate or simply faulty. It is important to check the 'Track record' before selecting a CRM vendor.

8.

Lack of commitment: Top management needs to sanction the funds for CRM. But only that is not sufficient. CRM needs a committed senior management - committed to customer thinking, customer care and customer delight. It is important that a proactive management sells CRM across the organisation. This helps in getting a company wide commitment to CRM.

8.7 CRM AS A STRATEGIC INITIATIVE_____________________________ Consumers are constantly changing and so is the market. Thus marketing and CRM also have to change. This change is happening with your competitor as well and so you are required to change further. Strategy is deciding how you want to be better than your competitor, where you want to go and how? It is a direction for tomorrow. CRM today is used as a competitive strategy. What is a strategy? According to Nigel Percy, a strategy is:

Being best at doing the things that matter most to customers. Building shareholder value by achieving superior customer value. Finding new and better ways of doing things to achieve the above.

Why strategise? "We can analyze companies in mind numbing details, perform autopsies, and render verdict, but we are still addressing the what of the competitiveness and not the why!"
C. K. Prahlad and Gary Hamel HER March-April 1993

218

You will have to strive to build a suitable competitive advantage (SCA) for your business. The essence of competitive advantage is the positioning theme that sets your business

Unit 8

Effective CRM Today and Tomorrow

apart from your rival. Successful themes are built on the combination of being better, being faster and being closer. CRM definitely has the potential to give that sustainable competitive advantage to your organisation. Let's see how : CRM is a long-term initiative. It gives you a definite advantage over your rivals. It is an initiative difficult to copy. It leads to your being better and faster than your competitor. It helps you to get closer to your customer. It is about durable relationships between the firm and external entities (such as distributors, suppliers, customers...). It leads to partnering with your customers.

With all the limitations discussed above in this chapter of CRM, please understand that CRM is here to stay. It is sure to grow. If you use and apply this CRM knowledge to your career and business, it will definitely create a competitive advantage for you. Make CRM work for you! 8.8 SUMMARY____________________________________________________ Every new business management theory has its dark side and with CRM, it is a big black wall of failures and critics. This is primarily because it was perceived to be the ultimate answer to all prevailing questions for organizations striving to be customer oriented. CRM is not the miracle cure everyone hoped for when the first solutions were introduced. Incidentally, as a theory and philosophy, CRM is very fundamental and of great depth. But you cannot treat it as software and hope that it transforms your business totally. In unit 8 you have seen the emerging trends in CRM and most importantly the reasons for the failure of CRM. You have also seen the importance of channel relationship 219 development Channels are increasingly becoming effective and you need to develop a special focus on

Customer Relationship Management

Channel relationship development. CRM has evolved and has come a long way. We hope that this understanding of CRM will help you.

8.9 SELF-ASSESSMENT QUESTIONS


Ql. Define the following:

411. OCRM 412. ACRM 413. CMR 414. Strategy


Q2. Write the Ml form of the following: PR M ER M SR h) M ER i) M CR j) M 415. OCRM

f) g)

416. ACRM 417. CMR 418. h-CRM 419. CER


Q3. Fill in the blanks:

420. ACRM uses technology and new business processes in order to create meaningful customer................and.................... 421. ACRM uses...................concept to develop business intelligence from the
customer and marketing data. Q4. What are the issues and concerns of SME's? Q5. True/False: Only technology by itself is enough for successful CRM. Q6. What are the myths of CRM? Q7. What are the causes of CRM failure?

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Effective CRM Today and Tomorrow

8.10 CASE STUDY : RESPECTING THE CHANNEL: GREAT PLAINS Great Plains sells mid-range accounting and management solution packages. If your 300 employee Law firm, or manufacturing plant, wants to install a new payroll system to run on a Microsoft SQL Server, chances are good that it will be a Great Plains package. These products, while virtually "shrink wrapped," when compared to more complicated corporate system upgrades and installations, nevertheless require some amount of consulting and integration work, both on the front end and back end. Usually a reseller partner (a firm that might consult on accounting and financial control issues, for instance) will work with the customer to install and implement the solution, streamlining business processes along the way. They provide customized training and other services to ensure a successful implementation. And they typically provide ongoing technical support during and after the implementation, working collaboratively with Great Plains to meet the customer's needs. VOICE, an acronym for Virtual Organization Information Center, represents Great Plains' principal effort in cementing its relationship with both customers and resellers. An ambitious, web-based organisation, VOICE offers detailed information profiles on key contacts within partner organizations and their assigned customers, product information, installation and usage tips, training course material and even job placement advertisements. Names, phone numbers, sales figures (by time periods and product line), and customer satisfaction ratings are also recorded. Resellers using VOICE can see nearly everything Great Plains has in its records, including serial numbers, registration keys, call history, service log and the customer's record of past interactions, with both Great Plains and the reseller. So, whether the customer calls Great Plains, or the company they bought the solution from, everyone is working with the same information. This program enhances the marketing decision-making process of Great Plains by grouping customers by industry, by growth rate, by revenue to Great Plains, by needs expressed to Great Plains, by the number of service calls made, and even by the type of their corporate culture. This allows the firm to treat the customers differently based on what they need and what they are worth to Great Plains. Great Plains regularly conducts internet surveys and asks customers if they need additional information, services or attention. These surveys allow the company to develop customized solutions for customers when concerns or problems crop up. To use this information effectively, a cost-efficient process for prioritizing the information was needed so that the company and its channel partners could respond appropriately to

Customer Relationship Management

Great Plains also decided to prioritize the information by urgency and customer type. When a call comes in from a customer, the company's support technicians log the call history. When the information is entered into the database, it is also emailed automatically to the appropriate customer account manager, wherever he may be. However, if a customer has called and is upset about something, or the technicians determine that the customer needs some extra support and attention for any reason, the e-mail is flagged as "urgent". The e-mail is also flagged as "urgent" if the technician feels that the interaction represents a business opportunity. Great Plains also educates its people through training programs that itself provides an object lesson in the benefits of Itol marketing. For instance, Pam McGee, a member of the corporate education team and co-trainer of Itol business practices, sends personalized messages to employees about training classes. These messages will take into account any training that the employee has had before, and will emphasize the benefits of additional training. McGee also sends personalized notes to employees who attend the classes, thanking them for their participation and following up on their ideas and questions. These personal touches help the company maintain a high level of enthusiasm among employees. It also offers a vivid demonstration of the power of personalized communications. So, on the surface it might seem that Great Plains has a simpler, more easily understood business model, but scratch the surface of this business model and you will see that the management of customer relationships at this firm is no less complex than it would be at any other. (Abridged form of case studies from Itol marketing by Don Peppers and Dr. Martha Rogers.)

Activity: 422. Draw a schematic / block diagram of the sales process in this case study. 423. Relate the following definition with this Great Plains case:
"CRM is the establishment, development, maintenance and optimization of long-term mutually valuable relationships between customer and organization. Successful CRM focuses on understanding the needs and desires of the customer and is achieved by facing these needs at the heart of the business, by integrating them with the organization strategy, people, technology and business processes".

222

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Effective CRM Today and Tomorrow

3. Find out the meaning of the following words: Dealer Wholesaler Business associate Representative Distributor Franchisee Channel partner Reseller

4.

Why do you think CRM aids in the channel development process ? Visit any service business and list out the training programs conducted for their employees in the past one year. Speak to atleast 5 employees at different levels in the organization to learn their opinions about the training programmes they have attended. What does this say about the organization ?

22 3

Customer Relationship Management

Marketing is defined as identification, stimulation & satisfaction of consumer needs at profit. Need: A need is an absolute necessity essential to maintain life. Wants: Wants are a desire for specific satisfiers. Demand: Wants become demand backed by an ability and willingness to buy. Value is total worth of what customer gets in exchange of price paid for a product or service. Market is a lot or bunch of potential customers with needs and wants, who are able & willing to exchange for satisfying their needs & wants. Customer - The individual or organization that actually makes the purchase decision is customer. Consumer - Consumer is the individual or organizational unit that actually uses a product. CRM is the establishment, development, maintenance and optimization of longterm mutually valuable relationships between customer and organization. Formal study You employ an internal committee or an external consultancy firm to institute a formal customer perception study. Focus group is a group of existing / potential customers invited for a brain storming group discussion. Customer lifetime value is the total business generated by a customer over his / her purchasing lifetime. Structural bonding is that intimacy in your relationship with the seller that he gets into your structure. It is a symbiotic relationship - which develops, nurtures and grows together. Customization bonding is bonding which is developed through an intimate knowledge of individual customers in developing a product to suit his/her requirements. Client: When customer regularly starts buying from the same supplier he/she becomes a client.

226

Appendix A

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Operational CRM (OCRM) is about developing and automating the process of' TouchPoints' with customers. Touch points are the contact points an organization has with the customer. ACRM is the capture, storage, extraction, processing, interpretation and reporting of customer data to users for redefining the business actions, processes and strategies. eCRM refers to "Electronic" customer relationship management or, more simply, CRM that is web-based. ERM refers to "enterprise" CRM, meaning a CRM program that spans an enterprise -wide view of a customer. Partner Relationship Management (PRM) means managing the company's alliance partner and reseller relationships to provide customers with the optimal sales channel while streamlining the sales process. Collaborative CRM (cCRM) denotes a situation in which customers can interact directly with the organization, usually through the web. Supply Chain Management (SCM) means evaluating and categorising suppliers for given projects to optimize supplier qualification and selection, thereby streamlining the supply chain. Mobile CRM (mCRM) suggests the provision of data to customers, suppliers, and business partners via wireless technologies. Enterprise Relationship Management (ERM) Solution that enables the enterprise to share comprehensive, up-to-date customer, product, competitor and market information for the end goal of long-term customer satisfaction, increased revenues, and higher profitability. A product is anything that can be offered to a market to satisfy a want or need. Products that are marketed include physical goods, services, experience, events, persons, places, properties, organizations, information, and ideas. A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.

227

Customer Relationship Management

Promotions are the means of communicating a product or service availability and suitability to the target market. Physical Evidence is a set of place, people, publicity material, symbols, the design, layout, the signage and all that a person can see, which visualizes a service. External marketing uses all the elements of communicating and reaching the customers. Internal marketing is about applying marketing concepts to your own employees. Data: is raw. It is just a bundle of facts and figures. Information is created using data, by giving it a meaning by relational connections. Knowledge is the learning created out of the meaningful information, which may be put to some use or application. Primary data is the data gathered for a specific purpose or for a specific research project. Secondary data is the data collected for some other purpose, which already exists. Internal data is data that is available within the organization. External data is the data available outside your organization mostly in published and printed form. Data mining derives its name from the similarities between searching for valuable information in a large database and mining a mountain for a vein of valuable ore. Data warehouse (DW) comprises a computing system used to store information regarding an organization's activities in database. Customer Acquisition: This type of application involves finding customers who previously were not aware of the product, who were not candidates for purchasing the products (for example, baby diapers for new parents), or who in the past have bought from a competitor. Telemarketing is marketing done using the telephone for selling, marketing and service aspects. TeleseiUng is selling done over the telephone.

228

Appendix A

Cross-selling is offering your customer a basket-full of related products/services along with the main product/service that is being sold. Up-selling is about looking for opportunities of selling more to the same customer. De-selling is no-selling or negative selling. Sales Management is a sequence of activities that guides managers in creating, implementing and evaluating the sales program for an organization. Sales Force Automation (SFA) is a technological tool to help salespeople acquire and retain customers, which helps in reducing administrative cost and provides good basis for account management. It increases better selling chances for the Salesperson and more business for the company. Contact Management is an area of CRM that can track the where, who and why of a particular client.

Customer Relationship Management

SIEBEL

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Siebel Systems is the leading provider of solutions that help organizations of all sizes optimize everythingtheir people, processes, and technologyaround their customers, resulting in outstanding customer experiences and long-term competitive advantage. Their customer relationship management, business intelligence, and customer data integration solutions are the product of more than $2 billion in direct and partner investment and reflect over 11 years of experience with more than 4,000 organizations.More than 3 million users worldwide rely on Siebel solutions to deliver dramatic improvements in identifying, acquiring, retaining, and serving their customers. SALESLOGIX Award-winning SalesLogix is the customer relationship management solution that enables small to medium-sized businesses to acquire, retain, and develop profitable customer relationships. With more than 250,000 users at 7,000 companies worldwide, SalesLogix is the CRM leader for small and medium businesses, and is part of the Sage Software family of integrated business management solutions. MICROSOFT BUSINESS SOLUTIONS Microsoft Business Solutions automate and help improve financial, customer relationship, and supply chain management processes. Delivered through a network of Microsoft partners, these integrated, adaptable solutions work with familiar Microsoft software to streamline processes across an entire business. ONYX SOFTWARE Onyx Software Corp. is a global supplier of enterprise-wide, customer-centric ebusiness solutions. It has recently integrated itself with ChannelWave Software, Inc., a leader in partner relationship management (PRM) solutions. Through this alliance, customers will be able to purchase a tightly integrated, best-of-breed e-business solution with industry-leading, Web-based customer relationship management (CRM) and eCRM capabilities, as well as the most extensive capabilities for building strong, profitable partnerships. SAP Founded in 1972, SAP is the recognized leader in providing collaborative business solutions for all types of industries and for every major market. Its my SAP Business Suite is one of

234

Appendix C

the best business solutions available today. mySAP Business Suite allows employees, customers, and business partners to work together successfully anywhere, anytime. mySAP Business Suite is open and flexible, supporting databases, applications, operating systems, and hardware from almost every major vendor. SAS SAS is the world's largest privately held software company with nearly 10,000 employees in more than 300 offices spanning the globe. SAS is the market leader in providing a new generation of business intelligence software and services that create true enterprise intelligence. SAS solutions are used at more than 40,000 sites including 96 of the top 100 companies on the FORTUNE Global 500 to develop more profitable relationships with customers and suppliers; to enable better, more accurate and informed decisions; and to drive organizations forward. SAS is the only vendor that completely integrates leading data warehousing, analytics and traditional Business Intelligence applications to create intelligence from massive amounts of data.

E.piphany
E.piphany has spent the past few years refining its architectural and strategic vision and is well placed for continued growth. E.piphany's focus is on more insightful treatment of customers during interactions with the highest potential for adding value to the relationship. It tends to focus on making campaign management functionality available to more casual users, and to enable "standard" customer processes to be made more dynamic through embedded analytics and real-time offer arbitration. i-flex
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i-flex solutions is a world leader in providing IT solutions to the financial services industry. i-flex has serviced over 540 customers in more than 110 countries, i-flex offers a comprehensive range of products and customized services that enable financial institutions to cut costs, respond rapidly to market needs, enhance customer service levels, and mitigate risk. FLEXCUBE is the choice of more than 225 financial institutions worldwide-a feat which has been achieved within six years of its launch, i-flex also offers financial institutions customized solutions through its domain and technology Centers of Excellence, which encompass areas such as Business Intelligence, CRM, eservices, Integration Services, Insurance and Payment Systems.
235

Customer Relationship Management

Gausa India Ltd:


Headquartered at New Delhi, Gausa India Ltd pioneers itself in providing software solutions and IT enabled services to its offshore and onshore clients. They provide solutions in Business Process Management (BPM), Customer Relationship Maintenance, Enterprise Resource Planning (ERP), Middleware Integration Solutions, Business Process Management (BPM) - The Third Wave Solutions, Embedded Systems and Outsourcing.

I
2

Oracle India
Oracle has been operating in India for more than 15 years. India is Oracle's fifthlargest market in Asia in terms of revenue. India accounts for Oracle's largest research and development investment outside the United States. India also hosts several of Oracle's global divisions and services including global consulting, global support, Oracle On-demand, Internet sales and financial accounting and analysis. The entire Oracle product family -Oracle Database lOg, Oracle Application Server lOg, Oracle Collaboration Suite and Oracle E-Business Suite are available in India. India is home to more than 220,000 members of Oracle's online developer community, Oracle Technology Network.

Tata Consultancy Services


Tata Consultancy Services Limited (TCS) is a world-leading information technology consulting, services, and business process outsourcing organization that envisioned and pioneered the adoption of flexible global business practices that today enable companies to operate more efficiently and produce more value.

Wipro
Wipro is a leading IT services provider in implementing end to end CRM solutions. They have over seven years and 600 man-years of CRM deployment experience. Wipro's CRM solutions help customers address a variety of CRM implementation issues in areas like customer retention, account management, campaign management or call center interactions. Wipro helps them devise strategies to increase revenue, productivity and customer satisfaction. These strategies are then brought to life by carefully choosing the right package solution, orchestrating a pinpoint execution, and providing post go-live support and end user training.

Appendix C

PDServer-CRM PDServer-CRM is a simple and yet very powerful CRM product. It is a part of entire suit of PDServer-PLM modules. The PDServer-CRM gives you an easy and yet very effective way of managing your suspects, prospects and customers. The inbuilt dashboards, advanced search and excel reports help companies to stay on top of customer information. The tool can be very easily configured to suit the requirements of each industry and organization. The PDServer-CRM product is seamlessly integrated to PDServer-Enquiry and PDServerSupport modules and is very effective in automating entire business processes. Please visit http://www.productdossier.com for more information.

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