MBCH772D Customer Relationship Management PDF

Customer Relationship Management
Course Design
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Advisory Council
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Chairman
Dr Parag Diwan
Members
Dr Anirban Sengupta Dr Ashish Bhardwaj
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Dr Kamal Bansal
Dean Dean CIO
Dr S R Das Dr Sanjay Mittal Prof V K Nangia

VP – Academic Affairs Professor – IIT Kanpur IIT Roorkee
SLM Development Team

Wg Cdr P K Gupta
Dr Joji Rao
Dr Neeraj Anand
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Dr K K Pandey
Print Production
Mr Kapil Mehra Mr A N Sinha

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Manager – Material Sr Manager – Printing
Author
Ekta Rastogi
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other means,
without permission in writing from MPower Applied Learning Enterprise.
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Course Code: MBCM-772D
Course Name: Customer Relationship Management
Version: July 2013
© MPower Applied Learning Enterprise

UNIT 20: Case Study
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Contents
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Block-I
Unit 1 Introduction to CRM....................................................................................................... 3

Unit 2 CRM Programs and Marketing Initiatives ................................................................. 19
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Unit 3 CRM Implementation................................................................................................... 31
Unit 4 CRM Projects in Other Disciplines.............................................................................. 49
Unit 5 Case Studies.................................................................................................................. 61
Block-II
Unit 6 CRM: A New Mantra in Travel and Tourism ............................................................. 71

Unit 7 CRM Trends in Tourism Industry ............................................................................... 79
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Unit 8 Customer Relationship Measurement......................................................................... 87
Unit 9 CRM Measurement Implementation......................................................................... 103
Unit 10 Case Studies................................................................................................................ 119
Block-III
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Unit 11 Customer Loyalty ....................................................................................................... 131

Unit 12 Customer Retention.................................................................................................... 145
Unit 13 Impact of Retention .................................................................................................... 159
Unit 14 Service and Complaint Management ........................................................................ 175
Block-IV
Unit 16 Consumer Complaints Management Initiatives....................................................... 197

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Unit 17 Service Characteristics............................................................................................... 213

Unit 18 e-CRM.......................................................................................................................... 225
Unit 19 Portals and other Fields in e-CRM ............................................................................ 241
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Block-V
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Unit 21 Sales Force Automation ............................................................................................. 267
Unit 22 CRM in B2B and B2C Markets.................................................................................. 283
Unit 23 BPR and CRM............................................................................................................. 299
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Unit 24 Creating Customer-focused Organisation ................................................................. 313
Glossary ............................................................................................................................................ 333
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UNIT 1: Introduction to CRM
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Notes
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___________________
___________________
___________________
___________________
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___________________
___________________
___________________
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BLOCK-I
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Detailed Contents Customer Relationship Management
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Notes
UNIT 1: INTRODUCTION TO CRM
___________________ UNIT 3: CRM IMPLEMENTATION
z Introduction z Introduction
___________________
z History of CRM z CRM: A Comparison with CMM Levels
___________________
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z Meaning of CRM z Drawbacks of CRM Implementation
___________________
z Needs of CRM z A Framework for Successful CRM
___________________
z Goals of CRM z Customer Strategy for CRM Implementation
___________________
Significance of CRM Implementing CRM: A Step-by-step Process
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z z
___________________
UNIT 2: CRM PROGRAMS AND MARKETING UNIT 4: CRM PROJECTS IN OTHER DISCIPLINES
___________________
INITIATIVES
z Introduction
___________________
z Introduction
z Five Phases of CRM Projects
___________________
z Decisions of CRM
z Development of Customizations
z Types of CRM Programs
z CRM in Marketing
z CRM Marketing Initiatives
z CRM in Human Resource
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UNIT 5: CASE STUDIES
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Unit 1
3
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Notes
Introduction to CRM
___________________
___________________
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___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
\ Meaning and Importance of CRM ___________________
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\ Interface between Marketing and CRM ___________________
\ Benefits of CRM to the Organization as well as to the Customers
___________________
___________________
Introduction
___________________
Customer satisfaction has always been a key element in the
pursuit of corporate goals and objectives. However, the current
competitive environment fostered by liberalization and
globalization of the economy, and the rising customer expectations
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for quality; service and value have prompted many companies to
organize their business around customers they serve, rather than
around product lines or geographic business units. This is partly
because customer contact, care and insight have been rendered
increasingly more practicable and economical through computers,
telecom technology and internet, historically, customer
relationship existed even in the pre-industrial era due to the direct
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interaction between producers and customers as between farmers

and buyers of agricultural products, or as artisans and craftsmen
produced customized products for each customer. It was when
mass production of goods in the industrial era led to the emergence
of middlemen and transaction-oriented marketing, that direct
interaction between producers and customers became less
frequent.
Sophisticated analytical techniques are then applied to this
customer information to better understand and predict customer
behaviour. CRM can then be used to strategically implement
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acquired customer knowledge in every area of the company, from

the highest management level to all employees who come into
direct contact with customers. CRM thus enables an organisation
to address its customers’ preferences and priorities much more
effectively and efficiently. CRM is a tool that can help
4 organisations to profitably meet the lifetime needs of customers
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Notes
Activity better than their competitors.
Make a brief report on the
___________________
history of CRM.
___________________ History of CRM
___________________ Customer Relationship Management (CRM) is a model for
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___________________ managing a company’s interactions with current and future
customers. It provides a 360 degree view of customer data. It
___________________
involves using technology to organize, automate, and synchronize
___________________
sales, marketing, customer service, and technical support.
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___________________ Customer Relationship Management is a concept that became very
___________________ popular during the 1990s. It offered long-term changes and
benefits to businesses that chose to use it. The reason for this is
___________________
because it allowed companies to interact with their customers on a
___________________ whole new level. While CRM is excellent in the long-term, those
who are looking for short term results may not see much progress.
One of the reasons for this is because it was difficult to effectively
track customers and their purchases. It is also important to realize
that large companies were responsible for processing tremendous
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amounts of data. This data needed to be updated on a consistent
basis.
In the last few years, a number of changes have been made to
customer relationship management that has allowed it to advance.
These capabilities have allowed CRM to become the system that
was once envisioned by those who created it. However, the biggest
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problem with these newer systems is the price. A number of

personalized Internet tools have been introduced to the market,
and this has driven down the cost of competition. While this may
be a bane for vendors who are selling expensive systems, it is a
bonanza for small companies that would otherwise not be able to
afford CRM programs. The foundation for CRM was laid during
the 1980s.
During this time, it was referred to as being database marketing.
The term “database marketing” was used to refer to the procedure
of creating customer focus groups that could be used to speak to
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some of the customers of the company. The clients who were

extremely valued were pivotal in communicating with the firm, but
the process became quite repetitive, and the information that was
collected via surveys did not give the company a great of
information. Even though the company could collect data through
surveys, they did not have efficient methods of processing and
analyzing the information. As time went on, companies begin to 5
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realize that all they really needed was basic information. They Notes
needed to know what their customer purchased, how much they ___________________
spent, and what did they do with the products they purchased.
___________________
The 1990s saw the introduction of a number of advances in this
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___________________
system. It was during this time that term Customer relationship
management was introduced. Unlike previous customer ___________________
relationship systems, CRM was a dual system. Instead of merely ___________________

gathering information for the purpose of using for their own ___________________
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benefit, companies started giving back to the customers they
___________________
deserved. Many companies would begin giving their customers
gifts in the form of discounts, perks, or even money. The companies ___________________
believed that doing this would allow them to build a sense of ___________________
loyalty in those who bought their products.
___________________
Customer relationship management is the system that is
responsible for introducing things such as frequent flyer gifts and
credit card points. Before CRM, this was rarely done. Customers
would simply buy from the company, and little was done to
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maintain their relationship. Before the introduction of CRM, many
companies, especially those that were in the Fortune 500 category,
didn’t feel the need to cater to the company. In the minds of the
executives, they have tremendous resources and could replace
customers whenever it became necessary. While this may have
worked prior to the 1980s, the introduction of the Information Age
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allowed people to make better decisions about which companies

they would buy from, and global competition made it easier for
them to switch if they were not happy with the service they were
getting.
Today, CRM is being used to achieve the best of both worlds.
Companies want to maintain strong relationships with their
clients while simultaneously increasing their profits. The CRM
systems of today could be called “true” CRM systems. They have
become the systems that were originally envisioned by the pioneers
of this paradigm. Software companies have continued to release
advanced software programs that can be customized to suit the
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needs of companies that compete in a variety of different

industries. Instead of being static, the information processed
within modern CRM systems is dynamic. This is important,
because we live in a world that is constantly changing, and an
6 organization that wants to succeed must constantly be ready to
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Notes adapt to these changes.
___________________
Table 1.1: Landmarks in the History of CRM: 1960-2010
___________________ 1960s Mass Production/Mass Product
___________________ 1970s Mass Market
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1980s Total Quality Management
___________________
1990s Customer Relationship Management (CRM)
___________________
2000s Customer Relationship Management (CRM)
___________________ 2010s e-Customer Relationship Management (e-CRM)
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___________________ Mass Production/Mass Product: Mass Production is a system of
___________________ manufacturing based on principles such as the use of
interchangeable parts, large-scale production, and the high-volume
___________________
Assembly Line. Although ideas analogous to mass production
___________________
existed in many industrialized nations dating back to the
eighteenth century, the concept was not fully utilized until refined
by Henry Ford in the early twentieth century and then developed
over the next several decades. Ford’s success in producing the
Model T automobile set the early standard for what mass
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production could achieve. As a result, mass production quickly
became the dominant form of manufacturing around the world,
also exerting a profound impact on popular culture. Countless
artists, writers, and filmmakers used the image of the assembly
line to symbolize either the good or the evil of modern society and
technological prowess.
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Mass production techniques maximized the profit making ability of

corporations, but it dehumanized the lives of workers. Frederick
W. Taylor introduced Scientific Management at the beginning of
the twentieth century, which used time and motion studies (often
timing them with a stopwatch) to measure workers’ output.
Taylor’s goal was to find the ideal process and then duplicate it
over and over. In the abstract, scientific management was a giant
leap forward, but in reality, mass production led to worker unrest,
turnover, and social conflict. Unionization efforts, particularly the
struggles to organize unskilled workers by the Congress of
Industrial Organizations (CIO) in the 1930s and 1940s, and battles
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between management and employees intensified as workers

became more alienated because of the factory setting.
Mass Market: Mass Marketing is a market coverage strategy in
which a firm decides to ignore market segment differences and go
after the whole market with one offer. It is type of marketing (or
attempting to sell through persuasion) of a product to a wide 7
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audience. The idea is to broadcast a message that will reach the Notes
largest number of people possible. Traditionally mass marketing ___________________
has focused on radio, television and newspapers as the medium
___________________
used to reach this broad audience. By reaching the largest
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audience possible exposure to the product is maximized. In theory ___________________
this would directly correlate with a larger number of sales or buy ___________________
in to the product. As the name says it’s mass so you are trying to
___________________
get as many as you can.
___________________
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Mass marketing or undifferentiated marketing has its origins in
___________________
the 1920s with the inception of mass radio use. This gave
corporations an opportunity to appeal to a wide variety of potential ___________________
customers. Due to this, variety marketing had to be changed in ___________________
order to persuade a wide audience with different needs into buying
___________________
the same thing. It has developed over the years into a worldwide
multi-billion dollar industry. Although sagging in the Great
Depression it regained popularity and continued to expand
through the 40s and 50s. It slowed during the anti-capitalist
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movements of the 60’s and 70’s before coming back stronger than
before in the 80’s, 90’s and today. These trends are due to
corresponding upswings in mass media, the parent of mass
marketing. For most of the twentieth century, major consumer-
products companies held fast to mass marketing- mass producing,
mass distributing and mass promoting about the same product in
about the same way to all consumers. Mass marketing creates the
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largest potential market, which leads to lowered costs.

Total Quality Management: Total Quality Management (TQM),
a buzzword phrase of the 1980’s, has been killed and resurrected
on a number of occasions. The concept and principles, though
simple seem to be creeping back into existence by “bits and pieces”
through the evolution of the ISO 9001 Management Quality
System standard.
“Total Quality Control” was the key concept of Armand
Feigenbaum’s 1951 book, Quality Control: Principles, Practice, and
Administration, in a chapter titled “Total Quality Control”
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Feigenbaum grabs on to an idea that sparked many scholars

interest in the following decades, that would later be catapulted
from Total Quality Control to Total Quality Management. W.
Edwards Deming, Joseph Juran, Philip B. Crosby, and Kaoru
8 Ishikawa, known as the big four, also contributed to the body of
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Notes knowledge now known as Total Quality Management.
___________________
The American Society for Quality says that the term Total Quality
___________________ Management was used by the U.S. Naval Air Systems Command
___________________ “to describe its Japanese-style management approach to quality
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improvement.” This is consistent with the story that the United
___________________
States Navy Personnel Research and Development Centre began
___________________ researching the use of Statistical Process Control (SPC); the work
___________________ of Juran, Crosby, and Ishikawa; and the philosophy of W. Edwards
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Deming to make performance improvements in 1984. This
___________________
approach was first tested at the North Island Naval Aviation
___________________
Depot.
___________________
Companies who have implemented TQM include Ford Motor
___________________ Company, Phillips Semiconductor, SGL Carbon, Motorola and
Toyota Motor Company.
The latest changes coming up for the ISO 9001:2000 standard’s
“Process Model” seem to complete the embodiment. TQM is the
concept that quality can be managed and that it is a process.
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Total Quality Management (TQM) is a management strategy
aimed at embedding awareness of quality in all organizational
processes. TQM has been widely used in manufacturing, education,
government, and service industries, as well as NASA space and
science programs.
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Total = Quality involves everyone and all activities in the

company.
Quality = Conformance to Requirements (Meeting Customer
Requirements).
Management = Quality can and must be managed.
TQM = A process for managing quality; it must be a continuous
way of life; a philosophy of perpetual improvement in everything
we do.
Customer Relationship Management (in 1990): Customer
Relationship Management (CRM) is one of those magnificent
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concepts that swept the business world in the 1990’s with the
promise of forever changing the way businesses small and large
interacted with their customer bases. In the short term, however,
it proved to be an unwieldy process that was better in theory than
in practice for a variety of reasons. First among these was that it
was simply so difficult and expensive to track and keep the high 9
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volume of records needed accurately and constantly update them. Notes
In the last several years, however, newer software systems and ___________________
advanced tracking features have vastly improved CRM capabilities ___________________
and the real promise of CRM is becoming a reality. As the price of
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___________________
newer, more customizable Internet solutions have hit the
marketplace; competition has driven the prices down so that even ___________________
relatively small businesses are reaping the benefits of some custom ___________________
CRM programs. ___________________
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In the beginning… ___________________
The 1980’s saw the emergence of database marketing, which was ___________________
simply a catch phrase to define the practice of setting up customer
___________________
service groups to speak individually to all of a company’s
___________________
customers.
In the case of larger, key clients it was a valuable tool for keeping
the lines of communication open and tailoring service to the clients
needs. In the case of smaller clients, however, it tended to provide
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repetitive, survey-like information that cluttered databases and
didn’t provide much insight. As companies began tracking
database information, they realized that the bare bones were all
that was needed in most cases: what they buy regularly, what they
spend, what they do.
Advances in the 1990’s: In the 1990’s companies began to
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improve on Customer Relationship Management by making it

more of a two-way street. Instead of simply gathering data for their
own use, they began giving back to their customers not only in
terms of the obvious goal of improved customer service, but in
incentives, gifts and other perks for customer loyalty.
This was the beginning of the now familiar frequent flyer
programs, bonus points on credit cards and a host of other
resources that are based on CRM tracking of customer activity and
spending patterns. CRM was now being used as a way to increase
sales passively as well as through active improvement of customer
service.
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e-CRM: This is a web based Sales Force Automation tool that

helps you to focus on un-covered customer-revenue opportunities
that are not possible in a manual sales process. The architecture of
the product brings your Customers/Sales Teams/Channel partners
into a single centralized structure. This will help you overcome the
10 stumbling block of remote accessibility of information across your
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Notes
Activity organization. Its easy to use web based interface, faster
Write an article for a business
___________________ deployment and effective implementation will streamline your
magazine on CRM.
sales process quickly and in a cost effective way. It records
___________________
enquiries, follow ups, complaints and details of any other
___________________
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interaction with the client which helps to build and maintain life
___________________ long relation with the customer.
___________________
Check Your Progress
___________________
Choose appropriate answer:
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___________________
1. CRM stands for:
___________________
(a) Customer Retention Management
___________________
(b) Customer Retention Mathematics
___________________
(c) Customer Relationship Management
(d) None
2. Customer relationship management is a concept that
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became very popular during
(a) 1670 (b) 1990
(c) 1790 (d) 1975
Meaning of CRM
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Customer Relationship Management refers to the holistic approach

an organisation can take to manage their relationships with
customers, including policies related to contact with customers,
collecting, storing and analyzing customer information and the
technologies needed to perform these tasks. You should think of
CRM as a strategic process that will help you understand your
customer’s needs and how you can meet those needs and enhance
your bottom line at the same time. CRM (Customer Relationship
Management) is a comprehensive strategy and process of
acquiring, retaining and partnering with selective customers to
create superior value for the company and the customer. The basic
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objective of CRM is to increase marketing efficiency and

effectiveness. It is co-operative and collaborative processes that
help in reducing transaction costs and overall development costs of
the company.
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CRM can be defined as an alignment of strategy, processes and
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Notes
technology to manage customers and all customer-facing
departments & partners. CRM in short is about effectively and ___________________
profitably managing customer relationships throughout the entire ___________________
lifecycle.
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___________________
Most CRM initiatives begin with a strategic need to manage the
___________________
process of handling customer related information more effectively.
___________________
For beginners it could simply mean better lead management
capabilities or sales pipeline visibility. However, as organisations ___________________
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mature in their CRM initiatives, shall visualize as a tool to acquire ___________________
strategic differentiators, t includes adoption of IT related systems,
___________________
training of employees and amendments in business processes
related to customers. It is not just software but an approach to ___________________
update and enhance business methods to improve customers’ ___________________

relationship with the organisation.
Some of the CRM Software systems now offer marketing modules
which specifically integrate a marketing campaign, seamlessly into
a sales effort, then on to customer management as a single CRM
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Software package. Some CRM vendors offer the Marketing
Software module separately, and others include it with the basic
CRM Software.
CRM is a comprehensive approach which provides seamless
integration of every area of business that touches the customer –
namely marketing; sales, customer service and field support –
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through the integration of people, process and technology, taking

advantage of the revolutionary impact of the Internet. CRM
creates a mutually beneficial relationship with your customers. In
the rapidly expanding world of e-Commerce, there is a new
generation of empowered customers emerging who demand
immediate service with the personalized touch.
Relationship marketing is a term often used in marketing
literature. It is sometimes used interchangeably with CRM.
Relationship marketing has been defined more popularly with a
focus on individual or one-to-one relationship with customers
(c)
integrating data-base knowledge with long-term customer

retention and growth strategy. Some writers have taken a strategic
view and shifted the role of marketing to genuine customer
involvement (communicating shared knowledge) rather than
manipulating the customer (telling & selling). Overall, the core of
CRM and relationship marketing is the focus of co-operative and
12 collaborative relationships between the firm and its customers and
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Notes
Activity for other marketing factors. It must, however, be noted that CRM
Make a draft of
___________________ an programs now envisage a wider spectrum of efforts other than
assignment on the needs of
CRM.
data-based one-to-one relationship with customers, which
___________________
characterizes relationship marketing.
___________________
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The development of CRM as a strategy is attributable to certain
___________________
emerging factors. One is the process of disinter-mediation in many
___________________ industries i.e., direct interaction with end-consumers. This is due
___________________ to the easy accessibility of companies to the sophisticated computer
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and telecom technologies. Thus, in the case of financial institutions
___________________
including banks, insurance companies, computer software,
___________________
household appliances and even consumables, the process of
___________________ disinter mediation is making relationship marketing more popular.
___________________ This development is also due to the growth of service sector. In so
far as services are supplied directly to the customers, it minimizes
the role of middlemen. There is inevitably a greater emotional
interaction between service provider and user, which is found
necessary to be sustained and enhanced.
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Needs of CRM
Customer relationship management currently, a much talked
about issue is not a fad, but is very vital for companies in the
present highly competitive scenario. However, across the
organization the attitude towards customer service should be
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inculcated and this should be driven from the top most downwards.
z Companies have to increasingly pursue a customer
centric competitive strategy rather than a product-
centric one: Two trends have brought CRM to the forefront.
First, with increased global competition and easy access to the
latest technology, products have become harder to
differentiate; hence companies are increasingly pursuing a
customer-centric competitive strategy rather than a product
centric one. Second, now it is possible to put customer
information from all over the enterprise into a single system
rather than a no different systems and access it from
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anywhere in the world through the internet.

z E-customers demand constant access, immediate
response, and a personalized touch: Customers in the e-
business age expect constant access to a company, through e-
mails; call centres, faxes and websites. They demand
immediate response and a personalized touch meeting their 13
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needs, placing new demands on the enterprise, which CRM Notes
alone can satisfy. ___________________
z Focus is shifting from supply chain to demand chain ___________________
effectiveness: With the product quality at all time highs,
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___________________
manufacturers find it increasingly difficult to gain competitive
advantage based solely on product attributes. Therefore the ___________________
focus now is on channel operations and customer relationships, ___________________

when there is great potential for adding value and ___________________
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differentiating the offerings. Increasingly companies are
___________________
applying sophisticated information technology to identify,
acquire and retain the most profitable customers by ___________________
continuously improving the highest levels of customer ___________________
experience, and creating and sustaining the highest levels of
___________________
customer satisfaction. Thus, in the era of e-business, the key
source of competitive advantage is shifting. Thinking firms are
revising their strategy to focus on demand chain effectiveness
that is, a continuously improving their ability to identify,
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acquire and retain profitable customers.
z Better understanding and intelligent management of
customer relationships is essential for survival: The effect
of increased commoditization of products and production
processes is that customers now have more and more choices.
Hence giving them better, more personalized product offerings
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and services is the only real way to make a difference winning

the battle for share of mind and share of wallet in this new
economy depends on understanding and intelligently
managing relationships with customers. It is no longer the
privileged domain of particularly successful companies; it has
become the make-or-break challenge for every company.
Check Your Progress

Fill in the blanks:
1. ................... is a term often used in marketing
literature.
(c)
2. With the product quality at all time highs,

manufacturers find it increasingly difficult to gain
................... based solely on product attributes.
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Goals of CRM
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Notes
Activity
Prepare a short report on the
___________________
goals of CRM for an
The idea of CRM is that it helps businesses use technology and
organization. human resources to gain insight into the behaviour of customers
___________________
and the value of those customers. With an effective CRM strategy,
___________________ a business can increase revenues by:
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___________________ z Providing services and products that are exactly what your
___________________ customers want
___________________ z Offer better customer services
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___________________ z Cross selling products more effectively
___________________ z Helping sales staff close deals faster
___________________ z Retaining existing customers and discovering new ones.
___________________
Significance of CRM
The benefits of customer relationship management are considered
abound. It allows organisations not only to retain customers, but
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enables more effective marketing, creates intelligent opportunities
for cross selling and opens up the possibility of rapid introduction
of new brands and products. To be able to deliver these benefits,
organisations must be able to customize their product offering,
optimize price, integrate products and services and deliver the
service as promised and demanded by the customer base. Keeping
the customer happy is obviously one way of ensuring that they stay
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with the organisation. However, by maintaining an overall

relationship with the customer, companies are able to unlock the
potential of their customer base and maximize the contribution to
their business. Whilst the value of customer relationship
management has been identified by organisations, the full
implications and benefits are yet to be evaluated. Those
responsible for delivery are perhaps the most informed about these
strategic benefits yet the transformation is a long-drawn-out
process.
The strategic benefits of customer relationship management allow

companies to reduce the cost of customer acquisition and give
(c)
established players the ability to react like a new market entrant,

the very people they are battling against. Ironically these are
increased and the potential of customers can be then capitalized
through cross selling of other products and services. It is important
to understand the key benefits of CRM for most companies. These
benefits generally fall into three categories; cost savings, revenue 15
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enhancement, and strategic impact. Notes
___________________
Benefits of CRM to Organization
___________________
The benefits of CRM to organization are:
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___________________
z Increased revenue through acquisition of new customers,
retaining existing customers, and increased share of wallet ___________________
through up selling, cross-selling, etc. ___________________
z Reduced costs: The ability to differentiate between customers ___________________
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on the basis of their long-term profitability helps the ___________________
organisation to plan better, cost-effective marketing strategies
___________________
to derive better returns on marketing investments.
Automation of many services and ability to provide many ___________________
services as self-services further reduces the cost. ___________________
Cost of CRM to Organization

Costs of CRM to organization are:
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z CRM requires the organization to make significant
investments in IT infrastructure.
z The organization has to incur the cost of process change
arising out of alteration in the habitual pattern of
accomplishing tasks. Employees find it far easier to carry on
traditional transaction marketing. The company might need to
spend significant amount of efforts to make employees adapt
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to CRM.
Benefits of CRM to Customers

The benefits of CRM to customer are:
z The continuity derived from a relationship with the same
seller results in a simplified buying process and reduction in
customer’s perceived risk. This, in turn, increases the feeling
of safety and comfort.
z CRM provides more avenues for customers to communicate
and explain their needs to the organisation through numerous
(c)
contact points Customers get increased satisfaction and a

feeling of being special and important because of the increased
personalization of services and customization of goods offered
to them.
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Notes Cost of CRM to Customers
___________________ Costs of CRM to customer are:
___________________ z Possible or inevitable loss of privacy. Many customers don’t
___________________ want a company to collect and store information about them.
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Online companies must disclose their privacy policies to the
___________________
customers and give them the right not to have their
___________________ information stored in a database.
___________________
z Opportunity cost associated with ignoring other offers from
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___________________ competitive sources – once a habit is formed most customers
___________________ would refrain from exerting the effort to assess the options and
prices offered by others.
___________________
___________________ Check Your Progress

Fill in the blanks:
1. The idea of CRM is that it helps businesses use
................... and ................... to gain insight into the
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behaviour of customers and the value of those
customers.
2. The strategic benefits of customer relationship
management allow companies to reduce the cost of
...................
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Summary
CRM is a comprehensive approach which provides seamless
integration of every area of business that touches the customer –
namely marketing; sales, customer service and field support –
through the integration of people, process and technology, taking
advantage of the revolutionary impact of the Internet. CRM
creates a mutually beneficial relationship with your customers. In
the rapidly expanding world of e-Commerce, there is a new
generation of empowered customers emerging who demand
immediate service with the personalized touch.
(c)
Lesson End Activity

Prepare a PowerPoint presentation on the concept, needs, goals
and significance of CRM.
Keywords 17
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Notes
CLTV: It is a reflection of the possible future business a company
___________________
can expect from a loyal customer.
___________________
Customer Relationship Management (CRM): It is a model for
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managing a company’s interactions with current and future ___________________
customers. ___________________
Database Marketing: It was used to refer to the procedure of ___________________

creating customer focus groups that could be used to speak to some ___________________
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of the customers of the company.
___________________
Mass Production: It is a system of manufacturing based on
___________________
principles such as the use of interchangeable parts, large-scale
production, and the high-volume Assembly Line. ___________________
___________________
Mass Marketing: It is a market coverage strategy in which a firm
decides to ignore market segment differences and go after the
whole market with one offer.
Total Quality Management (TQM): It is a management strategy
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aimed at embedding awareness of quality in all organizational
processes.
e-CRM: This is a web based Sales Force Automation tool that
helps you to focus on un-covered customer-revenue opportunities
that are not possible in a manual sales process.
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Questions for Discussion

1. Define CRM. What is the significance of Customer
Relationship Management?
2. Explain the marketing strategies for building effective
relationship with a customer.
3. Explain various approaches of customer acquisition.
4. Throw light on the needs and goals of CRM.
5. Describe the significance of CRM.
(c)
Further Readings
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
18
Paul Greenberge, CRM – Essential Customer Strategies for the 21st
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Notes
Century, Tata McGraw Hill, 2005.
___________________
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
___________________
Customer Relationships Management, Wiley, 2003.
___________________
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Alex Berson, Stephen Smith, Kurt Thearling, Building Data
___________________ Mining Applications, 2004.
___________________
CGI Group Inc. White Paper, Building Competitive Advantages
___________________ through Customer Relationship Management, January 2001.
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___________________ Anderson, Paul and Art Rosenberg, The Executive’s Guide to
___________________ Customer Relationship Management, Doyle Publishing Company,
Houston, 2000.
___________________
___________________ Web Readings

en.wikipedia.org/wiki/Customer_relationship_management
searchcrm.techtarget.com/definition/CRM
finance.yahoo.com/q?s=CRM - United States

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www.impelcrm.in
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
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(c)
UNIT 2: CRM Programs and Marketing Initiatives
Unit 2
19
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Notes
CRM Programs and Marketing

___________________
___________________
Initiatives
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___________________
___________________
Objectives ___________________
___________________
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topics:
___________________
\ Decisions of CRM
\ Types of CRM Programs ___________________
\ CRM Marketing Initiatives ___________________
___________________
Introduction
In recent years, however, several factors have contributed to the
rapid development of direct interaction between producers and
customers. The concept of customer relationship management as a
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co-operative and collaborative process has thus tended to be more
common. Its purpose is mutual value creation on the part of the
marketer and customer. Customer Relationship Management
(CRM) solutions provide customer-oriented services for planning,
developing, maintaining, and expanding customer relationships,
with special attention paid to the new possibilities offered by the
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Internet, mobile devices, and multi-channel interaction. CRM

enables a company to capture a consolidated customer view
through multi-channel interactions in a data warehouse solution.
Decisions of CRM
The following factors contribute to the decision making process for
the installation of an effective CRM:
z Clearly define the management objective and strategy
z Evolve the right process around it
(c)
z Identify the right software solution for implementation

z Understand the hidden costs and hurdles
z Back it up with good training and support.
20
While selecting the software solution for implementation, one
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Notes
Activity
should ensure the below dimensions are satisfied:
___________________
decisions of CRM. z It can manage both data and process
___________________
z It is easy to implement and roll out
___________________
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z It is simple to use
___________________
___________________
z Total cost of ownership
___________________ z The risk exposure.
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___________________ Process of CRM decision-making involves below major areas, which
are responsible for automating business processes that are related
___________________
to customers like marketing and sales, etc.
___________________
___________________ Sales Force Automation (SFA)

SFA is responsible for automating all sales related processes. Its
basic purpose is to improve the productivity of sales department
that in turn improve company’s sales process.
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Customer Service and Support (CSS)
CSS is responsible for automating process related to different
services like product complaints, service requests and product
returns, etc.
Enterprise Marketing Automation (EMA)

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EMA is responsible for automation of marketing related processes.

Its key role is to improve efficiency of marketing staff that in turns
improves company’s marketing processes.
Analytical CRM
Analytical CRM is responsible for analyzing customers’ behaviour
in terms of sales, marketing or any other service provided. It
utilizes database and sometimes data warehouse to extract
appropriate data regarding different customers.
Communication/Collaborative CRM
(c)
Communication/Collaborative as the name implies, is responsible

for efficient collaboration/association with the customers through
e-mails, fax, phone, SMS or face to face communication.
Organisations intending to improve their customer relations,
surely implement for their business processes. IT helps to gain and
retain customers and provide services to them efficiently.
21
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Alerts and Interfaces Notes
In order to ensure efficient Customer Relationship Management, ___________________
companies/organisations should provide various means of
___________________
communication to the subscribers. Some alerts or interfaces should
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be provided by company/organisation to offer good customer care. ___________________
___________________
Customer care allows subscribers to serve themselves via various
means offered by the service providers. It reduces cost and ___________________
monitoring overhead at providers’ end, thus ensuring lower churn ___________________
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rate and greater customers’ satisfaction. Customer care can be
___________________
provided via various means such as website, FAQs (Frequently
Asked Questions), knowledge base and forums explaining various ___________________
technical terms for the subscribers and providing an interactive ___________________

environment to seek help. Prior to all these, service providers
___________________
should provide online support to the subscribers to increase their
level of satisfaction.
To enhance customer care, companies should give preference to the
following:
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z Allow subscribers to select any means to communicate with
the support personnel such as Telephone/E-mail/SMS etc.
z Ensure security and reliability in the service being provided to
the customers.
z Process customers’ requests with minimum period of time to
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decrease churn rate of the subscribers.
Trouble Tickets
Trouble Ticket System collects and manages queries/requests from
the customers to facilitate organisation with customer
management. Every time a customer sends a support query, a
ticket is assigned to him/her by the software. This ticket has a
ticket number which acts as a reference number to customer’s
problem. Trouble tickets in this way facilitate tracking of
customers’ problems and help customers as well as company in
monitoring of support process.
(c)
Churn Rate
Churn rate is also known as turn over rate. It is determined by the
number of customers who end/discontinue their relation with an
organisation (for any reason). This term is mostly used for
22 telecommunication services that provide wireless communication
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Notes
Activity or long distance communication facilities or any kind of
Write an article on the various
___________________ subscription.
types of CRM programs.
___________________
Check Your Progress
___________________
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Fill in the blanks:
___________________
1. ................... is responsible for automating all sales
___________________ related processes.
___________________
2. ................... is responsible for automation of marketing
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___________________ related processes.
___________________ 3. .................... allows subscribers to serve themselves via
___________________ various means offered by the service providers.
___________________
Types of CRM Programs
Till recently, most marketers focused on traditional models of
marketing to segment and acquire new customers from its target
segments, using the tools and techniques developed for mass
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marketing in the industrial era, as a way to generate growth. In
the present competitive era, this is proving to be highly ineffective.
Today, there is a different approach to business that involves
relationship marketing, customer retention and cross-selling,
leading to customer extension, which is a far cry from the
traditional segmentation model. Based on the prevailing practices
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and review of literature, it is possible to distinguish between three

main types of CRM programs which do actually have variations
attempted by innovative marketers. The three main types of CRM
programs are:
Continuity Marketing
These programs are generally aimed at retaining customers and
enhancing their loyalty. The basic premise is that of offering long-
term special services with potentiality of increased mutual value.
For end-users in mass markets, attempt is made to offer rewards
to consumers by way of membership and loyalty-cards with variety
(c)
of rewards, which may include privileged services, discounts and

cross-purchased items. As regards distributor customers, the basis
of continuity marketing is offer of continuous replenishment
including Just-in-Time (JIT) inventory management, efficient
consumer response initiatives through electronic order processing 23
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and Material Resource Planning (MRP). Notes
In the case of business-to-business markets, continuity marketing ___________________

may include preferred customer programs or special sourcing ___________________
arrangements, or just-in-time sourcing.
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___________________
One-to-One Marketing/Individual Marketing ___________________
This type of CRM programs aim at meeting individual customers ___________________

needs which is fully satisfying and uniquely customized. In the ___________________
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mass markets, information on individual customers becomes the
___________________
basis of individual customer interactions and attempt is made to
fulfil the unique needs of each as well as develop frequency ___________________
marketing, interactive marketing and after sales programs for ___________________

high yielding customers. Advancement in information technology
___________________
has made it possible to use customer information at low cost.
Customer business development is the form of individual
marketing vis-à-vis distributor customers. A large manufacturer
may be able to offer expert advice based on his knowledge from
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across many markets and also offer resources to build the business
of distributors.
Co-marketing
As regards business-to-business marketing, individual marketing
has been long in use by way of key account management programs,
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which involves appointment of separate teams by marketers to

decide on the use of company resource to be used to meet
individual customer needs, and if necessary, engage in joint
planning with customers at the national as well as global levels.
The relative and marked emergence of CRM as a business
strategy, has radically transformed the way organisations operate.
There has been a shift in business focus from transactional to
relationship marketing where the customer is at the centre of all
business activity and organisations are now desperately trying to
restructure their processes around the needs of their strategically
significant customers. The critical driver of such a shift towards
(c)
customer orientation is the realization that customers are a

business asset that when mange effectively can derive continuous
and sustainable economic value for an organisation over their
lifetime.
24
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Notes
CRM Marketing Initiatives
___________________
Companies simply do not purchase CRM products to automate
___________________
campaign management without a clear view of what they want to
___________________ do. After all, companies devoid of a marketing vision rarely have
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___________________ sufficient budget for CRM software. Those who do, have a variety
of tactics in mind for increasing customer value and loyalty.
___________________
___________________ Cross-selling
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___________________ Cross-selling is the act of selling a product or service to a customer
___________________ as a result of another purchase. The example of a new mother
purchasing products for the newborn; at the same time buying
___________________
clothes for her is an example of cross selling. Cross selling is all the
___________________ rage nowadays, because selling more services to an existing
customer increases revenue from that customer and costs less than
acquiring a new one. Cross-selling means understanding that not
every customer is a good candidate for cross-selling. For instance,
credit card customers have proven to be poor cross-selling
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candidates because favourable interest rates and low fees – not the
card itself or even the issuer – are the dominant determinant of
consumer response to credit card offers. Understanding the ways
by which customers evaluate how and whether to respond to such
promotions is critical. Not surprisingly, the desire to improve
cross-selling business practices accounts for much of the popularity
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of CRM marketing automation technologies.
Up-selling
Likewise, companies are frantically looking for opportunities to up-
sell, or motivate their existing customers to trade up to high priced
products for profitability.
The art of cross-selling and up-selling is understanding which
products will increase, rather than decrease, a customer’s and
subsequently company’s overall profitability. Simply cross-selling a
customer an unprofitable product might actually render that
customer less profitable than he was prior to the sale.
(c)
Behaviour Prediction
Although not so much a marketing practice as a marketing
enabler, behaviour prediction helps marketing departments
determine what customers are likely to do in the future. This
analysis includes several variations: (i) Propensity-to-buy analysis 25
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– Understanding which products a particular customer is likely to Notes
purchase; (ii) Next sequential purchase – Predicting what product ___________________
or service a customer is likely to buy next; (iii) Product affinity
___________________
analysis – Understanding which products will be purchased with
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other products. Also known as “market basket analysis”, it can be ___________________
viewed as examining products in a shopper’s basket to understand ___________________

possible product associations; and (iv) Price elasticity modelling –
___________________
Determining the optimal price for a given product, often for a given
___________________
customer or customer segment.
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___________________
Marketing Decisions
___________________
By understanding consumer behaviour, a company can make a
___________________
host of marketing decisions based on this knowledge such as:
___________________
z Pre-emptively offering discounts or fee waivers to existing
customers who are at risk of churning.
z Refining target marketing campaigns to smaller customer
segments or specific products.
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z Packaging certain products together and fixed-pricing to sell
more products and increase their profitability.
z Marketing automation, the goal is to offer the right message to
the right customer at the right time. For instance, a new
customer whose use of online banking services has steadily
increased might prefer to be e-mailed a new offer along with
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regular statement, whereas a retiree who enjoys visiting the

neighbourhood branch might be delighted when the branch
manger offers a cup of coffee and a brochure on a new annuity
product. Indeed, banking customers have range of choices
when it comes to their preferred channels.
z Cross-selling products are likely to be purchased with other
products. The key to all this analysis, and especially to the
actions that result, is the knowledge of the company’s best
customers.
(c)
Customer Profitability and Value Modelling

For the first time companies could quantify that price-sensitive
customers – those who bring in paper-thin margins – might never
recoup their value, irrespective of their purchase volume, yet
26 certain low-volume customers were nevertheless highly profitable.
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Notes However, profitability is only a piece of the revenue puzzle.
___________________
A customer can be unprofitable but could have referred three high-
___________________ value customers to a firm, thereby rendering himself very
___________________ valuable. Despite not being currently profitable, a recent college
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graduate shows several signs of emerging profitability and thus
___________________
might be considered valuable over the lifetime.
___________________
___________________
Customer Value
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Different companies in different industries will have different
___________________
value metrics. It refers to a Customer’s Lifetime Value (LTV),
___________________
potential value, or competitive value (also known as wallet share).
___________________ Many firms have formalized the practice of value modelling,
___________________ allowing them to score a customer based on one relative worth to
the company over long-time. The score is then used in a variety of
ways to tune communications with that customer. For instance, a
brick-and-mortar retailer recognizes a shopper with a frequent-
buyer card who nevertheless visits the store only during advertised
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sales. The customer has been assigned a low value score. The
retailer sends the customer a pre approved credit card to increase
his value and thus his corresponding revenue contribution. The
credit card might result in raising the number of monthly shopping
trips, as well as boosting the customer’s average purchase amount.
Measurement of Value
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Irrespective of the level of customer value being modelled,

customer value measurement is data-intensive. The challenge of
value modelling is that it is only as accurate as the customer
information data – and the analysis statistically correct. Historical
customer behaviours, product costs, support costs, customer
profitability, and channel usage should all figure into the overall
value of a customer. Basing customer value on only a single metric
puts companies at risk of making erroneous decisions about how to
communicate with customers, which could ultimately decrease
customer satisfaction and increase attrition. Companies can use
the result of customer value analysis to differentiate customer
(c)
service.
Customer Centric Decisions

Personalization is the capability to customize customer
communication based on knowledge preferences and behaviours at
the time of interaction. These technologies enable analysis of each 27
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customer over time and across all channels, using customer profile Notes
data, past purchases, click stream data, and web survey responses ___________________
to determine, for instance, what product the customer is most
___________________
likely to purchase next or whether the customer is at-risk and thus
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deserving a discount offer to lure him back. A personalized ___________________
message reflecting the results of the analysis is then delivered in ___________________

real time when the customer visits the website.
___________________
z Event-based Marketing: The best definition of event-based ___________________
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marketing is a tie-sensitive marketing or sales communication
___________________
reacting to a customer-specific event. Event-based marketing –
also called event-driven marketing – can apply to a segment of ___________________
customers or to individual customers. For instance, mailing an ___________________
application for an increase in collision damage insurance to all
___________________
customers who have recently had traffic accidents is an
example of event-based marketing to a largely
undifferentiated segment of the existing customer base.
The marketing campaigns to be more reactive, real-time
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customer communications highly focused on the individual
customer’s profile. In our previous example, the insurance
company would suggest to each individual customer how much
collision damage insurance would be appropriate given specific
factors such as the customer’s current coverage, claims history,
and demographic. Such event-based marketing tactics combine
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personalization techniques with process design to ensure that

the right action targets the right customer at the right time.
The ideal goal of event-based marketing is to be able to react
to customer events in near real-time, soon after the actual
event occurs. A simple example of this is the grocery store
receipt featuring coupons on the back for merchandise a
customer is likely to be interested in, but might not readily
buy if unprompted. Such real-time, event-based marketing
means detecting and responding to events quickly, often using
complex data-mining capabilities and requires an intimate
understanding of possible events and their desired outcomes.
(c)
Dynamic event-based marketing means reacting to a customer

event in the optimal time frame, which could differ from one
event to another.
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Check Your Progress
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Notes
State True or False:
___________________
___________________
1. Churn rate is also known as turn over rate.
___________________ 2. Cross-selling is not the act of selling a product or
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service to a customer as a result of another purchase.
___________________
3. Different companies in different industries will have
___________________
different value metrics.
___________________
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___________________
Summary
___________________
Companies simply don't purchase CRM products to automate
___________________ campaign management without a clear view of what they want to
___________________ do. After all, companies devoid of a marketing vision rarely have
sufficient budget for CRM software. Those who do, have a variety
of tactics in mind for increasing customer value and loyalty.
Lesson End Activity

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Prepare a PowerPoint slideshow on CRM programs and marketing
initiatives.
Keywords
Event-based Marketing: The best definition of event-based
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marketing is a time-sensitive marketing or sales communication

reacting to a customer-specific event.
Cross-selling: Cross-selling is the act of selling a product or
service to a customer as a result of another purchase.
Continuity Marketing: These programs are generally aimed at
retaining customers and enhancing their loyalty.

1. What gaps you perceive in customer service? How do you
(c)
intent to plug these gaps?

2. Explain the decisions of CRM.
3. What are the various types of CRM programs? Explain them
in detail.
4. Describe the various CRM marketing initiatives.
Further Readings 29
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Notes
Books ___________________
Mohammed H. Peeru and A Sagadevan, Customer Relationship ___________________

Management. Vikas Publishing House, 2004, Delhi.
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___________________
Paul Greenberge, CRM-Essential Customer Strategies for the 21st ___________________

___________________
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert, ___________________
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___________________
___________________
Mining Applications, 2004.
___________________
___________________
through Customer Relationship Management, January 2001.
Anderson, Paul and Art Rosenberg, The Executive’s Guide to

Customer Relationship Management, Doyle Publishing Company,
Houston, 2000.
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Web Readings

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www.impelcrm.in
(c)
30
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Notes
___________________
___________________
___________________
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___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
UNIT 3: CRM Implementation
Unit 3
31
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Notes
CRM Implementation
___________________
___________________
E
___________________
Objectives
___________________
topics: ___________________
\ CRM: A Comparison with CMM Levels ___________________
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\ Drawbacks of CRM Implementation ___________________
\ A Framework for Successful CRM
___________________
\ The Key to Accomplishing CRM Success
___________________
\ Customer Strategy for CRM Implementation
\ Implementing CRM: A Step-by-step Process ___________________
\ CRM implementation process
Introduction
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When one choose the right Customer Relationship Management
(CRM) solution one can immediately increase the effectiveness of
sales, marketing, and support organizations and understand where
marketing campaigns are most effective, where the most profitable
customers come from, how effective sales cycle is, what types of
customs support problems are faced, and how quickly they can be
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resolved.
In case a company picks a wrong solution, it will land up in
spending resources for an overly complex system that goes unused,
wasting precious IT/IS resources on an unproductive project, and
compromising organization’s ability to succeed in an ever-
competitive marketplace.
CRM: A Comparison with CMM Levels
Level One: Ad hoc or Initial

A revolution prevails in an organisation at the level one stage of
(c)
CRM process development. Account managers tend to view

themselves as marketing directors unbound by a structured
methodology for working with customers. There may be a
suggested sell-cycle, but is used spontaneously at best, based on
the impulse of the individual salesperson. Being at level one, an
32 organisation does not mean a failure, it simply means that results
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Notes
Activity are unpredictable. In this type of company, leads get generated,
Write an article on comparison
___________________ sales get made and accounts are serviced. However, sometimes
of CRM with the CMM levels
lead conversion rates are 20 per cent, sometimes they are even one
___________________
per cent. Sometimes deals close in three days, sometimes in one
___________________
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year. Sometimes customer satisfaction ratings are near 100
___________________ percent, sometimes they are in the pits. The problem is – nobody
___________________ can explain why these things happen.
___________________ The success of a level one firm is not dependent on processes
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because there are no any standards. Instead, it is based solely on
___________________
the skill levels of individual marketing, sales and support
___________________
personnel. If there are no CRM processes in place, it is impossible
___________________ to implement a sophisticated CRM system, as there is nothing to
___________________ automate. A firm at this level of maturity would be best served by
providing its people with CRM tools that focus on increasing
individual efficiency (contact mangers, word processors,
presentation systems, and e-mail) versus organisational
effectiveness. Such companies need to do a lot of work on process
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definition before they try to expand their CRM technology plans.
Level Two: Replicable or Repeatable

A level two organisation is one in which things are pretty much
under control. The sales people hit their numbers regularly, future
business is forecast with a fair degree of confidence, and customer
satisfaction is within an acceptable range. The key attribute of a
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level two organisation is that it achieves its success not through

sophisticated CRM process methodologies, but rather through solid
management.
Level two companies are types of companies tend to be successful,
but only as long as there are no major changes in the way business
is done in their marketplace. These types of companies can
successfully implement a more advanced CRM system than in a
level one firm. Since there is a recognized way of doing business,
such tools as opportunity managers, forecasting systems,
configurations, and help desk systems can be implemented to help
(c)
improve operations.
Level Three: Focused or Defined

A level three organisation is one where the CRM processes have
become a way of life for the company. Every employee in
marketing, sales and support has the way of how things need to be
done-not only the accepted way of doing things, but also the only 33
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way a to do them. Because these processes are so ingrained into Notes
daily operations, they can be analysed and improved. This type of ___________________
company is rarely caught by cadges in its marketplace. It can
___________________
detect very early on, when product requirements being to shift,
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when competitive strategies are becoming more effective, or when ___________________
customer satisfactions is just starting to decline. ___________________
This type of company is an optimal candidate for more ___________________

sophisticated CRM system. Processes are so well dispersed ___________________
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throughout the enterprise that these companies can successfully
___________________
absorb technological innovations such as marketing automation
systems, sales-coaching systems, interactive selling systems, and ___________________
systems for marketing, sales, and support performance analysis. ___________________
These companies will probably have no trouble implementing e-
___________________
business extensions to their CRM systems, to allow channel
partners access to the tools.
Level Four: Managed

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Level four is where all companies want to be. A firm at this level
has solid CRM processes that are optimized by the most
sophisticated CRM systems. These companies are also strong
believers in gathering and continually analyzing metrics about
their performance. They have a solid understanding of how they
sell, how their customers buy, and how they need to service client
to create long-term loyalty.
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A level four company is in a position to implement not just great

CRM systems, but great e-business systems as well. These
companies’ knowledge of how they, their channel partners and
their customers do business gives them the insight they need to
determine how to effectively leverage technology to optimize their
operational capabilities.
Level Five: Optimized

A level five company is in a position to prevent defection,
technology change management, and process change management.
(c)
Common causes of customer loss are identified and the company

can prevent the dissatisfaction of their customers by offering
invisible quality and services. Common causes in a stage of slump
in sales and marketing activities are eliminated. Continuous CRM
process improvement is planned and participation of all the
34 departments in the organisation is expected to improve their
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Notes
Activity customer comfort.
With the help of internet, find
out___________________
how to overcome the
drawbacks of CRM Drawbacks of CRM Implementation
___________________
implementation.
Selecting the right CRM solution is not an easy task. Before one
___________________
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make final decision, one need to have a clear sense of how much it
___________________ is going to cost and how long it is gong to take to implement. That
___________________ means that one has to be assertive enough to ask tough questions.
___________________
After all, to make assure the vendors in consideration are
responsive to the needs. Look at the customer list to see if they
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___________________
have a good track record of serving companies; competitors to the
___________________ organisation. The good news is that there are some very good
___________________ products and services out there to help maximize an organisation’s
potential. All a company has to do is find the right ones.
___________________
There is no such thing as an easy implementation. Even installing
Microsoft Word or Excel can be problematic on network for multiple
users. CRM and e-CRM are very complex implementations involving
multiple elements and frequently, back-office integration. It could
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involve coming with multiple software packages that already
installed in the corporate system. Issues such as scalability – it can
help the software handle the amount of use and number of users it
is going to get – are paramount even prior to the selection of the
software. Some CRM applications are focused on the smaller and
mid-size companies, others on the Fortune 1000-sized enterprises.
Large companies with multiple locations have a different set of
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problems than small companies with a single location and multiple

users. Because each company has a different process and culture,
each company will have a unique set of issues to solve with the
implementation-technical, functional, and cultural. Even a perfect
technical installation and carefree customization can fail if one has
employees who do not take care of the system.
Check Your Progress

1. CRM and e-CRM are very complex implementations
(c)
involving multiple elements and frequently, back-

office integration.
2. A CRM framework maximizes the possibility of CRM
implementation success that will be among the 68 per
cent of projects that succeed.
A Framework for Successful CRM 35
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Activity
Notes
A CRM framework maximizes the possibility of CRM Write an article on the
___________________
implementation success that will be among the 32 per cent of framework for successful
CRM.
projects that succeed (as opposed to the 68 per cent that don’t). ___________________
Companies that have successfully implemented CRM solutions are
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___________________
reporting excellent results and the interest surrounding the topic
___________________
is grater than ever.
___________________
A recent study indicated that only 31 per cent of CRM initiatives
___________________
lead to significant improvements in sales performance. Of the rest,
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37 per cent recorded only minor improvements and 32 per cent ___________________
stated that there was no noticeable improvement at all. While ___________________
these results represent a significant improvement from the 60 per
___________________
cent to 80 per cent failure rates reported a few years ago, there is
still clearly cause for concern. ___________________
Lack of Business Focus

A recurring theme in many of the failures is a lack of business
focus. Instead of being driven by a clear strategy that dictates how
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CRM will address marketing, sales, and services issues, many
initiatives are launched by organisations jumping without thought
onto the technology bandwagon. Companies that first select a
solution and then go in search of problems that might be solved by
it are heading for disappointment.
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New Solutions
As further complication is the persisting excited activity in the
CRM solution marketplace, new solutions are arriving almost
weekly, bringing with them fantastic claims of technological
breakthroughs. In this environment, it is extremely difficult to
determine what will work in a particular business situation.
Employee Involvement
CRM involves much more than instilling any one application,
embracing a new technology, or even committing to one vendor’s
CRM suite. It provides better insight into customer behaviour and
(c)
enables new ways of doing business. Good implementation gives

employees a complete view of the organisation’s relationship with
its customers, and opens up internal systems to customers so they
can have access to sales and service themselves.
36
Cultural Change
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Notes
Activity
CRM requires a cultural change that aligns a company, its
___________________
customer strategy for CRM employees and its systems towards customers and away from
implementation.
___________________ traditional product or process – centric models. Companies that are
unresponsive to the shift will soon find themselves scrambling for
___________________
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scraps left behind by those that are.
___________________
___________________ The Key to Accomplishing CRM Success

___________________ Due to the transparent complexity and diversity of CRM solutions,
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there are no simple off-the-shelf methodologies that will guarantee
___________________
results. However, the following important principle will help to
___________________ guide the network:
___________________
Adopt a Suitable Framework
___________________
A simple framework will help to understand the full scope of a
CRM solution and also help to focus on areas that need attention.
A useful framework will encompass the following elements:
z Customer strategy: This will ensure that the company is
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focused on achieving specific customer goals, and will provide
direction to the selection and deployment of CRM applications.
z Customer insight: This encapsulates customer data
acquisition and storage capabilities, insight generation (data
mining) capabilities and insight exploitation capabilities and is
used both to support customer strategy development and to
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drive “intelligent” customer interaction in marketing, selling

and service activities.
Customer Strategy for CRM Implementation

Customer interaction channels encapsulate all the possible ways of
interacting with customers. This comprises a mix of old legacy
channels such as call centres, mail, sales force, and new channels
such as mobile, Internet, voice automation, and interactive TV.
The issues here are which of the new channels will provide an
efficient means of improving customer access and convenience, and
(c)
which of the “old” channels need to be re-engineered to improve

customer service and cost effectiveness. Internet could fall in either
category for some companies. Internet sales and service
capabilities are still to be implemented, whilst for others these are
in place but failing to achieve their potential.
Create a Synchronous Customer Strategy 37
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Notes
This should be one of the first activities in a CRM program.
Initially prepared in outline it evolves and expands as new ___________________
capabilities are implemented and new customer information ___________________
becomes available. It is important to start with at least an outline
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___________________
strategy, as this will help to ensue that all subsequent design and
implementation activities are totally focused on achieving specific ___________________
customer goals with quantifiable business value. A customer ___________________

strategy comprises set of strategic goals that will provide
___________________
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initiatives that can be applies to customers in identifiable
___________________
segments to achieve the overall objective of sustained profitable
growth. ___________________
___________________
Typical Elements of a Strategy
___________________
Obtaining high value customers to improve market-shares;
rewarding the best customers; to improve loyalty ranges of
sleeping customers to reduce agitation; stimulation of occasional
customers to bring more frequent contact; cross-selling to frequent
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low-value customers to improve share of wallet reduction of cost to
market, sell, and serve to low-value customers; migrate frequent
customer on to lower cost channels. The ability to create intuitively
sound actionable segmentation is important. It is important to
segment customers for a meaningful CRM. An enterprise should
start by examining what data is available or is going to be
available and use common sense to determine the level of
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segmentation that will be possible.
Prioritize Initiatives
The next step is to prepare the business case. This will entail
assessing the commercial impact of the customer strategy in terms
of growth of customer base, development of customer relationships,
and reduction of service costs. This should be carried out in a
detailed manner such that the value of different elements can be
evaluated. This will help support the prioritization of development
of initiatives. This prioritization will also allow a phased
implementation plan to be created, which will generate an early-
(c)
benefits stream whilst moving towards the goal of a fully

functional CRM capability. The plans will typically involve three
types of activity: (i) Quick wins – activities that rollout existing
best practices across the business; (ii) Short-term developments –
initiatives that can exploit the existing infrastructure to create
38 benefits quickly; and (iii) Long-term developments – detailed
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Notes design and implementation activities that will create the technical
___________________ infrastructure, processes, and an organisation that will finally
support the fully functional capability.
___________________
___________________ Measurement of the Customer
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___________________ CRM will to be able to deliver significant benefits with a good data.
___________________ However, this can bring significant challenges. Effective target
marketing, for example, depends on the availability of
___________________
discriminatory information on customers. To do well, a good mix of
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___________________ demographic, psychograph, geographic, behaviour, and attitudinal
___________________ information maybe required. This could mean implementation of
___________________
new capabilities to strengthen the ability to measure the customer.
In certain situations where customer transactions are infrequent
___________________
or non-descriptive, third party information might be employed,
acquired through affinity partnerships, or purchase of
commercially available data.
Adopt a Piloting Study

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CRM business cases are often highly theoretical, and it can be
unclear how well a solution element will work in practice. The
careful implementer will adopt a piloting approach where, critical
elements are tried out in the field prior to commitment to full roll
out. This will also help to refine the solution and expose significant
problems and organizational issues at an early stage. Repeat
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problems will also give the opportunity to think about how to apply
the technology to improve the processes, thereby leading to an
entirely new way of working.
Customer Performance Measures

The presence of good, concise management reports describing all
aspects of the customer base can be invaluable in helping to refine
the customer strategies and shape future pre-cuts services and
promotional activities. Such customer performance measures
would typically describe the size and value of key customer
segments, profile, the behaviour and attitude of the segments, and
(c)
track how the value, behaviour and attitude is changing in

response to CRM initiative.
Full Range of Technology

Rapidly advancing technology means e-structuring ways in which
how business is to be conducted. New communications technology
connects remote employees with the rest of the enterprise; the 39
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internet deepens self-service options; telephone advances make Notes
virtual call centre operations possible; call centres or website ___________________
provide selling opportunities by marketing products that are
___________________
relevant to the individual. An effective CRM program makes
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technology a base to be used in an iterative process that considers ___________________
what technology can do for an organisation and vice-versa. ___________________
___________________
Assess Package Solutions
___________________
Given the importance of making the right CRM technology choices,
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sorting through the endless applications on the market today can ___________________
be intimidating and frustrating. Applications should be sorted by ___________________
the broad view of platforms supported and size of company they fit
___________________
the best. Consideration should also be given to vendor viability in
terms of financial stability and service and support capabilities. No ___________________
single vendor currently provides all the required applications, so

users typically must patch together a set of components to fit the
overall solution requirement.
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Skills and Organisational Implications
In implementing CRM capabilities, attention must be paid to
addressing people, process ad organisational issues as well as
technological needs. For example, the analysis of customer
information, to achieve customer segmentation and target
marketing initiatives are rarely successful without the
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involvement of experienced statisticians who are trained to develop

and apply their skills whilst being driven by business
requirements.
Proactive Leadership
At its best, CRM combines the information, systems, policies,
processes, and employees of an enterprise in a unified effort to
identify, attract, and retain profitable customers. Clearly, no single
department can drive the cross-functional process changes
required to achieve a well-defined customer focus. CRM must be
achievement within the fabric of a company, not bolted on to it.
(c)
This means hat CRM initiatives must be planned at the top and
implemented from the boardroom.
40
Check Your Progress
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Notes
Activity
Choose the appropriate answer:
___________________
Make a slideshow on the
step-by-step process
___________________
of 1. With the use of CRM how many percentage have
implementing CRM.
improvement in their business.
___________________
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(a) 37% (b) 31%
___________________
(c) 33% (d) 36%
___________________
___________________
2. Which channels encapsulate all the possible ways of
interacting with customers?
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___________________
(a) Customer interaction
___________________
(b) Customer improvement
___________________
___________________
(c) Customer knowledge
(d) None
Implementing CRM: A Step-by-step Process

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Once the stakeholders are convinced, the budget is set, the
software is chosen, and the integrator/implementation partner is
hired, and then comes the work. The software must be
implemented. This is not a simple matter. Implementation does
not just mean installing the software and hoping that it runs well.
It means understanding how the software must conform to the
business model and the style of the company.
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Implementation is always required, regardless of how much or

little it is. Very rarely does a CRM work right out of the box.
Implementation
When a firm attempts to implement a CRM package without
knowing how implementations work, it is likely that it will face
problems throughout the project. The statement of work and the
change management processes have to be cleared prior to starting
the installation. The industry thumb rule is that the
implementation services will cost at least double to triple the price
(c)
of the software itself. This definitely needs attention.

Implementations on a larger scale are not covered here; they are
more complex in scope and methodology. They have a different set
of problems and often a larger team. A marketing director is often
necessary for tracking the cost, schedule, performance, and risk 41
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factors involved in the project. Notes
___________________
Pre-implementation
___________________
The timeframe on this one varies from several weeks to several
E
months, according to the depth of preliminary work a company ___________________
needs to do. For example, in this timeframe, the decision is made ___________________
to go with e-CRM implementation. The criteria for this are those
___________________
questions the CRM software functionality needs to answer and
___________________
those corporate weaknesses the software and processes need to
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address. Additionally, this is the phase where the stakeholders at ___________________
the executive level are identified and engaged. This also is the ___________________
phase where software selection occurs. The market is witnessing
___________________
new CRM choices every day. The selection criteria must be sharp
and also have some reference to help identify the established ___________________
vendors and new vendors. Identifying the cutting-edge vendors

would considerably ease the process of selection.
Some of the criteria for the selection are:
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z Scalability of software
z Toolset flexibility for customization
z Stability of the existing CRM application with legacy systems
and internet systems
z Level of technical support available during and after the
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implementation upgrades support.
Meeting the Vendor

This is where the implementation partner – be it the vendor, a
large or small consulting services firm, or a systems integrator who
is doing more than just the implementation – meets with the
customer to figure out the customer’s needs. This meeting, which
should take two or three days, is where the customer and the
partner decide which responsibilities are assigned to whom. The
team members meet each other and the chemistry for the
implementations established.
(c)
Project Manager (PM)

The project manager is responsible for all aspects of the
implementation, including cost control, quality and testing, and
customer satisfaction. Since the PM maybe managing several
42 projects simultaneously he usually may not be available to spare
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Notes the required time. The project manager represents a consulting
___________________ services partner or a systems integrator. If there are changes in
the Statement of Work (SOW), it is the project manger that must
___________________
work out the details with the customer. There should be a change
___________________
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management process in place that is approved by both the
___________________ customer and the implementation services company.
___________________
Implementation Leader
___________________
This person is also titled the technical leader. He is responsible for
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___________________ technical aspects, directs the system engineers, and is usually
___________________ dedicated to only one project at a time. He tends to be onsite full
___________________
time until the end of the project. His strength is a combination of
personnel skills and technical knowledge. Often he is a CRM
___________________
architect who takes a hands-on role in the project. He assists the
PM in preparing the statement of work. However, he does not
resolve the problems of the project. The project manager’s team
does that.
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System Engineers
Their primary role is to do the coding and they can be Java
developers or analyst programmers or any developers. They are
onsite all times, unless otherwise, there is work to do at home. In
many implementations, one has to have the technical and
functional expertise necessary do the work. CRM implementations
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are complex. For example, it’s important for the systems engineer
to now how corporate sales processes tend to function. It’s now
time for introductions and assignments for the customer’s team.
First and foremost, the team is the one with the knowledge of how
the company works and is expected to impart that knowledge.
Second, the team needs to know how a CRM works.
When the implementation is done, the partner will probably not
want to stay back and maintain, unless a separate company is
engaged to do so. Therefore, someone has to learn how CRM works
at the technical level. That would be the responsibility of in-house
team.
(c)
In-house Project Manager

The project manager owns the project from the customer’s point of
view. That means the PM is in relationship with the partner’s PM,
and is also the one who sees to it that the statement of work
developed by the partner PM is adhered to. This project manager 43
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filters any suggested changes in the SOW, prior to a discussion Notes
with the partner PM on changes. This PM is also the one who ___________________
approves the pricing of the changes.
___________________
Systems or Business Analysts
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___________________
These employees are the functional experts. They provide input on ___________________
business processes and flow that are enterprise specific. In the
___________________
ideal world, they will be assigned full time to the project and not
___________________
leave it until it is complete. That happens sometimes. The rest of
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the time, they are onsite when can be, which doesn’t necessarily ___________________
dovetail with when they should be. That can create serious ___________________
headaches, if not major problems for the implementation’s
___________________
completion in a timely fashion. Here is where some variance might
also be the case. ___________________
There may be some differences in the way the project is staffed.

For example, there would also be functional expertise on the
implementation partner’s team in the disguise of “business
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analysts”. This would not mitigate the need for the enterprise-
process specialists. It is just that the larger CRM packages have
enormous specialized functionality best understood by a functional
specialist, who has background in the area and who also knows the
product being implemented.
Networking Staff
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People, who are maintaining and setting up the network and its
software, should ensure that there is no significant downtime or
problems during the implementation period. Actually, they have to
do this all the time. Because a good deal of an implementation
process involves working the bugs out of it, the stress on the
system can be high. The administrators, who have enough stress in
their lives as it is, are under greater pressure during this critical
period.
Integration Professional
This expert is in charge of integration of CRM with other
(c)
information systems. This person has to have specialized skills to

interact with the other information systems. For example, someone
who is integrating mid-market SAP with Vantive is going to be
someone who knows how to make the hooks, find the APIs, write
the scripts, and do whatever is necessary to make this work.
44
Heads of Non-technical Departments
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Notes
These heads provide input and approval on issues affecting their
___________________ departments. They can make the implementation succeed if the
___________________ implementation partner understands that they are non-technical,
which means patience and explanations are necessary. They can
___________________
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make it fail if either they think that they have the technical
___________________
knowledge and try to tell the technical group how to do their jobs
___________________ or if they have insufficient explanation of what is going on. This
___________________ usually leads to misunderstandings and wrong decisions. This is a
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very important group of team members who have to do their job
___________________
well.
___________________
It’s important for both teams to come to an understanding as to the
___________________
expectations and the outcomes of the solution as to what the
___________________ system is functionally and technically going to do. For example
both teams must agree that it will allow forecasting in the sales
pipeline that can be managed against the steps of the sales
process. It also means agreeing that it will run under updated
versions of Windows when the company upgrades. As long as the
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agreement is there, things run smoothly for both parties.
Information Gathering
Gathering the requirements for a CRM implementation should
take about three to four days. The length of the requirements
gathering can change remarkably, if the scope of the project is
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significantly bigger. That can be a quantitative reason; there are a

lot more people to interview.
It can be qualitative, if the project meets the requirement meeting,
which happens with the stakeholders, users, other corporate
decision makers, and the IT staff. In other words, all those who are
going to use the system could be a small team, or a big team. The
in-between number tends to be the implementation team group.
This requires that departments cooperate, since the CRM
implementation is going to affect the interactions of every
appropriate department in the company. Marketing, sales, finance,
and so on and are having a direct need to provide input to the
(c)
teams during the requirements in gathering phase.

Once the requirements for the front-office practices are gathered,
the next step is to identify the inputs and outputs. This is the way
users will interact with the system. Some of the questions to be
answered in this phase include:
45
z Which screens will be needed to input data?
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Notes
z Which screen will be need to output data?
___________________
z How will information be retrieved from the system?
___________________
z How does the customer want to wok with the system?
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___________________
z How many users must the system accommodate and how will ___________________
they connect to it, that is via WAN, LAN, individual, remote
___________________
users, remote offices, Web, etc.?
___________________
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First, the users, unacquainted with what the system can
___________________
technically do and not do, often ask for functionality that is
impossible. CRM application prior to the requirements gathering is ___________________
often useful in narrowing the field of dreams. As the project ___________________
proceeds, the functionality list narrows significantly. Obviously,
___________________
the plan is to include as much as possible to keep the customer
happy, but the technical boundaries and the interactions of the
proposed functionality have a lot to do with the ultimate
restrictions on what gets implemented.
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Detailed Proposal Generation
This is where the actual hands-on work begins with prototype. The
purpose of this prototype is to develop some of the key functionality
for the customer to examine before the rollout. By doing it with a
prototype, the various difficulties that crop up in the achievement
of the functionality and the issues it brings up are all on the table
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before a complete implementation for all users is done. This

confirms whether it can be done or not. The same goes for the
creation of fake screens. With the creation of the screens, the
workflow can be demonstrated. This allows the user to participate
in each step of the workflow and prototype development. In most
circles, the methodology that gives the users the maximum
participation and input on deliverables as they are delivered is
called the repeat method. The idea is that the users are involved in
all interactions of the application. The result is happy customers
because they not only verified the workflow, the look and feel of the
screens, but they are also giving input to the team at all times,
(c)
hopefully with a clear understanding of the scope of the statements

of work.
46
Check Your Progress
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Notes
Fill in the blanks
___________________
___________________
1. Rapidly advancing technology means .................. ways
in which how business is to be conducted.
___________________
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2. The .................. is responsible for all aspects of the
___________________
implementation, including cost control, quality and
___________________ testing, and customer satisfaction.
___________________
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___________________ Summary
___________________ Selecting the right CRM solution is not an easy task. Before one
___________________ make final decision, one need to have a clear sense of how much it
is going to cost and how long it is gong to take to implement. That
___________________
means that one has to be assertive enough to ask tough questions.
After all, to make sure the vendors in consideration are responsive
to the needs. Look at the customer list to see if they have a good
track record of serving companies; competitors to the organisation.
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The good news is that there are some very good products and
services that help maximize an organization’s potential.
Lesson End Activity

Visit any company of your choice and comfort. Find out the
techniques adopted by the company to implement CRM.
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Keywords
Cultural Change: CRM requires a cultural change that aligns a
company, its employees and its systems towards customers and
away from traditional product or process-centric models.
CRM Framework: It maximizes the possibility of CRM
implementation.
Networking Staff: People who are maintaining and setting up the
network and its software, should ensure that there is no significant
downtime or problems during the implementation period.
(c)
Business Analysts: These employees are the functional experts.

They provide input on business processes and flow that are
enterprise specific.
Questions for Discussion 47
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Notes
1. What are the drawbacks of CRM implementation?
___________________
2. Explain the comparison between the CRM and CMM level. ___________________
3. “The customer strategy in terms of growth and CRM model
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___________________
has to be well integrated for achieving the objectives of the ___________________
model”. Discuss.
___________________
4. Examine different steps involved in implementation of a CRM
model. ___________________
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___________________
5. Discuss the role of a project manager in CRM implementation.
___________________
6. “Information Gathering is key for successful implementation of
___________________
CRM”. Explain.
___________________
7. A CRM framework maximizes the possibility of CRM
implementation. Discuss.
Further Readings
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Books
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw- Hill, 2005.
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through Customer Relationship Management. January 2001.
Anderson, Paul and Art Rosenberg. The Executive’s Guide to
Customer Relationship Management. Doyle Publishing Company,
Houston, 2000.
(c)
Web Readings
www.crminfoline.com/crm-articles/implementing-crm.htm
www.crminfoline.com/crm-articles/crm-implementation-
process.htm
48
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Notes
___________________
www.edynamic.net/home/.../CustomerRelationmanagement. aspx
___________________ www.webpronews.com/five-steps-to-a-successful-crm-i... - United

States
___________________
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___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
UNIT 4: CRM Projects in Other Disciplines
Unit 4
49
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Notes
CRM Projects in Other Disciplines

___________________
___________________
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___________________
Objectives
___________________
topics: ___________________
\ Phases of CRM Projects ___________________
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\ Development of Customizations ___________________
\ CRM in Marketing
___________________
\ CRM in Human Resource
___________________
Introduction ___________________
In the early stages of any significant CRM effort, you need to look
for symptoms of business process disconnect and incentive
misalignments across various parts of sales and marketing.
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Unifying and automating non-integrated business processes will
only expose or exaggerate contradictions.
Five Phases of CRM Projects

The phases of a CRM projects are as follows:
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Phase I: Sales Module Customizations: The product catalogues,

the sales process embedding, the account and contact databases,
and the sales pipeline management criteria, among other things,
are developed.
Phase II: Marketing Module Customizations: They are no
different in technical process than sales module customizations. It
is merely different in what needs to be customized.
Phase III: Service and Support Module Customization:
Includes call centre technology, Computer Telephony Manager,
Interactive Voice response. There is no difference in the technical
process.
(c)
Phase IV: Integration with External Applications: This is

where there are certain possible difficulties. This is an analysis of
the existing information technology infrastructure and the network
functionality. This work identifies the integration points between
the legacy systems, the CRM application, and the possible
50 installation and customization of other new non-CRM applications
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Notes
Activity and systems. This is always done after the customizations of Phase
___________________ I, II and III and a third intermediate phase of other CRM modules
phases of CRM projects.
(for example, PRM customization).
___________________
___________________ Phase V: Reporting Integration: Oddly, this apparently
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innocuous phase is one of the most important points in the process.
___________________
Reporting is a vital function, especially for businesses that are
___________________ scattered beyond one office. The customization of those reports and
___________________ their generation are critical to corporate success. There are often
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problems when information is not appropriately structured or
___________________
appropriately routed – problems that are corporate-life
___________________
threatening. By making sure the appropriate templates are created
___________________ and the right reports are auto routed to the right recipients, the
___________________ danger of incorrect decision-making is reduced dramatically.
Once there are the appropriate sign-offs on the format and the
final proposal document, the next phase is customization.
Development of Customizations
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The time length of the customization varies widely, six to ten
weeks being typical, and depends on a substantial number of
factors such as:
z The size of the project, the complexity of the interfaces, the
workflow and the functions.
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z The current availability of employees/users to work with the

team, to improve the customizations at a given interaction.
z Technical problems unrelated to the implementation that
affects it. These can be resolved by creating an independent
environment for development, testing and eventually
production.
z Mid-stream workflow and rules change for the customization,
necessitated by changing corporate business. This is
something that can be managed but will affect the timetable
and the price.
(c)
These are a few of the many reasons because of which the project
can exceed the anticipated timeline of six to ten weeks.
z Making the customizations – other production the same broad
CRM category or in the more specialized categories such as
EMA or PRM may to have the easily useable – have a
proprietary architecture, making the application of 51
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customization very difficult. Notes
z The next step is to assign tasks to developers. These ___________________

developers may not be, for example, CRM toolset specialists. ___________________
Rather, they may be Oracle database administrators, front-end
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___________________
tools professionals, People Soft and Vantive integration
specialists, and Java developers, whoever is needed to ensure ___________________
the project’s success. ___________________
z An effective implementation partner will then set up a ___________________
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development environment that mirrors the customer site as ___________________
closely as possible. Needless to say, an exact mirror image is
___________________
not possible. There are differences that will have to exist,
simply because the machines used are not identical. ___________________
___________________
z The project manager is responsible for a project plan at this
phase also. This is a checklist of which development and team
members are assigned to what tasks. Based on the hopefully
successful assignment of these personnel to the tasks, status
reports on the state of deliverables can be given to the
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customers with in agreed-upon timeframes. Depending on the
formalities of the project these can be phone calls or formally
written documents with specific information.
z Throughout this customization period, the development team
demonstrates the functionality to the customer and solicits
customer response. It is important that the development team
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should solicit the customer terms for a successful CRM project.

z With a clear statement of work, strong change management
procedures should be adopted. There is simply no way that
changes to the original, agreed upon statement of work will
not occur. So the change management process is there to
control both costs and time loss. It can satisfy the customer
without succumbing to the client feature that is often the case
when the client realises how much more powerful and
interesting the application is than they expected. This is
universal to almost every project ever done.
(c)
If there are changes to be made, several things must take place

prior to that. As mentioned earlier, a clear-cut change
management process has to be in place so that both the contractors
and the customer can accept the changes. Undoubtedly changes to
the statement of work in function scope will incur extra costs,
52 increase the delivery time and due date of the total
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Notes
Activity implementation, and there is no liability to the implementation
Write an article on the role of
___________________ partner concerning that. It also must include as workflow that
CRM in marketing.
identifies the authority that is empowered to approve the changes
___________________
made and thus add them to the budget.
___________________
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z One in every valuable implementation lesson is to “routinize”
___________________
it as much as possible. In the customization phase, writing
___________________ data routines using the CRM toolkit can save days of effort
___________________ and manual entry. The time saved is inestimable and critical.
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___________________ z Finally, the data routines are written, the screens developed,
___________________
and the other customizations are done. The final part of this
phase is development team testing, which ensures that the
___________________
basic system works.
___________________
Check Your Progress
Fill in the blanks
1. ................... is a vital function, especially for businesses
that are scattered beyond one office.
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2. ................... will then set up a development
environment that mirrors the customer site as closely
as possible.
3. Throughout the customization period, the ...................
demonstrates the functionality to the customer and
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solicits customer response.
CRM in Marketing
Customer relationships are now at the forefront of business.
Breaking all barriers after Liberalisation, Privatisation, and
Globalisation (LPG). Customer Relationship Management (CRM)
has once again gained prominence among management
professional in general and academicians in particular
Relationships are as old as mankind. They have been studied by
Sociologists, Social Psychologists, Anthropologists, Philosophers,
(c)
Theologians and many other people. For that matter businessmen

and academicians and researchers of yester years relied on
relationship for their success. However the modern markets
started taking a fashion recently.
53
It is always interesting to look at history to understand the
S
Notes
evolution of any discipline. Though marketing as a systematic
study of Subject or an activity may be of recent Origin, but the ___________________
practice of marketing is as old as human civilization. The Batter ___________________
System may be a stepping stone for the discipline of marketing
E
___________________
management, which passed through several stages to arrive at
present form. The development of marketing can be choronologized ___________________
as follows: ___________________
z Marketing of the early stages can be termed as traditional ___________________
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marketing which basically refers to the batter system. The ___________________
starting point for the discipline of marketing lies in human
___________________
needs and want. Marketing emerges when people decide to
satisfy needs and want through exchange. ___________________
___________________
z The effect of successful exchange resulted into inventions of
money. Industrial revolution led the seller engages in mass
production, mass distribution and mass promotion of
marketing known as mass marketing epitomized by Henery
Ford.
E-
z Formal marketing started with Psychologists helping
marketers to manipulate customers to their advantage. The
heart of modern strategic marketing can be described as STP
marketing namely – Segmenting, Targeting, and Positioning.
Then it got established as a discipline with its 4P’s – Product,
Price, Place, and Promotion.
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z Then came the value based marketing which emphasized

offering better value to customers money by constantly
improving the quality of products and services offered to
customers.
z Simultaneously, the developments in business -to-business
marketing and services marketing emphasized the need for
developing long-term relationship with customers. The new
paradigm emphasizes the need for the customers. The new
paradigm emphasizes the need for the customer retention
through relationship building. Transaction marketing is part
(c)
of larger idea, that of Relationship marketing Smart

marketers try to build up long-term trusting, “Win-Win”
relationship with customers, distributors, dealers and
suppliers.
54
z Another variant of the same is emerging marketing on the
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Notes
Web leads to one-to-one marketing that emphasizes
___________________
relationship customization at the individual level.
___________________
Model for a Marketing Cycle
___________________
E
In Figure 4.1 present the model of a marketing cycle. These days
___________________
marketing is moving from being broad based to a one-to-one
___________________ relationship with the customer.
___________________
In the early 90s Smart marketers try to build up long-term
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___________________ trusting “Win-win” relationship with customers, distributors,
___________________ dealers and suppliers. With the recent Advent of the era of
Globalization there has been total transformation from sellers
___________________
market to buyers market paved the path for customer relationship
___________________ marketing. Marketers realized that authentic marketing is not the
art of selling what you make but knowing what to make. The
present day marketing concepts rests on four main Pillars, namely
a market focus, customer orientation, coordinated marketing and
profitability. Their focus has shifted towards integrating the three
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elements-people, service and marketing, which is know today as
customer service, quality and marketing in a close alignment.
Thanks to government policy on liberalization, privatization and
globalization which led to bring consumerism in India. Today you
name any product in consumer durable, you have more than half a
dozen brands in each category and there is heavy competition in
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the field with each company fighting in the market to get a major
share.
Customer relationship management has attracted the expanded
attention of scholars and practitioners. Many scholars with
interest in various sub-disciplines of marketing such as channels,
services marketing, business-to-business marketing, advertising
and so forth are actively engaged in studying and exploring the
conceptual foundations of managing relationship with customers.
In a new age, Marketing aimed at winning customer forever,
where companies greet the customers create products to suit their
needs, work hard to develop life-time customer approval, customer
(c)
enthusiasm, etc., of ways like sending thank-you cards, special

discount cards, developed customer database – a large storehouse
of customers personal profile, preferences, intentions, expected
purchases, suggestions, etc. Customer education and customer
invitation on special occasion in company and so on. Constant
improvisation, customization, shift from marketing myopia to 55
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marketing hypermetropia, provision of additional services and Notes
giving something special to customers beyond functional utility ___________________
inclusive of both the tangible and intangible attribute, binds a
___________________
consumer with the brand related brands and company itself.
E
___________________
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
Figure 4.1: A Model of Marketing Cycle
In recent years, however, several factors have contributed to the

rapid development and evolution of CRM. These include the
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following:
De-intermediation process in many industries due to the Advent of
sophistication computer and telecommunication technologies that
allow producers to directly interact with end customers. In many
industries such as airlines, banks, insurance computer program
software, or household appliances and even consumable, the de-
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intermediate process is fast changing the nature of marketing and

consequently making relationship marketing more popular.
Databases and direct marketing tools give them the means to
individualize their marketing efforts. As a result, producers do not
need those functions formerly performed by the middlemen. Even
consumers are willing to undertake some of the responsibilities of
direct ordering personal merchandising, and product use-related
services with little help from the producers.
Thus relationship marketing is aimed to create strong, long
lasting, fruitful relationships by developing long-term bonds
through its various instruments of personal connections as a result
(c)
customer start identifying, associating themselves with the

product, prefer and accept company’s product and service over
competitors offerings, buys again, and recommend others to buy.
56
A Model for Customer Relationship Marketing
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Notes
Indian marketers have recorded a high score for greeting the
___________________ customers, paying them due respect, attending customers
___________________ promptly, talking in terms favourable to them, informing about the
latest in the field, maintaining competitors activity with
___________________
E
customers, asking for references from existing customers,
___________________
promotions of benefits of buying from their company, practicing a
___________________ two-way communication, listening and recording the customer
___________________ problem and keeping promises made as post-sales strategy,
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exploring the opportunity to meet new customers and maintaining
___________________
relationship with existing customers.
___________________
___________________
___________________
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Figure 4.2: A Model for Customer Relationship Marketing
However “Customer Care” is practiced by some of the leading

industries in India. Some examples are given below:
1. Recently Rockitt & Colman Company for the first time in India
has introduced tool free telephone number to serve its
customer better.
(c)
2. Lakme lever employs ‘Computer Touch Screen” to advice

customer regarding use of cosmetics on the basis of the skin
colour satisfaction of the customers beauty consultants are
also there at the point of purchase to help hesitant customers.
57
3. Pond’s Institute has a customer response centre to answer to
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Notes
Activity
each & every letter and phone call received calls answered
Write an assignment on the
with empathy and responsibility. ___________________
role and importance of CRM
in Human Resources.
___________________
4. Recently HLL-SURF received “Open customer feed back” on
product defects and suggestion, new product surf Excel was
E
___________________
lunched on the basis of suggestions given by customers.
___________________
5. In the consumer durable sector, Godrej-GE has a database of ___________________
millions customers, Service personal regularly’. Contact
___________________
customers and enquire about complaints. In order to serve the
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customers better the company franchises its service to expand ___________________
its reach. ___________________
___________________
CRM in Human Resource ___________________
Human resources are arguably the most important resources an
organization could have, and having a good way to manage them is
crucial. Hence, the interest of HR is in CRM.
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A vital responsibility of any organization lies in managing its own
people. Employees and staff make up the organization, and are
arguably among its most important assets, far greater than any
financial ones. Hence, it is within any management’s interest to be
able to take care of its employees and ensure that they are not only
productive, but also satisfied and happy. This task falls square on the
shoulders of the human resources department or its equivalent. In
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recent years, customer relationship management, a strategy for

dealing with clients and customers, has been used to great effect on
employees, too. The interest of HR in CRM lies in its systematic
approach to managing relationships. The resulting hybrid or offshoot
is usually called ERM or employee relationship management.
Now, of course, CRM and ERM would have similarities, but also
differences, which means that the processes and tools of CRM would
not directly translate to ERM. But in terms of the methodologies
used and the software tools applicable to managing customer
relationships, in many cases, they can be used for employees with
(c)
just minor adjustments. This is due to the aforementioned

similarities in caring for employees and customers and in the
approach to doing both based on objective measurements.
For instance, small organizations that are just starting out would
be concerned with new acquisitions, both in terms of clients and in
58 terms of manpower. This would involve the creation of the
S
Notes infrastructure needed to handle greater numbers, as well as the
___________________ implementation of effective marketing and promotional campaigns.
Keeping track of new acquisitions can be done for both CRM and
___________________
ERM using similar sets of databases and interfaces.
___________________
E
Customer and employee retention strategies would also be quite
___________________
alike and may be handled using comparable utilities. These involve
___________________ working with existing contacts and making sure that they are
___________________ satisfied enough to stay with the company. In the case of internal
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contacts, incentive and bonus schemes help improve morale, while
___________________
in the case of external contacts; it would be the quality of service
___________________
that is important. Again, the status of existing contacts may be
___________________ kept in a database and ready access provided via effective
___________________ interfaces. This would streamline both internal and external
relationship processes quite a bit.
Human resources should embrace new technologies, especially
such useful and ready-made ones as CRM software tools.
Managing people, whether employees or customers, may seem like
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a tricky, complex business, and it is, but having and using the
right tools can help immensely. In essence, objective management
approaches make use of the judicious choice of metrics and key
performance indicators in order to measure progress and
achievement. Applying this concept to the specific task of dealing
with people both inside and outside the organization gives rise to
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the ERM and CRM frameworks, respectively. Based on a sound

business plan detailing the organization’s goals and objectives,
these systems of metrics and careful monitoring are great utilities.
The stake of HR in CRM and related technologies and systems
cannot be understated.
Check Your Progress

Fill in the blanks:
1. ................. has attracted the expanded attention of
scholars and practitioners.
2. The interest of HR in .................. lies in its systematic
(c)
approach to managing relationships.

3. .................. should embrace new technologies,
especially such useful and ready-made ones as CRM
software tools.
Summary 59
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Notes
Unifying and automating non-integrated business processes will
___________________
only expose or exaggerate contradictions. If there are changes to be
made, several things must take place prior to that. As mentioned ___________________
earlier, a clear-cut change management process has to be in place
E
___________________
so that both the contractors and the customer can accept the
___________________
changes.
___________________
Customer relationships are now at the forefront of business.
___________________
Breaking all barriers after Liberalisation, Privatisation, and
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Globalisation (LPG). Customer Relationship Management (CRM) ___________________
has once again gained prominence among management ___________________
professional in general and academicians in particular
___________________
Relationships are as old as mankind.
___________________
Indian marketers have recorded a high score for greeting the
customers, paying them due respect, attending customers
promptly, talking in terms favourable to them, informing about the
latest in the field, maintaining competitors activity with
E-
customers, asking for references from existing customers,
promotions of benefits of buying from their company, practicing a
two-way communication, listening and recording the customer
problem and keeping promises made as post-sales strategy,
exploring the opportunity to meet new customers and maintaining
relationship with existing customers.
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Lesson End Activity

Visit a placement consultant company and collect information on
the relationship of CRM and human resources.
Keywords
Relationship marketing: It is aimed to create strong, long
lasting, fruitful relationships by developing long-term bonds
through its various instruments of personal connections as a result
customer start identifying, associating themselves with the
(c)
product, prefer and accept company’s product and service over

competitor’s offerings, buys again, and recommend others to buy.
Employee Relationship Management (ERM): The interest of
HR in CRM lies in its systematic approach to managing
relationships.
60
Customer Care: It relates to the relationship between a product
S
Notes
or service provider and those people who use or buy its products or
___________________
services.
___________________
___________________ Questions for Discussion
E
___________________ 1. What are the five phases of CRM implementation?
___________________
2. What are the advantages of right CRM solution?
___________________
3. Write a short note on the development of customizations.
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___________________
4. Explain the role and importance of CRM in marketing.
___________________
5. Describe the importance of CRM in Human Resource.
___________________
___________________
Further Readings
Books
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Century, Tata McGraw- Hill, 2005.
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Anderson, Paul and Art Rosenberg. The Executive’s Guide to
Customer Relationship Management. Doyle Publishing Company,
Houston, 2000.
Web Readings
www.crminfoline.com/crm-articles/implementing-crm.htm
www.crminfoline.com/crm-articles/crm-implementation-
(c)
process.htm
www.edynamic.net/home/.../CustomerRelationmanagement. aspx
www.webpronews.com/five-steps-to-a-successful-crm-i... - United
States
UNIT 5: Case Studies
Unit 5
61
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Notes
Case Studies
___________________
___________________
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___________________
Objectives
___________________
After analyzing these cases, the student will have an appreciation of the
concept of topics studied in this Block. ___________________
___________________
Case Study 1: The Concorde Saga
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___________________
A technical marvel, the Concorde was the only aircraft offering
___________________
commercial supersonic travel to passengers. Designed and built in
the late 1960s and early 1970s, Concorde represented the dream ___________________
of travelling faster than the speed of sound. The Concorde project
was a collaboration between the governments of Britain and ___________________
France and was launched with the expectation of revolutionizing
air travel. In the initial stages, the project generated a lot of
interest and Concorde received purchase orders from 16 major
airlines by the late 1960s. However, as the drawbacks of flying
these aircraft began to come to the fore, especially after the fuel
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crisis of the 1970s, most of the airlines backed away. Eventually,
British Airways and Air France were the only airlines operating
Concordes.
In 2003, British Airways and Air France decided to discontinue
Concorde services and retire their fleet to aviation museums
around the world. This decision was taken because of several
problems that the airlines experienced in flying Concordes
including, high noise levels, excessive fuel consumption, the
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advancing age of the fleet, safety issues (especially after an Air

France Concorde crashed in 2000) and the declaration of
maintenance partner Airbus that it would not support Concorde
operations after October 2003. On 24th October 2003, the last
Concorde flight landed at Heathrow, drawing to an end an era of
supersonic aviation. The case examines the reasons for Concorde’s
inability to succeed at a commercial level, despite its technical
superiority and discusses the important elements which
determine the success of aircraft.
Issues
z To understand the operation of a one-of-a-kind aircraft, that
was technically superior to any other comparable product of
its time.
To examine the relationship between technical excellence and
(c)
z
commercial success and how the presence of the former does
not automatically guarantee the latter.
Contd…
62
Questions:
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Notes
1. Analyze the case and write down the case facts.
___________________
2. What do you infer from the case?
___________________ 3. Discuss the related issues.
___________________
E
Source: A. Sahay & Sharma. Entrepreneurship and New Venture Creation. Excel Books
Publishing. New Delhi.
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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(c)
63
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Case Study 2: Customs Simplification: An International Airline Notes
Perspective
___________________
Geoffrey Barrington ___________________
Introduction
E
___________________
The name of British Airways World Cargo is familiar to many.
According to the last annual industry statistics, British Airways ___________________
World Cargo is the fifth largest scheduled carrier of air cargo in
the world, an achievement of which we are especially proud, given ___________________
the fact that British Airways only operates with passenger- ___________________
carrying aircraft. How do we achieve it? The main reasons, among
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others, are: ___________________
z We manage our capacity very closely. ___________________
z We supplement our capacity with key partnerships where
___________________
necessary to meet our customers’ demands through our global
route network, which is our key resource. ___________________
These demands also require us to listen to our customers and to
support them in partnership. We recognize the importance of our
role in the global supply chain.
Background
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In the early 1990s, we realized that we had to make significant
changes in the way that we did business if we were to realize the
increasing opportunities that would be available in the future.
This realization became a vision, and we have spent the last three
years turning that vision into a reality. At the top of the agenda
was a major capital investment of US$400 million in a new hub
facility in London to handle over 800,000 tonnes a year. This
investment has not been restricted to London. We have also
invested across our entire global network to ensure that all our
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freight and documents are bar-coded, and we have established

EDI links for all our customers. We are also building a new
90,000-sq. ft. temperature-controlled fresh-produce complex in
London to handle 100,000 tonnes of perishable produce. This will
double our capacity and current revenues of US$72 million a year.
Our vision was not just about facilities, it was about people and
cultures, together with a change in the way we did business and
in the processes and procedures we had relied upon for several
decades. Make no mistake: change is never easy and in a large
organization it presents major challenges. As a business we had
to rise to the challenges. Our shareholders demanded it, our
customers required it, and, equally as important, our staff wanted
it. We invested over 1998 alone. We have made the transition and
are now starting to realize the benefits. The sheer scope and
(c)
speed of these changes are realities of the modern business

climate and in some way, we feel, illustrate the increasing
pressures on trade facilitation. This is not to suggest that the
extent of the change in customs administrations and their
procedures needs to be as great. We realize that the speed of
change will always be faster in the modern business environment
than in regulatory and control regimes. However, given the speed
Contd…
64 of change, it would not be unrealistic to believe that customs
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Notes procedures in ten years’ time will be totally different from those of
today and very much more streamlined. But beware: our business
___________________ requirements will also have changed by that time. It is a step-
change program that is already accelerating.
___________________
As a scheduled operator, we do, of course, have our own
___________________ difficulties when moving our consumables, aircraft spares, and
E
support equipment around the globe. We are also very aware of
___________________
the complexities and differences in customs procedures.
___________________ As a carrier primarily we are not directly involved with
commercial cargo clearance and other inward-processing regimes.
___________________
However, we do move goods under bond and operate customs-
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___________________ bonded warehouses. Furthermore, as carrier we are held liable
under many customs procedures, especially in the event of
___________________ inadvertent discrepancies. These discrepancies cost us real
money.
___________________
It is not my intention to discuss the reasons behind the
___________________ accelerating growth in world trade, other than to say that
deregulation has positively encouraged air transportation and
expanded it into new areas, not least of which is new entrants
into the market. Despite deregulation, the industry still remains
beset by regulatory control, often in the name of “consumer
interests” or “consumer protection.”
E-
The growth in the trade of goods, however, is increasingly
determined by the efficiency of customs processes. We should not
forget the two fundamental roles of customs: revenue collection
and protection of society. In an address to the UNCTAD World
Automated Systems for Customs Data Management
(ASCYCUDA) meeting in Manila in the spring of 1998, the
Secretary General of WCO referred to the balancing act of today’s
customs administrations, among “Competing interests of revenue
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collection, trade facilitation, enforcement of trade instruments

and the increasing demands for social and environmental
protection.”
The reduction or outright removal of trade barriers has turned
more of the focus onto protecting society. In international trade
we recognize that protection does take account of other interests,
such as cultural differences and the need for protection against
transnational crime, especially the traffic in drugs, counterfeit
goods, endangered species, nuclear and biological material, and
money laundering. This protection, however, must not be seen as
substituting one form of control for another, as it would further
complicate and break up trade patterns and flows. The WCO has
some 150 member states, nearly all of which have different sets of
customs procedures. This in itself is a clear demonstration of the
(c)
need for harmonization.

The current deficiencies of customs are the following:
z Their interventionist nature;
z Reliance on transaction-based controls;
z Lack of transparency of procedures;
Contd…
65
z Issues of corruption and integrity;
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Notes
z Little or no redress for error;
z Inadequate resources; ___________________
z Low level of training; ___________________

z Lack of cooperation; and
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___________________
z Outdated technology or even a total lack of automation.
___________________
The scene seems bleak worldwide, but increasingly we are
becoming aware of customs administrations that are addressing ___________________
these deficiencies. Through seminars such as the ASEM Seminar
in February 1999 at the Asian Development Bank in Manila we ___________________
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hope to use our influence for change. It is not our intention to tell ___________________
people how to do things, but to support them and to cooperate in
reaching common goals. The Way Forward Customs integrity. We ___________________
look forward to the implementation of the 1993 WCO
Declaration—Arusha Guidelines, which include simple, ___________________
consistent, transparent customs procedures. ___________________
Customs efficiency: To operate efficiently, customs
administrations worldwide will likewise require:
z Modern legislation;
z Service-based culture and service-level standards; and
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z Streamlined organization.
Accession to international instruments: More countries
should accede to the instruments that have been developed
internationally to simplify and harmonize customs transactions,
such as those of the WCO:
z Harmonized Code System;
z Valuation Agreement;
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Consultation
With our global hub operation based in London, it is essential to
our business that we work as closely as possible with our own
customs administration, as indeed we would with any other
administration, as necessary. The result has been our ability to
develop short-term solutions that facilitate our operations and to
establish practical guidelines on new procedures necessary in an
ever-developing business.
The UK has placed much emphasis on consultation, and UK
Customs has an established and successful Joint Customs
Consultative Committee that brings together customs and trade
on a regular basis. Let me say from personal experience that this
committee does not always produce a consensus of opinion, but it
(c)
has given all parties a fair opportunity to cooperate and to discuss

issues in a genuine consultative forum of major impact to the
interests of both UK Customs and British Airways has been the
success of the MOU on illegal drug control. The MOU has support
from the very top of both organizations and is regularly reviewed
by senior managers from Customs and BA. It has not changed the
“law” but it has greatly facilitated our interface with Customs.
The success of the MOU and the further development of the
Contd…
66 tripartite MOU agreements that are now being signed must not
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Notes be understated.
As an international operator we are no strangers to the need for
___________________
consultation and lobbying. Where possible, we work through
___________________ industry associations at the national, regional, and international
levels. We are active members of regional associations such as the
___________________ AEA. Its EC Working Group in particular enables us to respond
E
regularly to and work with the EC, in such activities as the
___________________
current search for real solutions to the issues of transit reform in
___________________ Europe. Globally, we are proactive within IATA, particularly its
Cargo Facilitation Panel, which is currently developing air
___________________ consignment guidelines. Before closing, may I highlight a growing
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concern. There are too many overlapping bodies and organizations
___________________
(WTO, UNECE, UNCTAD, UNCITRAL, IMO, ICAO, EC, APEC,
___________________ NAFTA, ASEAN, WCO, OECD, IMF, and World Bank, to name a
few) seemingly striving to be flag-bearers of facilitation and
___________________ equally as many trade associations wanting to be heard.
___________________ Conclusion
Let me conclude by raising the stakes a little higher. A key reason
for the growth in procedural obstacles is “the lack of political will
among governments to seek comprehensive solutions or to place
implication of procedures sufficiently high on their domestic or
international trade agendas.”
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This statement does not come from the private sector but from the
European Commission itself.
As a leading international carrier we are proud of having
provided customs with the highest standards of assistance and
cooperation, but we must now seek to ensure that real facilitation
prizes go to the best compliance performers.
Trade will continue to grow, and the proportion carried by air is
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set to increase. Unless there is a coherent plan to modernize

customs procedures worldwide, we must look at customs as
inhibiting this growth. As an international carrier we are not
willing to stand aside and let this happen, and will seek to take
whatever action is appropriate to influence change. Individually
we cannot influence the future growth in trade between Europe
and Asia, but collectively we can facilitate the future. We must
therefore examine every opportunity to simplify and harmonize
procedures.
The demands are growing. We must move forward with firm
resolve. We can form a partnership and that process must begin
right now. Real facilitation is not a question of gains and
concessions but the achievement of gains for all concerned. The
fact that an estimated 2–10 percent of product costs are
attributable to customs and other control regimes suggests that
(c)
there is a multibillion-dollar reason for change.

For British Airways World Cargo real facilitation across our
global business could increase our contribution to the profitability
of British Airways by an estimated US$ 120 million yearly. We
are constantly challenged by change, and, like many others in our
sector, we are only too willing to share with customs
Contd…
administrations the lessons and experience of such change. After 67
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all, we all have a very real interest in the outcome. Notes
Questions
___________________
1. Analyze the case and interpret it.
___________________
2. Write down the case facts.
E
___________________
Source: http://www.adb.org/Documents/Conference/Simplifications_of_Customs/part3.pdf
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
68
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Notes
___________________
___________________
___________________
E
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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(c)
UNIT 6: CRM: A New Mantra in Travel and Tourism
69
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Notes
___________________
___________________
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___________________
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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BLOCK-II
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(c)
70
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Notes
UNIT 6: CRM: A NEW MANTRA IN TRAVEL AND UNIT 8: CUSTOMER RELATIONSHIP
___________________
TOURISM MEASUREMENT
___________________
___________________
E
z Tourism and CRM z Concept of Customer Relationship
___________________ Measurement
z Why Do CRM Implementations Fail?
___________________ z Objectives for CRM Measurement
UNIT 7: CRM TRENDS IN TOURISM INDUSTRY z Factors making CRM Measurement Complex
___________________
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z Introduction z CRM Measurement Frameworks
___________________
z Technology and CRM
___________________ UNIT 9: CRM MEASUREMENT
z Customer Relationship Strategy
IMPLEMENTATION
___________________
z Introduction
___________________
z Implementing CRM Measurement
z Attributes of A CRM Measurement Framework
z Building a Composite Measurement Framework
Customer Lifetime Value

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z
z Customer Equity

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(c)
Unit 6
71
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Notes
CRM: A New Mantra in Travel

___________________
___________________
and Tourism
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___________________
___________________
Objectives ___________________
___________________
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topics:
___________________
\ Tourism and CRM
\ Why Do CRM Implementations Fail? ___________________
\ Ways to Avoid CRM Shortcomings ___________________
___________________
Introduction
CRM provides the organization with the chance to acquire and
retain customer relationships. It serves to convert almost every
customer interaction into the travel and tourism sector. Its diverse
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functionality enables employers, customers and employees to
access common information. Millions of tourists or clients are being
contacted daily through phone, e-mail, fax, and face to face
interactions. All these increase the need for an effective and well-
coordinated customer approach.
Customer relationship management (CRM) solutions are just as
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useful to companies that operate in the tourism industry as they

are in other client or customer-centric enterprises. The ultimate
goal of CRM is still to deliver best total customer experience to
maintain long-term customer relationships.
Tourism and CRM

Tourism is big business in many cities around the world. Various
types of companies make money by offering travelers hospitality
services, tours, transportation and other services and goods on
their vacations and trips. A CRM program, designed to optimize
(c)
the customer experience and make marketing more efficient, can

help companies more effectively turn leads into sales and establish
repeat business.
The World Travel and Tourism Council estimates that business
travel from India will be worth Rs. 46,450 crore by 2013. The
72 tourism industry has contributed Rs. 30,000-32,000 crore in 2006,
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Notes
Activity to India. These mind-boggiing figures indicate that the hitherto
Write an article on the
___________________ unrecognised travel and tourism industry is indeed a sleeping
relationship between tourism
and___________________
the CRM. giant.
___________________ With almost every tourist spot in India as well as overseas
E
registering a steady increase in the number of visitors, more and
___________________
more players are sensing a great business opportunity and are
___________________ entering this segment. Most state governments in India have
___________________ entered the fray, competing inter alia among themselves as well as
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with private agencies, and are promising the very best in terms of
___________________
infrastnicture as well as services. to woo the holidayers.
___________________
With competition hotting up, more and more hotels and travel
___________________
agencies are unleashing attention-grabbing advertisements with
___________________ unique packages—all with a view to enticing the travel-minded
customer to use their facilities and services. Acquiring new
customers while retaining the old ones is the focus of organisations
today. Consequently, Customer Relationship Management (CRM)
is emerging as the core marketing activity for businesses operating
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in fiercely competitive environments. Organisations are now
paying more attention to their relationship with existing customers
and stepping up efforts to increase their share of the customer's
purchases. Modern CRM strategy is all about capturing the
customer's heart share more than his mind share by offering a
differentiating value proposition through various innovative ideas.
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Since the travel and tourism industry is service-oriented, it has to

improvise on existing mechanisms and come up with innovative
ideas to gain customer loyalty and attract new clientele.
Traditionally, the travel and tourism industry did not lay much
emphasis on CRM. Travel was then believed to be a one-time
affair, Tourists were therefore considered to be ‘one-time’
customers and were taken to be part of a floating population. This
made the industry treat its customers in a casual manner, with the
players not too keen on maintaining or building a long-lasting
relationship with customers, However, with changing lifestyles
and attitudes, and people having access to faster and cheaper
(c)
communication mechanisms, information gathering and sharing

(through e-mails, etc.) has come to play a key role in the travel and
tourism industry. The customer's view has crucial implications for
the industry. The significance of treating even the ‘one-time
customers' cordiality is being well-recognised today. A debilitating
customer experience translating into negative publicity regarding 73
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a hotel or an agency may result in the loss of a group or at times a Notes
whole generation of customers. In order to ensure they do not fall ___________________
into this trap, the travel and tourism industry, be it a small hotel,
___________________
agency, airline or a large hotel chain, are investing heavily in
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CRM. ___________________
In a competitive environment, the ability to capture, interpret, and ___________________
leverage detailed customer information has become mission- ___________________

critical, especially in the service industry. ___________________
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Customer relationship management (CRM) applications enable ___________________
travel and tourism providers to maintain brand value and perform
___________________
more competitively in their dynamic marketplaces. CRM supports
the most demanding sales, marketing, and customer service ___________________
requirements of this industry. Built on the market-leading ___________________

functionality, CRM empowers customer-facing professionals with
unmatched levels of reliability, scalability, and user acceptance.
CRM applications help service organisations manage each
interaction—whatever be the channel—for maximum customer
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satisfaction and revenue potential.
The CRM best practices outlined in the tourism industry can be
extended to the B2C relationship in the high-technology services
and support industry, and likewise help improve customer
profitability. The key is collecting accurate customer data in a
consistent manner, storing the data in a usable format, applying
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proven data mining techniques, and market-testing the customer

behaviours learned through analysis. Applying CRM best practices
can generate significant ROI for the technology services industry,
as has been proven in numerous B2C industries.
Companies that focus on CRM have several benefits, They:
z Serve their customers better 24 x 7 (and better than
competitors).
z Reach out to new customers more easily and build stronger
ties with the existing customer.
Deliver most effective and accountable one-to-one
(c)
z
communication.
z Increase the rupee value of existing customers, increase sales
and profitability_
z Reduce administrative and customer support costs,
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z Speed up order to delivery cycles for faster, better customer
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Notes
Activity
service and more turns.
___________________
out the reasons for the failure z Maximise the lifetime value of a customer.
of CRM implementations.
___________________
z Have the ability to use customer data to drive business
___________________
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decisions.
___________________
z Reduce time to market,
___________________
z Are better equipped to meet future requirements.
___________________
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Main aspects of CRM in Hospitality Services are:
___________________
z Know your customer
___________________
___________________
z Customer service
___________________ z Personalisation
z More efficient marketing
z Building customer loyalty.
Check Your Progress

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1. CRM is a product.
2. Applying CRM best practices can generate significant
ROI for the technology services industry, as has been
proven in numerous B2C industries.
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Why Do CRM Implementations Fail?

Organisations the world over have spent a lot of money to
implement Customer Relationship Management (CRM) systems.
According to a survey, more than 80 per cent of CRM
implementations don't deliver on their original promise. Why do so
many CRM implementations fail? One reason could be over-
emphasising better management of their own business by
organisations at the expense of a better customer experience.
While implementing CRM an organisation should focus more on
(c)
the "CR" (Customer Relationship) aspect rather than the "M"

(Management) aspect.
Ways to Avoid CRM Shortcomings

Despite the hype surrounding customer relationship management,
a number of reports suggest that many companies are dissatisfied
with their CRM implementation. The Gartner Group found that 75
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more than half of CRM projects are not expected to deliver a Activity
Notes
measurable return on investment. And a recent study by Forrester Make a report on the ways to
___________________
avoid the shortcomings of
Research indicates that 57 per cent of the companies surveyed CRM.
___________________
could not justify investment in customer service programmes
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because of the difficulty in measuring their impact on profitability. ___________________
The following are the top ten strategies for avoiding common ___________________
shortcomings in CRM: ___________________
z CRM software should be moulded to company’s best practices, ___________________
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rather than forcing to use the best practices of the CRM ___________________
vendor.
___________________
z Understand one's own business processes before buying CRM
___________________
software.
___________________
z No CRM vendor excels in all areas.
z Any CRM vendor only provides 20 per cent of the total CRM
solution.
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z CRM needs are inherently fluid and will change as
organisations evolve.
z Any CRM project that takes more than 90 days to implement
runs the risk of failure.
z The total cost of ownership over five years must include the
entire CRM strategy.
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z Make sure that the CRM vendor is financially stable and can
weather an economic downturn.
z Beware of jumping on to the latest technology bandwagon.
z CRM technology is useless if the employees are unwilling or
untrained to use the CRM product.
Check Your Progress

Fill in the blanks:
1. A recent study by ..................... indicates that 57 per
cent of the companies surveyed could not justify
(c)
investment in customer service programmes because of

the difficulty in measuring their impact on profitability.
2. While implementing CRM an organisation should focus
more on the ..................... aspect rather than the
..................... aspect.
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Summary
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Notes
The travel and tourism industry can better predict when customers
___________________
will require service and provide proactive, prompt service when
___________________ needed. Another facet of the concept of CRM is identifying new
___________________ customers and providing them with customised services on the
E
___________________
basis of their preferences and needs.
___________________
Lesson End Activity
___________________
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Prepare a presentation on the role of CRM in the services sector
___________________
focussing on the Indian tourism sector. Also give examples to make
___________________
your presentation more attractive.
___________________
___________________ Keywords
Tourism: Various types of companies make money by offering
travellers hospitality services, tours, transportation and other
services and goods on their vacations and trips.
E-
CRM program: It can help companies more effectively turn leads
into sales and establish repeat business.
Customer Relationship Management (CRM): It is emerging as
the core marketing activity for businesses operating in fiercely
competitive environments.
Customer relationship management (CRM) applications:
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They enable travel and tourism providers to maintain brand value

and perform more competitively in their dynamic marketplaces.

1. Throw light on the relationship of Tourism and CRM.
2. Explain, why do CRM implementations Fail?
3. What are the various ways to avoid CRM shortcomings?
Discuss.
(c)
Further Readings
Books
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Paul Greenberge, CRM – Essential Customer Strategies for the 21st
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Notes
___________________
Customer Relationships Management, Wiley, 2003. ___________________
E
___________________
Mining Applications, 2004. ___________________
CGI Group Inc. White Paper, Building Competitive Advantages ___________________

through Customer Relationship Management, January 2001. ___________________
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Anderson, Paul and Art Rosenberg, The Executive’s Guide to ___________________
___________________
Houston, 2000.
___________________
Web Readings ___________________

www.crminfoline.com/crm-articles/crm-financial-services.htm
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www.impelcrm.in
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(c)
78
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Notes
___________________
___________________
___________________
E
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
UNIT 7: CRM Trends in Tourism Industry
Unit 7
79
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Notes
CRM Trends in Tourism Industry

___________________
___________________
E
___________________
Objectives
___________________
topics: ___________________
\ Technology and CRM ___________________
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\ Customer Relationship Strategy ___________________
\ CRM and Transport Agencies
___________________
\ CRM and Hotel Industries
___________________
\ CRM and Tourism Intermediaries
___________________
Introduction
A customer is a person who buys goods or services for some price.
The nucleus of every business is the customer. The success of an
E-
enterprise depends heavily on customer satisfaction. It is the era of
the customer. Every customer should know his rights and
responsibilities.
The relationship between the customer and the seller is very
important. This relationship should be regular, smooth and
friendly. When there is no cordial relationship between the
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customer and the seller, then there will be a great danger for the
survival of the business.
Management is both an art and science. The seller should please
the customer by selling quality products at a reasonable price.
We experience CRM ourselves everyday. Dining at a favourite
restaurant or taking our car for service are examples of interaction
with a business that leaves the customers with an experience. If
the customers recall pleasant or unpleasant memories of these
experiences, think about how those feelings affect their propensity
to return to those businesses again.
(c)
Retaining customer loyalty is a sales principle. CRM is actually a

tremendous step forward in creating a system that can provide a
means for retaining individual loyalty.
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Technology and CRM
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Notes
Activity
With the help of internet, find Technology has empowered consumers with the ability to conduct
___________________
out the relationship between business with a variety of alternatives to the traditional face-to-
CRM and Technology.
___________________ face contact.
___________________
E
The Internet blends computing and communication into a
___________________ platform-independent, globally accessible, and universally usable
___________________ medium. To date, the Internet's impact on business has been
substantial, creating new channels for commerce, driving new
___________________
market models and enabling collaborative business-to-supplier
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___________________ relationships.
___________________
Online commerce is maturing rapidly, shaped by changes in
___________________ technology, consumer behaviour, and innovation in business
___________________ models.
The buying pattern of browse by Internet, order by phone, and ship
overnight satisfies the consumer's desire to get the best deal and
ensures that the purchase transaction is correctly handled and
that the wait to receive the benefit is minimised.
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The issue is not whether CRM is important for business, but how
best to apply it. CRM can be a personal undertaking of small
business owners and merchants who do a majority of their trade
face-to-face, and on a scale permitting them to know and
understand their customers. Good CRM becomes much more
challenging to maintain as business scales up, and as technological
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and behavioural trends put distance and anonymity between the

business manager and their customers.
As its core, CRM is an enterprise-wide mindset, mantra, and set of
business processes and policies that are designed to acquire, retain
and service customers. Broadly speaking, CRM includes the
customer facing business process of marketing, sales and customer
service.
CRM is not a technology. Technology is a CRM-enabler.
Every company's game plan includes what we call the G-SPOT.
This stands for Goals, Strategies, Plans, Objectives, and Tactics,
(c)
The CRM G-SPOT is shown in Figure 7.1.

81
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Notes
___________________
___________________
E
___________________
___________________
___________________
___________________
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Figure 7.1: The CRM G-Spot
___________________
The various components of the CRM G-SPOT are discussed below. ___________________
1. Goals: Every business has clearly defined goals. At the most ___________________
basic level, these include things like profitability, worldwide
___________________
recognition, and high stockholder value.
2. Strategies: In order to achieve your goals, you establish
strategies such as designing innovative products, focusing on
international markets, and establishing long-term
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relationships with customers.
3. Plans: Executing strategies requires plans. For example, for
designing innovative products, you might implement a plan of
hiring top product engineers; to focus internationally, you
might develop a public relations plan that targets the
worldwide press; and to establish customer relationships you
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might determine to measure customer satisfaction and

behaviour, and to invest in technoiogy, you might decide to
support customer interaction.
4. Objectives: These are the measurable goals of each plan, such
as maintaining a 60 per cent customer retention rate or
lowering product return rates to less than 20 per cent.
5. Tactics: Tactic imply how you achieve the objectives that are
part of the plans to implement the strategies to achieve the
goals (whew!). For example, you might establish a 24/7 call
centre or create a data warehouse that consolidates all
(c)
customer information.
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Check Your Progress
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Notes
Activity
___________________ State True or False:
customer relationship
strategy.
___________________
1. CRM is actually a tremendous step forward in creating
a system that can provide a means for retaining
___________________
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individual loyalty.
___________________
2. Online commerce is declining rapidly, shaped by
___________________ changes in technology, consumer behaviour, and
___________________ innovation in business models.
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___________________ 3. Goals imply how you achieve the objectives that are
___________________ part of the plans to implement the strategies to achieve
the goals
___________________
___________________
Customer Relationship Strategy
The customer relationship strategy (CRS) is supported by two
dimensions of technology, the Customer Intelligence products that
act in support of the overall CI process (indicated with the arrows
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on the left in Figure 7.2) and the CRM products (indicated with the
arrows on the right in Figure 7.2).
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Figure 7.2: Customer Relationship Strategy
Tourism is the world's largest and fastest growing industry. This

(c)
industry is highly employment-intensive and can earn significant

revenues including foreign exchange. It offers immense socio-
economic development potential. It generates high levels of
economic output with minimum capital investments.
An investment of ` 10 lakh in any tourist-related activity creates
47 direct jobs. As compared to this, the manufacturing sector (with
the same investment) will generate only 12 jobs and the 83
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agricultural sector, 44 jobs. This phenomenon is illustrated in Notes
Figure 7.3. ___________________
___________________
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___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
Source: Tamil Nadu Tourism Statistical Handbook, 1997
Figure 7.3: Tourism and its ALlied Industries

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Tourism requires specialised functionaries. It includes the
functions of transportation, hoarding, lodging, entertainment,
shopping, banking, creating an atmosphere of safety, etc. When
tourists are satisfied with these facilities, they will be happy and
their visits will be frequent. Their satisfaction will also lead to
word-of-mouth promotion of the tourism industry.
CRM in tourism can be seen in terms of the following headings:
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1. CRM and Transport Agencies

2. CRM and Hotel Industries
3. CRM and Tourism Intermediaries.
CRM and Transport Agencies

The tourists avail of all modes of transport, viz., road, rail, water
and air transport during their visit. Customer satisfaction will
influence the tourists to visit more places. CRM plays a pivotal role
in transport services.
(c)
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CRM and Hotel Industries
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Notes
The tourists stay in various hotels depending upon their
___________________ requirements. The services of hotels and restaurants may attract
___________________ customers. When customers are not satisfied with the services of
hotel industries, the customers' visits to hotels will be less. CRM
___________________
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plays a major role in the hotel industries also.
___________________
___________________ CRM and Tourism Intermediaries

___________________ Tourism intermediaries include tourist guides, transport operators,
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shopkeepers, recreational agencies, banks and insurance
___________________
companies. The services of tourism agencies also influence
___________________ customer satisfaction. CRM helps tourism agencies to offer much
___________________ better services to customers.
___________________ The level of satisfaction of customers is decided by the quality of
services rendered by the transport, hotel and tourism agencies.
The focus an customer service has increased exponentially.
Sensitising tourism agencies to customer needs, metrics to track
service levels and customer satisfaction have become derigor.
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Check Your Progress
1. The customer relationship strategy is supported by
two dimensions of technology, the Customer
Intelligence products that act in support of the overall
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CI process and the CRM products.

2. Tourism is the world's smallest and slowest growing
industry.
3. The level of satisfaction of customers is decided by the
quality of services rendered by the transport, hotel
and tourism agencies.
Summary
CRM is very important in the tourism industry now-a-days
(c)
because it is labour-intensive and creates more jobs for both skilled

and unskilled workers. The fully satisfied customers may visit
tourist centres frequently. 'Tourist Satisfaction will he ensured
only with the help of CRM.
Lesson End Activity 85
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Notes
Collect more information on the merging trends and issues of CRM
___________________
in tourism industry. Make a collage from the information collected.
___________________
Keywords
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___________________
___________________
Customer: He is a person who buys goods or services for some
price. ___________________
G-SPOT: This stands for Goals, Strategies, Plans, Objectives, and ___________________
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Tactics, ___________________
Objectives: These are the measurable goals of each plan, such as ___________________
maintaining a 60 per cent customer retention rate or lowering
___________________
product return rates to less than 20 per cent.
___________________
Tactics: Tactic imply how you achieve the objectives that are part
of the plans to implement the strategies to achieve the goals.

E-
1. What are the components of CRM G-Spot?
2. Explain Customer Life Cycle.
3. Examine the role of CRM in the various tourism

intermediaries.
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Further Readings
Books
(c)

86
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Notes
___________________
Houston, 2000.
___________________
Web Readings
___________________
E
www.crminfoline.com/crm-articles/crm-financial-services.htm
___________________
___________________
___________________
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___________________ finance.yahoo.com/q?s=CRM - United States
___________________ www.impelcrm.in
___________________ www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
___________________
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(c)
UNIT 8: Customer Relationship Measurement
Unit 8
87
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Notes
Customer Relationship
___________________
___________________
Measurement
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___________________
___________________
Objectives ___________________
___________________
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topics:
___________________
\ Concept of Customer Relationship Measurement
\ Objectives for CRM Measurement ___________________
\ Factors making CRM Measurement Complex ___________________

\ CRM Measurement Frameworks ___________________
Introduction
Comprised of several distinct disciplines and cutting across just
about all business units within most companies, Customer
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Relationship Management (CRM) measurement is complex.
Companies use CRM measurements for different purposes; digital
channels provide for new measurement and product/service
distribution options; businesses are fractured internally with
inconsistent communication and often incompatible systems.
One big issue in convincing the top management about allocation
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of CRM budget is the lack of proper measurement tools to show the

improvements convincingly. What makes CRM measurement
difficult is that the measurement problem is not confined to just
measuring customer behaviour and mindset. Instead, businesses
need to measure activities that occur inside the company, too. CRM
measurement also sometimes goes beyond measuring those
activities that directly touch the customer (value delivering
capabilities).
Concept of Customer Relationship Measurement

(c)
Relationship marketing some times is referred to as Customer

Relationship Management (CRM). Earlier, organizations could
have a close relationship with only a few of their bigger clients and
it has not been possible to be close to each and every customer, as
such customer base has been generally large, many times running
88 into millions. With the adoption of information technology, it has
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Activity
Notes now become possible to forge a close relationship with each of the
___________________ customers.
concept of customer
relationship measurement.
___________________ The concept of CRM is now gaining wide acceptance and is
recognized as a powerful tool for business development and to have
___________________
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an edge over the competitors on account of the universal traits of
___________________
human behaviour. People need to have social and interactive
___________________ relationships. So fast moving organizations believe in their
___________________ customers, understand their needs in advance before the
customers give the feedback about their particular requirements
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___________________
and design their products matching to such needs.
___________________
According to Cap Gemini Ernst & Young, a leading management
___________________ consulting firm, CRM is defined as “a company’s ability to
___________________ continuously maximize the value of its customer franchise by
effectively allocating scarce resources to specific customers
segments in those areas viewed as having a significant impact on
the profit – impacting behaviours of customers.”
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Objectives for CRM Measurement
There are three main purposes for CRM measurement: to influence
or validate decision making, to guide ongoing activities or tactics,
and to predict future states.
Influencing Decision-making
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Companies implement CRM measurement very differently based

on their internal decision making styles. As companies make
decisions about customer strategies, they look to customer
measurement to help influence specific decision makers or the
decision making process or validate initial ideas about how to
manage customer relationships.
Many companies frequently adopt more than one style. The styles
adopted, consciously or not, shape how the company will measure
customer activity. The company’s business model, approach to the
market and history of measuring customers also influences which
(c)
of the measurement styles seem more appropriate or expedient for

the company.
Guiding Ongoing Activities

CRM measurement frameworks are not only used to help
managers collectively formulate plans and make decisions, but
they are also used to inform and guide ongoing daily activities 89
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related to customers. This is related to but somewhat different Notes
from influencing decision-making. Measuring customer activities ___________________
not only helps companies decide which customer strategies to
___________________
adopt, but also helps front-line employees and managers perform
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regular tasks. Often, this is the predominant focus for CRM ___________________
measurement systems. For example, for those businesses with call ___________________
centres, managers frequently run reports from the call centre
___________________
technology systems, such as Automatic Call Distribution (ACD)
___________________
systems, on how well the call centre is performing and if customers
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are being serviced at the prescribed level. If managers see ___________________
problems with performance, those problems can be diagnosed and ___________________
resolved.
___________________
Since a company interacts with customers through a variety of
___________________
different business units in a variety of methods, each business unit
measures customers very differently. The way a brand manager
measures its customer-facing activities is very different from the
way the field service staff may measure its customer-facing
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activities. It is this different way of “touching the elephant” that
contributes to a company’s inability to deliver on the promise of
CRM systems. Given the diverse nature of these measurement
frameworks, it is not surprising that CRM practitioners are often
skilled in one measurement framework and unaware of the issues,
complexities and importance of the other frameworks.
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Specific measures in each of these measurement frameworks can

be focused internally towards company employees and productive
processes that generate and deliver products and services or
externally towards customers and their behaviour. For example, a
call centre frequently measures the cost per call as a measure of
economic productivity. This is an internally focused measure. Call
centres frequently survey customers to determine the level of
customer satisfaction.
When it comes to coordinating customer-facing activities, the level
of interconnectedness within companies and within value chains
can be surprisingly high. In the retail Consumer Packaged Goods
(c)
(CPG) industry, when a grocery store chain changes its consumer

promotion schedules, at least seven groups within a CPG firm are
impacted: sales, marketing, trade promotions, warehouse,
transportation, manufacturing and finance (Rubin, 2001). Rubin
reports the lack of coordination costs manufacturers $100,000 in
90 lost revenue per promotion. Collaborative supply chain tools,
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Notes planning, forecasting and replenishment applications, address
___________________ these issues and all are heavily dependent on customer insight
capabilities within each company in the value chain to work.
___________________
___________________ When CRM measurement is looked at in this way, one can get the
E
impression that CRM is too wide of a discipline and a technology
___________________
set since it encompasses nearly every aspect of a company. While
___________________ this is true, that is because companies exist to sell to and serve
___________________ customers and it is natural that a wide set of measurements would
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need to be managed. Companies also have to manage all sorts of
___________________
measures and measurement frameworks that customers are
___________________
typically not interested in, such as stock price volatility, bank
___________________ financing interest rates, overall accounts receivables day’s sales
___________________ outstanding and so on. So where does CRM measurement begins
and end? One way to answer that is to say that CRM should
measure those company activities that pertain to or can benefit
specific customers as well as specific customers’ behaviour and
mindset.
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Predicting Future Market
Companies have a need to use CRM technology to help anticipate
customer needs or otherwise predict a future customer or market
state. Within marketing, there is a long history of using predictive
modelling techniques to test out potential marketing approaches to
determine how successful the program will be in advance of
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launching the entire program. CRM technologies and approaches

are being used to help companies improve the design of existing
products and build new innovative products through closer
collaboration with customers. Digital technologies let companies
engage customers in a less costly and highly measurable dialog.
Companies use CRM technology to help predict future states in
other ways. Gathering customer insight to drive product or service
innovation can take many forms, from well-controlled research
experiments and surveys to more collaborative and ethnographic
approaches. All of these approaches collect data that can be
(c)
structured and measured. For more traditional CRM system

implementations, companies frequently pilot the solution within a
single business unit or customer segment (or a small part of a
customer segment) to determine if the program will be successful
before being rolled out to the entire company or market.
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Check Your Progress
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Activity
Notes
___________________
factors making CRM
1. ACD stands for: measurement complex.
___________________
(a) Automatic Customer Detection
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___________________
(b) Automatic Call Distribution ___________________
(c) Automatic Call Decision ___________________
(d) None ___________________
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2. CPG stands for: ___________________
(a) Customer Packaged Goods ___________________
(b) Consumer Packing Goods ___________________
(c) Consumer Packaged Goods ___________________
(d) None
Factors making CRM Measurement Complex

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Several factors have conspired to make CRM measurement
increasingly complex:
z The appearance of many different digital channels to exchange
information with customers
z The ability to distribute all or parts of the product/service
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bundle through digital technologies

z Business unit silos causing differentiated and disconnected
technologies and human processes
z Product silos causing differentiated and disconnected
technologies and human processes
z Increased data and process integration between companies
within a value chain
z Differing styles of customer decision-making approaches
z Differing CRM measurement purposes: influencing
(c)
collaborative decision-making processes, guiding ongoing

activities and predicting future states.
The challenge for businesses is to weave together a CRM
measurement approach that deftly handles these complexities and
constraints.
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CRM Measurement Frameworks
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Notes
As discussed earlier, how a company measures its CRM activities
___________________
depends on who is doing the measuring and what activities are
___________________ being measured. Below are the common CRM measurement
___________________ frameworks:
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___________________
Brand-building
___________________
The goal in brand building is to carefully manage a company’s
___________________ name, brands, slogans and symbols, otherwise known as brand
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___________________ equity. Various models (and criticisms) of brand equity have been
published over the years. The main challenge lies in how to
___________________
quantify this important intangible asset. David Aaker (1991)
___________________
breaks down brand equity into four components as described in
___________________ Table 8.1.
Table 8.1
Brand Loyalty This is a measure of the attachment a customer has to

a brand. How likely is a customer to switch to another
brand?
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Brand Awareness This is the ability of a potential customer to recognize
or recall a brand as a member of a product category.
Perceived Quality This is the customer’s perception of the overall quality

of a product or service with respect to its intended
purpose and considering alternatives.
Brand Associations This is anything that is linked, in the mind of the
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customer, to a brand. The association also has a level

of strength. An association can be a celebrity or
person, a life style, a geographic area, various product
attributes, some customer benefit, a particular
application or use and any other intangible concept.
Brand loyalty can be measured quantitatively in a number of ways.

So can brand awareness through surveys and interviews. Many
qualitative techniques are used to generate measures for perceived
quality and brand associations.
Companies can look at brand building as if they were managing an
asset. Brand equity can be calculated by removing from operating
(c)
earnings attributed to a brand the cost of capital, taxes and risk

and then determining the value of the remaining number as a
discounted cash flow extending out five or more years (Schultz,
2001).
93
By treating brand value as an asset, investments in brand building
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Notes
can be measured and more easily compared with other corporate
investments, the value of the brand and the performance of the ___________________
investments can be tracked and the performance of specific brand ___________________
activities can be monitored. Measuring brand value can get
E
___________________
complex. Boston Consulting Group’s Brand Value Creation (BVC)
approach looks at dozens of variables concerning different aspects ___________________
of a brand and various competing brands and determining how ___________________

significant each variable is to the brand’s value (Bixter, et al., ___________________
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1999). This approach uses cross correlation analysis, cluster and
___________________
factor analysis and linear regression to build the brand value
model. The authors state that this approach helps companies ___________________
understand what consumers value most and how well brands ___________________
deliver it.
___________________
Davenport and Beck (2001) suggest a different way to think about
company or brand awareness. Their technique, called the Attention
Scape, helps managers understand what kind of attention they are
getting from customers (or employees, suppliers, etc).
E-
Data is collected through survey techniques and plotted along
three scales:
z Front of mind/back of mind attention
z Voluntary/captive attention
z Attractive/aversion attention.
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Competitors can be plotted along these axis and companies can

develop strategies to reposition themselves relative to their
competitors’ attention profile.
Customer Equity Building

Recently much has been written about the benefits of looking at
customers as the key asset, rather than the brand as the key asset.
Companies have historically measured products and brands and
focused on eliminating unprofitable products from their portfolio.
This approach, while seemingly a correct one, fails to account for
(c)
the multi-product effect on customers and can actually cause a

“profitable product death spiral” in which weeding out unprofitable
products causes initial customer defections, which causes
additional products to become unprofitable, which causes further
elimination of unprofitable products and so on (Rust et al., 2001).
94 Rust et al. argue for changing the focus from unprofitable products
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Notes to unprofitable customers.
___________________
With the customer as the primary unit of analysis, the CRM
___________________ literature suggests two frameworks: understanding how customer
___________________ equity links to business value and understanding how customer
E
behaviour works and is linked to parts of the overall customer
___________________
equity. The first framework is a management framework for
___________________ linking various customer-facing activities in a reasoned way to
___________________ overall customer equity and business success. The second
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framework is a marketing research framework that seeks to
___________________
understand how customer behaviour is influenced by a company’s
___________________
customer-facing activities.
___________________
Customer Value Management
___________________
Different approaches exist for measuring customer value. Four
approaches are considered here: customer equity management,
customer value analysis, loyalty monitoring, and customer
satisfaction. While customer equity management, as described by
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Rust et al. in 2001 is perhaps the most encompassing of the
approaches, each of these approaches has a history of research and
literature behind it.
Customer Equity Management

Rust et al. identify three main components to customer equity as
describe in Table 8.2.
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Table 8.2
Value equity The customer’s objective assessment of the utility of the

brand, with quality, convenience and price satisfaction as
key components.
Brand equity The customer’s subjective and intangible assessment of

the brand beyond its objectively perceived value. Key
components include the customer’s awareness of the
brand, customer’s attitude towards the brand and how the
customer perceives the brand’s social ethics.
Retention equity The customer’s tendency to stick with the brand above and
beyond the customer’s objective and subjective
(c)
assessments of the brand. Key components include loyalty,

special recognition, affinity, and community and customer
knowledge-building programs.
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Each of these areas of customer equity requires measurement and
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Notes
the authors identify some preliminary drivers of each area of
equity that can be measured. ___________________
___________________
Customer Value Analysis (CVA)
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___________________
Much has been written about Customer Value Analysis (CVA),
___________________
which was devised by Bradley Gale and utilized by Ray
Kordupleski at AT&T. CVA compares price and quality (or value) ___________________
of a product against competitors. The purpose of this analysis is to ___________________
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determine how changes in price, value or quality can affect market
___________________
share and as such, this framework provides a linkage between a
company’s customer facing activities with overall corporate ___________________
performance. One form of this analysis compares two competitors ___________________

in a grid with two axes: relative cost and relative product and
___________________
service quality.
Since each product or competitor’s scores for price (Relative
Competitive Price or RCP) and quality (Relative Total Quality or
RTQ) are expressed as relative percentages (for example, between
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90% and 110%) of each other. If one company changes price or
quality in its product, the position of both company’s products will
change on the map. In essence, this map tries to show how
customers perceive the product relative to a competitor and how
price and quality perceptions will affect their choice in purchasing
(Gallagher & Kordupleski, 2000). Most of the analysis work is in
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determining the components to quality, although depending on the

product and category, price can have several components that
require analysis as well. When performing this analysis, perceived
price (or price satisfaction) and perceived quality are the key
measures versus actual price and quality. Surveys are a primary
means of capturing CVA data.
Frequencies and sampling can vary depending on how dynamic the
customer base and competitive environment are and how
frequently internal processes within the company change.
CVA fits inside of a comprehensive framework call Customer Value
Management (CVM). CVA is the information component of
(c)
customer value management (APQC, 2001). CVM has a strategic

component that helps companies answer four basic questions:
z Where are we now?
z Where do we want to go?
96
z How do we want to get there?
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Notes
___________________
z Are we there?
___________________ CVM also has a continuous improvement component or an

operational component that helps companies understand the root
___________________
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cause of delivery failures, improve the value delivery systems,
___________________ enhance team development across all improvement initiatives and
___________________ establish customer recovery or intervention programs to keep and
enhance profitable customers and shed unprofitable ones. The
___________________
APQC identifies four basic steps for establishing and monitoring a
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___________________
CVM measurement system:
___________________
z Identify strategic priorities in the context of customers and
___________________ products.
___________________ z Conduct qualitative research to get a comprehensive
understanding of the ways customers think about value.
z Conduct surveys that will provide data for analysis so that the
company can determine what from the customer’s perspective
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are the 3-4 key benefits of the 10 or 12 benefits for each
product. These surveys need to be specific to customer
segments.
z Monitor the value proposition with a limited subset of
questions.
CVM proponents feel the method addresses limitations within the
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customer satisfaction survey approach. According to the APQC,

customer satisfaction scores lack linkage to key internal
performance metrics and may be unrepresentative of how
customers really evaluate product and service purchase decisions.
The customer satisfaction framework is older and widely adopted
in North America while the customer value framework is newer
and being adopted by leading edge companies (Gale, 2002). Gale
positions CVM as the latest evolutionary version of voice-of-the-
customer initiatives with conformance quality as the first followed
by the customer satisfaction and then the customer loyalty
paradigm.
(c)
Loyalty Monitoring
Frederick F. Reichheld’s writings on loyalty (not just customer
loyalty, but employee and shareholder loyalty as well) are widely
cited with the CRM world as a framework for measuring the effect
of customer-facing activities. This measurement framework helps 97
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companies look at the customer base along a longitudinal axis. The Notes
central notion is that if a company can cause fewer customer ___________________
defections, the long-term effects on company performance would be
___________________
significant. Customer loyalty data, then, serves as a predictor of
E
financial performance. For example a 5% increase in customer ___________________
retention rate can have between a 30% and 95% impact on ___________________
customer net present value and a similar impact on corporate
___________________
profits (Reichheld, 1996).
___________________
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Customer Satisfaction ___________________
For the past several decades, businesses have been determining ___________________
customer satisfaction to help improve their customer-facing ___________________
activities and predict and improve financial performance.
___________________
Customer satisfaction, then, is an antecedent to some form of
loyalty behaviour. Customer satisfaction has been defined as a
“satisfactory post-purchase experience with a product or service
given an existing pre-purchase expectation,” (Vavra, 1997).
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Vavra (1997) offers a model for customer satisfaction in which
satisfaction is an antecedent to repurchase behaviour and has
several antecedents as well. The most important antecedent is
prior experience that “serves as a ‘memory bank’ of all the previous
experiences with a product or service.” Several factors can
influence prior experience, such as the customer’s demographic
characteristics, their level of personal expertise, the nature of the
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competition, advertising and PR influences, and the evolution of

technology. Along with prior experience, customer desires and
expectations, the perceived product or service performance and
ease of evaluating that performance are all antecedents to a
mental process customers go through to compare what was
expected and what was delivered. This “disconfirmation /
confirmation / affirmation” process, in which expectations are not
met, met or exceeded, can be visualized as a sigmoidal function
(Vavra, 1997).
Customer Behavioural Modelling

(c)
Embedded within brand-building and customer equity

measurement frameworks is some form of a customer behavioural
model. These models try to explain one or more customer
behaviours by describing the antecedents on that behaviour and
the level of influence each antecedent has. The reason customer
98 behavioural modelling is discussed separately here is that the
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Notes market research literature is rich with studies that do not
___________________ necessarily try to tie customer behaviour to financial performance
or company responses. Instead, the research simply wants to
___________________
understand customer behaviour better more or less removed from
___________________
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specific company goals, objectives or performance. In addition,
___________________ researchers are focusing on new concepts to link to customer
___________________ behavioural loyalty.
___________________
Customer-facing Operations
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___________________ Most, if not all or traditional CRM and customer transaction
___________________ software, collect all kinds of basic data regarding customer facing
___________________
activities. These operational CRM systems automate customer
facing activities and in doing so, collect information on employee
___________________
and customer behaviour. For most companies deploying CRM
technology, these are the only kinds of CRM measurements they
make.
Marketing Operations
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Software that manages marketing operations lets companies plan,
schedule, execute and track their marketing campaigns. Several
key metrics from the marketing automation function are shown in
Table 8.3.
Table 8.3
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Reach How many potential customers have been reached by the

campaign?
Response rates What percentage of the total campaign population
responded to the campaign?
RFM Stands for recency, frequency, monetary value. This is a
calculation for scoring a customer based on past
behaviour. The recency of past interactions (purchases),
the frequency of that type of interaction and the
monetary value of those interactions are added together,
with specific weighting applied. This composite score is
used to predict likely involvement with a campaign.
Conversion What percentage of the total campaign population bought
(c)
rates something or completed an activity (enrolled in a

sweepstake, for example) as a result of the campaign?
This CRM area is perhaps the most mature. Companies have been
deploying sales force automation solutions long before CRM
became a popular buzzword. The rise of Sales Force Automation
(SFA) software parallels that of the portable and laptop computers
and the handheld devices. Measurements in sales force operations 99
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focus on tracking leads as they develop into sales, measuring Notes
performance of individual sales staff members and teams, ___________________
monitoring the sales performance of products, reviewing the
___________________
impact training has on performance, and the cost of sales.
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___________________
Service Centre Operations ___________________
With the increased use of phone technology to handle incoming ___________________
phone calls and manage outbound sales calls, companies have long
___________________
housed those resources into a single functional group called the
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call centre, service centre or interaction centre. Much has been ___________________
written about call centre and service centre operations, revealing a ___________________
host of measures (Anton, 1997). ___________________
Check Your Progress ___________________
Fill in the blanks:

1. The goal in ................ is to carefully manage a
company’s name, brands, slogans and symbols,
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otherwise known as brand equity.
2. ..................... compares price and quality (or value) of a
product against competitors.
Summary
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Comprised of several distinct disciplines and cutting across just

about all business units within most companies, Customer
Relationship Management (CRM) measurement is complex.
Companies use CRM measurements for different purposes; digital
channels provide for new measurement and product/service
distribution options; businesses are fractured internally with
inconsistent communication and often incompatible systems.
Despite this complexity, companies are adopting measurement
systems, or frameworks, that have acceptance in the marketplace.
These frameworks range from the strategic to the operational.
(c)
Lesson End Activity

Prepare a PowerPoint presentation on the concept, objectives and
factors of Customer Relationship measurement.
100
Keywords
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Notes
Brand-building: The goal in brand building is to carefully
___________________
manage a company’s name, brands, slogans and symbols,
___________________ otherwise known as brand equity.
___________________
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Customer Value Analysis (CVA): CVA compares price and
___________________ quality (or value) of a product against competitors.
___________________ Call Centre: With the increased use of phone technology to handle
___________________ incoming phone calls and manage outbound sales calls, companies
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have long housed those resources into a single functional group
___________________
called the call centre, service centre or interaction centre.
___________________
___________________
___________________
1. Explain the concept of Customer Relationship Measurement.
2. Describe the objectives for CRM measurement.
3. List and explain the factors making CRM measurement
Complex.
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4. Discuss the various CRM measurement frameworks.
Further Readings
Books
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(c)

Houston, 2000.
Web Readings 101
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Notes
___________________
___________________
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___________________
www.impelcrm.in
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
102
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Notes
___________________
___________________
___________________
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___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
UNIT 9: CRM Measurement Implementation
Unit 9
103
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Notes
CRM Measurement
___________________
___________________
Implementation
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___________________
___________________
Objectives ___________________
___________________
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topics:
___________________
\ Implementing CRM Measurement
\ Attributes of A CRM Measurement Framework ___________________
\ Building a Composite Measurement Framework ___________________

\ Customer Lifetime Value ___________________
\ Customer Equity
Introduction
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When customer behaviour is fluid due to a dynamic and changing
market, existing tools designed to find significant patterns of
customer behaviour cannot be calibrated on old data or
assumptions. The tools must evolve as the market evolves.
Implementing CRM Measurement

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A company’s ability to perceive the market must be as fluid as its

ability to adapt to or shape the market. In complex, dynamic
markets, it is quite conceivable that known causal linkages
between layers within a company’s working theories of customer or
market behaviour can be invalid or worse still, be correct but
irrelevant. When it comes to measuring something as dynamic as
customers, most measurement frameworks need continual
reassessment and recalibration.
At the other extreme are non-causal measurement schemes in
which successful solutions proceed without establishing the causal
linkages between related or rolled-up solutions. In some (most?)
(c)
companies, this is the default approach to measuring successful

initiatives. Lack of enterprise-wide coordination between various
initiatives can lead to conflicting, redundant and sub optimal
solutions. In this Darwinian model, however, successful CRM
solutions are advanced, unsuccessful programs are weeded out and
104 the company does receive some benefit. In fact, one could, in
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Notes
Activity theory, design a measurement system that measures competing
___________________
implementation of customer CRM programs on operational measures to help the company weed
relationship measurement. out what shouldn’t be done.
___________________
___________________ Key concepts from successful programs can be shared and cross-
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pollinated across multiple teams. Proving causal linkages between
___________________
human (customer or employee) behaviour and business success can
___________________ be dispensed with or downplayed. Instead, surviving programs and
___________________ the key concepts behind them, however cross-pollinated they have
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become, represent the “causal” linkages “explaining” behaviour or
___________________
“predicting” performance.
___________________
Anecdote rules: The key concepts, which inform new CRM
___________________
programs, are more like memes, units of cultural information that
___________________ successfully spread throughout the company. No one engineers a
comprehensive behavioural model around customers nor does
anyone engineer how customer knowledge is created. Is this a valid
measurement approach?
Perhaps, if speed of adaptation is important, companies may not
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have the time to identify the right measures and the right causal
relationships, which may take months or years to develop, as it
sometimes does for balanced scorecard methods (Smith, 2001). Are
causal measurement models better than correlated or non-causal
ones at finding useful patterns? Perhaps, but the real issue is
whether the measurement system is finding the right knowledge in
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timely way. While a non-causal CRM measurement system can

detect conditions that provide opportunities quickly, determining
the right business response will require some root cause analysis
for diagnosing and fixing customer problems. Time becomes the
pivotal variable.
All the things that can and should be measured across the
enterprise regarding customers, be they value-creation, value
delivery or customer insight activities, can be compared to that
opaque sea. While the business can cast its net (its measurement
system) to find fish (useful knowledge) where the fish usually
swim, all sorts of things can cause the fish to swim in other hidden
(c)
waters. Overly developed and non-adapting measurement systems

are like the persistent fisherman casting his or her old nets in the
same place, waiting for the fish that may never return. In this
regard, the sea of activity between a company and its customers
and within itself as it serves customers is that sea of complexity.
The theory of measurement advanced here is neutral on this 105
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question of causal versus non-causal customer knowledge. Notes
Investing in identifying causality is a decision that folds within the ___________________
framework offered here and will be influenced by many factors.
___________________
The CRM practitioner that complained that CRM stands for “can’t
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really measure” was most likely responding to the cost of ___________________
identifying causality that made proving CRM investments more ___________________

difficult.
___________________
How does a business go about consistently measuring that field of ___________________
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complexity in a way that will detect new and unseen patterns?
___________________
Most companies assume that this can be engineered in a
predictable way. Some argue that it can’t. At best, a business can ___________________
create an adaptive internal environment that seems best suited for ___________________
detecting and acting upon this field of dynamic complexity. Stacey
___________________
(2000) argues that the mainstream thinking about knowledge
management that says knowledge is stored within the minds of
individuals in tacit form and has value only when extracted as
explicit knowledge, is wrong. For Stacey, knowledge assets lie in
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the “pattern of relationships between its members.” Knowledge is
“the act of conversing and new knowledge is created when ways of
talking, and therefore patterns of relationship change.” Customer
knowledge comes about through interactions between people
within the company.
Thomas et al. (2001) also agree that mainstream thinking about
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knowledge management is too simplistic. “Knowledge management

is not just a matter of managing information. It is … deeply social
in nature and must be approached by taking human and social
factors into account,” (Thomas et al., 2001). The authors argue the
most important aspects of a knowledge management system is that
it becomes a knowledge community; a place where people can
encounter and interact with others who discover, use and
manipulate knowledge.
Maxfield & Lane (1997) provide a deeper discussion about the non-
deterministic way that strategy can unfold into business success
through people. In this model, agents in the market pursue and
(c)
form “generative relationships” with each other. These

relationships are perceived as creating value for the agents
involved. How agents perceive themselves, products and services in
the market and generative relationships is re-examined and
106 reinterpreted as the agents themselves understand and describe
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Notes
Activity the market space.
___________________
attributes of a CRM Another way of thinking about this knowledge management debate
measurement framework.
___________________ is to pose a question. For companies that deploy CRM systems,
___________________ which contributed most to the benefits derived from the CRM
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system:
___________________
z Establishing strong causal linkages within the measurement
___________________
model deployed or in use?
___________________
The use of CRM technology for some efficiency or effectiveness
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z
___________________
gain?
___________________
z The socialization of the measurement framework within the
___________________ culture of the company?
___________________ In extremely fluid market conditions, it seems unlikely that
businesses can identify, in time, key causal linkages in customer
and employee behaviour when all the agents involved are
reinterpreting and redefining how they conceive of products,
services, customers and relationships. When the nouns are fluid,
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do the verbs make sense?
Check Your Progress

1. Customer satisfaction is not a reaction to value
received.
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2. Customers consume physical and digital products.
Attributes of A CRM Measurement Framework

What we need now are some attributes that help us understand
what constitutes the key dimensions of a measurement approach.
Measurement frameworks can have three attributes or vectors
that describe them.
z Field breadth
z Field depth
(c)
z Field tractability
The term field here is defined as those customer-facing and
customer-impacting activities to be measured that can include
processes within the company, among its suppliers and certainly
with its customers. Each of these vectors competes with each other 107
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for management funding and attention. Field breadth refers to how Notes
much of the total set of activities needed to be measured are ___________________
actually measured. Are all customer segments, product categories,
___________________
business processes measured? Field depth refers to how granular is
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the measurement approach. Systemic? At the customer segment ___________________
level? At the customer level? How far are sub-attributes broken ___________________
down? How frequently is data measured? Field tractability refers
___________________
to how explainable and provable is the CRM measurement
___________________
framework employed.
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___________________
With these attributes in mind, here are the principles companies
should consider for establishing the proper measurement ___________________
framework: ___________________
z The measurement framework designed must cover the field ___________________

width, depth and tractability in a cost effective manner that
meets the company’s strategic goals. Tradeoffs between these
vectors will ensue to address the cost of measurement and
applicability to meeting strategic goals.
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z The measurement framework designed must consider the level
of stability or complexity within the market or within the
enterprise. The more complex and volatile the market, the
more adaptive and timely the measurement framework needs
to be.
The measurement framework needs to be able to function with
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z
partial and incomplete measures. It is impossible for
companies to measure everything at once. A starting point
must be had. One can be determined by restricting any
combination of field breadth, depth and tractability.
z For highly complex markets, the measurement framework
itself will evolve, perhaps rapidly. The measurement
framework needs to be either self adapting or measured in
some way (meta-measurement) so that it can be reconstituted
as needed. This requires a different knowledge management
approach and organizational model than most companies
(c)
possess. Analogies from the complexity sciences provide some

future directions for thinking about adaptable measurement
systems.
108
Building a Composite Measurement Framework
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Notes
Activity
With the help of internet, If they haven’t done so already, most companies will need to build
___________________
collect information on how to composite CRM measurement frameworks to get the optimal
build composite measurement
___________________
framework. combination of measurement breadth, depth and tractability.
___________________ Measurement frameworks are not a one-size-fits-all proposition.
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___________________
They need to be tailored for the company and its conditions. With
the abundance of measurement approaches and lack of a
___________________
comprehensive theory of customer behaviour to guide them,
___________________ companies will be designing frameworks themselves. Based on the
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___________________ issues discussed so far, here is an approach to consider.
___________________ 1. Consider the planning time horizon, competitive market

___________________
stability or volatility and other market of company factors.
___________________ (a) Are current market conditions stable or chaotic with rapid
unpredictable change?
(b) What is the company’s current competitive posture? Is the
company attempting to shape the market significantly,
adapt as a fast follower to the market, or sitting it out for
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a while and doing nothing?
(c) What is the balance of focus needed between measuring
internal capabilities and measuring customer behaviour?
(d) How much of the measurement framework needs to
measure past activity or predict future events?
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2. Consider the technology implications:

(a) What technical infrastructure changes are needed to
support the measurement framework?
(b) Can the data needed be collected and combined within this
infrastructure?
(c) What is the ongoing cost of measurement and data
collection?
(d) What are the sampling and refresh rates that will be
needed to support the measurement framework?
(c)
(e) What are the core analytic techniques and technologies to

support the data analysis needed?
(f) What are the technical needs to continually collect
strategic and qualitative data as opposed to conventional
CRM operational data?
109
3. Consider the organizational implications:
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Notes
(a) What skills sets are needed to support the measurement
___________________
framework?
___________________
(b) How do motivation and incentive approaches in the
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___________________
company need to be altered to encourage successful
measurement? ___________________
(c) Can the company’s decision-making abilities absorb and ___________________

use the measurement framework? ___________________
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(d) Does the company have flexible communication and ___________________
collaboration tools and policies that let people within the
___________________
company interact with each other concerning
___________________
measurement data?
___________________
(e) Can the customer decision-making capabilities of the
company be measured and monitored so that the health of
decision-making capabilities can be assessed?
(f) Can feedback from the decision-making process inform
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and alter the measurement framework?
With these considerations in mind, a CRM measurement
framework deployment plan can be formulated. In most cases,
deployment of new measurement approaches is evolutionary. With
the inherent risks in disrupting a customer base and employees
that serve the customers within a company, companies frequently
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choose to limit deployment along some axis. Typically companies

try to control the field breadth in the following ways:
1. Product Deployment: A measurement approach is rolled out

for all customers for one specific product or service.
2. Segment Deployment: A measurement approach is rolled out

for one customer segment (or sub-segment) for all products or
services.
3. Narrow Deployment: A measurement approach is rolled out

for one customer segment (or sub-segment) for one product or
service.
(c)
Within each deployment model, companies can control scope

further by restricting the remaining two vectors (depth and
tractability):
z Controlling the field depth by limiting the how detailed the
measurement approach is.
110
z Controlling the field tractability by limiting causal research,
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Notes
Activity
Prepare an assignment on the data collection and analysis.
___________________
customer lifetime value and
its calculation. In practice, probably any sequence of deployment is possible. Since
___________________
it is most unlikely that companies, especially large ones, can
___________________ transform themselves completely, iterative implementations of
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___________________ new CRM strategies and measurement frameworks will be needed.
In fact, for many companies, “adapt or perish” is the directive.
___________________
Changing market conditions and customer behaviour and the
___________________ proprietary, non-reproducible relationship companies and brands
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___________________ can have with their customers practically insists on iteratively
___________________
implemented, adaptable CRM measurement frameworks.

___________________ Fill in the blanks:
1. The ……............... has evolved from its early use as a
simple performance measurement framework to a full
strategic planning and management system.
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2. ................ is typically used to judge the
appropriateness of the costs of acquisition of a
customer.
Customer Lifetime Value

Lifetime Customer Value or Long term Customer Value is a
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reflection of the possible future business a company can expect

from a loyal customer. This will include not only the repeat
purchases by the customer, but also his family purchases, referral
purchases, cross sells etc over a long period of time. It should also
consider the future product introductions of he company for which
this loyal customer is a ready prospect. This adds more dimensions
to the exact assessment of the LCV. Use of customer lifetime value
as a marketing metric tends to place greater emphasis on customer
service and long-term customer satisfaction, rather than on
maximizing short-term sales.
(c)
In marketing, Customer Lifetime Value (CLV), Lifetime Customer

Value (LCV), or Lifetime Value (LTV) and a new concept of
“customer life cycle management” is the present value of the future
cash flows attributed to the customer relationship.
Calculating Lifetime Customer Value (LCV) 111
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Notes
There are two kinds of Lifetime Value measurement – absolute
and relative. The first is very difficult to calculate; the second, very ___________________
easy to calculate and in many ways more powerful than the first. ___________________
The most difficult part of calculating LTV is deciding what a
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___________________
“lifetime” is. Lifetime Value is the value of the customer over the
___________________
Lifecycle (if you don’t know what a Lifecycle is, you really should
read the article on Lifecycles before reading this one). Lifetime ___________________
Value doesn’t exist without a Lifecycle. We will get into some ___________________
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details on calculating Lifetime Value in a moment, but first, a ___________________
clarification.
___________________
The Lifetime Value concept has been horribly abused and
___________________
misunderstood over the last several years. It is not necessary to
figure out an absolute Lifetime Value for a customer or wait “a ___________________
lifetime” to find out the value to use the concept in managing

customer value. If you are new to this Lifetime Value stuff and
have not tracked the appropriate parameters, or your company is
new and lacks meaningful operating history, you can look for
E-
“relative Lifetime Value,” link it to customer behaviour, and still
get leverage from using LTV/LCV in your business model to
manage customer value.
Here’s a very simple example. Say I run the same ad in two
different newsletters and get response from both. When I look at
these responders, maybe a week later for a content visit or 30 days
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later for a purchase, I find a high percentage of repeat visitors or

buyers from one newsletter, and a low percentage from the other.
Repeat behaviour indicates higher Lifetime Value, and predicts
future repeat behavior, regardless of what the actual monetary
Lifetime Value is. I can switch money out of the low repeat
newsletter into the high repeat newsletter and get higher ROI
without having to measure anything but repeat behavior.
By the way, using customer behavior to predict the relative
Lifetime Value and loyalty of customers is a 40 year old technique
still used by mail order and TV shopping companies today. Large
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sites with CRM analytics are using this technique, known as RFM,
to predict customer value and response to promotions. If you’d like
to see more details on using relative Lifetime Value to make ad or
product decisions, see the tutorial: Comparing the Potential Value
of Customer Groups.
112
Let’s say you’re not satisfied with using relative Lifetime value as
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Notes
a proxy for absolute Lifetime Value. You’re a glutton for
___________________
punishment, or your boss wants a hard number. No problem. Here
___________________ are a few issues we need to put on the table when discussing the
___________________ calculation of LTV:
E
___________________ z If you haven’t been in business long enough to know the
Lifetime of a customer, just put a stake in the ground by
___________________
looking for defected best customers. Look at customers who
___________________ have spent or visited the most with you and then of these, look
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___________________ at the ones who haven’t made a purchase or visit in some time
___________________
(6-9 months, for example). In all likelihood, the last purchase
or visit was the end of the Lifecycle when considering best
___________________
customers who have stopped buying or visiting. When best
___________________ customers stop, they’re usually all done. Then look at first
purchase or visit date for these customers, calculate your
Lifetime, and use this length of time as the “standard”
customer Lifetime, realizing the average lifetime is probably
much shorter.
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z Frequently, a customer will defect for a few years and then
come back. This is cool, and normal. Their life changed
somehow and they left, and now they need you again. Most
offline marketers would call a customer who has had zero
activity for over 2 years a defected customer. Online, it’s more
like 6 months for the average customer, unless you are in a
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classic seasonal business. If the customer starts up again, they

would be a “new customer”, for marketing and modelling
purposes. They will more likely behave like a new customer
than a current customer. The behaviour will ramp and fall off
all over again, just like it did in their previous Lifecycle with
your business.
That doesn’t mean you can’t use the same customer number,
or combine the old behavior record with the new behavior
record in the customer service shop. In fact, knowing how long
on average a customer defects before they come back can be a
useful promotional tool.
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But there has been a significant break in behavior, and this

customer is more likely to behave as a new customer than a
customer who has been with you the whole time. That’s just
the way it works. They’re likely to be interested in different
products, for example.
113
You decide if it’s a new lifetime or not based on your business.
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Notes
In most cases, from a marketing perspective, and for the
purposes of Lifetime Value, they should be treated as a new ___________________
customer. Otherwise, all your customers will have “infinite” ___________________
lifetimes, and you lose the relevance of the metric.
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___________________
z Another challenge to calculating Lifetime Value: usually much
___________________
of the data you need to complete the simple calculation are not
___________________
available, or can’t be agreed upon by all the players, especially
if you are in a big company. If you don’t know what the ___________________
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average unit returned costs you in terms of overhead, you can’t ___________________
do the calculation. If you don’t know what the average number
___________________
of customer service calls per unit shipped is and what the calls
cost, you can’t do the calculation. This is a particularly difficult ___________________
problem for offline retailers, who don’t have a database that ___________________
captures nearly enough relevant data.
Here’s one way approach it if the operational data you need is
unclear. Try to focus on the average unit sold, and break up all the
revenue and cost components that comprise the unit. Once you get
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to a profit/unit, just multiply by units sold to a customer over the
“lifetime,” minus overhead and promotional costs, and you get
LTV.
Average price, cost of goods sold, gross margin should be easy to
find. To get customer service costs, look at how many units you
move annually, and divide by annual customer service cost. Do the
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same thing for returns, and so on, until you know the costs/unit
sold of all the elements going into a sale. Don’t forget credit
processing, after sale support, etc. For example: Most models to
calculate CLV apply to the contractual or customer retention
situation. These models make several simplifying assumptions and
often involve the following inputs:
z Churn Rate: The percentage of customers who end their
relationship with a company in a given period. One minus the
churn rate is the retention rate. Most models can be written
using either churn rate or retention rate. If the model uses
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only one churn rate, the assumption is that the churn rate is
constant across the life of the customer relationship.
z Discount Rate: The cost of capital used to discount future
revenue from a customer. Discounting is an advanced topic
that is frequently ignored in customer lifetime value
114 calculations. The current interest rate is sometimes used as a
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Notes simple (but incorrect) proxy for discount rate.
___________________
z Retention Cost: The amount of money a company has to
___________________ spend in a given period to retain an existing customer.
___________________ Retention costs include customer support, billing, promotional
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incentives, etc.
___________________
z Period: The unit of time into which a customer relationship is
___________________
divided for analysis. A year is the most commonly used period.
___________________ Customer lifetime value is a multi-period calculation, usually
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___________________ stretching 3-7 years into the future. In practice, analysis
___________________
beyond this point is viewed as too speculative to be reliable.
The number of periods used in the calculation is sometimes
___________________
referred to as the model horizon.
___________________
z Periodic Revenue: The amount of revenue collected from a
customer in the period.
z Profit Margin: Profit as a percentage of revenue. Depending
on circumstances this may be reflected as a percentage of gross
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or net profit. For incremental marketing that does not incur
any incremental overhead that would be allocated against
profit, gross profit margins are acceptable.
Managing Customer Value

After measuring customer value, the next step is to manage
customer value – to make money by creating very high ROI
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customer marketing campaigns and site designs. The Drilling

Down book describes how to easily create future value and
likelihood to respond scores for each customer, and provides
detailed instructions on how to use these scores to continuously
improve the profitability of your customers.
Uses of Lifetime Value

Lifetime Value is typically used to judge the appropriateness of the
costs of acquisition of a customer. For example, if a new customer
costs $50 to acquire (CPNC, or Cost per New Customer), and their
lifetime value is $60, then the customer is judged to be profitable,
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and acquisition of additional similar customers is acceptable. For

this reason, the costs involved in the first purchase are typically
not included in LTV, but rather, in the Cost per New Customer
calculation.
Customer Equity 115
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Notes
Activity
Customer Equity is the Net Present Value of a customer from the
Make a summarized report on
___________________
perspective of a supplier. It can – and should – also include customer equity.
customer goodwill that is normally not expressed in financial ___________________
terms, e.g. a customer’s level of loyalty and advocacy. The concept
E
___________________
of customer equity, which unifies customer value management,
___________________
brand management, and relationship/retention management, has
recently emerged from the work of Professors Roland Rust (Univ. ___________________
of Maryland), Valarie Zeithaml (Univ. of North Carolina) and Kay ___________________
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Lemon (Boston College). They view customer equity as the basis ___________________
for a new strategic framework from which to build more powerful,
___________________
customer-centered marketing programs that are financially
accountable and measurable. ___________________
Quantitatively speaking, a firm’s customer equity is the total of the ___________________
discounted lifetime value of all of its customers. In their new book

Driving Customer Equity: How Customer Lifetime Value is
Reshaping Corporate Strategy, Rust, Zeithaml and Lemon state
that customer equity has three drivers:
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z Value equity, “the customer’s objective assessment of the
utility of a brand, based on the perceptions of what is given up
for what is received”
z Brand equity, “the customer’s subjective and intangible
assessment of the brand, above and beyond its objectively-
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perceived value”
z Retention equity, “the tendency of the customer to stick with
the brand, above and beyond the customer’s objective and
subjective assessments of the brand.”
The customer equity model enables marketers to determine which
of the three drivers – value, brand or retention equity – are most
critical to driving customer equity in their industry and firm.
Using this approach allows marketers to quantify the financial
benefit from improving one or more of the drivers. Relationship
marketing some times is referred to as Customer Relationship
Management (CRM).
(c)
For example, if a regional grocery chain wants to evaluate whether

or not they should spend $2 million on an advertising campaign
that will improve ad awareness by 1 percent, the customer equity
model translates the percentage improvement in ad awareness into
the percentage improvement in brand equity (a component of
116 customer equity). The percentage improvement in customer equity
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Notes then translates into dollar improvement. Comparing the
___________________ advertising expenditure to the dollar improvement allows the
company to calculate its return on the advertising investment.
___________________
___________________ The customer equity model provides a basis for projecting the ROI
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of any strategic investment that improves customer equity whether
___________________
as a function of value, brand or retention equity. It provides a
___________________ catalyst for companies to become truly customer-centric and to
___________________ make marketing programs more successful and accountable. It’s a
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mystery to us why managers seem to spend millions of dollars on
___________________
marketing programs without knowing if their investment produces
___________________
a fair return. One possible explanation, however, is that managers
___________________ simply do not know how to project the return on investment for
___________________ their marketing programs. They have lacked a basic model that
links marketing actions with customer spending actions, and
instead use intuition to make decisions. The customer equity model
has the potential to forge that missing link.
Check Your Progress

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1. Customer Equity is the Net Present Value of a
customer from the perspective of a supplier.
2. Relationship marketing some times is referred to as
Customer Relationship Management (CRM).
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Summary
How companies build and deploy a CRM measurement framework
depends on the planning horizon under consideration, the market
volatility, the company’s overall strategic posture and goals, and
how much of the organization and customer base is impacted by
the CRM solutions considered. In addition, how customer
knowledge is created and utilized for benefit is under continual
debate with different points of view. This unit reviews the key
issues in CRM measurement, offers some attributes for describing
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and evaluating CRM measurement frameworks, and suggests

several implementation approaches. Change begins with knowing.
Companies today need to implement more sophisticated ways of
measuring this complex and diverse field.
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Notes
Prepare a PowerPoint presentation on the CRM measurement
___________________
implementation.
___________________
Keywords
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___________________
___________________
Balanced Scorecard: It is a strategic planning and management
system that is used extensively in business and industry, ___________________
government, and non-profit organizations worldwide to align ___________________
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business activities to the vision and strategy of the organization,
___________________
improve internal and external communications, and monitor
organization performance against strategic goals. ___________________
Lifetime Customer Value: It is a reflection of the possible future ___________________
business a company can expect from a loyal customer. ___________________
Customer Knowledge: It refers to understanding your customers,

their needs, wants and aims is essential if a business is to align its
processes, products and services to build real customer
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relationships.
Customer Equity: It is the Net Present Value of a customer from
the perspective of a supplier.

1. What do you understand by implementing CRM
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measurement?
2. Describe the attributes of a CRM measurement framework.
3. Explain the method of building a composite measurement
framework.
4. Discuss the concept of customer lifetime value.
5. Write short notes on:
(a) Calculating Lifetime Customer Value (LCV)
(b) Churn Rate
(c)
(c) Discount Rate

(d) Retention Cost
(e) Profit Margin
(f) Customer Equity
118
Further Readings
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Notes
___________________ Books
___________________ Mohammed H. Peeru and A Sagadevan, Customer Relationship
___________________
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___________________ Paul Greenberge, CRM-Essential Customer Strategies for the 21st
___________________
___________________
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___________________
___________________
___________________
Houston, 2000.
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Web Readings
www.impelcrm.in
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Unit 10
119
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Notes
Case Studies
___________________
___________________
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___________________
Objectives
___________________
___________________
Case Study 1: The Integrated Air Express Industry
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___________________
James Goh
___________________
This paper presents the views of the Conference of Asia Pacific
Express Carriers (CAPEC) on: ___________________
the integrated air express industry and its development; ___________________

customers of the integrated air express industry and their
expectations in today’s global market;
risk management—the challenges and perspective of the
integrated air express industry;
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customs administrations and the integrated air express
industry
Their role in today’s global market,
Shared responsibility and the importance of “strategic
partnership,” and
Convergence of objectives—balancing enforcement and
facilitation;
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Change management—the mind-set of customs

administrations and the integrated air express industry; and
The way forward—economic growth and the goals of trade
liberalization and trade facilitation.
There is an important element of shared responsibility between
customs administrations and the integrated air express industry.
Strategic partnership, cooperation, consultation, and sharing of
experiences and expertise between customs administrations and
the industry can help achieve and increase trade efficiency and
community protection.
Businesses can thus be helped to succeed and, ultimately,
economies to prosper. However, in order for us to achieve this
collectively, there must be change, just as the economic makeup of
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the world has changed over the past few years.

It has become commonplace to talk about change in the world
today. Who would have predicted an economic crisis in Asia a few
years ago? As the world economy continues to progress, change is
inevitable. The language of economics today is the language of
change and the language of the transnational corporations, of
companies with global operations but a local perspective in each
Contd…
120 country. The ongoing change due to economic growth and
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Notes development will affect customs administrations and the
integrated air express industry and will continue to do so, a
___________________ reality which some of the sunset industries still have not come to
grips with.
___________________
The Integrated Air Express Industry
___________________
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For those who are not familiar with the integrated air express
___________________ industry, a brief history may be interesting. From its humble
origin in the late 1960s as the international air courier industry,
___________________ the integrated air express business has evolved into competing
with the traditional airfreight forwarders and, in some countries,
___________________
even directly with the local postal authorities. Integrated air
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___________________ express carriers, unlike the traditional airfreight forwarders, offer
door-to-door pickup and delivery, cross-border transportation,
___________________ customs clearance, and delivery service to the entire spectrum of
the commercial world and for almost any commodity.
___________________
Because speed, reliability, and value-added service are the
___________________ hallmarks of an integrated air express carrier, there are size and
value restrictions which vary from country to country. But
generally, the integrated air express industry deals with the
business requirements of the global market and its economic
changes, within the permissible limits of regulatory. The
Integrated Air Express Industry provisions, especially those of
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customs. The bulk of what we carry is still lightweight, a mix of
documents and low-value merchandise. However, with the rapid
change in the global market and with economic development, we
are beginning to see that size, value, and commodity have also
changed to reflect heavier weights with higher value.
How large the market for cross-border integrated air express
business is anybody’s guess. However, the combined revenue of
the four founding members of CAPEC alone was in excess of US$
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60 billion in 1998—300 million in units handled and 1.5 million

tons in volume. And annual growth, in volume terms, is 20–45
percent, varying from country to country, a staggering quantity as
far as customs is concerned.
The integrated air express business today is at takeoff time. The
world has become smaller. Time and management techniques
have become a key competitive edge for global customers.
Delivery information has become as important as the delivery of
the goods itself. Players in the industry are grappling with the
challenge to provide product homogeneity and service flexibility
across national and cultural boundaries. And the traditional
segregation of the air transport industry between postal, air
courier, and airfreight forwarders has lost its relevance. For
example, components manufactured in one country today may be
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assembled into finished goods in a second country and then

distributed to many markets worldwide.
For the past 30 years, the development of the integrated air
express business was constrained by:
Poor communications infrastructure;
Visible and invisible barriers to trade;
Contd…
121
Inability of customs to accept and manage change and quickly
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adapt procedures to keep up with economic change and Notes
technological development; and
___________________
Lack of understanding of the integrated air express business.
___________________
The results were:
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Frequent, time-consuming, and costly delays at customs and ___________________
ports of entry (for example, consignments could lie in customs
___________________
longer than it took to transport them from one country to
another); ___________________
High demurrage charges; and
___________________
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Costly downtime if plans were late, tenders missed deadlines,
or replacement parts were not available. ___________________
An extremely important point which must be emphasized is that ___________________

all the above extra charges will be passed on to the businesses,
which means that the cost of doing business will increase, thereby ___________________
affecting not only a nation’s economic competitiveness but also its ___________________
foreign investments. The main problems were costly global
telecommunications and customs administrations that were
restrictive, enforcement-minded, and revenue-focused rather than
dedicated to global trade facilitation. These obstacles forced
integrated air express carriers to develop more costly ways to
achieve their business objectives and, of course, these extra costs
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were passed on to clients, thereby increasing their cost of doing
business.
But now is a time of change for both customs and the integrated
air express industry. It is a time when the combined pressures of
the global marketplace, of customers, of less government
intervention in business, and of global economic growth and
development are bringing us closer together and with increasingly
aligned objectives. Today, customs and the integrated air express
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industry could not be in a better position to act for their mutual

benefit and for the ultimate mutual benefit of our global
customers.
Customers of the Integrated Air Express Industry
The customers of the integrated air express industry today expect
door-to-door overnight service irrespective of the commodity or
the value or weight of the consignment.
This means:
End-of-business-day collection;
Overnight transportation; and
Start-of-business-day or morning delivery.
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The integrated air express industry is investing millions of dollars

in a dedicated air transportation network to meet these customer
expectations. All the companies already have comprehensive
ground distribution infrastructure in place. The only missing link
in many countries at the moment is the absence of pre-business
hour customs clearance within 60 minutes of flight arrival, which
would allow morning delivery to the global customers of today.
Contd…
122
In keeping with the demands of the fast-changing global market,
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Notes the integrated air express industry needs:
___________________ Pre-clearance of high- and low-value goods;
___________________ Release of low- and medium-value shipments directly from

the consolidated shipping manifests of the integrated air
___________________ express carriers;
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___________________ Matching customs work-hours as and when the industry
needs clearance;
___________________
The same clearance treatment as postal shipments; and
___________________ Sixty minutes’ customs clearance times upon flight arrival
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___________________ All that said, it must be emphasized strongly that global trade
facilitation need not be at the expense of customs enforcement
___________________ responsibilities. On the contrary, a strong strategic partnership
between customs administrations and the integrated air express
___________________
industry could further enhance enforcement.
___________________ Managing Risk
Effective risk management is as important to the integrated air
express industry as it is to all customs administrations, and
weighs very heavily in the international operations of the
integrated air express industry, especially in the last couple of
years. Just as customs administrations around the world are
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doing their best to manage risk effectively, the integrated air
express industry is trying its very best to manage effectively the
same set of risks.
I would like to highlight some of the challenges faced by the
integrated air express industry in the management of risk. I
sincerely hope that our common desire to manage risk more
effectively will bring us closer together, with increasingly aligned
objectives to help further our economic growth and development.
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Training. CAPEC member companies are spending a big

chunk of our profits to train and upgrade the skills of our
people. This is continuous, as we want our people to be highly
trained and effective in meeting the challenges and changes of
the new global market.
International operating procedures. All our CAPEC member
companies follow high-quality international operating
procedures, very much aligned to world standards. We
continue to keep ourselves updated to keep up with the
demands of the new global market and the changes that have
been forced upon us by rapid economic growth and
development. We are very proud that all our CAPEC member
companies are ISO certified; some have even achieved
international awards for their quality service.
(c)
Total control of the transportation cycle. Many businesses

have been affected by the economic downturn in Asia. Most
CAPEC member companies have nonetheless invested
millions of dollars in a dedicated air transportation network
to meet the demands of the new global market and the
changes imposed by rapid economic growth and development.
Contd…
All CAPEC member companies already have comprehensive 123
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ground distribution infrastructure in place. While taking total Notes
control of the transportation cycle has many business
objectives aligned to it, of paramount importance is ___________________
minimizing risk.
___________________
Leveraging electronic commerce and the use of information
technology. Along with our investments in a dedicated air
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___________________
transportation network, all our CAPEC member companies
are also investing millions of dollars in the development of ___________________
information technology. The new global market, and its very
___________________
rapid economic growth and development, presents us with
tremendous opportunities for the use of technology in a ___________________
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number of important areas:
___________________
Risk management, by providing good and reliable
databases for risk analysis and targeting; ___________________
Faster and possibly more effective global business ___________________
processes;
Efficient recordkeeping; ___________________
Better service and reduced cost through automated

operations; and
Simplified and standardized international operations.
We have a unique opportunity to move forward with customs
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administrations in leveraging the use of technology for our
common interest, just as we can develop a strategic partnership in
the area of risk management.
Customs Administrations and the Integrated Air Express
Industry
For customs administrations, it is a time when global and
regional pressures are forcing a change in customs to facilitate
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rather than restrict trade. Technology is providing tremendous

opportunities to speed up manual processes, to make more
effective and timely use of information. While customs
administrations differ, in general, developed customs
administrations emphasize the following:
Streamlined movement of low-value, low-risk goods, including
the adoption and implementation of the WCO guidelines for
the handling of air-express shipments;
Facilitation (rather than intervention), using risk analysis
and selective processing, and introducing amendments to
legislation where necessary, in accordance with the annexes
to the Kyoto Convention;
Reduced tariffs and licensing;
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Greater reliance on consumption and other indirect taxes;

Use of GATT or WTO valuation code;
Increased use of customs automation and EDI for data
collection and pre-clearance;
Simplified procedures, relying less on paper and requiring
fewer signatures;
Contd…
124
Support and man-dedicated air-express airport facilities;
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Notes
Memorandums of Understanding to build trust; and
___________________
Risk management.
___________________ These are but some of the trends noted in our work with both the
WCO and customs administrations within APEC. In general,
___________________
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CAPEC hopes that all customs administrations will follow these
___________________ trends. In making these suggestions, CAPEC is in no way
belittling the need for customs to retain control at the border.
___________________ Rather, we wish to assist customs in this undertaking by:
___________________ Reconciling our need for simplicity with customs need for
information and regulatory integrity;
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___________________
Recognizing the sophistication of smugglers and cooperating
___________________ to help curb illicit activities;
Recognizing country imperatives and differences in the
___________________
setting of customs’ mission; and
___________________ Fostering close working relations with the WCO and its
individual member customs administrations.
We have a unique opportunity to move forward with customs. In
conclusion, this opportunity can be summed up as follows:
Customs administrations and integrated air express carriers
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are closely linked.
Both want to facilitate trade.
Both are leveraging the use of technology.
There is a unique opportunity to provide overnight delivery
capability to support rapid economic growth, and customs and
the integrated air express industry can play a substantial role
in helping to make this happen.
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Customs and the integrated air express industry have shared

risks and shared responsibility for managing risk.
A forum is needed for CAPEC to interact with WCO and its
member customs administrations to help facilitate change.
Together, we are in a position to take this strategic partnership a
step further. Naturally, allowances would need to be made for
country differences, but a regional charter for the integrated air
express industry and customs could help enhance regional growth
and economic interrelations for the common economic interest.
Questions:
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Case Study 2: Air Cargo Facilitation 125
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Notes
Robert Richardson
___________________
“On behalf of the 260 member air carriers of the International Air
Transport Association (IATA), I would like to focus on a few ___________________
critical issues of concern to the aviation community. For each of
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the points discussed below, the industry believes that there are ___________________
reasonable solutions, many of which have already been
___________________
implemented by forward thinking states. In some instances, these
solutions have required changes in national legislation. In others, ___________________
the solutions have been the result of simple modifications in the
way processes are carried out. However, in every case, the ___________________
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solutions have required a greater level of cooperation and trust
between governments and the trade, as well as a shared vision of ___________________
what changes were necessary and how they could best be ___________________
implemented.”
___________________
Introduction
Aviation carries but a small percentage of the total goods ___________________
transported over international borders—only about 1 percent of
movements (net value). That number might initially sound less
than impressive and rather unimportant compared with the
amount of goods carried by other modes of transportation. But it
is the nature of the goods moved by air that makes our industry
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so vital to shippers, manufacturers, and even the states for which
those goods are ultimately destined.
Compared with other modes of transport, such as shipping and
rail, the air industry carries a significantly higher percentage of
high-value and time-critical consignments.
Shippers, and their customers, depend on the speed inherent in
aviation to meet the needs posed by just-in-time inventory
controls, perishable-product movements, and critical-parts
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replacement, to name just a few.

Unfortunately, this benefit on which shippers and their customers
depend for their economic well-being is often lost because of
inefficient clearance of goods for release to home use. In too many
cases today, in countries all around the globe, consignments
arriving at their final destination take longer to be released from
customs than the total time spent getting there.
Here we will discuss the main rules and practices that govern the
air transport sector. While these vary from state to state, they can
be distilled down to their basic components for quick presentation.
When moving goods, the air transport sector must:
accept goods from shippers;
document those goods;
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comply with import and export control regulations; and

Produce the goods at the destination with the necessary
support documentation for entry, clearance, and release.
Each step of the process involves capturing specific data, creating
paper documents for each consignment, creating other paper
Contd…
126 documents to reconcile the original documents, presenting the
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Notes documents to customs authorities, and then archiving the
documents for varying lengths of time after the goods have been
___________________ moved. Needless to say, this is not an efficient or labor-friendly
process. And it is made worse by the fact that a set of documents
___________________
created for one phase in the process often does not satisfy the
___________________ requirements of subsequent phases, resulting in the need for even
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more documents.
___________________
This process is repeated thousands of times each day, and is not
___________________ limited only to movements by air. It is the same process relied
upon by governments since the days of the sailing ships. It was
___________________ slow and manpower-intensive then, and in today’s environment of
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instant electronic communication and ever-shorter delivery
___________________
deadlines, paper-based data exchange and inspection processes
___________________ that do not rely upon risk assessment and selectivity criteria can
bring the cargo industry to its knees.
___________________
The past 30 years have given rise to remarkable developments in
___________________ the aviation industry, the business community, and in the way
states view themselves and the world around them. The world has
changed in so many ways. New opportunities are being discovered
almost daily. Regrettably, however, the methods of moving goods
across international borders have failed to keep pace. What has
always been is not necessarily how things should be today, or in
the future.
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It is time that governments and the trade, with an eye to the
needs of the future, undertake the necessary task of reviewing
existing policies and practices and seek to implement new
methods, using new technologies which will truly facilitate trade,
while at the same time protecting national interests. Specifically,
the air transport sector must act to realize the following
achievable goals.
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Paperless Transaction Processing

As described earlier, air carriers today must gather great
quantities of data from shippers, often in electronic format, copy
the data manually onto paper documents, attempt to verify their
accuracy, and then transmit the information to the proper
authorities. The authorities, on the other hand, often do the same
thing in reverse. The entire process is plagued by unavoidable
errors in data input, duplication of effort, waste of critical human
resources for carrier and customs alike, and unnecessary costs for
everyone.
A solution exists and its framework has been developed to realize
the goal of making paperless transactions the norm instead of the
exception. With the Montreal Protocol IV, we have an
international convention that provides the legal basis for
(c)
establishing electronic airway bills. We in the industry recognize

that such change will not come easily. We understand that many
states will need to modify their national legislation to allow for
exchange of electronic data. We also understand that many
governments have yet to begin work on developing Electronic
Data Interchange (EDI) systems for cargo manifest processing.
Together, industry and government representatives have
Contd…
developed specific EDI programs, that is, computer-to-computer 127
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language formats and standardized messaging guidelines to Notes
reduce the time governments need to develop their capability in
this critical area. Many governments have made these choices, ___________________
resulting, we believe, in significant cost reductions for themselves,
the airlines, and the shippers, by making paper-based processes ___________________
less inefficient. Manpower, so scarce in today’s environment of
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___________________
shrinking budgets, has been redirected to productive activities
such as enhanced customer service for the industry and ___________________
strengthened enforcement by governments.
___________________
Harmonized Information Requirements
One of the most difficult and costly aspects of cargo movements is ___________________
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the lack of standardization in the data requirements imposed by ___________________
different countries for the movement of goods. Differing
requirements generally require creating separate documents to ___________________
satisfy export and import controls. Additional documentation is
often required to transfer goods at intermediate points. One might ___________________
think that the emergence of trading blocs of nations, such as the
___________________
European Union or NAFTA, would have resulted in harmonized
requirements and a reduction in required documentation, but that
has not been the case. Systems developed within these economic-
based groups continue to be essentially incompatible with one
another because of their varied data elements and formatting
requirements.
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The industry believes that these variations in data requirements
increase the risk of errors in data collection and transmission,
delaying clearance and creating unwarranted financial liability.
Divergent requirements also keep us from exploring ways of
processing outbound and inbound clearances with a single ling.
Obviously, under such systems, trade efficiency is curtailed,
resulting in:
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Greater processing demands on shippers, carriers, and

customs
Reduced performance in clearance of goods
Incremental cost increases for all
Pre-arrival Processes or Expedited Clearance upon
Arrival
Lastly, but possibly most critical in any effort to improve trade
efficiency, the industry seeks support for processes that will allow
governments to screen consignments en route, and through risk
assessment and selectivity, expedite the release of low-risk goods
forwarded by known shippers upon arrival.
For this ultimate goal to be realized, the first two points I have
(c)
raised today will, by necessity, have to be adopted. The benefits of

such a program are immediately apparent. By utilizing
technological advances, governments would be able to screen
consignments in advance of arrival and focus their dwindling
inspection resources on those that pose a real threat. The great
majority of goods, as much as 99 percent in some countries, could
be released for home use with minimum formalities, subject, of
course, to periodic, unscheduled checks.
Contd…
128
Various methods that can expedite the clearance of goods already
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Notes exist. Electronic commerce programs can support post-release
payment of taxes and duties, which often slows the release of
___________________
goods cleared in the existing manner. Precedents exist for such
___________________ schemes. They are based on the shippers’ performance and entail
adequate financial guarantees and a reliable post-clearance audit
___________________ procedure.
E
___________________ To further facilitate trade, governments should consider adopting
procedures that would allow release documents to be led
___________________ electronically from locations other than the airport of importation.
Such remote ling procedures would enable shippers and carriers
___________________
to concentrate their cargo documentation experts in national or
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___________________ regional centres, and would likely result in increased data
accuracy, reduced costs, and improved service.
___________________
Questions:
___________________ 1. Analyze the case and interpret it.
___________________ 2. Write down the case facts.
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(c)
UNIT 11: Customer Loyalty
129
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Notes
___________________
___________________
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___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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BLOCK-III
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(c)
130
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Notes
UNIT 11: CUSTOMER LOYALTY
___________________ UNIT 13: IMPACT OF RETENTION
___________________
z Customer Loyalty z Perceptual Gaps and Retention
___________________
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z Relationship Commitment z Meeting Customer Needs and its Impact on
___________________
Retention
z Factors affecting Customer Loyalty
___________________ z Customer Satisfaction and Retention
z Attitudinal and Behavioural Components of
___________________
Loyalty z Relationship through Loyalty
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z Factors that may Lessen Customer Loyalty
___________________ z Organisational Change to Match Retention
Strategy
___________________
UNIT 12: CUSTOMER RETENTION
___________________ UNIT 14: SERVICE AND COMPLAINT
z Introduction
MANAGEMENT
___________________
z Customer Acquisition
z Introduction
z Nature and Significance of Customer Retention
z Handling Customer Complaints
z Customer Retention Process
z Types of Customer Complaints
z Attrition: The Negative Signal of Retention
Analysis and Resolution
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z
z Handling Complaints to Improve Retention
z Advantages of Online Complaint Handling
Systems
z Complaint Handling – An Advantage for

Businesses

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(c)
Unit 11
131
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Notes
Customer Loyalty
___________________
___________________
E
___________________
Objectives
___________________
topics: ___________________
\ Customer loyalty ___________________
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\ Relationship commitment ___________________
\ Factors affecting Customer Loyalty
___________________
\ Attitudinal and Behavioural Components of Loyalty
___________________
\ Factors that may Lessen Customer Loyalty
___________________
Introduction
The term customer loyalty refers to a customer’s commitment or
attachment to a brand, store, manufacturer, service provider, or
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other entity based on favourable attitudes and behavioural
responses, such as repeat purchases. Two basic perspectives of
loyalty describe brand loyalty as behaviour toward the product and
customer loyalty as an attitude, or predisposition to behave. The
unwavering positive attitude towards the Cubs baseball team in
the opening example reflects a high degree of customer loyalty.
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Customer Loyalty
Building customer loyalty is the basic platform of relationship
formation. In a highly competitive and challenging business
environment, organisations are really blessed if they are fortunate
to have loyal customers in their customer inventory. With the
backup of loyal customers, the organisation could enjoy a number
of advantages. In short, having loyal customers will serve as a
sustainable competitive edge to the organisation concerned in the
present day context. Therefore, organisations should keep
“building customer loyalty” as their prime agenda.
(c)
Customer loyalty is a company’s ability to retain satisfied

customers. Maintaining customer loyalty is one of the toughest
challenges for any marketing department in a business enterprise,
since the wants of a customer are modified at much faster rate
than their needs. It requires a business enterprise to follow a pro-
132 active approach that includes formulating strategies for brand
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Notes
Activity consolidation, researching and continuing with new product
Write an article on customer
___________________ development, following TQM (Total Quality Management),
loyalty and brand loyalty as
behaviour. implementing CRM systems, and also, working out Pipeline
___________________
Management tactics.
___________________
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A customer loyalty program is based on a simple premise: as a
___________________
company develops stronger relationships with their best
___________________ customers, those customers will stay with the company longer and
___________________ become more profitable.
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___________________
Brand Loyalty as Behaviour
___________________
Early academic research investigated the purchase behaviour of
___________________ customers to identify and measure brand loyalty. This behavioural
___________________ brand loyalty approach explored how consistent customers were in
repurchasing brands. If the customer bought Heinz brand ketchup
every time he or she went to the store, the customer was said to be
brand loyal.
Behavioural brand loyalty is measured by the proportion of
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purchase the number of times the most frequently purchased
brand is purchased, divided by the total number of times the
product category is purchased. While it is possible for a customer
to demonstrate undivided loyalty by purchasing a brand of a
product 100 percent of the time, the behavioural view recognizes
that this is not always the case. Researchers view a brand loyalty
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continuum and classify customers from complete undivided loyalty

to complete brand indifference. Customers can also be classified
into different categories based on the sequence of their brand
switching. Figure 11.1 shows five types of behaviour towards the
purchase of brands.
Undivided loyalty AAAAAAAAAA
Occasional switcher AAABAAACAA
Switched loyalty AAAAAABBBB
Figure 11.1: Variations in Behavioural Brand Loyalty
As shown in Figure 11.1 undivided loyalty describes the behaviour

(c)
of a customer who always selects the same brand. An occasional

switcher usually selects the same brand over time but may want a
change of pace now and then, or may face an out-of stock situation.
If the soft drink machine is out of your favourite choice but you are
quite thirsty, you may select another flavour or brand. Switched
loyalty describes a customer who has experienced a change of heart, 133
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or a change of brand, while divided loyalty shows a customer who is Notes
Activity
loyal to more than one brand. For example, many customers use Make a brief report on brand
___________________
loyalty as a customer’s
more than one shampoo on a regular basis and switch back and
attitude.
___________________
forth between two or three favourites. The behavioural pattern of
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indifference represents the customer who see no distinction between ___________________
brands or who could not care less which brand is purchased. ___________________
The term churn rate indicates the rate at which new customers try ___________________
a product or service and then stop using it. Often it refers to a ___________________
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given time rate such as the yearly churn rate. CRM systems may
___________________
allow mathematical model builders with databases containing
extensive purchase histories to use proportion of purchases, ___________________
sequence of purchase, and most recent purchase to predict the ___________________
probability of a consumer purchasing one brand over alternative
___________________
choices. Point of Sale (POS) systems are designed to provide such
inputs for the data warehouse.
Brand Loyalty as Attitude

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Measuring proportion of purchases, sequence of purchase, or most
recent purchase has a major shortcoming: It does not tell the
marketer why a brand was selected. A customer may be making a
repeat purchase not because of any true loyalty or commitment but
because of convenience, price, availability, or inertia due to habit.
The attitudinal brand loyalty approach takes the view that loyalty
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involves mush more than repeat purchase behaviour. This view

holds that brand loyalty must also include a favourite attitude that
reflects a preference or commitment expressed over time. In other
words, brand loyalty is a behavioural response to an attitude
toward a brand.
An attitude serves an object appraisal function. Is the brand
favourable or unfavourable, liked or disliked, desirable or
undesirable? An attitude involves and evaluation. More
specifically, an attitude comprises an individual’s general affective,
cognitive, and behavioural responses to a given object, issue, or
person. To understand attitudes, organizations would describe
(c)
what people know or believe to be true about the brand, how people
feel about the brand or their level of emotional attachment, and
what people intended to do about those beliefs and feelings.
People learn attitude. For true brand loyalty that is, attitudinal-
loyalty to develop, there must be a psychological process that
134 involves evaluation, decision-making, and awareness of a strong
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Notes predisposition toward purchase as well as an overall linking of a
___________________ brand. An attitude implies a predisposition to purchase suggesting
that an emotional attachment exists. The emotional component of
___________________
loyalty may be most difficult to capture within the data warehouse
___________________
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of the organization. When used together, attitude, loyalty, and
___________________ behaviour provide a framework for thinking about customer loyalty
___________________ that would differentiate no loyalty from latent loyalty and inertia.
___________________ Customers who fail in the no loyalty category have a weak
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attitude; the non-loyal customers view all companies or all brands
___________________
in a product category to be similar. Often, price consciousness is
___________________
associated with the lack of loyalty where people will purchase
___________________ whichever brand is on sale. Marketing efforts directed at these
___________________ customers may cost more than they are worth.
Inertial loyalty has also been called spurious loyalty to indicate
that behaviour appears to be “bogus” because there is no strong
attitudinal influence. These customers may exhibit inertia because
they have low-involvement with what they perceive to be
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undifferentiated companies, stores, or brands. The behaviour of
these customers can be driven by habit. “My mother used Tide and
I’ve always used it”. With latent loyalty, customers have strong
attitudes, but repeat purchase is low. Situational factors, such as
preferences of joint-decision makers have a stronger influence than
attitudinal factors. When a teenage girl uses parent’s credit card to
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buy a high priced, prestigious perfume, she may be very satisfied

and hold strong positive attitudes. However, when her parents
learn of her behaviour, they may voice their disapproval. Thus, the
social norm about “obeying one’s parents” creates a latent loyalty.
The implied goal is to define loyalty by describing behavioural
patterns that result from attitudinal predispositions that are
modified by situations over time. Customers who exhibit inertia
may be more costly to encourage to switch to a new provider than
are those with no loyalty or behavioural pattern.
Check Your Progress

(c)
Fill in the blanks:

1. Building .................. is the basic platform of
relationship formation.
2. Customer loyalty is a company’s ability to retain
..................
Relationship Commitment 135
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Activity
Notes
Loyal customers high in repeat purchase behaviour and strong in Prepare a draft of an
___________________
attitude are theoretically the most desirable customers. Not only assignment on relationship
commitment.
do they purchase a large amount of the product but they may also ___________________
advocate the product to others. They may enjoy sharing their
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___________________
knowledge and experiences with friends and family. Customers of
___________________
Miracle Grow may faithfully tell fellow gardeners and neighbours
how the plant food has made their flowers fast growing and ___________________
beautiful. ___________________
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Loyalty indicates a commitment to and support of a relationship. ___________________
Relationship commitment is defined as an enduring desire to ___________________
maintain a valued relationship. Commitment implies an attitude
___________________
or affective response, a willingness to invest and the idea that the
interactions or relationship will exist over time. A strong ___________________
commitment to a relationship develops if the relationship is

mutually beneficial to the parties. A committed partner believes
the relationship has value and is willing to work at preserving it.
This is especially true of business-to-business relationships among
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suppliers and intermediaries.
The transactional/relational continuum portrays a view of options
within a range of relationship choices. Transactions are discrete
events that result in no feeling of relationship and no anticipation
of future interactions. Customers oriented to the transaction seek
to maximize their own benefit in the current exchange, while those
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who are committed to the relationship may be more willing to

negotiate or compromise to maintain interaction over time. In
contrast, relationalism suggests an approach characterized by
cooperative actions, compromises, sharing of benefits and costs, as
well as plans for future interactions. The overall objective of
relationalism is to build trust and loyalty, which leads to an
altered focus for the marketing management process.
Another way of considering relationalism is based on the richness
of interactions that are necessary to initiate, maintain, and grow a
relationship over time. The more transitional or discrete
(c)
interactions may exhibit and arms-length attitude and low trust

while committing a limited number of resources to maintaining the
relationship. Switching costs are perceived as low and there are
few personal relationships between the organization and its
customers. High relational richness, in contrast, is characterized
136 more by high levels of trust personal friendships, similar goals,
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Notes
Activity and a synergy in learning and knowledge capabilities.
Make a list with examples of
the___________________
factors affecting customer
loyalty. Check Your Progress
___________________
Fill in the blanks:
___________________
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1. .................. is measured by the proportion of purchase
___________________
the number of times the most frequently purchased
___________________ brand is purchased, divided by the total number of
___________________ times the product category is purchased.
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___________________ 2. .................. is a post-purchase or post-choice evaluation
___________________ that results from a comparison between those pre-
purchase expectations and actual performance.
___________________
___________________
Factors affecting Customer Loyalty
Since every marketer wants customers, a logical question to ask is
“what affects customer loyalty”. The factors that affect the
customer loyalty are:
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z Customer satisfaction
z Emotional bonding
z Trust
z Choice reduction and habit
History with the company
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z
(c)
Figure 11.2: Factors affect Customer Loyalty

137
Customer Satisfaction
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Notes
People develop belief about what they expect to happen before they
___________________
make a choice. Customer satisfaction is a post-purchase or post-
___________________
choice evaluation that results from a comparison between those
pre-purchase expectations and actual performance. Fulfilment of
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___________________
an expectation is confirmation. If there is a disconfirmation ___________________
expectations are not met. Dissatisfied customers may complain,
___________________
choose never to purchase the transactional experience is thus seen
to result in confirmation or disconfirmation yet for most ___________________
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organizations, the goal is to measure and manage customer ___________________
satisfaction with the cumulative experiences customers have with
___________________
the brand, product, organization, or location.
___________________
Effective marketers try to understand if the discrepancy between
___________________
expectations and performance is large or small. The term
delightful surprises has been use to describe situations in which
customer receive fulfilment that exceeds the satisfaction of
unexpected needs or wants. A delightful surprise may be a defining
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moment in which a regular customer becomes a loyal advocate.
Effective marketers likewise try to understand the degree of
discrepancy when marketers fail to meet expectations and the
causes of consumer dissatisfaction.
Satisfied customers may not be loyal customers. One explanation is
that expectations, which shape satisfaction, are complex and exist
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at different levels. People may formulate expectations in terms of a

desired level – what should be done—and in terms of an adequate
level—what will be done. Many marketers believe customers have
a zone of tolerance where expectations range from what they hope
to receive to what is minimally in a study of satisfaction. The
company ranked satisfaction on a 5-point scale ranging from 1 for
completely dissatisfied to 5 for completely satisfied. It found that
customers who rated their satisfaction as 4 were six times more
likely to switch to a competitive offering than those who marked 5
were. So, while satisfaction is important in knowing what shapes
loyalty, we have to go deeper to fully understand loyalty.
(c)
Why do satisfied customers often switch brands or buy from other

companies? There are several explanations. The first is that a
company’s satisfied customer might also have a positive experience
with and be equally satisfied with a competitor’s offering. Thus
relative satisfaction should be considered in the role that customer
138 satisfaction plays in shaping customer loyalty. Another has to do
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Notes with familiarity and a need for variety. People may simply opt for
___________________ an experience because they get less and less satisfaction from the
old one. A third explanation is that new information changes
___________________
customer expectations about a previously untried offering.
___________________
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___________________ Emotional Bonding
___________________ Over time customer loyalty requires emotional bonding. Customers
___________________ have a positive brand affect, which is an affinity with the brand, or
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they have a company attachment, which means they like the
___________________
company. In many circumstances, consumers may identify with
___________________
and become emotionally attached to mental images that a company
___________________ or a brand develops or acquires. For example, many customers
___________________ identify with Polo Ralph Lauren. They identify with the brand
because the brand identifies them and their friends. From a
consumer’s perspective the brand equity associated with Polo leads
to customer loyalty. Brand equity is the value of the brand name
associated with a product or service that goes beyond the
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functional aspect alone. For example, many customers feel a
closeness with other people who also use the good or service.
Some companies know how to connect emotionally with their

customers while others have more difficulty in accomplishing this
level of commitment. CRM must reach beyond the idea of the
rational consumer and strive to establish feeling of closeness,
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affection, and trust as true emotional bonding is often based on

trust and respect.
Though CRM systems attempt to build emotional bonds with

customers, IT linkages within CRM systems may actually limit
emotional bonds between organizations and their customers.
Personal contacts are very powerful within a relationship-building
process and can reveal many subtle issues that affect a customer’s
willingness to buy. Non-verbal signals, friendships, and personal
interactions are critical actions that build trust and that may be
short-changed as efforts increase to reduce labour costs by
(c)
developing strong IT linkages.
Trust
Thrust the third component of the model, is interrelated with
emotional bonding. Trust exist when one party has confidence that
he or she can rely on the other exchange partner. Trust can be 139
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defined as the willingness of the customer to rely on the Notes
organization or brand to perform its stated function. Trust reduces ___________________
uncertainty/risk and is viewed as a carefully thought out process,
___________________
whereas brand affect may be an instantaneous response. In many
E
situations, trust means a customer believes that the marketer is ___________________
reliable and has integrity. In many personal selling situations, ___________________

trust means that a customer has confidence that the sale
___________________
representative is honest, fair and responsible and that his or her
___________________
word can be relied on. If a delivery date is given the buyer has
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confidence that the product will be shipped on time. When there is ___________________
trust in a relationship, all partners believe that none will act ___________________
opportunistically. Marketers, especially the marketers of services,
___________________
establish trust by maintaining open and honest communication
and by keeping the promises they make. ___________________
Choice Reduction and Habit

Contrary to traditional economic theory, consumer research shows
that people have a natural tendency to reduce choices. In fact
E-
consumers like to reduce their choices to a manageable set, usually
not more than three. People feel comfortable with familiar brands
and well known situations that have been rewarding. Part of
customer loyalty, such as the absence of brand switching behaviour
is based on an accumulation of experiences over time. With simple
repetition we become familiar with a brand, store, company, Web
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site, or search engine. We develop habits that result in continuity.

For example, it has been estimated that consumers go to the same
supermarkets up to 90 percent of the time.
There can be a switching cost associated with change to the
unfamiliar, the untried or the new. There may be a cost in time,
money, or personal risk. In other words, as the adage “if it ain’t
broke, don’t fix it” suggest there may be a perceived risk in change.
Perceived risk means the customer may be uncertain about the
consequences of making a purchase. There may be perceived
performance risk or social risk. The customer may think the new
brand will not perform as well as the current brand. The customer
(c)
may believe his/her friends will not like the new brand as well.
History with the Company

A final component of customer loyalty involves the customer’s
history with the company. One’s history with the company
140 influences one’s habits. But we should draw a distinction between
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Notes
Activity repeat behaviour and contact history with the company and its
Prepare a summarized report
___________________ image. A positive corporate image – the perception of the
on the attitudinal and
behavioural components of organization as a whole – can have a favourable impact on
___________________
loyalty. customer loyalty, creating habitual responses to the company
___________________
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name itself. Wal-Mart, for example, is known for everyday low
___________________ prices while another department store, such as Nordstrom, may be
___________________ known for excellent customer service. Thus, perceptions of the
company’s historical image can impact customer intentions, loyalty
___________________
and likelihood of buying. The CRM system, however, is usually
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___________________ more focused on a customer’s actual purchasing history.
___________________
In many situations, people have a long history with a company.
___________________ There may even be intergenerational influences, i.e. within-family
___________________ transmission of information, beliefs, and resources from one
generation to the next. For example, a customer who, as a child,
saw his or her parents consistently purchases Ford cars might be
expected to accept the parent’s history of suing the brand and
remain loyal to Ford vehicles.
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A customer’s initial or regular experience with a product may be
quite positive. Consider a long-time customer of North-western
Mutual Life Insurance. The customer receives a letter that
explains the company is now giving a superior underwriting price
to non-smokers. The company is not limiting the better pricing to
new customers but will provide it, retroactively, to all
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policyholders. The price of the customer’s policy, therefore, is

decreasing with no effort on the customer’s part. This positive
customer experience or unexpected delight is bound to contribute
to consumer loyalty.
Service experience is an important part of a consumer’s history
with a company. A customer who calls the Butterball Turkey
hotline on Thanksgiving Day with a problem and talks to a
customer service representative who patiently listens to the
problem may be eternally grateful to the company. Companies that
create a mutually beneficial dialog to learn what the customer
really wants engender loyalty.
(c)
Attitudinal and Behavioural Components of Loyalty

The five components that we have just discussed above influence
customer loyalty in different ways. Satisfaction, emotional bonding
and trust contribute to attitudinal loyalty. Choice reduction and
habit including perceptions of risk and the history with the 141
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organization, contribute to behavioural loyalty. Attitudinal and Notes
behavioural loyalty combines to then affect the degree of customer ___________________
commitment and loyalty to products and organizations.
___________________
Loyalty as One-to-one Relationship
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___________________
To provide a customer relationship system that generates ___________________

emotional commitment, organizations may benefit from
___________________
understanding the bases of customer loyalty in online
___________________
environments, as well as toward different facets of the
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organization or its product. Loyalty is multi-faceted and more than ___________________
a repetition of a behaviour. Table 11.1 shows customers can exhibit ___________________
loyalty to price, brand, company, other customers, a place, or any
___________________
number of other potential options.
___________________
Consider the cell phone. Some customers are loyal to the product
itself. Such people know about different brands, plans, and the
relative costs of each. Others who are not loyal to cell phones seem
to be bewildered by the many plan options and ambivalent to
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alternative providers. But when people do express loyalty toward a
certain brand of cell phone, then the company should reinforce its
complementary, or flanker, products such as cell phone covers or
hands-off connectors.
Table 11.1: Loyalty and Organizational Options
Customer loyalty to Organizational Options

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Brand Brand image/positioning/extensions/flankers…promotion
Product Accessories, complementary items, reliability….production
Company Personal connections/reinforcement/trust……public relation
Customers Interpersonal meetings, chats, reunions……..target markets
Price Discounts, coupons, everyday low price….efficiencies
Place Outlets, aromas, sounds, excitement…atmospherics
Variety New options, variations, flankers….production
If customers feel loyalty toward the company, then institutional

advertising, tours, and public relations might reinforce that
attachment. Many purchasers of Saturn automobiles gather for
(c)
reunions each year, thus exhibiting a type of loyalty toward the

other purchasers of this car as well as toward the brand image of
the car itself. Similar to Saturn, many organizations can benefit
from carefully reinforcing the image of the target market.
142
Check Your Progress
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Notes
Activity
Make a draft of the various Fill in the blanks
___________________
factors that may lessen
customer loyalty.
___________________
1. .................. exist when one party has confidence that he
or she can rely on the other exchange partner.
___________________
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2. .................. is multi-faceted and more than a repetition
___________________
of a behaviour.
___________________
___________________ Factors that may Lessen Customer Loyalty
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___________________
If customers perceive that a company has a deficiency in any of the
___________________ factors that positively contribute to customer loyalty, they may be
___________________ less loyal. There are other factors that tend to lessen loyalty as
well.
___________________
Competitive Parity
When the offerings of different organizations are not
differentiated, competitive parity exists. If customers perceive that
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brands are identical, perceived risk is low and there is a greater
tendency for brand switching as the likelihood of loyalty toward
the product declines.
Variety-seeking Behaviour
People who become bored and have a need for variety may engage
in variety-seeking behaviour. People may simply want a new
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experience because of the declining benefits associated with repeat

patronage or because they feel energized by the prospect of having
a new experience. Organizations can benefit from variety seeking
behaviour by satisfying the need and creating flanker brands, new
flavours, or other extensions of the basic products.
Low Involvement
A low level of personal relevance or perceived importance of a
product or service to the individual is referred to simply as low
involvement. Low involvement consumers often engage in
“satisfying” behaviour in which they make decisions that are “good
(c)
enough” and not necessarily optimal. If a person has a low interest

in a product category, he or she is less likely to be loyal to a
particular company or brand.
Customers who are low in involvement tend to be price sensitive,
another factor which lessens loyalty toward the brand or
organization. Conversely, customers who are involved with the 143
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product tend to be less price-sensitive. Deal proneness, or Notes
receptivity to sales promotion incentives can also be used by ___________________
organizations if they can provide the low cost options.
___________________
If a brand or company has a low share of voice, that is, if a brand’s
E
___________________
store’s or company’s relative promotional expenditure are low,
customer loyalty may decline. Customers may not know to interact ___________________
with the organization any may not get a clear picture of the ___________________
community of customers or the target base. ___________________
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State True or False: ___________________
1. Loyalty indicates a commitment to and support of a ___________________
relationship. ___________________
2. Satisfied customers may not be loyal customers.
Summary
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There are two basic perspectives on brand loyalty, the behavioural
approach and the attitudinal approach. The behavioural approach
to brand loyalty investigates how consistent consumers are in their
repurchase if a brand. The attitudinal approach to brand loyalty
considers beliefs, emotional responses, and intensions that from a
predisposition toward the brand that is expressed over time.
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The term customer loyalty refers to a customer’s commitment or

attachment to a brand, store, manufacturer, service provider, or
other entity based on favourable attitudes and behavioural
responses, such as repeat purchases.
Lesson End Activity

Make a presentation on the role of attitude and behaviour of the
customers on the customer and brand loyalty.
Keywords
(c)
Brand Equity: Brand equity is the value a brand adds to the

product.
Customer Loyalty: Building customer loyalty is the basic
platform of relationship formation.
144
Attitudinal Brand Loyalty: The attitudinal brand loyalty
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Notes
approach takes the view that loyalty involves mush more than
___________________
repeat purchase behaviour.
___________________
___________________ Questions for Discussion
E
___________________ 1. What do you mean by brand loyalty? What are its components?
___________________
2. What factors seem to affect customer loyalty?
___________________
3. How does a company develop customer trust?
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___________________
4. Explain different types of customer loyalty.
___________________
___________________ Further Readings

___________________
Books
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CC

Houston, 2000.
Web Readings
(c)
www.impelcrm.in
UNIT 12: Customer Retention
Unit 12
145
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Notes
Customer Retention
___________________
___________________
E
___________________
Objectives
___________________
topics: ___________________
\ Customer Acquisition ___________________
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\ Nature and Significance of Customer Retention ___________________
\ Stages of Retention in the Customer Life Cycle
___________________
\ Sequences in Retention Process
___________________
\ Attrition: The Negative Signal of Retention
\ Handling Complaints to Improve Retention ___________________
Introduction
Under the present context of competitive environment, the focus of
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the organizations is more on customer retention than simply on
customer acquisition. Customer retention is the process of keeping
customers in the customer inventory for an unending period by
meeting the needs and exceeding the expectations of those
customers. It is the approach of converting a casual customer into
a committed loyal customer.
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Acquisition is a vital stage in building customer relationship.

Certain key issues connected with customer acquisition are dealt
here.
Customer Acquisition
Following are some of the requisites essential for an organisation
to be effective in its acquisition efforts.
Focused Approach
The organisation operating in a market condition consisting of
(c)
potential consumers who can be categorised from the

organisation’s service or product point of view as; (a) Knower-set of
people just know the existence of the product or service without
any specific preference for those products; (b) Referrers, set of
people preferring to have the product or service, but have not acted
on their preference; (c) Indifferent, set of people are indifferent
146 towards the organisation’s offering; (d) Rejecters, set of people
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Notes
Activity mentally reject the organisation’s offerings and are far away from
Write an article on customer
___________________ the acquisition process.
acquisition and its process.
___________________ The organisation should have a detailed database containing the
___________________ above classification of the market and related details, which would
E
help to make the approach of acquisition effective.
___________________
z It is necessary to develop and provide a win-win platform
___________________
applicable to both the prospective customers and to the
___________________ organisation concerned. This would induce easy customer
UP
___________________ acquisition because of the benefits the customers might
___________________
anticipate.
___________________ z Communication plays a vital role in the acquisition process.

Communication has to be open and interactive in nature. This
___________________
would enable prospective customers to come closer to the
organisation.
z The organisation should also ensure integrated
communication, ensuring integrity and dependence every time
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the customer communicates. This would bring confidence in
the minds of the customers and would enable them over
towards acquisition.
z The organisation must effectively plan to minimise Fear,
Uncertainty and Doubts (FUD) that might occur in the minds
of customers during the course of acquisition. As far as an
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individual customer is concerned, prior to becoming a

customer, he would be in the “buy” stage of Extended Problem
Solving (EPS), in which the FUD influence would be at the
maximum level. In the subsequent stages, namely Limited
Problem Solving (LPS) and Routine Responsive Behaviour
(RRB), the FUD aspects will gradually minimise and the
customer tends to become more and more loyal. If the
customer is an organisation the “buy” stages corresponding to
EPS, LPS and RRB would be, new task or experimental
buying, Modified Re-buy and Straight Re-buy.
z The critical success factor, leading to customer acquisition, is
(c)
the benefits that the organisation provides to the customers.

Customers do not buy products or services; they are interested
in the core or the augmented benefits the product or service
might generate. If the benefits promised by the organisation
correspond to their expectation, then the customers can be 147
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easily acquired. Notes
z Customers assume differing roles in various contexts, relating ___________________

to their purchase and consumption environment. Those roles ___________________
include: Initiator, Influencers, Decider, Buyer, and User, and
E
___________________
so on of the product or service. The efforts towards acquisition
are to be directed in tune with specific role the prospective ___________________
customer plays in a given context. The organisation should ___________________

gather those details in relation to who influences, decides, ___________________
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buys, uses, and so on. At times, the same individual would be
___________________
playing all the roles. On occasions, different individuals in a
family or an organisation would play different roles. The ___________________
organisation attempting to acquire customers should have ___________________
total knowledge of these actors ad has to set its approach
___________________
accordingly.
Focus on Consumer Decision Process

The organisation, for the purpose of acquisition, must focus
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attention on the purchase decision process and the influences on
the process. The decision process starts with, need identification,
search for information, evaluation of information, decision-making,
implementation and post purchase action. Each of these stages is
influenced by several internal and external factors. The internal
factors include learning motives, perception, self-image, attitude,
personality and the like, whereas the external factors include
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culture, society, religion, family life style, income level and the
like. All these influencing factors are to be studied and the attempt
of acquisition should be suitably tuned.
Focus on Consumer Adoption Process

The product adoption by different customers differs depending on
several connected factors. Generally, a very less percentage of the
total number of customers would initially join in the adoption
process at the introduction stage of the products. Such initial
adopters are called innovators who are followed subsequently by
(c)
early adopters, early majority, late majority and finally the

laggards. Accordingly, depending on the number of customers
adopting the product, the product moves in its life cycle from the
stage of introduction to stage of growth and maturity. The nature
of adoption and rate of acquisition share an intimate relationship.
148 The organisation should evolve its customer acquisition policy after
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Notes considering the adoption process.
___________________
Focus on Prospective Customers
___________________
The options of prospective customers, in terms of various
___________________
E
components of marketing mix and other related aspects, deserve
___________________
serious attention. The organisation should devote attention to find
___________________ out the options available to customers in terms of product
___________________ attributes, package, price, channel of distribution, promotion
measures, and so on. There should be regular research on these
UP
___________________
lines, and based on the findings the offerings of the organisations
___________________ are to be tailored so as to match the specific options of the
___________________ prospective customers. This would help to enhance the acquisition
rate.
___________________
Focus on Public Relations

Publicity and public relation aspects deserve special focus. Both
publicity and public relations help to boost the organisation’s
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image in the society, which in turn help to gain more customers
within the organisation’s fold. For this reason, many organisations
commit themselves to meet social needs.
Focus on Existing Customers

Existing customers will no doubt help a lot in acquiring new
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customers. Existing customers are valuable spokespersons whose

views would be rated very high by the prospective customers. For
this purpose, the organisation should evolve appropriate rewarding
and incentive schemes. Many organisations, which are practicing
this method, find it very fruitful in their process of customer
acquisition.
Process of Acquisition
Any company embarking on a programme to acquire the customer
should know the stages of consumer product acquisition process
(Enquiry, Interaction, Exchange, Co-ordination and Adoption) in
(c)
which the prospective buyer undertakes a detailed enquiry with

regard to several aspects pertaining to the organisation, product,
nature of transaction and all other related aspects. Having stored
the information the customer interacts with the organisation and
obtains additional information clarifies and ensures already
collected information. Terms of exchange, mode of delivery and
other things related to exchange, are settled at the exchange stage. 149
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Further coordinated effort on either side would lead the customers Notes
moving to adoption of the product or service concerned, and that ___________________
completes the acquisition process.
___________________
Influences of Acquisition
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___________________
The application of the acquisition process explained above is ___________________

influenced by the following: ___________________
z Type of Buying: There are two different types of buying: one, ___________________
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the rational and the other, emotional. Rational buying is a
___________________
more systematic buying influenced by reason and logic. On the
___________________
other hand, emotional buying (impulse buying) is influenced
by the emotions of the buyer. It is likely that a customer ___________________
involved in the rational buying would move from one stage to ___________________
another systematically, whereas in emotional buying he may
not do so.
z Type of Product: Acquisition also depends on the type of
product, whether it is convenient shopping of the specialty
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product. Accordingly, the significance of each stage of the
acquisition process varies.
z Type of Customers: Further, the significance depends on the
type of customer, whether the customer is an individual or an
organisation. In contrast to the individual buyer an
organisation may have its own procedure to adopt product, and
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the process of acquisition might vary depending on the

organisation’s policy, culture, and the related aspects. Also
acquisition depends on whether the acquisition is a first time
exercise or a repeated one.
z Economic Environment: The economic and environmental
forces focus attention on the market conditions, the operations
of the competing forces, supply and demand conditions,
purchasing power etc. The acquisition process is likely to differ
under conditions of limited availability of a product, with
limited brand choice and limited purchasing power, as
(c)
compared to unlimited availability of brands and purchasing

power.
z Contextual Operations: The context of operation refers to
the prospective buyer’s intention, urgency, previous
experience; specific benefits expected, life style of customer,
150 and so on. The acquisition process is likely to differ as per the
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Notes
Activity context of operation concerned.
___________________
nature and significance of The above aspects explained have an impact on the acquisition
customer retention.
___________________ process. As such the organisation has to pay attention to these
___________________ aspects, by suitably managing its operations, which in turn leads
E
to acquisition of more and more customers.
___________________

___________________ State True or False:
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___________________ 1. The product adoption by different customers differs
___________________ depending on several connected factors.
___________________ 2. Publicity and public relation does not aspects deserve

special focus.
___________________
Nature and Significance of Customer Retention

Customers are not acquired and retained overnight. It needs
meticulous planning coupled with well planned marketing strategy
E-
and effort. More importantly the management should develop the
intent to acquire and retain the customer. The management should
not feel it is a course of business activity. An organisation acquires
customers by:
z Chance
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z Occasion
z Choice
z Repetition
z Loyalty.
In the customer retention approach the organisation makes every
effort to convert a customer by chance into a customer by loyalty. A
retained customer who turns out to be loyal will shift his focus of
relationship with the organisation, from a mere transactional
relationship to a relationship tied up with emotion and
commitment, which will benefit the organisation a long way. Those
(c)
customers by retention may prove to offer a benefit to the

organisation as:
z An asset
z An ambassador
151
z Experience shaper
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Notes
z Winning edge
___________________
z Knowledge provider
___________________
z Spokesperson
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___________________
z Driving force ___________________
z Caretaker ___________________
z Resource provider ___________________
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z Partner. ___________________
Customer retention would enable the organisation to minimize ___________________
expenses in terms of acquisition of new customers. Customer ___________________

retentions cost for an organisation is expected to be far less than
___________________
that of the acquisition cost.
Customer retention enables a long-term relationship of mutual
benefit, both to the organisation and to the customer concerned.
There appears to be close interaction between customer retention
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and customer loyalty. Loyalty is usually measured in terms of
longevity of the patronage of customers. Loyalty that arises out of
retention is a preferred state, as compared to loyalty of reluctant
customers. A reluctant customer may also appear to be a loyal
customer, which is a type of spurious loyalty or artificial loyalty
forced by various factors such as situational, limited brand choice,
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limited income, limited supply, and so on. Customers who are not
trained may even opt for shared loyalty, which is risky because the
chances of brand switching are likely to take place more
frequently. As such these loyalty statuses are not dependable, as
these would be eroded quickly. More over, part of these customers
would be engaging themselves in the attrition process at the same
time being engaged in the loyalty process. On this line loyalty
based on retention is a more welcome step.
Customer retention would further enable customers to spend more
and more on organizational offerings. Customer’s share of business
will increase. Accordingly cost of serving retained customers would
(c)
be less compared to serving fresh customers every time.

Retained customers would help to spread a positive image of the
organisation by word of mouth, which in turn helps to acquire new
customers to the customer inventory.
152
Further it is likely that retained customers may be less-price
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Notes
Activity
Prepare a chart on the sensitive.
___________________
process of retention of
customers. Considering the above aspects, there appears to be more profit
___________________
potential for the organisation by way of customer retention.
___________________ Customer retention assumes significance in the light of the
E
___________________ following facts generally reported through revenue analysis of
various organizations, and as quoted by CRM experts Jay Curry
___________________
and Adam Curry (2000) in their publication, ‘customer marketing
___________________ method’.
UP
___________________
z Top 20 per cent of the customers deliver 80 per cent of the
___________________ revenue.
___________________ z Existing customers contribute up to 90 per cent of the revenue.
___________________ z Top 20 per cent of the customers deliver more then 100 per
cent of profits.
z The bulk of marketing benefit is often spent on people other
than customers.
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z 5-30 per cent of all customers have the potential for moving
upward the loyalty ladder.
z 2 per cent upward migration in the loyalty ladder means 10
per cent more revenue and 50 per cent more profits.
Check Your Progress

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1. Rational buying is a more systematic buying
influenced by reason and logic.
2. Customers are not acquired and retained overnight.
Customer Retention Process

The various aspects of the customer retention process are
explained as follows:
Approaches to Retention Process

(c)
The approach of the organisation at the retention process is

expected to be different from the approach adopted at the
acquisition process. The difference is indicated in the following
lines:
153
z During the acquisition, the focus is on acquiring relationships
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Notes
whereas at the retention, it is on nurturing the relationship.
___________________
z At the acquisition the focus is on demographic, Psychographic
profiles of the customers, whereas at the retention process the ___________________
focus is more on past and present transactional profiles in
E
___________________
addition to demographic, Psychographic profiles, etc.
___________________
z While at the acquisition process the customer is mainly driven ___________________
by offer and incentives, at the retention process the customer
___________________
is driven by the type and extent of relationship maintained by
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the organisation for furthering the relationship. ___________________
The organizations are expected to focus their approach on the ___________________
above lines to have effective customer retention. ___________________
___________________
Stages of Retention in the Customer Life Cycle
The position of retention in the overall life cycle of customer
generally covers the following stages:
Acquisition is a stage in which customers are acquired for an
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organization’s business. Customers so acquired would reach a state
of either satisfaction or dissatisfaction. While satisfaction leads to
retention, dissatisfaction leads to the stage of attrition. A
satisfied customer who joins the retention stage might either
proceed towards loyalty stage or in the event of being dissatisfied
will join the attrition stage. The customer who joins the attrition
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stage will proceed to the stage of defection, unless he is satisfied.

If he is satisfied, he would possibly join the retention process.
Those customers in the defection stage may be reacquired, by
means of appropriate marketing programmes designed and
implemented for the purpose of reacquisition. The details about
this are presented under the head “Recovery of Lapsed
Customers.”
The normally expected move of a customer in the customer
lifecycle varies from individual to individual. There are certainly
exceptions to the flow of actions exhibited. For example, even a
satisfied customer need not move to retention if he perceives that
(c)
the competition’s offering would be of more value for the money he

spends. So also a dissatisfied customer need not move to attrition,
because of several other factors such as his own personal reasons,
forced choice, inability or unwillingness to assume the risk of
154 brand switching and so on. Effective control on attrition would
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Notes
Activity strengthen retention and minimize defection.
___________________
out more about attrition of Sequences in Retention Process
customers.
___________________
An organisation focusing attention on retention may adopt the
___________________
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following sequence of actions:
___________________
z Exploring: This step focuses attention on exploring the type
___________________ of customers to be attracted or retention. The choice is based
___________________ on value of customer’s volume of business as they bring in
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regularity of purchase, profit margin and the like.
___________________
___________________ z Evaluating: It is a detailed analysis of the profile of those

customers explored for the purpose of retention. This can be
___________________
done in terms of the customer’s purchase history.
___________________
z Establishing Strategies: At this point appropriate strategies
are evolved which are customer-specific and that lead to
retention.
z Examining Feedback: The result of the strategies
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implemented is to be examined on regular basis to their
suitability towards achieving the goal of retention.
Attrition: The Negative Signal of Retention

An organisation focusing attention on retention must obviously
focus attention on attrition. Attrition is a process of gradually
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weaving down. This is a stage in which customer for various

reasons begin to question the continued patronage with the
product or service, or the provider of the product or services. This
is a step initiated towards defection. Attrition, if not arrested, will
lead to defection. Therefore organisations must carefully observe
attrition signals and enforce preventive measures, so that
customer could be maintained at the retention stage.
The attrition signals vary from business to business and from
customers to customers. It includes the following:
z Increase in the number of complaints.
(c)
z Decrease in the frequency of contacts.

z Decrease in personal visits.
z Decrease in the volume of business.
155
z Increase in the perceptual differences between customers and
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Activity
Notes
organisations on various aspects relating to product, service,
Present a summarized report
etc. on
___________________
the methods and
procedures for handling
___________________
z Decrease in the number of active buyers. complaints to improve
retention.
E
___________________
z Decrease in the extent of interaction.
___________________
z Decrease in the flow of communication. Organisations must
develop an appropriate mechanism to capture, classify, and ___________________
measure the attrition signals and suitably react to erode ___________________
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attrition.
___________________
State True or False: ___________________
1. Acquisition is a stage in which customers are acquired ___________________

for an organization’s business.
2. Organisations must develop an appropriate
mechanism to capture, classify, and measure the
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attrition signals and suitably react to erode attrition.
Handling Complaints to Improve Retention
Focus on Customer Complaints

The manner in which complaints are handled has an impact on
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customer retention. Complaints are to be viewed as opportunities

given by customers for gearing the operations of the organisations
towards value-added performance. As regards complaints, the fact
is that, most customers do not express it or register it. The
organisation should not have a wrong notion that less registration
of complaints is an indicator of effective performance. In fact,
organisations must be more careful about unexpressed or
unregistered complaints, as compared to expressed or registered
complaints. This is due to the simple reason that, customers who
do not express or register complaints might join the process of
attrition more quickly than that of their counterparts who express
(c)
or register the complaint.
Complaint Inventory
The organisation must develop an appropriate complaint
inventory, and a proper system must be evolved to measure and
manage complaints that are registered or unregistered, expressed
156 or unexpressed. Of late, organisations have developed online
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Notes complaint management systems to handle complaints. This
___________________ includes automatic response system, call centres, answer centres
etc. However, organisations should note that the human touch
___________________
involved in handling complaints will help a long way in retention
___________________
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of customers.
___________________
Classification of Complaints
___________________
Complaints may have different levels of impact on customer
___________________
retention. Complaints from this viewpoint may be classified into
UP
___________________ four major heads, which are depicted in Table 12.1.
___________________
Table 12.1: Impacts of Complaints on Retention Process
___________________
Nature of Complaints Impact on Retention
___________________ Expressed and Resolved Customer Retention Chance is High
Expressed but not Resolved Move to the Attrition Stage
Not Expressed but Resolved Chance of Retention is Much Higher
Not Expressed and Not Resolved Customer Becoming a Defector is More
The organisation must pay attention to each category and initiate

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proactive steps in such a way that attrition is arrested at the
budding level itself.
Check Your Progress

Fill in the blanks:
1. ................... is a process of gradually weaving down.
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2. ...................... are to be viewed as opportunities given

by customers for gearing the operations of the
organisations towards value-added performance.
Summary
Customer retention is the key to any organisation’s effectiveness.
Customer centric approach to marketing programme helps retain
customers and win back lost customers. An organisation needs to
study the needs of the various market segments and design the
marketing programmes tailor made to suit the segments.
(c)
Customer anticipates several things from the company in addition

to the product; which the firm has to study well to bridge the gaps
between customer expectations and firm’s delivery.
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Notes
Visit any company selling consumer goods. Collect information
___________________
about the measures taken by the company to retain its customers
and the reasons for the attrition of the customers. ___________________
E
___________________
Keywords ___________________
Acquisition: It is a stage in which customers are acquired for an ___________________

organization’s business. ___________________
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Customer Retention: It enables the organization to minimize ___________________
expenses in terms of acquisition of new customers.
___________________
FUD: Fear, Uncertainty and Doubts.
___________________
___________________
1. List the CRM decisions of a firm.
2. Examine the Stages of Retention in the Customer Life Cycle.
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3. Discuss the challenges in planning and implementing effective
CRM.
4. Explain the concept of Customer Acquisition.
5. Describe the nature and significance of customer retention.
6. Discuss the stages of retention in the customer life cycle.
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7. Explain the sequences in retention process.

8. Write a short note on attrition: the negative signal of
retention.
Further Readings
Books
Paul Greenberge, CRM - Essential Customer Strategies for the 21st
(c)

158
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Notes
___________________
___________________
___________________
E
___________________ Houston, 2000.
___________________
Web Readings
UP
___________________
___________________
___________________
___________________
www.impelcrm.in
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(c)
UNIT 13: Impact of Retention
Unit 13
159
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Notes
Impact of Retention
___________________
___________________
E
___________________
Objectives
___________________
topics: ___________________
\ Perceptual Gaps and Retention ___________________
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\ Meeting Customer Needs and its Impact on Retention ___________________
\ Customer Satisfaction and Retention
___________________
\ Relationship through Loyalty
___________________
\ Organisational Change to Match Retention Strategy
___________________
Introduction
For the purpose of customer acquisition an organisation is likely to
focus its attention on various types of customers that a firm come
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across in its marketing arena and treat the same as its major
sources for providing input for acquisition: (i) suspects represent
the segment of the market and have the potential to become
prospective customers; (ii) enquiries are casual wanderers and
proper responses to enquiries are likely to result in customer
acquisition; (iii) lapsed customer is any customer who has
purchased something to fulfil a specific need and has then stopped
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buying from an organisation becomes a lapsed customer and he

should be encouraged to become a customer again, by marketing
the organisation’s new offerings to fulfil the customer’s emerging
new needs and so on; (iv) company’s former customers and
competitors’ former and lapsed customers can be acquired with
precise marketing and CRM programme; (v) referrals play a
significant role and provide a strong base for new customer
acquisition. It is likely that fresh customers will rely heavily on
referrals rather that the organisation’s own promotion efforts; and
(vi) existing buyers may also be targeted for acquisition in the
event of the organisation expanding its product line.
(c)
Perceptual Gaps and Retention

The gaps between product or service providers and users must be
identified and bridged, which in turn would lead to a high degree of
160 customer retention. The gaps are likely to take place in the
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Notes following ways:
Activity
___________________
Write an article on the z Perceptual
relationship of perceptual
___________________
gaps and customer retention.
z Promotional
___________________
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z Procedural
___________________
z Positional
___________________
Further, the above can be detailed as:
___________________
UP
z Gap between what the business thinks a customer wants and
___________________
what the customer actually wants.
___________________
z Gap between what the business thinks a customer has bought
___________________
and what the customer has perceived that he has received.
___________________
z Gap between what the business provides and what the
customer actually received.
z Gap between expected service and delivered service.
z Gap between marketing promises and actual delivery.
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z Gap between what organisations perceive as suitable method
of distribution and what customers receive.
z Gap between what the organisation perceives in its positional
strategy and what is reached to the customers.
z Gap between what is communicated by the organisation and
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what is understood by the customers.

Wider the gap between the organisations providing the service of
product and the user, lesser is the rate of retention. Organisations
are expected to audit their marketing-related issues on regular
basis and initiate corrective measures to bridge the gap with
regard to understanding customer needs and meeting those needs
effectively.
Meeting Customer Needs and its Impact on Retention

Needs are expressions of customers, indicating the requirement to
(c)
be fulfilled by a select product or service. Customers need products

or services of their own reasons and not hose of the organisation.
Customers are not going to be interested in what an organisation
can provide, for the simple reason that the organisation is
providing. Customers show interest on product or service
depending on what needs would be fulfilled by what the 161
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organisation is offering to them. Obviously, organisations must Notes
focus attention on meeting the needs of the customers. Unmet ___________________
needs of customers drive them from retention towards attrition.
___________________
Needs may be classified under three heads namely: (i) Basic needs,
E
___________________
which are the basic minimum requirements expected from out of a
product. Fulfilment of this would keep the customers in the stage ___________________
of “just satisfied”; (ii) Articulated needs, these needs are something ___________________
more than the minimum basic expectations from the product. ___________________
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Fulfilment of these needs would give the customers “more
___________________
satisfaction” as compared to the previous level. The customer
would want to fulfil this need in search of value for the money he ___________________
spends; and (iii) Exciting needs, Under this category of need the ___________________
customer wants to fulfil more than his level of expectation, in
___________________
terms of the above two categories.
An organisation focusing on retention has to carefully move from
fulfilling one category of need to the next category of need. If
certain conditions such as very less or no competition, limited
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purchasing power, etc., prevail, even fulfilling the basic need would
be more than sufficient to retain customers, whereas under
conditions of unlimited brand choice and the target customers
having fairly good amount of discretionary income at their
disposal, etc., fulfilment of mere basic needs would not be sufficient
to have customer retention. The organisation should pay attention
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to the profile of the target market segment, its changing needs and
make efforts for fulfilling the same, and this would yield better
results in customer retention.
Further, in the process of need fulfilment the customers can be
placed in any of the following divisions:
(a) A customer who has a specific need and that has been fulfilled.
(b) A customer who has a specific need and that has not been
fulfilled.
(c) A customer who does not prefer a need to be fulfilled (at least
for the time being) and that has been fulfilled.
(c)
(d) A customer who does not prefer a need to be fulfilled and that
has not been fulfilled.
The chances of retention are more likely in case (a) whereas in case
(b) chance of retention is very remote and attrition may take place.
162 Cases (c) and (d) are open either for attrition or defection. The
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Notes organisation must pay careful attention to the above divisions of
___________________ customers and initiate appropriate action to prevent attrition and
provoke retention. The process of managing needs is a most
___________________
significant and challenging aspect as far as retention is concerned.
___________________
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This is particularly so in the context of needs that are constantly
___________________ changing and the changes are never ending too.
___________________
Changing Conditions and Needs
___________________
From the context of changes that are taking place in nature of
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___________________ needs, the needs can be classified into several categories. For
___________________ example:
___________________
Based on life status (a) Life-maintaining needs
___________________
(b) Life-enhancing needs
(c) Life-changing needs
Based on time (a) Existing needs

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(b) Future needs
Based on conditions (a) Emotional needs
(b) Rational needs

Organisations are expected to arrive at a suitable need
determination process which includes the following sequences:
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z Capturing of needs is concerned with understanding the

differing needs of the customers and from their own perceptual
viewpoint.
z Clarifying those in terms of common customer-oriented
elements.
z Classifying a further step in the sense that those clarified
needs would be classified in terms of select criteria for easy
further processing.
z Codifying which means, specification of attributes and other
conditions to codify the needs.
(c)
z Condensing is a further step which focuses on evaluation of

the needs and fits those into the total product concept. This
process is unending and has to be repeated, which is indicated
by the stage of continuity. This process would enable the
organisation to manage needs very effectively, which in turn 163
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leads to customer retention. Activity
Notes
Present an assignment on the
___________________
Check Your Progress relationship between
customer satisfaction and
___________________
Fill in the blanks: retention.
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___________________
1. The gaps between product or service providers and
___________________
users must be identified and bridged, which in turn
would lead to a high degree of ................... ___________________
2. Needs may be classified under three heads namely: ..., ___________________
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and................... ___________________
___________________
Customer Satisfaction and Retention ___________________
Satisfaction is a state of mind that occurs when the customer feels ___________________
that his expected requirement is fulfilled by what is offered by the
organisation. The ultimate satisfaction a customer aims for has
four major components, namely:
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Product Satisfaction
It covers the tangible core benefits provided by the product. It is
related to the basic minimum function expected to be performed by
the product.
Peripheral Satisfaction
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It is in addition to the core benefit. It adds value to the core

benefits expected. Peripheral satisfaction helps the customer to
enhance his desire for personal attention.
Ambience Satisfaction
It is a blend of tangible and intangible factors which the customer
experiences, in the purchase and consumption process. The
tangible aspects of ambience satisfaction include appearance of
sales point, services available, competitive pricing, and the like.
The intangible aspects include the courtesy extended by sales
persons, the rapport generated and so on.
(c)
Psychic Satisfaction
It is related to the satisfaction extended in tune with the
individuality of the customer concerned. It depends more on the
personality traits of the customer. A talkative customer would be
164 much satisfied if the dales personnel engaged in lengthy dialogue.
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Notes A suspicious customer would be satisfied if all his latent and
___________________ expressed doubts are clarified. Psychic satisfaction provides the
customer an arena to educe his anxieties and fear with respect to
___________________
the purchase and use of as product.
___________________
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Each one of the above components of satisfaction contributes
___________________
towards total satisfaction, which has direct linkage to customer
___________________ retention. Therefore, it is imperative that the organisation has to
___________________ carefully monitor the level of satisfaction that their customers are
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enjoying, and initiate measures to enhance the level of satisfaction.
___________________
Of course, it should be done on a continuous basis.
___________________
Though there appears to be a direct correlation between
___________________
satisfaction and retention the condition cannot be taken for
___________________ granted by any organisation, because even a satisfied customer can
join the attrition process, when he changes his expectation in
terms of the various components of satisfaction as discussed above.
The levels of satisfaction a customer normally expects can be
booked under any one of the following categories:
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1. Expected Satisfaction: It is the “Must be” condition the
customer expects from a product performance; those attributes
contributing to expected satisfaction must be present. In the
absence of which, any customer will be dissatisfied.
2. Desired Satisfaction: Which is a preferred condition the
customer expects, however the presence or absence of the
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attributes contribute to preferred satisfaction would have no

effect on the level of satisfaction.
3. Exciting Satisfaction: Indicates a condition in which the
presence of certain attributes leads to a surprisingly attractive
performance. The presence of these attributes will further add
to the level of satisfaction.
The fact to be noted at this juncture is that the customer, whom an
organisation can retain by rendering expected satisfaction, cannot
continue to be retained when the customer changes his satisfaction
level from expected to desired level and further from desired level
(c)
to exciting level. Therefore organizations must keep on building up

their ability to continuously satisfy their target customers so as to
have customer retention. A suitably designed customer satisfaction
audit would serve the purpose.
165
Added to this, a well-structured customer care programme will go
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Activity
Notes
a long way in gradually furthering the customer satisfaction in
Prepare a summarized report
tune with their expectations. Customer care that exceeds customer ___________________
on the relationship developed
expectation will lead to higher rate of retention. In the absence of through loyalty.
___________________
due customer care, it is likely that the customers will be
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___________________
dissatisfied and will be left with three options viz.
___________________
z Rejection
___________________
z Postponement
___________________
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z Substitution
___________________
Any option the customer selects, will lead him only to the attrition
___________________
process. To prevent this, the organisation should design and
___________________
implement a well-designed customer segment specific (if not
customized) customer care-programmes and thereby increase the ___________________
rate of retention.
Relationship through Loyalty

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Building customer loyalty is the basic platform of relationship
formation. In a highly competitive and challenging business
environment, organisations are really blessed if they are fortunate
to have loyal customers in their customer inventory. With the
backup of loyal customers, the organisation could enjoy a number
of advantages. In short, having loyal customers will serve as a
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sustainable competitive edge to the organisation concerned in the

present day context. Therefore, organisations should keep
“building customer loyalty” as their prime agenda.
Strategies to Prevent Defection and Recover Lapsed

Customers
The below mentioned strategies are considered for winning the
faith of the customers.
z Total Knowledge about Customer Behaviour: The
organisation should have complete knowledge regarding the
behaviour patterns, migration patterns of the target
(c)
customers.
z Interactive Communication System: It is essential to
develop transparent and interactive communications system.
z Special Promotion Campaign: Whenever the signals of
customer defection are noticed, it is essentials to come out with
166 the specially designed promotions to attract the attention of
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Notes likely defectors.
___________________
z Developing Barriers to Exit: The organisation should
___________________ carefully evolve barriers to exist, which include:
___________________ Emotional appeal
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___________________ Conformation to specification
___________________
Durability
___________________
Lifetime utility
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___________________
Social relationship
___________________
Flexibility
___________________
Added value
___________________
Concessional price schemes
Commitment
Innovative approach
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Reducing risk
Avoiding threat
Holistic care.
In addition to the above there are few organizations that
practice unethical approaches also that include addiction,
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bribery, counterfeiting, deception, usury and the like, which

are not recommended in true spirit of business competition.
z Knowledge about Lifestyle and Life Cycle: Lifestyle of the
target customers has to be studied. The lifestyle represents the
activities, interests and opinions of the customers. Knowledge
about the life cycle stage is equally important. Organisation
should match its offerings to the lifestyle ad life cycle stages
and this approach would prevent defection.
z Establish Measurement System: Organisations cannot
manage their tasks well if they cannot measure the extent of
customer satisfaction, defection rate, etc., therefore, effective
(c)
system of measurement has to be introduced for measurement

of customer satisfaction and related aspects.
z Attempt to Track Losses: Many organisations do not pay
adequate attention to the losses suffered because of lapsed
customers. The cumulative impact of this should be
unmanageable. Therefore appropriate attempt should be 167
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initiated to track losses on a regular basis. Notes
z Customers Specific Approach: The approach to prevent ___________________

defection must be customer category specific. In tune with the ___________________
customer categories contribution towards revenue generation
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___________________
of the organisation, and also with specific personality traits of
the customers such as aggrieved customers, annoyed ___________________
customers, and frustrated customers, etc., should be ___________________

developed. ___________________
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z Customer Win-Back Programmes: The organisation must ___________________
introduce reward-based customer win-back programmes.
___________________
Employees involved in customer win back programmes should
be given suitable incentives and every win-back should be ___________________
celebrated and documented. ___________________
z Building Customer Care Team: A customer care team

specially focusing attention on defection drivers should be
formed. The team can devote attention to identify causes for
defection and rectify the same.
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z Developing Bondage with Customers: It is as vital to
develop bondage with customers. Such bondage could be
developed on several ways. For example; bondage through
professionalism which means the customer is linked to the
organisation in view of the professionally expertise service the
organisation offer. Bondage through zero option refers to the
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monopoly status of the product/service provider. The customer

has no other option available. Therefore, he has to necessarily
link himself to the organisation. Further, bondage could be
developed through customization, which means tailoring the
product or service to the specific requirement of the customer
concerned.
z Improvement of Value Delivery System: Value delivery
system consists of the entire process right from the time a
customer has expressed a need to the stage customer receives
the required service or product. The value path in the value
(c)
delivery system should be constructed effectively so as to

exceed the expectations of the customers. Such an approach
would prevent defection.
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Check Your Progress
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Notes
Activity
Prepare a report on the Fill in the blanks
___________________
organizational change to
match the retention strategy.
___________________
1. Building ...................... is the basic platform of
___________________
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2. A ...................... would be satisfied if all his latent and
___________________
expressed doubts are clarified.
___________________
___________________ Organisational Change to Match Retention Strategy
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___________________
The organisation should constantly improve its status in terms of
___________________ quality, trust, credibility, capability, confidence, and
___________________ communication. This would definitely help in winning back lapsed
customers. In an attempt to obtain ultimate success with regard to
___________________
winning back the lapsed customers, organisations can benchmark
its practices against the best practices available in the industry. To
win the confidence of the lapsed customers, an organisation may
practice experiential marketing the experiences includes strategic,
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sensory, physical, virtual experiences, etc., to provide the
confidence of better value to the money.
The major features of a customer retention centred organisation
are listed below:
z The organisation, in order to achieve success in its attempt of
retention should be a learning organisation, learning from the
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view point of customer’s preferences, competitor’s strategies,

technology advantages, social, cultural changes, life style
spending and consumption patterns and the like. A learning
organisation can easily adapt itself to meet the growing
requirements of the customers and thereby continuously fulfil
their changing needs. This would help to retain customers for
a long period. An organisation which has not assumed the
characteristics of a learning organisation may find it difficult
to have customer retention.
z The organisation should assume the characteristics of a market
leader rather than being its follower. Those organisations
(c)
simply following the business practices and strategies of a

market leader would find it difficult to have retention of
customers. Usually the customers would fall in line with
market leaders more easily than market followers, in view of
the advantages they would gain from those market leaders.
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z Organisations are expected to be much more innovative in its
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Notes
overall approach. In the context of customers’ needs are
constantly changing, a static approach will not be helpful in ___________________
rendering customer satisfaction. Innovation, in terms of each ___________________
component of marketing mix, relationship-building methods,
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___________________
incentives and rewards to customers would be more helpful to
retain customers. ___________________
___________________
z The organisation must develop an effective customer care
programme. Each customer expects himself to be treated with ___________________
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courtesy. The organisation should evolve an appropriate ___________________
customer care programme, which provides personalized care to
___________________
all the customers and would lead towards effective customer
retention. ___________________
___________________
z Organisations must have effective complaint management
systems. The efficiency involved in managing complaints will
have impact on the retention rate. The complaint management
should focus on maximizing satisfaction, while minimizing the
response time. Every customer has a level of acceptable
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tolerance time, within which he wants his complaint to be
rectified. Complaints rectified beyond the tolerance limit of the
customers probably will not help in retention. Here the
organisation should take into account both registered and
latent complaints.
Organisations should develop the culture of total employee
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z
involvement towards providing total satisfaction to customers.
In today’s context of ever-increasing customer’s expectations,
customers expect their needs to be satisfied in total and not
partially. For the purpose of providing total satisfaction, active
and visible involvement of every employee from top to bottom
in the hierarchy is needed. The organisation should motivate
each employee by impressing upon them the need for their
commitment in rendering total customer satisfaction. This
would obviously help maintaining customer retention.
z Organisations must formulate business strategies, which are
(c)
customer centric. In fact, organisation must look at the

business through its customer’s viewpoint and operate as a
customer driven organisation rather that resource driven. This
approach would eliminate or minimize the gap between the
organisation and its customers.
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z Organisations must have the mechanism to track attrition
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Notes
signals as early as possible and suggest suitable remedial
___________________
measures. Attrition factors identified would provide directions
___________________ for improving measured towards customer retention.
___________________ z Organisations should focus attention on former customers and
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___________________ lost customers. Some organisations consider former customers
as lost customers but the fact is that all the former customers
___________________
need not be lost customers. Effective measures are to be put
___________________ forth to convert former customers and lost customers into
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___________________ resent customers. This obviously requires a mechanism to find
___________________
out the dissatisfaction scores, attrition factors and related
aspects with regard to the former ad lost customers. And this
___________________
attempt should be o continuous basis.
___________________
z Organisations should practice total quality marketing with
emphasis on internal marketing. Effective internal marketing
practiced would indicate the quality standard of the input
process, output, and other related aspects as viewed by the
organisation’s internal customers. This would enable the
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organisation to initiate steps to improve the practice,
procedure, process and performance of people associated with
external customers. This attempt would obviously contribute
towards customer retention.
z Organisations should encourage all employees towards active
listening to customers’ grievances. For this purpose special
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skills maybe imparted by providing focused training. To

encourage active listening, organisation can depend on
assistance of technology and can go for cal centres, answer
centres, 24 hours customer response centres, etc. These
attempts would enable the organisation to sty close to
customers, which in turn would lead customers towards
retention.
z Organisations in addition to regular research should encourage
hands on research on customer related problems and there
must be active deployment of customer data. This would help
(c)
to minimize attrition and contribute towards retention.

z Organisations should encourage regular customer contact
programmes. This would enable customers to take active part
in the organisation’s activities and that will lead towards
customer partnership. This would further lead to increase the 171
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retention. Notes
z Organisations should think in terms of customer segment ___________________

specific strategies, which would focus the attention of specific ___________________
requirements of each segment. The customer retention would
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___________________
then improve.
___________________
z Organisations should develop effective communication systems
___________________
with internal customers (employee), intermediate customers
(middlemen), and external customers (end users). Ineffective ___________________
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communication will have serious negative impact on customer ___________________
retention.
___________________
z Organisation should empower employees at various levels so as
___________________
to arrive at appropriate actions interns of improving the level
___________________
of customer satisfaction and to archive at corrective measures
where ever necessary.
In this process the retention of customers would enhance.
z Organisation should focus on effective teamwork, with the
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objective of customer retention. The team should be highly
motivated ad object oriented viz. the object of increasing
customer retention.
z Organisation should further emerge into a market – intelligent
enterprise, which deviate from the traditional “We make it –
you take it” model to “You need it – we make it” model. This
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approach obviously requires close integration with customers,

understanding about their needs and factors providing them
satisfaction and so on. In this process customer retention
would be obviously taken care.
Check Your Progress

Fill in the blanks:
1. ................... is a state of mind that occurs when the
customer feels that his expected requirement is
fulfilled by what is offered by the organisation.
(c)
2. Effective ................... practiced would indicate the

quality standard of the input process, output, and
other related aspects as viewed by the organisation’s
internal customers.
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Summary
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Notes
Some of the grand strategies that are available to a firm in the
___________________
process of implementing an effective CRM includes but not limited
___________________ to: (a) total quality marketing; (b) regular research; (c) effective
___________________ teamwork; (d) empowering the employees; and (e) designing
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___________________
segment specific strategies.
___________________ Any business should have a proper market – intelligent system in

place to constantly monitor trends in customer moments and
___________________
competitor moves to match and revise the strategies for effective
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___________________ CRM process.
___________________
___________________ Lesson End Activity

___________________ Make a presentation on the benefits and the impacts on a company
achieved through customer retention.
Keywords
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Basic needs: These are the basic minimum requirements expected
from out of a product.
Articulated needs: These needs are something more than the
minimum basic expectations from the product.
Exciting needs: Under this category of need the customer wants
to fulfil more than his level of expectation, in terms of the above
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two categories.
Codifying: It means specification of attributes and other
conditions to codify the needs.
Capturing of needs: It is concerned with understanding the
differing needs of the customers and from their own perceptual
viewpoint.

1. How do you link customer satisfaction and retention? Explain
(c)
your statement with suitable examples.

2. ‘Loosing a customer is fatal to the marketing concept of
business’. What strategies you recommend to prevent customer
loss?
3. Explain the concept of perceptual gaps and retention.
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4. Write a note on meeting customer needs and its impact on
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Notes
retention.
___________________
5. What do you understand by relationship through loyalty?
___________________
6. Discuss about organisational change to match retention
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___________________
strategy.
___________________
Further Readings ___________________
___________________
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Books
___________________
___________________
___________________
Century, Tata McGraw Hill, 2005. ___________________

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Houston, 2000.
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Web Readings
www.impelcrm.in
(c)
174
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Notes
___________________
___________________
___________________
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___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
UNIT 14: Service and Complaint Management
Unit 14
175
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Notes
Service and Complaint

___________________
___________________
Management
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___________________
___________________
Objectives ___________________
___________________
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topics:
___________________
\ Handling Customer Complaints
\ Complaint Analysis and Resolution ___________________
\ Customer Complaint Management Initiatives ___________________
___________________
Introduction
It is hard to imagine a customer transaction not vulnerable to
problems and complaints, be it buying groceries, connecting to
cable service, purchasing a car or having a home repair done. Nor
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is it hard to see why businesses benefit from making concerted
efforts to prevent and respond to customer complaints.
The companies attract and keep customers when they follow
customer service standards and policies that prevent problems
from arising, and are honest, fair and responsive when things go
wrong. Customer Complaint Management (CCM) encompasses
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techniques, processes and systems that lessen the chance of

customers having problems and allow businesses to respond fairly,
efficiently and effectively when complaints arise.
Handling Customer Complaints

Successful businesses work hard to keep their customers satisfied.
Although prevention is better than cure, it is almost inevitable
that at some stage you will receive a customer complaint. Don’t
presume a customer complaint is a negative experience because, if
handled well, it can be a valuable learning tool.
(c)
An effective complaints handling system is essential to your

business. Your business can benefit in several ways:
z Improved product quality and service delivery
z Fewer mistakes and less time spent fixing them
176
z Better understanding of customers’ needs
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Notes
Activity
Write an article on the need
___________________
z Greater customer loyalty
and importance of handling
customer complaints.
___________________ z More customers through word of mouth advertising from
satisfied clients
___________________
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z Less time and money spent attracting customers
___________________
___________________
z Improved business reputation
___________________ z A healthier bottom line.
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___________________ Remember you could be pushing profits out of the door if you do
not have an effective complaints handling system.
___________________
___________________
Handle complaints effectively by:
___________________ z Having a policy of welcoming customer complaints

z Setting up a system to handle complaints effectively
z Training your staff to handle complaints well
z Dealing with the complaints you receive immediately
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z Ensuring the process for making complaints is easy for your
customers
z Regularly reviewing your complaints record.
An effective complaints handling system needs someone in the
company to drive it and take ultimate responsibility. This is a
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person who has the best interest of both the customer and the
company at heart, and the interpersonal and managerial skills to
ensure the system is performing well.
The complaints officer needs to ensure that:
z There is adequate information available to the public about
how to address any problems with your business, especially at
the point of sale.
z Front line staff are aware of:
The complaints handling policy
Their authority to settle complaints
(c)
When and to whom they need to refer complaints.

z There is a process to handle the more difficult and complex
cases.
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Complaints are reviewed regularly to identify any ongoing
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z
Activity
Notes
issues.
___________________
various types of customer
z Reports are made to senior management about complaints. complaints.
___________________
Customer Complaint Form
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___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
178
Check Your Progress
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Notes
___________________
___________________
1. CCM stands for:
___________________ (a) Customer Care Management
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___________________ (b) Customer Complaint Management
___________________ (c) Customer Complaint Manager

___________________ (d) None
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___________________ 2. An effective complaints handling system is essential
___________________ to your business for:
___________________ (a) Improved product quality and service delivery

___________________ (b) Fewer mistakes and less time spent fixing them
(c) Better understanding of customers’ needs
(d) All of the above
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Types of Customer Complaints
Customer complaints come in all shapes and sizes. Complaints can
be generated by everything from product malfunctions to
improperly trained or uncaring employees. Understanding the
main types of customer complaints is key to handling them
correctly.
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Product-specific: Customers receive products or services that do

not operate correctly. This common complaint can be handled by
fixing the product or replacing it with a new one. Customer service
training expert Myra Golden cautions against blaming the
customer when a product is faulty.
Wait Times: Long wait times are frustrating to many customers.
Whether on the phone or in a store, lengthy queue times will
generate customer complaints simply because time is precious for
customers.
Misunderstanding: Miscommunication, by the customer or the
(c)
company or both, can trigger complaints. Minimizing

misunderstanding requires knowledgeable associates and accurate
marketing materials. The Small Business advice website
morebusiness.com suggests that even when the customer is clearly
confused, treating him with respect helps retain business.
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Delivery Error: With online shopping on the rise, delivery errors
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Notes
increase. Upset customers may complain to the company, but the
company may use an independent shipper, complicating complaint ___________________
resolution. ___________________
Personnel: Customers may feel slighted by employees who are
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___________________
rude or uncaring. Golden warns that customer service
___________________
representatives and other employees must remain caring and
___________________
polite even when dealing with angry customers.
___________________
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Categories of Customer Complaints
___________________
At least five types of complainers can be identified. Each type is
___________________
motivated by different beliefs, attitudes, and needs. Consider the
following definitions of the types of complainers, how one might ___________________
respond to them, and the danger of not handling complaints ___________________

effectively.
(a) Meek Customer: Generally, will not complain.
Response: Must work hard at soliciting comments and
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complaints and act appropriately to resolve complaints.
(b) The Aggressive Customer: Opposite of the Meek Customer.
Readily complains, often loudly and at length.
Response: Listen completely, ask: “what else?, “agree” that a
problem exists, and indicate what will be done to resolve it and
when.
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Danger: Being aggressive in return. The Aggressive Customer

does not respond well to excuses or reasons why the product or
service was unsatisfactory.
(c) The High-Roller Customer: Expects the absolute best and is
willing to pay for it. Likely to complain in a reasonable
manner, unless a hybrid of the Aggressive Customer.
Response: Is interested in results and what you are going to
do to recover from the customer service breakdown. Always
listen respectfully and actively and question carefully to fully
determine cause. Ask: “what else?” and correct the situation.
(c)
Like the Aggressive Customer, the High-Roller Customer is

not interested in excuses.
(d) The Rip-Off Customer: The goal is not to get the complaint
satisfied but rather to win by getting something the customer
is not entitled to receive. A constant and repetitive “not good
180 enough” response to efforts to satisfy this customer is a sure
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Notes
Activity indicator of a rip-off artist.
Present a draft of an
___________________
assignment on analysis and Response: Remain unfailingly objective. Use accurate
resolution.
___________________ quantified data to backup your response. Be sure the
___________________ adjustment is in keeping with what the organization would
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normally do under the circumstances. Consider asking “What
___________________
can I do to make things right?” after the first “not good
___________________ enough.”
___________________ (e) The Chronic Complainer Customer: Is never satisfied;
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___________________ there is always something wrong. This customer’s mission is to
___________________
whine. Yet, he is your customer, and as frustrating as this
customer can be, he cannot be dismissed.
___________________
Response: Extraordinary patience is required. One must
___________________
listen carefully and completely and never let one’s anger get
aroused. A sympathetic ear, a sincere apology, and an honest
effort to correct the situation are likely to be the most
productive. Unlike the Rip-Off Customer, most Chronic
Complainer Customers will accept and appreciate your efforts
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to make things right. This customer wants an apology and
appreciates it when you listen. Tends to be a good customer (in
spite of his constant complaining) and will tell others about
your positive response to his complaints.
Check Your Progress

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Fill in the blanks:

1. A ................... customer is the one who will not
complain.
2. A ................... customer expects the absolute best and
is willing to pay for it.
Analysis and Resolution

Management finds out about customer dissatisfaction through two
mechanisms: Voice and Exit. “Voice” represents complaints … the
(c)
voice of the customer. “Exit” occurs when the customer stops

buying or using the services. All of us have exited at one time or
another, for example, if you’ve changed your doctor, telephone
carrier, or plumber due to poor service.
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Service providers employ all sorts of strategies to avoid customer
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Notes
turnover. Smart organizations know that it is not enough to have
the lowest price or the best technology – there always seems to be a ___________________
competitor who can do it better or cheaper. There are no ___________________
guarantees, but one of the best customer retention strategies is to
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___________________
provide superior customer service. And that means listening to
your customers. ___________________
___________________
How well do you listen and respond to complaints from your
customers? We all aim to be customer focused ... we claim to be ___________________
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customer focused ... but we need to become More Customer ___________________
Focused.
___________________
Although listening and responding is necessary, it’s not good
___________________
enough. Too often, a response is reactionary and you can easily
___________________
find yourself reacting over and over again to the same complaint
(sometimes this is called “firefighting”). We need to listen and
protect. That means listening to the voice of the customer and
making process improvements based on that feedback so that the
same complaints don’t recur.
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A complaint is any measure of dissatisfaction with your product or
service, even if it’s unfair, untrue, or painful to hear! Complaints
may be about:
z Service Content, Delivery or Quality
z Response time
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z Personnel
z Documentation
z Requests
z Billing
z Communication
z Follow up.
To increase the visibility of complaints, you should:
z Listen to the Customer: Complaints don’t always identify
(c)
themselves. Someone who is requesting the same information

for the 5th time isn’t asking for information anymore … it’s a
complaint!
z Solicit Complaints: Everyone in the organization should
collect and report complaints. All this input should funnel to
182 one place where your objective is to build a valid database of
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Notes complaints. Most of us are accustomed to environments in
___________________ which receiving customer complaints are considered negative
an interruption to doing business. But in the Customer
___________________
Complaint Resolution Process, the more complaints you log,
___________________
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the better! This is one of the biggest cultural issues for
___________________ organizations to overcome.
___________________ z Record Complaints: Create complaint categories that make
___________________ sense for your organization. For example, data that tells you
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that you had 123 complaints about adoptions last month tells
___________________
you nothing. The 123 complaints need to be broken down into
___________________
categories so that you can get to a root cause analysis.
___________________
If you only respond to complaints without correcting the root cause,
___________________ you’re spinning your wheels and you’ll find yourself fighting fires
instead of putting them out for good. You can identify root because
if you collect, categorize, and analyze complaints. As a result,
process improvements will be complaint-driven and thus should be
high-priority.
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This is a customer complaint resolution process that anyone can
implement:
Focus on the Customer: If you can’t immediately solve the
problem, respond to the customer and identify an “owner” who will
be responsible for final resolution. Complete the communications
loop with customer. If you’ve referred the complaint to others,
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make sure there’s closure. If you’ve left the customer hanging

without a response, you’ve become part of the problem.
Focus on the Complaint: Collect all complaints from all external
customers and categorize them in a way that allows you to analyze
data to see trends, patterns, concentrations, tendencies, etc.
Focus on Process Improvement: Use the database of complaints
to define processes that are important from the customer’s
perspective and to improve the most critical ones. Based on
analysis of the database, make appropriate investments to prevent
issues that result in customer complaints. Look for permanent
(c)
improvements to response time, cycle time, internal processes

related to the complaints, and complaint frequency.
183
Check Your Progress
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Activity
Notes
Fill in the blanks: Consider a company having
___________________
an online complaint handling
1. ................... occurs when the customer stops buying or system. Find out the
___________________
using the services. advantages of having such a
system.
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___________________
2. ................... represents complaints
___________________
Advantages of Online Complaint Handling Systems ___________________
___________________
The key advantages of online complaint-handling system are:
UP
___________________
z Enhanced effectiveness and saved time and money: The
___________________
use of ODR technology in complaint-handling processes can be
an important tool to assist complainants as, more often than ___________________
not, they have no insight into their legal rights when they ___________________
come into conflict with a supplier or with governmental
institutions. Because of this, some clients give up defending
their rights, whereas others hold on to their conflict – some of
them irresponsibly and always at relatively high costs – when
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they opt for legal proceedings.
z Streamlined back-office functions and automated
routine tasks: Online complaint-handling technology
facilitates taking the time and money that are not spent on
routine tasks and applying it to primary tasks or cases where
the specialty of complaint-handling services’ representatives is
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needed more.
z Increased participation through a setting that is
perceived as safe and neutral: Technology (coming across
as more “neutral”) facilitates more-structured communications
and provides a secure neutral environment for claimants to
engage and tell their side of the story, stimulating constructive
dialog rather than argument and fostering a problem-solving
attitude.
z A comfortable and safe environment: Many claimants feel
more at ease with the privacy offered by the Internet or with
(c)
textual and delayed means of communication, avoiding stress

and destructive communications that occur in emotional live
communications;
z Uninterrupted access with 24 × 7 availability: Suiting
today’s busy lives with the at-your-own-pace flexibility and
184 convenience of online collaboration, expediting resolution and
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Notes enhancing transparency.
___________________
z Increased focus on conflict prevention: At an early stage,
___________________ stakeholders are given the opportunity to assess the legitimacy
___________________ of the claim or case, explore underlying interests and evaluate
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both the preferred as well as second-best outcomes: As the
___________________
ABA Taskforce Report (2002) concluded: “effective complaints
___________________ handling is more important than effective third-party dispute
___________________ resolution”.
UP
___________________
___________________
Complaint Handling – An Advantage for Businesses
___________________ For many businesses, the holiday season provides a windfall of
customers and profits, and in some cases accounts for a substantial
___________________
portion of annual operating income. With seasonal customers
comes an increase in complaints, and the simple fact is that some
businesses drive profits right back out the door because they do not
have an effective complaint handling system.
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Industry estimates say that generally businesses receive
complaints from only about five percent of dissatisfied customers.
About 95 percent of customers simply will not complain, but more
importantly, about 90 percent of this group will never use the
business again. Equally alarming for businesses is that typical
dissatisfied customers will mention the problem to about eight
family, friends and acquaintances.
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“Businesses operating in tough markets with small margins are

constantly searching for points of competitive advantage and
effective complaint handling can be a key differentiator”. “A
complaint offers a superb opportunity to transform an unhappy
customer into a loyal customer, who may even help you win new
business by word-of-mouth advertising.”
The most common factors affecting consumer’s trust in businesses
were principally service-related – the exact space where a well-
managed complaint handling system can provide an edge over
competition. Survey respondents were asked to consider what one
(c)
company, large or small, that they regularly deal with in everyday

life, do they trust the most – and what does that company do to
earn their trust:
How a Company Earned Trust (All Consumers Who Named a Most
Trusted Company) n=530 (see Figure 14.1)
185
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Notes
___________________
___________________
E
___________________
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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Figure 14.1
Consumers were also asked what one business or company they

regularly deal with in their everyday life, large or small, they trust
the least – and what does that company do to not earn their trust.
Customer relations policies on a regular basis, and advises that
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complaint handling processes must make it easy for customers to

complain and empower employees to deal with complaints
promptly. The following procedures are essential:
z Screening and Logging: The date the problem occurred, a
description of the problem, and any other pertinent
information should be recorded.
z Investigating: Along with information from the customer,
gather more facts by researching in-house records, requesting
receipts and inspecting the product.
z Acknowledging: Let the customer know that the matter is
(c)
receiving attention and provide a realistic estimate for how

long it will take to resolve the issue.
z Formulating a Solution: Important criteria to consider
include warranty obligations; customer expectations; cost
186 versus benefit of alternative solutions; fairness of your
S
Notes decision; and your ability to carry out the solution.
___________________
z Responding: Any response should be clear, appropriate and
___________________ specific to the customer’s complaint. Avoid form letters and
___________________ technical jargon. Explaining a decision can preserve a
E
customer’s goodwill, even if a different result was desired.
___________________
z Following-up: Contact the customer following your response
___________________
to verify whether or not the matter has been resolved
___________________ satisfactorily. If the customer is unhappy, you can refer the
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___________________ matter for third party dispute resolution.
___________________ Reasons Why a Company is Least Trusted (All Consumers Who
___________________ Named A Least Trusted Company) n=527. (see Figure 14.2)
___________________
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Figure 14.2
Effective complaint handling is a value-added service that is

appreciated, remembered and talked about by consumers. To turn
(c)
this year’s holiday season patrons into year-round customers, it

strongly encourages businesses to develop a strong complaint
handling process.
187
Check Your Progress
S
Notes
Fill in the blanks:
___________________
1. Industry estimates say that generally businesses
___________________
receive complaints from only about ....................... of
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dissatisfied customers. ___________________
___________________
2. ................... is a value-added service that is
appreciated, remembered and talked about by ___________________
consumers. ___________________
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___________________
Summary
___________________
As part of their efforts to decrease the likelihood of consumer ___________________
problems arising, and to respond effectively when complaints and
___________________
difficulties do occur, businesses employ a wide range of Consumer
Complaints Management (CCM) techniques. In addition to
addressing the immediate problems of individual consumers, firms
may develop Consumer Complaints Management initiatives in
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response to competitive pressures, to obtain feedback on how to
improve products and services, and to reduce the likelihood of
government having to intervene to solve a problem. Consumer
Complaints Management initiatives are applied by businesses, and
are not required by law.
Lesson End Activity

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Visit any company and collect information on the initiatives taken

by them to manage service and complaint handling efficiently and
effectively.
Keywords
Follow-up: Contact the customer following your response to verify
whether or not the matter has been resolved satisfactorily.
Complaint Handling: Effective complaint handling is a value-
added service that is appreciated, remembered and talked about by
(c)
consumers.
Following-up: Contact the customer following your response to
verify whether or not the matter has been resolved satisfactorily.
High-Roller Customer: This customer is the one who expects the
absolute best and is willing to pay for it.
188
Meek Customer: This customer is the one who generally will not
S
Notes
complain.
___________________
___________________
___________________
E
1. What do you mean by handling customer complaints?
___________________
2. Describe the advantages of complaint handling.
___________________
3. Explain the process of complaint analysis and resolution.
___________________
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4. Discuss the customer complaint management initiatives.
___________________
___________________
Further Readings
___________________
___________________ Books
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Houston, 2000.
Web Readings
(c)
www.impelcrm.in
Unit 15
189
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Notes
Case Studies
___________________
___________________
E
___________________
Objectives
___________________
___________________
Case Study 1: GAIL opens LNG Trading Desk in Singapore
UP
___________________
To source natural gas for meeting domestic demand, GAIL (India)
___________________
Ltd opened a liquefied natural gas (LNG) trading desk in
Singapore on Wednesday. The company would be operating in ___________________
Singapore through its subsidiary, GAIL Global (Singapore) Pte
Ltd. ___________________
GAIL will get first cargo from this desk within this financial year,
sources said. India’s natural gas production is currently at about
120 mmscmd as compared to the demand of around 189 mmscmd.
The country is already importing 46.3 mmscmd gas as LNG. Even
after these imports, the total availability of 164 mmscmd is short
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of the current demand of 189 mmscmd.
Mr B.C. Tripathi, Chairman and Managing Director, GAIL said,
“the primary purpose of the trading desk is to source natural gas
for the Indian market and trading in LNG, petrochemicals and
related products.”
The company would undertake purchase and sale of LNG cargoes
on spot and short-term basis for trading. So far, GAIL, through
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the Singapore arm, has made investments in China, Egypt and

other countries and would be pursuing opportunities for further
investment in different countries.
“Singapore, an ideal geographical location, between LNG demand
centres in North East Asia, particularly in Japan, South Korea,
China and India as well as LNG supply sources in South East
Asia, West Asia and Australia, offers a good locational
advantage,” Mr. Tripathi said.
Scouting for Contracts
With the drop in output from Reliance Industries Ltd-operated
KG-D6 gas fields, the country’s dependence on imported gas has
increased. GAIL has been looking for long- and short-term
contracts with global suppliers, he said.
(c)
While imported gas is available at $8.5/mBtu and $14/mBtu

(excluding other levies and taxes), D6 gas is available at
$4.2/mBtu (excluding the levies and taxes), in the domestic
market.
GAIL transports 118 mmscmd of gas from various sources. Of
this, domestically produced gas is 92 mmscmd, including 29
Contd…
190 mmscmd from RIL’s East Coast fields. The remaining 32 mmscmd
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Notes is imported gas.
Within India, GAIL owns and operates a network of over 8,700
___________________
km of natural gas high pressure trunk pipeline with a capacity to
___________________ carry 64 billion cubic metre across the country. GAIL is at present
implementing over 5,000 km of new pipelines at an estimated
___________________ investment of nearly $6 billion.
E
___________________ Once commissioned, the capacity is expected to increase to over
110 billion cubic metre, by 2013-14 and would connect markets in
___________________ Southern and Eastern parts of India. GAIL would be looking for
importing gas for its proposed LNG facility on East Coast of India
___________________
either directly or through its affiliates.
UP
___________________ A petrochemical is the second largest business segment and a
major growth driver for GAIL. In order to diversify its
___________________
petrochemical product portfolio and actively involved in
___________________ petrochemical trading activities at an international level, GAIL
plans to undertake petrochemicals trading from Singapore.
___________________
Questions:
3. Find out reasons behind why GAIL opens LNG trading desk
in Singapore?
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Source: http://www.thehindubusinessline.com
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(c)
191
Case Study 2: “Touchy-Feely” Research: Psyching Out
S
Notes
Consumers
___________________
Consumers often don’t know or can’t describe just why they act as
they do. Thus, motivation researchers use a variety of probing ___________________
techniques to uncover underlying emotions and attitudes toward
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___________________
brands and buying situations. These sometimes bizarre
techniques range from free association and inkblot interpretation ___________________
tests to having consumers form daydreams and fantasies about
brands or buying situations. One writer offers the following ___________________
tongue-in-cheek summary of a motivation research session:
___________________
UP
“Good morning, ladies and gentlemen. We’ve called you here
today for a little consumer research. Now, lie down on the couch, ___________________
toss your inhibitions out the window, and let’s try a little free
association. First, think about brands as if they were your friends. ___________________
Imagine you could talk to your TV dinner. What would he say? ___________________
And what would you say to him? Now, think of your shampoo as
an animal. Go on, don’t be shy. Would it be a panda or a lion? A ___________________
snake or a wooly worm? For our final exercise, let’s all sit up and
pull out our magic markers. Draw a picture of a typical cake-mix
user. Would she wear an apron or a negligee? A business suit or a
can-can dress?
Such projective techniques seem pretty goofy. But more and more,
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marketers are using such touchy-feely approaches to dig deeply
into consumer psyches and develop better marketing strategies.
For example, Shell Oil used motivation research in an attempt to
uncover the real reasons behind a decade-long sales slump.
The manager of corporate advertising for Shell oil, Sixtus
Oeschle, was at his wits’ end. For months, he and his team of
researchers had pumped the consumer psyche. For months, they’d
come up empty. “We tried psychographic memory triggers,” he
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recalls. “We tried dream therapy.” All to no avail. At one point,

respondents were even given mounds of wet clay and urged to
mould figures that expressed their inner feelings about Shell.
It was time, Oeschle decided, to try something radical. To craft a
more potent appeal for its brand of gasoline, Shell would have to
go deeper – much deeper. Oeschle called in a consumer researcher
who specializes in focus groups conducted under hypnosis. The
results, Oeschle says, wowed even the sceptics. “I’ve got to tell
you, it was fascinating, fascinating stuff,” he says. After dimming
the lights, the researcher took respondents back, back-back all the
way to their infancy. “He just kept taking them back and back,”
Oeschle says, “until … he’s saying, ‘Tell me about your first
experience in a gas station.’ And people were actually having
memory flashbacks. I mean, they were going there. They were
(c)
saying, ‘I was three and a half years old. I was in the back of my
dad’s brand new Chevy’. It was like it was yesterday to them. I
was stunned.”
The real breakthrough, however, came after the respondents
awoke out of their trance. “When he brought them all back out, he
asked them who’d they prefer as a gasoline purveyor,” Oeschle
says. “What staggered me was that, to a person, it was always
Contd…
192 linked to that experience in their youth.” One woman volunteered
S
Notes that she always made a point of filling up at Texaco. “We asked
her why”, Oeschle recalls. “And she said, ‘I don’t know, I guess I
___________________ just feel good about Texaco.’ Well, this was the little three-and-a-
half-year-old in the back of her daddy’s car speaking.
___________________
Shell is now designing new marketing approaches base on the
___________________ insights gleaned from the groups of mesmerized motorists. Where
E
Shell had gone wrong, it seems, was in reasoning that, since
___________________
people don’t start buying gas until at least age 16, there was no
___________________ need to target the tiniest consumers, “They weren’t even on
Shell’s radar,” Oeschle laments. “It dawned on us…that we’d
___________________ better figure out how to favourably impact people from an early
UP
age.”
___________________
Similarly, Daimler Chrysler used a dose of deep motivation
___________________ research to create a successful new concept car.
___________________ A few years back, Daimler Chrysler set out to find the next, “wow
car,” the “segment buster” that would reach across age and
___________________ income lines, into the subconscious. That meant doing more than
the usual focus group research. So Daimler Chrysler hired
psychologist Clothaire Rapaille to probe consumers’ innermost
feelings. The underlying premise: The products we buy mean
something; they form part of a greater whole. “The more we learn
about American culture, the more we see how our vehicles fit into
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our psyche – the more we see how it is that we fit into the overall
scheme of living,” says David Bostwick, director of market
research at Daimler Chrysler.
Rather than convening traditional focus groups, Rapaille used a
method known as “archetype research”. He had participants lie on
soft mats, listen to mood music, and free-associate in the dark.
According to Bostwick, this re-creates the same brain activity you
have when you first wake up from a dream. “It’s a very special
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brain activity”, he says. “It allows us to actually access some of

those unconscious thoughts.”
When the lights came back up, Rapaille had learned that
Americans are entrepreneurial, individualistic, freedom loving,
and inventive – but also juvenile and self-indulgent. More
important, he discovered that many suffered nostalgia pangs. In
these complex and often unsettling times, car buyers yearned for
the good old days – for a time when things seemed simpler and
more secure, and when people felt good about themselves. “What
that said to us is that people are looking for something that offers
protection on the outside, and comfort on the inside,” says
Bostwick. “We communicated that to our design team.”
The result: The PT Cruiser, Daimler Chrysler’s phenomenally
successful retro-style car. Described by the Wall Street Journal as
(c)
“part 1920s gangster car, part 1950s hot rod, and part London
taxicab,” the PT Cruiser is what one analyst calls “a focus group
on wheels – an actual chrome-and-sheet-metal incarnation of the
popular will.” Its nostalgic look and protective exterior, combined
with a well-appointed and highly functional interior, inspires an
emotional reaction from almost everyone. In just two years
following its introduction, U.S. consumers snapped up more than
Contd…
225,000 PT Cruisers. “We didn’t set out to create a market,” 193
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Bostwick says earnestly. “We just tapped into what people had in Notes
their heads in the first place…. The vehicle takes you back, but
not to a particular time in the century. It just takes you back to a ___________________
time you felt cool.”
___________________
Some marketers dismiss such motivation research as mumbo
jumbo. However, like Shell and Daimler Chrysler, many
E
___________________
companies are now delving into the murky depths of the
consumer unconscious. “Such tactics have been worshipfully ___________________
embraced by even the no-nonsense, jut-jawed captains of
___________________
industry,” claims an analyst. “At companies like Kraft, Coca-cola,
Proctor & Gamble, and Daimler Chrysler, the most sought- after ___________________
UP
consultants hail not from (traditional consulting firms like
McKinsey.) They come from brand consultancies with names like ___________________
Archetype discoveries, Psychologics and Semiotic solutions.”
___________________
Questions
___________________
2. Write down the case facts. ___________________
3. Which projective techniques seem pretty goofy?

4. Define archetype research method.
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(c)
194
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Notes
___________________
___________________
___________________
E
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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CC
(c)
UNIT 16: Consumer Complaints Management Initiatives
195
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Notes
___________________
___________________
E
___________________
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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BLOCK-IV
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(c)
196
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Notes
UNIT 16: CONSUMER COMPLAINTS
___________________ UNIT 18: e-CRM
MANAGEMENT INITIATIVES
z Introduction
___________________
z Introduction
z Advent of e-Commerce
___________________
E
z Customer Complaints Management Initiatives
z Definition of e-CRM
___________________
z Service as a Business
z Scope of e-CRM
z ___________________
Service Challenges
z CRM vs e-CRM
___________________
Challenges in e-CRM
UP
UNIT 17: SERVICE CHARACTERISTICS z
___________________
z Introduction z Web Experience
___________________
z Intangibility
UNIT 19: PORTALS AND OTHER FIELDS IN e-CRM
___________________
z Perishability
z Introduction
___________________
z Variability
z e-CRM and Portals
z Modules in CRM
z Basic Requirements of e-CRM
Three Dimensions in e-CRM

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z
z Key e-CRM Features
z ERP and CRM
z SCM and CRM

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(c)
Unit 16
197
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Notes
Consumer Complaints
___________________
___________________
Management Initiatives
E
___________________
___________________
Objectives ___________________
___________________
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topics:
___________________
\ Customer Complaints Management Initiatives
\ Service as a Business ___________________
\ Service Challenges ___________________
___________________
Introduction
Businesses know that customers expect prompt, courteous
attention and accurate information when conducting a transaction.
They want the goods and services they buy to be of acceptable
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quality, and for the merchant to act quickly and appropriately
when problems arise.
Customer Complaints Management Initiatives

Customer Complaint Management (CCM) initiatives are
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mechanisms, approaches and techniques merchants use to increase

customer satisfaction with their products and services. These
initiatives attempt to anticipate and prevent problems and
complaints from arising, promptly and appropriately address
complaints through internal processes, and, when internal
complaints-handling processes prove insufficient, resolve disputes
fairly, effectively and efficiently through external private dispute
resolution approaches. Below, we explore these three aspects of
Customer Compliant Management individually, and conclude by
noting that some initiatives take a comprehensive approach to
Customer Compliant Management. The expenses associated with
(c)
developing and implementing effective customer complaints

management could be considered a cost of maintaining good
customer relations.
Customer Compliant Management initiatives are:
z Voluntary (i.e. not expressly required by law).
198
z Developed and implemented by individual firms or industry
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Notes
Activity
associations, governments, or customer or standards
Prepare a brief report on
___________________
customer complaints organizations.
management initiatives.
___________________
z Applicable to a single store or company, several firms or
___________________ organizations, an entire sector or many sectors.
E
___________________ z Usually initiated in response to, or anticipation of, customer or
___________________ competitive pressures, the real or perceived threat of
government action, or a combination of these
___________________
UP
___________________ z Operated within a legal framework that includes customer
protection, competition and contract law components.
___________________
Effectively preventing and resolving complaints can be rewarding
___________________
for businesses. Research suggests, and the examples in this Guide
___________________ show, that businesses can promote customer loyalty, enhance their
reputation and gather valuable market intelligence by developing
and adhering to service standards, policies and guarantees that
signal honesty and integrity to customers, and decrease the
likelihood of problems occurring.
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Benefits of Effective Customer Complaint Management
Initiatives
For customers, effective Customer Complaint Management
initiatives offer a number of benefits:
z Preventive measures help assure customers that a company is
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meeting customer service and reliability standards, and that

when it does not customers will be compensated in some way.
z Information is available up front about how a business
responds to customer problems.
z The number of problems with the products or services of a
particular merchant or group of merchants likely decreases.
z When compared with using the courts to complain, Customer
Complaint Management initiatives allow comparatively quick,
fair and inexpensive solutions to customer problems. For
businesses, Customer Complaint Management initiatives can
(c)
be advantageous in a number of ways.

z They can stimulate more efficient, fair and effective operations
that minimize customer problems. This puts firms in a more
favourable light with the public, customers, government and
others, and may have the added benefit of reducing the 199
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pressure for new laws or regulations. Notes
z Significant customer feedback can be used to devise better ___________________

products and services. ___________________
z There is a likely reduction in costly and acrimonious legal
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___________________
disputes.
___________________
z They complement existing laws, thereby improving relations ___________________
with government agencies and regulatory bodies.
___________________
UP
For governments, the use of Customer Complaint Management
___________________
initiatives by firms can have several advantages.
___________________
z Public policy objectives can be furthered through non-
___________________
regulatory means.
___________________
z They may complement or expand traditional regulatory
regimes.
z They can go beyond the minimum standards and criteria set in
law.
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z The need for government intervention may be decreased.
z Standards and criteria may be set or adjusted more quickly
and less expensively than by using laws and regulations.
Developing Consumer Complaints Management Initiatives

Eight-step model for developing consumer complaints management
CC
initiatives are as follows:
Step One: Define Problem and Gather Information

What problem is the Consumer Complaints Management initiative
intended to address? Is there baseline data pertaining to the needs
and concerns of consumers on which to draw? What are the
objectives of the Consumer Complaints Management initiative,
and does everyone agree with them? Finding common ground on
the problems being addressed and the objectives of the initiative is
essential to moving ahead with solutions. Industry Canada’s Office
(c)
of Consumer Affairs has developed a diagnostic tool to help

companies identify problems with complaints handling.
What are the options for resolving the problem, and what are the
potential costs, drawbacks and benefits of each solution? Industry
Canada’s Office of Consumer Affairs has developed a diagnostic
200 tool to help businesses identify ways of improving refund and
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Notes exchange policies. There may be value in looking to the experience
___________________ of merchants in other sectors and jurisdictions.
___________________ Have all the people and organizations that could be involved or
___________________ affected by the Consumer Complaints Management initiative been
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identified, and have their interests or concerns been taken into
___________________
account? For example, the views of a cross-section of upper
___________________ management and rank and file officials within affected
___________________ organizations, representatives of consumer organizations, and
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government officials should all be taken into consideration.
___________________
Clearly, the range of identified individuals will depend on the
___________________
initiative in question. A single pizza delivery company may not
___________________ need to directly involve anyone outside the organization when
___________________ developing a “30 minutes or free” delivery policy, but it would be
wise to identify and articulate the interests of the drivers (e.g. the
delivery policy should not put drivers at risk).
Step Two: Hold Preliminary Discussions with Major Stakeholders

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The objective of this stage is to test the tentative conclusions
reached in the information-gathering phase and identify partners
willing to help develop the Consumer Complaints Management
initiative. Looking beyond like-minded industry colleagues to more
broadly affected interests such as consumer group representatives
and government officials can help to confirm initial perceptions of
the initiative or stimulate useful revisions. Informal bilateral
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sessions may be appropriate in many situations, and focus groups

are also useful for testing new ideas.
Step Three: Create a Working Group

Having the right people on the working group is essential. They
should be dependable, credible and knowledgeable, represent the
diversity of affected stakeholders, and have the necessary time and
resources to commit to the project. Frank discussion should take
place at the outset about the group’s objectives, members’
responsibilities, anticipated workloads and outcomes, and the
(c)
ground rules about how the group will operate (e.g. decision
making by consensus, rotating chairs).
Within the organization, an effort should be made to ensure that
frontline employees (who will play a major role in implementing
the Consumer Complaints Management initiative), managerial 201
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staff and key organization leaders are included. Notes
Consumer Complaints Management proponents may wish to ___________________

explore the feasibility of inviting a government representative to ___________________
participate in the working group, since relevant government
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___________________
agencies and departments can provide important expertise and
advice. Even when they do not agree to participate as working ___________________
group members, relevant government departments and agencies ___________________

should be consulted early on in the development of the Consumer ___________________
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Complaints Management initiative.
___________________
To ensure that the full range of concerns is heard, it is very useful
___________________
to invite knowledgeable consumer group representatives to
participate in the working group. Consumer groups can provide a ___________________
wealth of information and valuable perspectives about complaints, ___________________

issues, and their input can give Consumer Complaints
Management initiatives additional legitimacy.” A consumer group
told us things about our own product that we didn’t even know,”
said John Tory, President and CEO of Rogers Cable Inc. This has
E-
led Rogers to develop new ideas and services. Consumer groups
and Consumer Complaints Management initiators should work
together to maintain the credibility and independence of the
participating consumer group. Regular communication with the
full consumer group community is also useful. When consumer
group representatives are involved, it is strongly recommended
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that some form of remuneration be offered, such as an honorarium

and compensation for travel expenses.
When selecting consumer group representatives, a good fit — both
of the group and of the individual within the group — is
particularly important. Care must be taken when identifying the
right consumer groups and inviting the appropriate
representatives within the groups. In this regard, it is
recommended that the consumer groups be fully informed of the
goals of the Consumer Complaints Management initiative, the
development and implementation processes, and the particular
roles and responsibilities of the consumer group representative.
(c)
This ensures mutual understanding, builds trust and sets the

groundwork for a good working relationship. Before agreeing to
participate, the consumer group representative will likely want to
know the following:
z Whether all the major players are at the table.
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z The views of relevant government agencies on the initiative.
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Notes
___________________
z The track record of the Consumer Complaints Management
proponent for similar initiatives.
___________________
z Whether there is commitment from the organization’s leaders.
___________________
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z The openness and accessibility of the decision-making process.
___________________
___________________
z The roles and responsibilities of all working group
participants.
___________________
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___________________ Step Four: Prepare Preliminary Draft and Explore Appropriate Structures
___________________ In preparing a preliminary draft of the initiative, working group
___________________ members will likely identify who (people, organizations and new
institutional structures) will be responsible for which aspects of
___________________
implementation. For example, certain employees may perform key
new functions, and a new agency or management structure may be
created to help with implementation. Several of the Consumer
Complaints Management initiatives discussed in Part One of this
Guide are housed in separate non-profit bodies dedicated
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specifically to complaints management or dispute resolution (e.g.
the Canadian Banking Ombudsman, Advertising Standards
Canada’s national and regional consumer response councils, and
the Cable Television Standards Council). The advantage of such
new structures is greater perceived and real independence from
other aspects of the organization’s activities. The credibility of
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complaints handling and dispute resolution decisions is likely to

increase when decision makers are seen to be at arm’s length from
the organization’s other activities and officials.
In other situations, ad hoc use of neutral third-party mediators or
arbitrators may be sufficient. In such situations, there needs to be
criteria for assessing the expertise of the third parties. Creation of
new structures and use of new parties to help with complaints
handling may involve considerable expense, which should be
factored into design considerations from the outset.
Step Five: Consult with Stakeholders

(c)
The working group draft of the initiative should be considered a

point of departure. Thorough consultations concerning the draft
with all interested parties will help prevent problems later. One
good approach is to work outward, from those most likely to be
directly affected to those less likely to know about the initiative.
203
For industry-wide initiatives, once the working group has agreed
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Notes
to a draft, it should invite, using a public announcement in
appropriate media, comments from anyone interested, allowing a ___________________
reasonable time for comments to be returned. Direct solicitation of ___________________
comments from known interested parties is also advised. A
E
___________________
consultation plan can be useful. It should include roles for high-
profile officials with good communications skills to explain the ___________________
Consumer Complaints Management initiative and receive ___________________

feedback. Typically, this feedback would go to the working group, ___________________
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which would then discuss how and to what extent the final draft
___________________
would reflect the comments.
___________________
Step Six: Announce and Publicize the Initiative ___________________
As mentioned earlier, a Consumer Complaints Management ___________________
initiative that is not adequately publicized has little chance of
succeeding. Participating merchants (including managers and
employees), consumers and governments all need to know what the
initiative is and how it affects them. A good communications plan
E-
is important. It should identify who must be made aware of the
Consumer Complaints Management initiative, who should receive
a copy of its terms, and how the individuals and groups will be
reached. The communications activities might include an
awareness campaign addressing such matters as the use of a logo,
publicity endeavours such as advertising and speeches, pamphlets,
and a notice that firms and organizations can display on their
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premises. There must be adequate funding to ensure that these

communications activities are properly carried out.
Step Seven: Implement the Initiative

The following are essential elements of effective implementation:
z Adequate Financing: When there is not sufficient funding, a

Consumer Complaints Management initiative risks being
nothing more than words on paper, potentially frustrating
consumers and bringing the reputation of firms into disrepute.
The salaries of complaints-handling specialists,
(c)
communications budgets, payment of consumer group

representatives’ expenses, and costs associated with operating
new decision-making bodies need to be taken into account
from the outset. Possible self-financing levies (e.g. paying
dispute resolution experts on a per use basis) need also to be
carefully worked out before the program is launched.
204
z Phased-in Implementation: There may be value in
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Notes
implementing the initiative in phases. For example, a program
___________________
might operate only in certain jurisdictions at first, or apply
___________________ only to certain types of transactions. Alternatively, the
___________________ program could initially operate on a “pilot” (limited term)
E
basis. The advantage of the phased-in approach is that it
___________________
allows administrators to test the viability and practicality of a
___________________ program, and make appropriate adjustments before unveiling
___________________ a full and comprehensive initiative.
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___________________ z Ongoing Communications Initiatives: In addition to initial
___________________
communications activities, there need to be regular
information updates — quarterly, bi-annually or annually —
___________________
to tell affected parties how the program is working and about
___________________ any changes in operation or other developments.
Step Eight: Monitor, Review and Improve the Initiative

Regular monitoring, review and continual improvement of program
terms and operation should be designed into Consumer Complaints
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Management initiatives from the outset. When and how often the
monitoring and reviews take place should be based in part on how
long it will take to generate data on effects and objectives achieved.
To measure the impact of a Consumer Complaints Management
initiative, data is needed on the situation prior to the Consumer
Complaints Management initiative being launched (i.e. baseline
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data) and at frequent intervals thereafter. This data can be used

not only to determine weaknesses in Consumer Complaints
Management initiative design and operation, but also to
demonstrate results. The Cable Television Standards Council, for
example, does a random callback of consumers who have had
problems to find out how well the process worked. The Canadian
Motor Vehicle Arbitration Plan (CAMVAP) uses an independent
survey firm to collect and interpret information from all clients
concerning its dispute resolution system. Such processes provide
vital feedback to the organization, so it can understand where
systemic problems lie and how they may be corrected.
(c)
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Check Your Progress
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Activity
Notes
Fill in the blanks:
Write an article on services as
___________________
1. ................... initiatives are mechanisms, approaches a business.
___________________
and techniques merchants use to increase customer
satisfaction with their products and services.
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___________________
2. Services are consumed by ................... ___________________
___________________
Service as a Business ___________________
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A service business entails selling a product that does not exist ___________________
until the customer pays for it. Because it is “intangible,” marketing
___________________
a service business is an entirely different ballgame from marketing
a product. Know the strategies for marketing a service business. ___________________
___________________
Marketing a service business is not the same as marketing a
product. When marketing a retail good, you are selling a product
that is tangible – an item that can be seen, handled and used.
Consumers can gain information and evaluate the product based
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on what they see.
In a service business, you are marketing yourself – your expertise
and capabilities, your reliability, and commitment to excellent
service. Your service technically does not exist until the customer
pays for it. Service is not a tangible good, so what you are selling is
the promise to deliver what you set out to deliver. Your marketing
efforts will have to focus on communicating that promise to your
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clientele.
Mass marketing strategies do not work well with a service
business. You are constrained by the amount of clients you can
service well. To please your clients, you can focus only on a select
number of accounts or customers to sustain your business. If you
decide to get as much clients as possible, there is risk that you will
spread yourself too thin that the quality of your work eventually
suffers.
A solo home-based web designer, for example, cannot mass market
his services as he can only create a limited number of web pages in
(c)
a day. A massage specialist can only massage a finite number of

clients before her hands give up. A wedding consultant can
coordinate a few clients at one time to ensure optimum service.
The doctors and the dentists too.
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Selling a service is more difficult than selling a tangible product.
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Notes
Consumers are much less certain when they are buying a service,
___________________
since what they are buying is merely a promise that someone will
___________________ do something for them in a way that will satisfy their expectations.
___________________ The following promotional tools in marketing a service business:
E
___________________ z Referrals: The recommendation of a satisfied client or a
professional colleague is often the most effective way of
___________________
bringing in new clients. People tend to view recommendations
___________________ from those who have previously used the service as highly
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___________________ credible, and are more inclined to use the recommended
___________________
service. Referrals, however, do not always come easily. Most
often, you have to ask for it. If one of your clients seem
___________________
satisfied with your service, request him or her to refer your
___________________ business to their friends or acquaintances who may benefit
from your service. To reinforce your request, you may give
them promotional materials such as business cards or
brochures that they may share with others. Other
entrepreneurs even make it a point to reward those who refer
E-
a client to them. It may not be money (some professions frown
on the practice of giving money for referrals), but a simple note
or a small act of thoughtfulness to show your clients that you
appreciate their effort to spread the word about your business.
z Client Relations: The authors define client relations as
“consistent courtesy + common sense + professional dignity =
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effective client relations.” Clients will patronize your service

repeatedly – if they are satisfied. It is therefore important to
cultivate your existing client base and bond with them. Your
beauty salon may not have the latest hairstyling techniques,
but if you treat your customers well, you’d have a greater
chance of seeing them back to your shop again. More than a
product-based business, you need to practice excellent
customer service every second that you deal with a client. Your
business depends on it.
z Participation in Organizations: Networking is the key
promotional technique in marketing a service business, and
(c)
participating actively in organizations is the best way to

network. Joining an organization allows you to network with
potential clients and industry players, increase your exposure
to your community and professional colleagues, and even get
new business. You can choose from the more general
organizations (e.g. small business groups) with members 207
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coming from all walks of life or industry specific organizations. Notes
z Direct Mail: A good way to promote your business is to send ___________________

letters or brochures to your target market. The key to success ___________________
in direct mail is to reach out to the right people. An accountant
E
___________________
I know watches out for the listings of new businesses in the
Washington DC area published by a local business journal. He ___________________
then sends a letter to owners of these new businesses offering ___________________

his services. The business he generates from his mailings more ___________________
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than compensate for the yearly subscription to the publication.
___________________
Service industries can be classified by the type of user and thus
___________________
there are three types of end-users:
___________________
Individual Consumer as an End-user ___________________
Services are consumed by individuals. Some examples are leisure,

hair-dressing, personal finance, packaged holiday tour, etc. The
implication for the marketer is profound: it is for a mass market
and there is scope for mass communication. If there is a possibility
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of branding (e.g., NIIT Futurz) then there is tremendous scope of
enlarging the geographical reach of the market, the catchment
area of a service retail outlet as well as for franchising.
Business-to-business End-users
This implies that one business or a firm from one industry will
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seek services from another business or another company from

another industry. This has connotations of industrial marketing –
abhorring mass media, more personal selling, high involvement,
with decision making units and decision making processes
different from those for individual consumers.
Industrial End-users
These end-users of services are plants and factories. They might
require very unique services that are highly technical.
Check Your Progress

(c)
True or False:
1. Marketing a service business is not the same as
marketing a product.
2. Service is a tangible good.
208
Service Challenges
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Notes
Activity
Present a draft of an Some common challenges of services are:
___________________
assignment on service
challenges. z Clients can’t see or touch services before they purchase
___________________
them: This makes services difficult to conceptualize and
___________________
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evaluate from the client perspective, creating increased
___________________ uncertainty and perception of risk. From the firm’s
___________________ perspective, service intangibility can make services difficult to
promote, control quality, and set price.
___________________
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z Services are often produced and consumed
___________________
simultaneously: This creates special challenges in service
___________________
quality management that product companies do not even
___________________ consider. Products are tested before they go out the door. If a
___________________ product has quality problems while in production, the
company can fix them and customers are none the wiser.
Service production happens with the customer present,
creating a very different and challenging dynamic.
z Trust is necessary: Some level of trust in the service
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organization and its people must be established before clients
will engage services. This is as important, sometimes more
important, than the service offerings and their value
proposition.
z Competition is often not who you think: Competition for
product companies are other product companies. Competition
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for service companies are often the clients themselves. Sure,

sometimes you find yourself in a competitive shootout (some
firms more than others), but often the client is asking ‘should
we engage this service at all’ and ‘if so, should we just do it in-
house’.
z Brand extends beyond marketing: Brand in service
businesses is about who you are as much as what you say
about yourself. And internal brand management and
communications can be equally as vital to marketing success
as are external communications.
(c)
z Proactive lead generation is difficult: Many service

companies have tried, and failed, at using lead generation
tactics that work wonders for product companies. Implemented
correctly, traditional product techniques, such as direct
marketing and selling, can work for services, but the special
dynamics of how clients buy services must be carefully woven 209
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into your strategy. Notes
z Service deliverers often do the selling: Many product ___________________

companies have dedicated sales forces. For services, the selling ___________________
is often split between sales, marketing, professional, and
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___________________
management staff.
___________________
z Marketing and sales lose momentum: Most product
___________________
companies have dedicated marketers and sellers. They market
and sell continuously, regardless of the revenue levels they ___________________
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generate. In many services companies the marketers and ___________________
sellers also must manage and deliver. This can often lead to
___________________
the Services Revenue Rollercoaster-wide swings between
revenue and work overflow, and revenue and work drought. ___________________
___________________
z Passion is necessary, yet elusive: The more passion, spirit,
hustle, and desire your staff brings to the organization every
day, the more revenue and success you will have. The
correlation between staff passion and financial success is
direct and measurable (as is the correlation between lack-of-
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passion and organizational failure). Yet institutionalizing
passion, while necessary, is agonizingly elusive.
Check Your Progress

Fill in the blanks:
1. ................... happens with the customer present,
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creating a very different and challenging dynamic.

2. ................... in service businesses is about who you are
as much as what you say about yourself.
3. ................... swings between revenue and work
overflow, and revenue and work drought.
Summary
Customer Complaint Management (CCM) initiatives are
mechanisms, approaches and techniques merchants use to increase
(c)
customer satisfaction with their products and services. These

initiatives attempt to anticipate and prevent problems and
complaints from arising, promptly and appropriately address
complaints through internal processes, and, when internal
complaints-handling processes prove insufficient, resolve disputes
210 fairly, effectively and efficiently through external private dispute
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Notes resolution approaches. Below, we explore these three aspects of
___________________ Customer Compliant Management individually, and conclude by
noting that some initiatives take a comprehensive approach to
___________________
Customer Compliant Management.
___________________
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___________________
Lesson End Activity
___________________
Prepare a PowerPoint presentation on consumer complaint
___________________ management initiatives.
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___________________
___________________ Keywords
___________________ Voluntary: It means not expressly required by law
___________________
Service business: It entails selling a product that does not exist
until the customer pays for it.
Referrals: The recommendation of a satisfied client or a
professional colleague is often the most effective way of bringing in
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new clients.

1. Explain customer complaint management initiatives.
2. Describe various service challenges.
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3. Discuss about services as a business.
Further Readings
Books
(c)

211
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Notes
Houston, 2000. ___________________
___________________
Web Readings
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___________________
___________________
___________________
___________________
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www.impelcrm.in
___________________
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/ ___________________
___________________
___________________
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(c)
212
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Notes
___________________
___________________
___________________
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___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
UNIT 17: Service Characteristics
Unit 17
213
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Notes
Service Characteristics
___________________
___________________
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___________________
Objectives
___________________
topics: ___________________
\ Intangibility ___________________
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\ Perishability ___________________
\ Variability
___________________
___________________
Introduction
___________________
Service provision is often an economic activity where the buyer
does not generally, except by exclusive contract, obtain
exclusive ownership of the thing purchased. The benefits of such a
service, if priced, are held to be self-evident in the buyer's
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willingness to pay for it. Public services are those services for
which society (nation state, fiscal union, regional) as a whole pays
for through taxes and other means.
Intangibility
A customer cannot see, touch, or feel the service product. There is
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also no scope for the customer to make impulse purchase decisions

as triggered by visual images and the touch-and-feel factor – which
are not anyway possible in intangible service offers. The consumer
cannot measure either its features or its quality. There is no
concept of ownership, possession or acquisition for the customer
after the service transaction.
These are the ways in which intangibility can be overcome:
1. Visualization: The marketer should find ways and means to
help the customer visualize the transaction process and the
service transaction benefits of consuming the service product.
(c)
Pictures, films, etc. should be used evocatively.

2. Association: The intangibility of the service offer makes it
difficult for the marketer to convince consumers about its
credibility, character, or the “ability to keep its word”, “service
delivery”, etc. This can be overcome by associating the offer
214 with some living persona, or known inanimate objects. This is
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Notes
Activity almost akin to having a known personality endorsing the offer.
___________________ In this way, the marketer can build a bridge, and expect the
intangibility of services.
association to rub off positively on the service offer, morphing
___________________
the endorser’s personality on it. The consumer makes the
___________________
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analogy, believes the service delivery promise, and gets some
___________________ idea of its character. This makes it easier to build a
___________________ relationship with customers.
___________________ 3. Physical Representation: The intangibility factor in a
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service offer forces a marketer to go for tangible
___________________
representations symbolizing the existence and character of
___________________
service industries. The tangibles help in making the offer
___________________ believable. Some of the ways in which this can be used are:
___________________ (a) Uniforms: This has been in use by many service
organizations over a long period of time effectively. They
not only convey uniformity, discipline and conformity but
also professionalism. They also improve visibility for the
service organization. Hospitals, the church, the army,
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police, airlines and shipping firms have seen the uniform’s
utility very early on.
(b) Colours: This is used in servicescapes like interiors,
stationery, glow signs, buildings, etc. The corporate
colours are a part of their logo and other corporate
communication tools. Colour communicates uniquely and
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softly sells the firm’s viewpoint.

(c) Logos and mascots: This is not unique to service firms but
has been effectively used by them to overcome
intangibility. Logos, derived from the Greek word logos,
implied “word”. Kings used it in their royal seals and
English Lords and other nobility used them in their family
crests. Service firms have sought to convey their mission
and vision through them. Most schools, colleges and
universities have them to convey their core values,
through mottos and distinctive badges.
(c)
4. Documentation, Facts and Figures: Service industries use

documentations to prove its features and claims and thus are
able to overcome the intangibility factor. Thus, firms like
World Network Services, the erstwhile BPO of British Airways
but now acquired by the investment firm Warburg Pincus, tout
ISO 9001 and 9002 quality certifications in their corporate
communications to convey their high standards of service 215
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delivery systems and processes. Educational institutions Notes
Activity
prepare to be awarded certification from National Association Make a brief report on the
___________________
of Accredition (NAAC), National Board of Accredition (NBA), perishability feature of
services.
___________________
etc. Annual reports, profit and loss statements, balance sheets,
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etc., all are examples of such positioning documentations. ___________________
___________________
Check Your Progress
___________________
___________________
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1. BPO stands for:
___________________
(a) Business Process Outsourcing
___________________
(b) Business Program Operation
___________________
(c) Business Program Outsourcing ___________________
(d) None
2. NAAC stands for:
(a) Numerical Association of Accredition
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(b) National Association of Accredition
(c) National Association of Accounts
(d) National Association of Accountability
Perishability
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The perishability factor prevents a service marketer from storing

his offers. This robs him of the privilege of delayed sales. The
service marketer suffers from lost opportunities. But there are
ways and means to overcome the perishability factor:
Over-marketing
A service marketer targets for more customers than he has the
capacity to serve. In this way, if there are drop-outs and
cancellations, the actual number of customers is the same as
servicing capacity. Then the service marketer does not suffer from
any opportunity loss. But the flip side with over-marketing is the
(c)
possibility of extreme dissatisfaction amongst those customers who

have been the target for over-marketing but are being denied
services. Obviously, no good service marketer worth his salt would
like to be in the position of having customers on the doorstep and
turning them down. So the trick is to do over-marketing with lots
216 of clauses, catches and conditions. The customer is made to
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Notes participate in the over-marketing process and also to agree
___________________ beforehand too many conditions.
___________________
Managing Demand
___________________
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With no scope for delayed sales or stocking of inventory, it is all the
___________________ more imperative for a service marketer to manage demand.
___________________ Accurate demand management would aid estimation and
forecasting which would in turn help avoid perishability. At the
___________________
risk of sounding pompous, one can safely say that marketing is all
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___________________ about demand identification, measurement and management.
___________________
Nine different types of demand have been identified. The service
___________________ marketer has to understand and adopt them in his marketing to
___________________ avoid perishability. They are:
1. Rising Demand: This occurs when the service offer is in the
growth stage of the product life cycle, customers are aware of
the service category and service brand, and the rate of
adoption is increasing in geometric progression with more
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first-time buyers trying the service offer and customers
making repeat purchases. The service marketer not only
should recognize this trend but also measure the rate of rise of
demand. This information would enable him to cater to the
rising demand by appropriately increasing capacity of service –
facilities, service personnel, etc. – and avoid lost opportunities.
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But the marketer should also be warned that success begets

imitators and to ward off the competition it would require
expenditures in promotions and discounts. This would severely
hit the service marketer’s bottom line and he should be
prepared for the next service product development.
Cellphone service: The marketer should not only recognize that
there is a rising demand for cellphones, across all sections,
especially youth, but also the rate of growth of demand.
He will thus be prepared with his expansion plans of more
network facilities, retail stores, capacities and personnel and
be ready to implement them. The service provider will be
(c)
ready to catch the incoming customers and will not suffer from
lost opportunity.
2. Falling Demand: There could be many reasons for declining
demand for a particular service offer: direct competition,
substitute competition, unattractive pricing, poor service
delivery, etc. Falling demand for video parlour services due to 217
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the popularity of satellite broadcasting TV channels is another Notes
case of technology changing the pattern of demand for services. ___________________
Declining popularity of pool parlours, once the rage in Mumbai ___________________
and other metros, may be ascribed to the fact that multiplexes,
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___________________
shopping malls and beer pubs were seen as better place to
hang out, by both sexes of the affluent, hedonistic metropolitan ___________________
youth. ___________________
Whatever be the reasons, the service marketer should identify ___________________
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the declining demand, measure the rate of decline, analyse the ___________________
causes, bring forth innovative marketing programmes to arrest
___________________
the trend or else if the service category itself is on the decline,
get out of the market and cut losses. ___________________
___________________
3. Demand: The market may not be having a need of a
particular service offer because of various demographic, socio-
economic and sometimes geo-demographic factors. The service
marketer has a choice: either create demand for the service by
finding out the needs, wants and desires of the market or do
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not enter the market.
People in certain localities may not be interested in home
delivery as they dislike strangers coming into their homes,
especially when the men folk are not at home. Even courier
services are badly hit due to this social factor. Thus, modern
retailing or non-store retailing may not take off in that place.
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There may not be any demand for English or foreign language

courses in rural Rajasthan. Similarly, there really may not be
any demand for counselling centres in rural India or Western
Union money transfer facilities in an area where there is no
migration of people – no reason to either send or receive
money. Correct reading of the demand will prevent marketers
from wrong investments.
4. Full Demand: In this situation, the service marketer will find
that the demand is equal to supply. It is an ideal situation for
the firm but danger lurks when a new entrant brings out his
(c)
offer. Then either the market has to increase consumption or

else the players battle it out amongst themselves fighting for
the same pie. Normally price wars are inevitable, margins fall
and the viability of the service firms comes into question. Only
the fittest tend to survive; mergers and acquisitions become
218 the norm or else the weaker players face closure and
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Notes bankruptcy.
___________________
5. Overfull Demand: This takes place when demand far
___________________ outstrips supply, and the service marketer is not able to
___________________ handle the demand. This implies that there are either fewer
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capable players or entry barriers and regulation against free
___________________
market enterprise. Either way, the service marketer cannot be
___________________ complacent and has to be prepared for de-marketing his
___________________ service. If not, disillusionment may set in and negative
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feelings might creep into the customer’s mind.
___________________
___________________
6. Negative Demand: This is a kind of anti-demand. Customers
would do anything to avoid consuming a particular service.
___________________
This could be because they might fear bodily harm,
___________________ irreversibility in the consumption, high risk, etc. They would
sometimes pay to avoid the consumption/experience of the
service offer. Cosmetic surgery – With increasing media
reports of the harmful effects of cosmetic surgery and beauty
treatments, there might be a negative demand by the target
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market for the service. Similarly, there are people who have a
phobia against inoculation and would do anything to avoid it.
The service marketer has to communicate the reversibility in
the purchase to his target market. Otherwise they tend to be
price sensitive.
7. Latent Demand: This is a demand that lies deep inside a
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consumer unquenched, as no service offer exists to satisfy it.

The consumer may not be able to accurately articulate his
demand and features of the offer and therefore may not be able
to voice his desire. But when such a service does come in the
market as an offer, he grabs it.
8. Seasonal or Irregular Demand: Demand for certain
services fluctuates with seasons or is irregular. Sometimes
there is regularity in their irregularity (seasonal). Some
seasons there would be peak demand, while in others there
would be less. This greatly affects the service management,
(c)
delivery and profitability. The service marketer should, with

suitable promotions shift the demand to off-peak
hours/seasons.
9. Unwholesome Demand: People tend to lose interest in the
service offer when they receive new information about the
process or ingredient in the service. The new information is 219
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unsavory and their desire for the service evaporates. The Notes
service or goods become unwholesome, without any nutrition, ___________________
resembling junk food.
___________________
Managing Supply
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___________________
A service marketer suffers from perishability if he is not able to ___________________

manage his supply. That is, during demand the service provider is
___________________
not in a position to deliver only because he is neither prepared nor
___________________
ready – due to supply bottlenecks. They range from goods to
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personnel: ___________________
z Goods: Supply problems in respect of goods occur in those ___________________
services that are highly tangible like retailing, car rentals, ___________________
restaurants, tourism, hotels, pubs, etc. If certain merchandise
___________________
is not available when a customer asks for it (stockout), he is
free to go to another retailer. Thus, the service marketer
forever loses that revenue. To retain the customer, the retailer
might offer rainchecks (a promise to stock the SKU especially
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for the customer whenever he comes next – which is an
expensive proposition anyway).
Souvenir sellers may lose customers because they may not
have the particular merchandise; similar would be the
dilemma of a pub manager if he doesn’t stock certain brands
asked for. If a car rental company like Wheels-Rent-A-Car
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doesn’t have a four-wheel-drive in their pool when asked for by

an adventure tourist, he might lose the customer.
z Systems and Processes: Supply problems occur here when
the systems and processes of service delivery fail and the
provider is not able to offer the service as he is entirely
dependent on them.
With the 9/11 terrorist attack in New York, and the
destruction of World Trade Centre, many BPOs and banks
based in USA could not continue their service. It was with
great difficulty that American Express restarted their
operations only due to their Indian connection via their BPO.
(c)
z People: Perishability occurs when the service marketer is not

able to marshal internal customers in the right place in the
right time in requisite numbers. The internal customers, as
mentioned before, are employees, channel partners, etc. – all
those who play the role of providers.
220
A retail store has peak-time crowds during evenings and slack
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Notes
times in the afternoons. The dilemma for the retailer is how many
___________________
employees to have: if their number is as per the peak time crowds,
___________________ then there might not be much work for them during the slack
___________________ times and the retailer ends up having higher operating costs. On
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the other hand, if the retailer has employees sufficient to cater to
___________________
the afternoon and morning shoppers, then they might be
___________________ overwhelmed by the peak time rush. This might greatly affect the
___________________ service encounter, inconvenience the shoppers, result in long
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queues and, in effect, have unpleasant experiences. The staff would
___________________
soon be de-motivated and the impatient shoppers might change
___________________
stores.
___________________
The store could then manage the personnel supply problem with
___________________ part-time employees during peak time demand. Esselworld, the
theme park pioneer, takes in students as temporary employees or
trainees on internship during their summer holidays.
Peak-hour Essential Services: A retail bank during peak hours
might shut down a few non-urgent desks/counters and concentrate
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only on essential services. Thus, during heavy withdrawals (old-
timers in PSU banks, before the advent of ATMs, would recall with
shudder the first ten days of the month in their branches as ‘salary
days’ – where people crowded for the withdrawal of their salary),
certain non-essential areas like the enquiry counter, dispatch etc.,
might be temporarily shut down to man extra counters in the
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savings and current accounts withdrawals and cash section.

In this way, service firms can manage to find ways and means to
address its unique characteristic of perishabilty and not losing
business during the time of service transactions.
Include the Customer in your Process: This is a novel way to
beat perishability due to the supply problem of personnel. The
customer is made to be a partner and a part of the service delivery.
Executive buffet lunch is a classic example of a high quality service
offer delivered with minimal staff support. Whatever be the crowd,
if the provision and capacity for the lunch is there, it can be
(c)
delivered through the executive buffet process. The diner helps and
serves himself; the provider ensures that all the paraphernalia like
cutlery, tissue paper, etc., is available.
Variability 221
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Activity
Notes
Variability conveys to the customer an element of inconsistency Prepare a draft on variability
___________________
and non-standardisation in the service offer and service delivery. characteristic of service.
The customer’s service encounters are different every time. The ___________________
same service product is never delivered in the same way to the
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___________________
same customer across two different time periods; a customer
___________________
perceives the service transaction as having a different quality
when delivered from two different places – or even on two different ___________________
occasions at the same service outlet. By its very nature, it can ___________________
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never be an identical, repeatable experience every time – only an ___________________
approximation thereof. This is so unlike goods, where the customer
___________________
is convinced that the product that he buys is the same –
irrespective of where he has purchased it and whom he has ___________________
purchased from. Some of the ways this can be overcome are: ___________________
z Training of Internal Customers

z Recruitment and selection of Internal Customers
z Training of External Customers
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z Automation.
Check Your Progress

Fill in the blanks:
1. The....................... factor prevents a service marketer
from storing his offers.
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2. A retail store has....................... crowds during

evenings and ....................... in the afternoons.
Summary
Services have become an integral part of any economy’s
infrastructure and have become indispensable to urban life.
Services marketing is marketing based on relationship and value.
It may be used to market a service or a product. Marketing a
service-base business is different from marketing a product-base
(c)
business.
Lesson End Activity

Prepare a presentation, with examples, on the characteristics of
services.
222
Keywords
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Notes
Service Marketing: Marketing based on simple relationship and
___________________
value.
___________________
Logos and mascots: This is not unique to service firms but has
___________________
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been effectively used by them to overcome intangibility.
___________________
Perishability: It prevents a service marketer from storing his
___________________ offers.
___________________
Over-marketing: A service marketer targets for more customers
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___________________ than he has the capacity to serve.
___________________ Zero Demand: The market may not be having a need of a
___________________ particular service offer because of various demographic, socio-
economic and sometimes geo-demographic factors.
___________________

1. Highlight the features of Intangibility of a service.
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2. What do you understand by the Perishability of a service?
3. Describe variability as a characteristic of a service.
Further Readings
Books
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(c)

Houston, 2000.
Web Readings 223
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Notes
___________________
___________________
E
___________________
www.impelcrm.in
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
224
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Notes
___________________
___________________
___________________
E
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
UNIT 18: e-CRM
Unit 18
225
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Notes
e-CRM
___________________
___________________
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___________________
Objectives
___________________
topics: ___________________
\ Advent of e-Commerce ___________________
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\ Definition of e-CRM ___________________
\ Scope of e-CRM
___________________
\ CRM vs e-CRM
___________________
\ Challenges in e-CRM
\ Web Experience ___________________
Introduction
Electronic Commerce (e-Commerce or EC) is the exchange of
E-
business information using electronic formats, including Electronic
Data Interchange (EDI) Electronic Mail (e-mail), Electronic
Bulletin Boards (EBBs) and Electronic Funds Transfer (EFT). e-
Commerce Technologies are designed to replace traditional paper-
based workflow with faster, more efficient and reliable
communications between computers. To conduct business in the
current environment using e-Commerce technologies requires that
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a business have access to a computer and a modem.

e-Commerce is what happens when one combines the broad reach
of the Internet with the vast resources of traditional information
technology systems. It uses the Web to bring together customers,
vendors, and suppliers in ways never before possible; e-commerce
is here and presents abundant opportunities. Companies around
the world already buy and sell over the Internet. They connect
with customers, suppliers and each other. They do business on the
WEB, and consequently, they do more business. There are
challenges like security, scalability and reliability. They are real,
(c)
but they are surmountable. e-Commerce is about web enabling the

core business processes to improve customer service, reduce cycle
time, get more results from limited resources, and actually sell
things. In its simplest terms electronic commerce is the process of
two or more parties making business transactions via computer
226 and some type of network e.g. a direct connection or the Internet.
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Notes
Activity This includes business-to-business transactions, online retail, and
Write an article on the advent
___________________
of e-commerce. the digitalization of the financial industry. Some experts and
leading Net Entrepreneurs even argue that electronic commerce
___________________
includes all the steps that occur in any business cycle, such as
___________________
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placing ads, completing invoices, and providing customer support.
___________________ The term “e-Commerce”, often used interchangeably with IBM’s
___________________ coined term “e-Business,” covers a lot of ground and refers to all
these areas.
___________________
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___________________
Advent of e-Commerce
___________________
E-commerce actually began in the 1970s when larger corporations
___________________
started creating private networks to share information with
___________________ business partners and suppliers. This process, called Electronic
Data Interchange (EDI), transmitted standardized data that
streamlined the procurement process between businesses, so that
paperwork and human intervention were nearly eliminated. EDI is
still in place, and is so effective at reducing costs and improving
E-
efficiency that an estimated 95 per cent of Fortune 1,000
companies use it.
Today, electronic commerce increasingly refers to business
conducted over the Internet. EDI, for example, is being brought to
the Internet and allowing companies to save money by eliminating
the old system’s expensive private networks and by expanding
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reach to include more businesses on the supply chain. Other

business-to-business transactions are simply moving to the web
without using the standardized forms required by EDI.
More recently, brand names like Barnes and Noble, the Gap, and
Wal-Mart and Indian companies like BPB publications and rediff
on the net have set up shops on the Net, and many experts believe
that these and other brand names will be able to establish long-
lasting presence on the Web. Today, all a person needs is a
computer, a browser, and Internet access, and he or she can buy
flowers, airline tickets, and even a car. The past 3 years have seen
a rise in the number of companies’ embracing e-CRM technologies
(c)
and the Internet in India. Most e-CRM sites have been targeted
towards the NRIs with gift delivery services, books, audio and
videocassettes, etc., Major Indian portal sites have also shifted
towards e-commerce instead of depending on advertising revenue.
The web communities built around these portal sites with content
UNIT 18: e-CRM
have been effectively targeted to sell everything from event and 227
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movie tickets the grocery and computers. Notes
Indian businesses trying to get into e-Commerce maybe frustrated, ___________________

since in India RBI does allow credit card information to be taken ___________________
over the Internet without a legally binding signature. The Indian
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___________________
government now recognizes digital signature for customer
verification over the Internet. ___________________
___________________
Definition of e-CRM ___________________
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CRM is a fundamental facet of an organization, encompassing the ___________________
philosophy and mission of organized business that is engaged with ___________________

a well-knit customer-focused knowledge base and pervasive
___________________
communications. It is more than software or process, and equal to
___________________
a culture of gaining and keeping value customers, delivering the
immitigable benefits. e-CRM can contribute incontrovertibly to an
organizational transformation into a real time enterprise for
customers, while harnessing the power of technology in a rapidly
changing competitive landscape.
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The major benefits that accrue are new sales and account
opportunities, quicker, smarter decision-making, and better
efficiencies leading to significant improvement in customer service.
Some of the core benefits of e-CRM are given below:
z Extended customer relationships
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z Competitive services delivering high value

z Improved product and service delivery processes
z Better customer knowledge and insight and
z Smooth, efficient customer service.
e-CRM is operational by integrating sales, marketing and
customer service functions, allowing for internal collaboration on
valuable customer knowledge and empowering to connect to
customers and partners through any process, functional system
and communication medium – telephone, fax, e-mail, internet and
(c)
mobile.
To take the best decision possible, engage the entire top
management, and evolve an informed and dynamic project group
(relevant functional leaders) to deliver a reasonable business case
with clearly identified roles, responsibilities and diligence
228 perspectives, with lucid time lines. The team must peruse and
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Notes
Activity analyze the current business situation in view of future goals,
___________________
scope of e-CRM. examine the existing systems, workflow and processes in customer
management and develop a roadmap for the e-CRM solution to
___________________
apply relevant strategies for achieving its goals.
___________________
E
___________________ Choose the suitable answer
___________________ 1. EFT stands for:
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___________________ (a) Electronic Fund Transfer
___________________ (b) Electronic Foreign Transfer
___________________ (c) Electrical Fund Transfer
___________________
(d) None...................
2. EBB stands for:
(a) Electronic Base Board
(b) Electronic Bulletin Board
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(c) Electrical Bulletin Board
(d) None...................
Scope of e-CRM
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The scope of e-CRM encompasses:

z Sales: Supports key functions such as contact management,
opportunity management, forecasting and 360-degree view of
all customer accounts and interactions. Automate and organize
sales force activities for focused selling and closing.
z Marketing: Detailed schedules and tasks, maintaining
contact lists and activity logs, automation association with
leads, accounts or contacts, managing product and resource
information, marketing alerts, etc.
z Channel Management: Supporting key functions as
(c)
campaign management and analysis, and customer

demographic analysis.
z Customer Service: Provides an efficient workflow and easy
access to information while synchronizing customer data
across all communication channels.
UNIT 18: e-CRM
229
z Partner Management: Tracks and analyses sales made by
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Notes
partners and track contacts associated with dealers,
distributors and other channel partners; ___________________
z e-Business: Creation and customization of customer centric ___________________
web pages, enabling customers to generate and track support
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___________________
requests from the company’s website.
___________________
___________________
CRM vs e-CRM
___________________
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e-CRM is not just customer service, self-service web applications,
___________________
sales force automation tools or the analysis of customers’
purchasing behaviours on the internet. ___________________
___________________
e-CRM is all of these initiatives working together to enable an
organization to more effectively respond to its customers’ needs ___________________
and to market to them on a one-to-one basis.
e-CRM is integration between the traditional CRM and e-Business
application. This small ‘e’ should be a gigantic ‘E’ because this
E-
technology, when properly used, can have a significant impact on
industries and the structure of businesses. Essentially, the ‘e’
enables an organization to extend its infrastructure to customers
and partners in ways that offer new opportunities to learn
customer needs, add value, gain new economies, reach new
customers, and do all of this in real time. e-CRM is all about
strategy and therefore requires the direction and engagement of
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senior management to be successful. Senior management must

have a broad understanding of the capabilities of these
technologies and then translate them into specific opportunities
that leverage competitive advantage.
e-CRM is different from traditional concept of customer service.
For example, the traditional customer service concept works as
follows:
z Customer has a problem with a product or service late in the
evening.
z Customer has to wait till company offices open the next day.
(c)
He is upset because he cannot resolve the problem

immediately.
z Next day when he contacts the company, the Customer Service
Representative assists the customer in resolving the
complaint. Sometimes resolution of complaint can take days,
230 as the Customer Service Representative may not have the
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Notes desired information or necessary technical skills to resolve the
___________________ problem. Customer is not happy.
___________________ On the other hand, e-CRM is proactive and provides easily
___________________ accessible data for real time decision-making. e-CRM would tackle
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the above situation as follows:
___________________
z Customer has a problem with a product or service late in the
___________________
evening.
___________________
Customer does not have to wait till morning to have his
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z
___________________
problem resolved. He visits company’s website for assistance
___________________ and checks the Frequently Asked Questions (FAQs). He is able
___________________ to resolve his problem. Customer is happy.
___________________ z In case, he is not able to resolve his problem, the customer

clicks the “Help Now” button and a Customer Support
Representative.
z The Customer Support Rep accesses the knowledge base and
conveys the desired information to the customer to resolve his
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problem. Customer is happy.
z The details of the interaction are recorded in the customer
history, so it is available to any Customer Service Rep who has
any interaction with the customer in future.
z Knowledge base is updated with relevant information from
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this interaction.
z An email is automatically sent on behalf of the President of the
company to the customer asking him if he was satisfied with
the resolution of the problem.
Determining what types of e-CRM tools to implement depends on
how a company anticipates customers’ needs. For example, a
customer purchased something from the Web site and needs to
know how to return merchandise, will it be necessary to offer a
customer service representative to answer the question? Or with
the use of the latest e-CRM technology to provide the customer
with an instant answer and save on the cost of having a person
(c)
answers a simple question?

Automatic response technology is an example of an e-CRM tool
that helps effectively and efficiently communicates with customers
and builds close relationships with them. By doing so, a company
gains customer loyalty.
UNIT 18: e-CRM
231
In the Internet a company should care customers online and
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Notes
provide a unified customer communication at various customer
touch points; live service and email support. To ensure that the ___________________
website is customer’s preferred place a business must provide ___________________
effective customer service.
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___________________
z Knowledge of Warehousing: Capturing customer
___________________
information is the key to managing customer relationship.
___________________
Software that can consolidate customer information into a
single database would provide your business with important ___________________
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analysis for customer tracking and analysis. ___________________
z Data Resourcing: Using data from multiple resources, ___________________

including customer information databases, e-CRM focuses on
___________________
building a real time customer profile for each customer. Your
___________________
customer agents can target market selective based on what it
knows about a particular customer.
z Categorizing or Segmenting Customers: Customer
information collected in databases is presented in formats that
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can be easily analyzed. Reports track customer service issues
and assist in e-marketing campaigns. Your company can use
data gathered by these tools to segment your customer base
into several groups or categories.
z Delivery Options:
Self-hosted Applications: the software is hosted by the e-
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business. The vendor will teach users how to put the

software to use. Downside: it costs more, you have to
maintain the applications yourself and implementation
time is usually longer. Upside: you have absolute control
and customization power.
Application Service Provider (ASP): the vendor will host
the software and system. Upside: You don’t have to do
much implementation and don’t have to know how to use
the system and deployment is faster. Downside: changes
and customization are more difficult to make, reporting
capabilities are limited and there is the perception that
(c)
there’s less security.

Outsourced Model: similar to the ASP option. A company
with limited resources and capabilities will utilize outside
businesses to fill in the gap. Upside: you don’t have to hire
232 additional employees and commit to complicated and
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Notes
Activity expensive applications. Downside: less control.
Prepare an assignment on the
___________________
challenges in e-CRM. Check Your Progress
___________________
Fill in the blanks:
___________________
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1. e-CRM is integration between the traditional CRM
___________________
and .................
___________________
2. ................... is different from traditional concept of
___________________
customer service.
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___________________
___________________ Challenges in e-CRM

___________________ The challenges in e-CRM are:
___________________
z Security: A sense of security needs to be established and
customers must be able to select a mode of payment and the
software must verify their ability to pay. This can involve
credit cards, electronic cash or purchase orders. Specialized
software such as cyber cash and Microsoft-wallet can verify
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the purchaser and the purchase.
e-CRM software usually works with the Secure Sockets Layer
(SSL) developed by Netscape or the Secure Electronic
Transaction (SET) technologies for encryption of data
transmission. The more support by an e-commerce package,
the better for the security.
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z Digital Certification: The method used to establish identity

is based upon an object called digital certificate. A digital
certificate simply ties together a public key with say the name
and address of the customer or merchant. The trick is that
these certificates are signed by a trusted third party, in much
the same way that the passport is signed by the government
that issues it. Verisign, a spin off from RSA data security is in
the business of issuing these certificates which they called
Digital IDs. Currently these are digital IDs are not recognized
by the Indian government.
(c)
z Future Trends in e-CRM: The forces that determine the

web’s winners and losers are just taking shape and
technological advances could add even more uncertainty. On
the downside, some experts predict that it will be increasingly
difficult for smaller companies to establish their presence.
UNIT 18: e-CRM
Public companies and traditional brand name retailers have 233
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deep pockets and a name recognition that will make it difficult Notes
for smaller sites and mom-and-pop shops to attract customers, ___________________
thereby forcing them to compete with the big firms. On the
___________________
upside, nearly all experts believe that overall e-commerce will
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increase exponentially in coming years. Business to business ___________________
transactions will represent the largest revenue. Online ___________________

retailing will also enjoy a drastic growth. Areas expected to go
___________________
include financial services, travel, entertainment and groceries.
___________________
And for those considering opening a virtual storefront,
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forthcoming technology and standards agreements will make it ___________________
easier to create a site, to protect it against payment fraud, and ___________________
to share information with suppliers and business partners.
___________________
___________________
Web Experience
It is a complex set of relationships between the Web surfer and the
person(s) at the other end of the Internet line, the Internet being
the channel that the parties use to communicate with each other.
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The relationship between the parties and the interactions between
them are very different from other forms of interaction. For
example, how often one decides to e-mail a friend rather than call
him? The thought behind it is that, easier to send one e-mail than
to give him a call upon him. The total time was about the inputs of
typing and sending the e-mail. A phone call, would probably have
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taken two minutes, or about five minutes cluing the response.

Additionally there are no distractions in the discussion. The
subject matter written is the subject matter referred to. No more,
no less. The interaction is there without the interaction being
actually there. No baggage, no emotion, and no complicated
thought process. It is what it is meant to be-and it doesn’t save a
bit of time. It just seems that way because one has more individual
control over the process. A customer is well informed about what
he wants and also can get additional information of his/her interest
and the salesman’s job becomes easier if well prepared on the sales
call; a practical example is presented as below:
(c)
The EVP’s transactions as shown above are a small segment of the

web experience. One has to recognize the significance or purpose of
the Web experience in the CRM world. It is to identify a customer,
derive the value of the customer, and interact with the customer.
This is so, whether it is a single individual who buys more
234 frequently than other individuals or a corporation that is doing
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Notes more business (or less) with you than any other customer. Its odd
___________________ nature makes innovation necessary to make sure that the
identification, derivation, and interaction work towards the benefit
___________________
of both the customer and the company.
___________________
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e-CRM’s value comes from giving a customer a “total experience”
___________________
on the Web. Traditional CRM channels can not do that because
___________________ they are based on applications that may not be effective in giving
___________________ the customer direct access to the interfaces functionally.
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Ordinarily, CRM provides sets of tools, which while possibly Web-
___________________
enabled, are not designed from the ground up for the Web. It is
___________________
more for the corporate department or the interfaces and
___________________ functionality. Ordinarily, the individual employee does this
___________________ customer ground-up creation or redevelopment so that all
functions, external and internal, is entirely web based. For
example, personalization tools are more appropriate to Web
customer experiences. Personalization tools have little value if
used in a purely client/server environment. However, this doesn’t
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guarantee that even CRM is entirely wonderful.
Features of Effective e-CRM

Any e-CRM is the customer-facing Internet portion of CRM. It
includes capabilities like self-service knowledge bases, automated
e-mail response, personalization of Web content, online product
bundling and pricing, and so on. The web-based e-CRM gives
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Internet users the ability to carry on with the business through

their preferred communication channels. It also allows the
business to offset expensive customer service agents to add value
to its ability to improve customer satisfaction and reduce costs
through improved efficiency. However, an e-CRM strategy
deployed alone can also backfire and this actually may result in
decreased customer satisfaction. If the customer’s interactions
through electronic channels are not effortlessly integrated through
traditional channels the customer is likely to become extremely
frustrated. Also, if the basis for the content being served to the
customer does not consider all the data gathered for the business,
(c)
the customer is likely to be served in that way. Therefore, it is

imperative that e-CRM be installed in conjunction with traditional
CRM and that the two function together. Otherwise, the result of
e-CRM might actually prove negative.
UNIT 18: e-CRM
235
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Designing e-CRM Notes
Some CRM companies have Web-enabled their existing application ___________________
and called it “Internet ready”. Others have redesigned it from the
___________________
bottom so that it is referred to as a Web application, rather than a
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client/server application that can be viewed on the Web. These are ___________________
the fundamental architectural differences. Mere accessibility from ___________________

a browser does not turn a CRM application into e-CRM. For
___________________
technology to fulfil the promise of making the desired customer
___________________
activity possible, the invisible technical details really matter. For
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example, if one wants to have an application that is optimized for ___________________
Internet security activity, it uses HTML that is, accessible from ___________________
either desktop or palm, or even laptop. It can be accessed securely
___________________
using Internet security protocols that are reachable via TCP/IP
and so on. ___________________
Application Servers
Application servers drive the pure Internet CRM applications. The
applications servers that are often found in three-tier
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architectures, which are not created just for the Internet
client/server architecture, which is, in fact, why the three-tired
approach was fashioned. But they are the best contemporary
architecture for the Internet. The application servers provide pre-
constructed Web pages to a Web server that delivers them to the
users through their queries.
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Web Browser
This model preserves the fundamental value of the Internet as a
communication medium, and provides a common platform for
independent access to data anytime and anywhere. There is no
program or application code that needs to reside on the user’s PC;
therefore, users gain immediate access to the application with the
right URL with security authorization. It’s just like using Web
browser to view any other Web page; click on the right link and one
can see the information. Peoplesoft/Vntive CRM 8.0 is a good
example of this. The people soft Internet Architecture consists of
(c)
the following principles. Applications are based on standard

Internet protocols and languages such as HTTP and HTML.
Internet applications can easily be accessed from a Web browser.
The Internet applications user’s experience is maintained through
236 the look, feel, and usages paradigm. It is not “Windows 98 on the
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Notes Web”.
___________________
Here is where the key difference lies. No client software is
___________________ installed with pure Internet applications, the browser is the client.
___________________ The architecture is as multi-tier, server-centric model, featuring
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separation of presentation, business logic, and data management
___________________
functionality. If one is not familiar with Internet – centric
___________________ application and interface and opens Microsoft Word 2000, it’s just
___________________ a routine thing. There is nothing interesting or special about it.
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But if one is loading Internet Explorer 5.5 and onto the Web, one
___________________
thinks about the fact that one is loading up the Internet
___________________
connection. It is not part of the desktop. With Internet-centric
___________________ applications, the browser is no different than the Word 2000
___________________ interface. It is just part of the landscape, not like walking. This
works particularly well when using a broadband Internet
connection such as T1 or T3 line, cable modem, or DSL that allows
to be up and run the Internet 24 hour a days, seven days a week
with a ground-up e-CRM application, it is as universal as the
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desktop is from wherever one is connected.
Application Codes and Applets

By contrast, CRM Web-accessible application is not nearly at the
same level of business utility because they are not purely data
driven. These systems rely on application code applets or controls
that must be downloaded and installed on users’ systems to enable
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them to communicate with the CRM database. This can defeat

platform independence and present logistical challenges to the
anywhere-anytime promise afforded by the Internet. Requiring
codes to be installed on each user’s system is invasive. It increases
the challenge and cost to manage and maintain, and it may not
even be feasible to do so in all cases. If a sales executive forgets to
bring a laptop along, the sales executive may not be able to
convince the Internet café in the area to allow access to the latest
pipeline. The partners, too, may not appreciate having to install
‘system” on their system to work with the organisation.
(c)
If it’s important to connect the employees with customers,

partners, and suppliers, it is more important to understand the
limitations that Windows 98 or any package on the Web can
impose on the business processes. The pure Internet application
usually rests on any server with the browser as client. The Web-
enabled client/server application needs downloaded applets and
UNIT 18: e-CRM
applications to the desktop to carry out a specific function. With 237
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the feel of the browser as the client, t is easy to feel that access Notes
anywhere and anytime is true because all functions are ___________________
transparent and accessible. When you load and unload applets
___________________
each time you need a specific function, you feel less in control of
E
your Internet CRM destiny. ___________________
While e-CRM is considered a front office technology, meaning that ___________________
the applications are both available to the customer (customer- ___________________

facing) and impact the customer, there is a back-end to the from ___________________
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office. In other words, to put up the “event” in e-CRM, the
___________________
development tools for the Web have to be used. Such tools as Java,
Enterprise Java Beans (EJB), Perl, and CGI are the ground work ___________________
for the “webfication” of CRM. ___________________
___________________
Check Your Progress
Fill in the blanks:
1. ................... used to establish identity is based upon an
object called digital certificate.
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2. ................... drive the pure Internet CRM applications.
Summary
The e-CRM, i.e., CRM online implies an additional means of
communication and level of interaction with the customer where
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there is as real difference in the technology and its architecture,

which allows for ease of self-service to the customer. A proactive
organisation with the intention to incorporate e-CRM should
develop appropriate: (a) business objectives; (b) Assess its current
“sophistication” along the e-CRM continuum in terms of process
and technology; and (c) Define business processes and changes
needed to support its goals.
Lesson End Activity

Find out an example for e-CRM. Collect information on the
(c)
strategies adopted by the company to improve customer

relationships.
238
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Notes Keywords
___________________
e-CRM: e-CRM is integration between the traditional CRM and e-
___________________ business application.
___________________ Web Browser: This model preserves the fundamental value of the
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___________________ Internet as a communication medium, and provides a common
platform for independent access to data anytime and anywhere.
___________________
___________________
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___________________
1. Explain the concept of e-CRM and analyze the essentials of
___________________
building an e-CRM.
___________________
2. What are the objectives of e-CRM? Examine the CRM process.
___________________
3. What are the essential features of an effective e-CRM?
4. “The CRM applications are a convergence of functional
components, advanced technologies, and channels”. Discuss
the modules of e-CRM.
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5. What are the strategic objectives of CRM marketing
applications?
Further Readings
Books
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(c)

Houston, 2000.
UNIT 18: e-CRM
239
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Web Readings Notes
en.wikipedia.org/wiki/Customer_relationship_management ___________________
searchcrm.techtarget.com/definition/CRM ___________________
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___________________
www.impelcrm.in ___________________
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/ ___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
240
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Notes
___________________
___________________
___________________
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___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
UNIT 19: Portals and other Fields in e-CRM
Unit 19
241
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Notes
Portals and other Fields in e-CRM

___________________
___________________
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___________________
Objectives
___________________
topics: ___________________
\ e-CRM and Portals ___________________
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\ Modules in CRM ___________________
\ Basic Requirements of e-CRM
___________________
\ Three Dimensions in e-CRM
___________________
\ Key e-CRM Features
\ ERP and CRM ___________________
\ SCM and CRM
Introduction
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With the emergence of the Internet, enterprise portals took on a
whole different meaning. They have now become the gateways to
entire Web-based communities and customer activity.
e-CRM and Portals

As portal is a gateway to an array of services to an optimal
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community. It is a centralised entry point, usually centered on a

Web server that links multiple information and interactivity
sources, and allows a personalized view of any or all of the services
according to the requirements of the user who is entering. The
personalization is accessible through a password and user ID. Each
user has a different view of the array of information, goods, and
services available to them. This is any easy going concept that
personalizes the view of each person using the portal. Yet the
collection of goods, services, and information is universal and
available on multiple servers sitting behind the portal doors. This
way, thousands of users can get what they need, with all the
(c)
universal links available to all people and with workflow and

security built in. Probably the best example of a portals-building
product is ‘Plumtree’, a corporate portal 4.0 tool, released at the
end of 2000. Plumtree’s tools allow the creation of interlinked
portals combined with devices portal add-ins in multiple locations,
242 through the use of their portals and massively, by letting a portal
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Notes
Activity user access multiple portals, increasing the selections of good,
Write an article on e-CRM
___________________ services, information and portals. One has to decide the benefits to
and portals.
an organisation.
___________________
___________________ As a good CRM portal aggregates all relevant customer
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information within a single application or desktop in a format that
___________________
is customized and personalized for the department or individual
___________________ interacting with the data. An ideal portal doesn’t just provide
___________________ access to customer data, but becomes a knowledge base that is
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tailored to the needs of each different audience, with Web content,
___________________
third-party applications, reference materials, and detailed
___________________
customer information. Portals thus contain anything within or
___________________ outside of the enterprise that customer-facing groups can utilise, to
___________________ enhance their understanding of a customer’s experience and needs.
Several things are important for a highly successful CRM portal
strategy; the system should be the architect around the customer,
instead of around specific job functions. By putting the customer at
the applications core, no matter who is viewing, using or sharing
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the information, companies are assured a sample customer
interaction process.
Deploying a CRM portal solution only in one department or one
business unit will not yield the same results as an enterprises-wide
solution, which gives every front-office employee access to the
critical customer data and knowledge base.
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A thin-client or Web-based portal system saves millions of dollars

in time, employee turnover, and other costs by greatly reducing
system implementation and management time. While there is still
a need for client/server technology, and onyx still supports it, the
future is on the Web where installations, upgrades, and expansions
can be managed from one location, on one server, and all end users
need to gain access is a browser. Different audiences require
different views and different types of information, making it
absolutely necessary to provide the right content and structure to
each.
(c)
Modules in CRM
The CRM applications are a convergence of functional components,
advanced technologies, and channels. Functional components
include: (i) sales application; (ii) marketing automation; and (iii)
customer service and support applications. Channels include the 243
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Web; call centres, phones, and mobile devices. The components and Notes
channels are described below: ___________________
z Sales Applications: The cornerstone of CRM is SFA (Sales ___________________
Force Automation). The thrust of SFA is automating the
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___________________
fundamental activities of sales professionals, both internally
and in the field. Common applications include: ___________________
___________________
Calendar and scheduling
___________________
Contact and account management
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___________________
Incentives calculates
___________________
Opportunity and pipeline management
___________________
Sales forecasting
___________________
Proposal generation and management
Pricing
Territory assignment and management
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Expense reporting.
Sales configuration applications go hand in hand with SFA
applications, which allow application users, to assemble
product components into finished goods. Rules are
programmed into configuration applications and are
abstracted from the user. Sales configurations are suitable for
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Web because users need not have a technical background to

assemble products. Unassisted web sales capabilities enable
customers to select and purchase products or services via the
Web.
z Marketing Applications: They form the newest breed of
applications in the CRM space. These applications complement
SFA applications and provide certain capabilities unique to
marketing. Common applications include the following:
Web-based/traditional marketing campaign planning,
execution and analysis
(c)
Collateral generation and marketing materials

management
List generation and management
Budgeting and forecasting
244
A marketing encyclopaedia (a repository of product,
S
Notes
pricing and competitive information)
___________________
Lead tracking, distribution and management
___________________
Marketing applications primarily aim to empower
___________________
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marketing professionals by providing a comprehensive
___________________ framework for the design, execution and evaluation of
___________________ marketing campaigns and other related activities. For
example, a successful marketing campaign typically
___________________
generates a qualified sales lead that needs to be
UP
___________________
distributed to sales professionals who need to act upon
___________________ them. Thus, marketing automation and SFA automation
___________________ are complementary. It is essential to realise that SFA and
marketing applications play different role in the customer
___________________
fulfilment life cycle.
z Customer Service and Support Applications: These
applications have gained a major importance for effective
customer retention and in many cases profitability depends on
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providing superior service. These applications are typically
deployed through a call centre environment or over the Web
for self-service, and allow organisations to support the unique
requirements of their customers with greater speed, accuracy
and efficiency.
Common applications include:
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Customer care
Incident, defect, and order tracking
Field service
Problem and solution database
Repair scheduling and dispatching
Service agreements and contracts
Service request management
CSS applications are helping organisations make a transition
(c)
from cost centres to profit centres. Moreover, when these

applications get fully integrated with sales and marketing
applications, they can provide unique opportunities for
organisations to up-sell and cross-sell additional products into
their customer base.
245
Check Your Progress
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Notes
Activity
True or False:
Make a short report on the
___________________
1. CSS applications are helping organisations make a basic requirements of e-CRM.
___________________
transition from cost centres to profit centres.
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___________________
2. ERP attempts to bridge the gap between the SCM and
CRM. ___________________
___________________
Basic Requirements of e-CRM ___________________
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A company can approach e-CRM from different evolutionary paths, ___________________
but they all need to proceed toward the same objective of ___________________
optimising the value of customer relationships.
___________________
Electronic Channels ___________________
New electronic channels such as the Web and personalized e-

Messaging have become the medium for fast, interactive and
economic customer communications, challenging companies to
keep pace with this increased velocity.
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Enterprise
Through e-CRM, a company gains the means to touch and shape a
customer’s experience across the entire organisation, reaching beyond
just the bounds of marketing to sales, services, and corner offices –
whose occupants need to understand and assess customer behaviour.
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An e-CRM strategy relies heavily o the construction and maintenance

of as data warehouse that provides a consolidated, detailed view of
individual customer behaviour and communication history.
Empowerment
In this new age, e-CRM strategies must be structured to
accommodate consumers who now have the power to decide when
and how to communicate with the company and through which
channel, which ability to opt for or out of. Consumers decide which
firms earn the privilege to “talk” with them. In light of this new
consumer empowerment, an e-CRM solution must be structured to
(c)
deliver timely, pertinent, and valuable information that a

consumer accepts in exchange for his or her attention.
Economics
Too many companies execute communication strategies with little-
effort or ability to understand the economics of customer
246 relationships and channel delivery choices. Yet customer
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Notes economics drives smart asset allocation decisions, directing
___________________ resources and efforts of individuals shall provide the greatest
return on customer communication initiatives.
___________________
___________________ Assessment
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___________________ Understanding customer economics relies on a company’s ability to
___________________ attribute customer behaviour to marketing programs. A company
should evaluate customer interactions along with various customer
___________________
touch-point-channels and compare anticipated ROI against actual
UP
___________________ returns, through customer analytical reporting. Evaluation of
___________________ results allows companies to continuously refine and improve efforts
___________________
to optimize relationships between companies and their customers.
___________________ Outside Information

The use of consumer-sectioned external information can be
employed to further understand customer needs. This information
can be gained from sources such as third-party information
networks and Web-page profiler applications, under the condition
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that companies adhere to strict consumer opt-in rules and privacy
concerns.
Conscious of each requirement that will shape its future business,
a company builds an e-CRM solution in order to optimize
relationships between itself and its customers. For each company,
optimization might have different and multiple objectives such as:
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z Increasing the number of customers

z Increasing customer profitability
z Growing revenue
z Driving customers through cost effective channels; and
z Cross-selling for retaining customers.
Check Your Progress

Fill in the blanks:
(c)
1. A company should evaluate................. along with

various customer touch-point-channels.
2. A Company should compare ................. against actual
returns, through customer analytical reporting.
Three Dimensions in e-CRM 247
S
Activity
Notes
e-CRM must address customer optimization in three dimensions Prepare a draft of an
___________________
viz.: assignment on the
dimensions of e-CRM.
___________________
z Acquisition getting (increasing number of new customers)
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___________________
z Expansion (increasing profitability by encouraging customers
to purchase more products and services) ___________________
___________________
z Retention (increasing the amount of time of customers stay).
___________________
While acquisition and retention are fairly well understood,
UP
customer profitability through expansion requires some scrutiny. ___________________
Since expansion presents enormous untapped value; an e-CRM ___________________

strategy must be able to identify the expansion potential for each
___________________
customer.
___________________
For example, historically, grocery retailers have struggled to
understand the value in communicating directly with a customer
beyond basic promotions. The average margin in a food retail store
is only two to three percent. On the surface, these small margins
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appear to leave little or no room to warrant sophisticated customer
optimization techniques. As a result, supermarkets have spent
most of their energy on acquiring more customers. What many food
retailers fail to grasp is the marginal economics of customer
behaviour. While profit margins may float around three percent,
the incremental margin obtained from getting a shopper to add
just to increase incremental margins hold potential. Uncovering
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that potential requires companies not only to understand how

customers behave with them but what interactions they have with
their competitors.
Customer Investment Allocation

While a significant amount of latest profit potential exists within
your customer base, the question remains how do you leverage
those opportunities? Most companies have no central mechanism
to determine which customers should receive which investment
allocations are generally based on a decision to sell more products
to optimize the channel.
(c)
An e-CRM strategy requires businesses to reallocate their

investment toward customers who deliver the most value and have
the greatest potential value. To achieve this objective a business
must develop and deploy an additional set of business processes
designed to be customer-centric and not product-centric. This
248 simple method can result in profound changes to the
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Notes organizational structure and technical infrastructure of a business.
___________________
___________________ Key e-CRM Features

___________________ Regardless of the company’s objectives, an e-CRM solution must
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___________________ possess certain key characteristics. It must be:
___________________ z Focus on process: A CRM process brings you the appropriate

___________________
technology and it will reduce the technology gap as well as
refining your business process.
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___________________
z Data warehouse driven: In an e-CRM solution, the data
___________________
warehouse or customer data mart contains a consolidated and
___________________ comprehensive view of the customer. The warehouse provides
___________________ the broadest possible profile of the customer. This is needed to
determine an appropriate course of action the most effective
offer to make, and the best channel to deliver pertinent
message.
z A multi-channel view: Organisations today have different
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methods of interacting with customers. For example, a bank
might use one application to support its Website; another to
support its call centre; another to support e-mail; another to
support sales, another to support ATMs; and yet another to
support direct mail and telemarketing. These applications
rarely connect to each other thus precluding the sharing of
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information between channels and preventing meaningful

cross-channel connections for a customer. For example, a call
centre agent may be careless to a complaint that a customer
registered that day through e-mail. Nor would the agent be
aware of customer behaviour on the Website.
z Measurement driven: Today, many companies spend
millions of dollars communicating with customers, but spend
little time and effort determining the effectiveness of those
campaigns. e-CRM provides the means to measure
communications efforts.
(c)
The disparities between customer touch point systems can

make the establishment of consistent metrics difficult. Thus,
cross-channel coordination becomes important for establishing
a metrics baseline. Effective measurement enables companies
to target their customer investments in an optimal fashion
across all channels.
249
Check Your Progress
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Activity
Notes
Fill in the blanks: Make a presentation on the
___________________
relationship between ERP
1. e-CRM provides the means to measure ................... and___________________
CRM.
2. ...................enables companies to target their customer
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___________________
investments in an optimal fashion across all channels.
___________________
ERP and CRM ___________________
ERP implementation is an expensive and long drawn affair that ___________________
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requires the best efforts of the most competent team drawn from ___________________
the middle and senior management of the company. Typical team
___________________
size is 60 to 70 from within the company and an equal number
from the implementation partner. Substantial time of top ___________________
management is also a pre-requisite to ensure that quick decisions ___________________

are given for any bottleneck that may arise.
The typical time period for implementation is 24 to 30 months.
This can be crashed to some extend but not beyond a point.
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The cost of software and the implementation partners fee together
can be in the region of ` 50 to 70 crores. This is after excluding the
cost of other resources such as new hardware, additional office
space, etc.
Why are we talking of ERP on a seminar on CRM. Because we feel
that CRM cannot be effective in a company that does not have a
back office information setup.
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Modern day ERP offerings have many features that closely

resemble the best of CRM software.
ERP (Enterprise Resource Planning) attempts to bridge the gap
between the SCM and CRM packages by providing a “unified
software program divided into software modules that roughly
approximate the old standalone systems” (Koch, 2006). I think that
the main focus of ERP systems is data sharing, data distribution
and data quality in order to avoid duplicate and redundant. Kock
states that the main goals for an organization to undertake ERP:
z Integrate financial information,
(c)
z Integrate customer order information,

z Standardize and speed up manufacturing processes,
z Reduce inventory, and
z Standardize HR information (Koch, 2006).
250
SCM and CRM
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Notes
Activity
With the help of internet,
SCM (Supply Chain Management) allows organizations to
___________________
collect more information on efficiently manage their entire supply chain from purchasing to
SCM and CRM.
___________________ distribution and logistics. I think that the main focus of SCM is on
___________________ purchasing or transactional data, or internal data. SCM and ERP
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___________________
are often different systems in many organizations, which make it
difficult to “Connect Demand with Supply” as Michael Schrage’s
___________________
article discusses. The difficulty will play an important role for
___________________ technology managers as the two systems can have contrasting
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___________________ objectives. Schrage offers an example of this:
___________________ “There’s no question that you can optimize the efficiency of a

___________________
supply chain at the cost of being less responsive to customers. For
example, I might save my firm 25 percent of hard dollar costs if I
___________________
eliminate some distribution centres and carry fewer inventories.
That decision would probably make my company less responsive to
customers, since they might then experience more stock-outs. But
that trade-off may be worth it. What I pay for that extra inventory
may cost more than what I lose in sales from customers who don’t
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find the stock they want. The question is: What’s the better
business investment?”
For any business to extract maximum benefit from its CRM
deployment, it is important that it be linked to the back processes.
Supply chain management, when connected via business
intelligence tools with CRM, can throw light on many hitherto
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unknown aspects of a company’s business processes.

The insight offered by CRM into customer behaviour and demand
patterns can be made use of to streamline manufacturing and
distribution of products as managed by the supply chain function.
An important feature to understand when deploying CRM is that it
can only provide information that has to be used both at the front
end and back end to improve processes. Customer segmentation
information can be used to structure the purchase of raw
materials, scheduling manufacturing, managing inventory, and
overall running the supply chain. A business can obtain major cost
(c)
savings by acting upon information from CRM systems.

A streamlined supply chain is the key to reaching out to the right
consumer at the right time and CRM offers inputs on providing the
customers with the right product mix and targeting them with
appropriate marketing. A backward integration of processes taking
into account the information obtained from CRM can help a 251
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business better allocate its resources be they in manufacturing, Notes
processing, marketing, or sales. Apportioning of raw materials to ___________________
machines and machines to a given product can be done more
___________________
accurately if market demands are known; it also leads to a
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reduction of inventory stocks, JIT production, and a lean supply ___________________
chain that responds to demands quickly. All this not only helps cut ___________________
costs but also acquire a competitive advantage for a business that
___________________
can take the lead in offering a better buying experience and service
___________________
level that competitors may not be able to offer.
UP
___________________
An efficient and responsive supply chain can have a huge positive
impact on store product segmentation and effective customer ___________________
targeting. Integration between CRM and SCM improves ___________________
communication between the store and the manufacturing. For
___________________
retail businesses such integration can imply a lot of benefits such
as better distribution to retail outlets over various geographic
locations; feedback to suppliers, distributors, transporters, etc. The
use of BI for predicting performance at individual stores that can
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be aggregated to obtain a holistic picture of the supply chain is
relevant to the entire exercise. Businesses can ensure the
availability of quick-moving items and reduce the likelihood of
losing customers.
A wider view of the happenings at the retail level can also help to
take ad hoc decisions when pressed for time. Marketing and sales
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can coordinate more fruitfully with the supply chain to move or

divert goods to given locations during peak seasons or for
promotional purposes. Viewing data pulled from marketing, sales,
supply chain, finance etc on a single dashboard can enable
management as well as store managers to take profitable decisions
on cross-selling and up-selling across different channels.
Check Your Progress

Choose the suitable answer
1. ERP stands for:
(a) Enterprise Regional Planning
(c)
(b) Enterprise Regional Placing

(c) Enterprise Resource Planning
(d) None
Contd…
252
2. SCM stands for:
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Notes
___________________
(a) Supply Chain Marketing
___________________ (b) Service Change Management
___________________ (c) Supply Chain Management
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___________________ (d) None
___________________
___________________
Summary
UP
___________________ As a good CRM portal aggregates all relevant customer
information within a single application or desktop in a format that
___________________
is customized and personalized for the department or individual
___________________
interacting with the data. An ideal portal doesn’t just provide
___________________ access to customer data, but becomes a knowledge base that is
tailored to the needs of each different audience, with Web content,
third-party applications, reference materials, and detailed
customer information. Portals thus contain anything within or
outside of the enterprise that customer-facing groups can utilise, to
E-
enhance their understanding of a customer’s experience and needs.
Lesson End Activity

Find out an example of a company having portals for its customers
as well as employees. Make a report of the features of the
company’s portal.
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Keywords
Portal: It is a gateway to an array of services to an optimal
community.
Customer Service and Support Applications: These
applications have gained a major importance for effective customer
retention and in many cases profitability depends on providing
superior service.
Acquisition: It means increasing number of new customers.
(c)
Expansion: It means increasing profitability by encouraging

customers to purchase more products and service.
Retention: It means increasing the amount of time customers
stays.
Questions for Discussion 253
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Notes
1. Discuss the designing of CRM marketing organization.
___________________
2. Explain the interdependence of CRM and e-CRM. ___________________
3. What is e-Commerce?
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___________________
4. What are the basic requirements of e-CRM? ___________________
5. “Regardless of the company’s objectives, an e-CRM solution ___________________
must possess certain key characteristics”. Discuss. ___________________
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___________________
Further Readings ___________________
Books ___________________

Paul Greenberge, CRM - Essential Customer Strategies for the 21st
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Houston, 2000.
Web Readings
www.impelcrm.in
(c)
254
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Notes
___________________
___________________
___________________
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___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
Unit 20
255
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Notes
Case Studies
___________________
___________________
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___________________
Objectives
___________________
___________________
Case Study 1: Mould for all Seasons
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___________________
Moderna created the market for Moulded Plastic furniture.
___________________
Though the product benefits are strong, lack of brand
differentiation has harmed its one-time dominance. ___________________
—By Mona Rai
___________________
In the late 70s, Blowplast Ltd (1994-95 turnover: ` 218 crore), the
maker of V.l.P. luggage, began exploring the viability of launching
moulded plastic chairs in India. The furniture market had never
seen synthetic products before, and the consumer was just
beginning to experiment with materials other than wood. Cane
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and steel furniture was entering houses already, and some
companies were even examining the prospect of marketing
products made of fibre glass.
For Mumbai-based Blowplast, the investment involved in
installing its factories with capacity to make moulded furniture
was marginal, since it could use the same machines being used for
its V.l.P. moulded luggage.
Convinced of the saleability of the product, the company launched
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plastic chairs in 1981 under the brand Moderna (‘style’ in Italian,

but conveys ‘modern’ to the domestic consumer).
The product’s seat (which is attached to a metal frame on which it
stands) is a single-piece shell moulded into a shape designed for
the user’s comfort. Its principal input, polypropylene copolymer, is
claimed to be among the lightest, toughest and most resilient
polymers in commercial use. It can be sterilized at temperatures
up to 80 degree Celsius and can withstand extreme temperatures.
The material is acid and alkaline resistant, and can be cleaned
with any household detergent solution. All this ensures that the
chair may be moved easily, and that the seat doesn’t lose its
shape, colour or strength even when put to rough use.
Tough Start
(c)
The first three models received lukewarm response from the

market. Sales in the first year were a paltry ` 20 lakh. Clearly,
plenty of hard work lay ahead.
Priced at ` 150 a piece, Moderna was one-third the price of the
cheapest wooden chair available then. But that along didn’t work;
the buyer had to be convinced of the functional benefits.
Contd…
256
For distribution, Blowplast tried to use its existing dealer
S
Notes network for moulded luggage, but to its dismay, dealers were not
enthused by the product idea.
___________________
Market research found that the consumer had a mental block
___________________ against plastic chairs, which were seen as a cheap alternative to
___________________
wooden furniture. Moreover, plastic was considered too weak to
E
replace sturdy wooden chairs, and the bright colours too gaudy to
___________________ fit into conventionally furnished rooms.
___________________ Breakthrough
On a weak footing in the home segment, the company decided to
___________________ go for institutional sales—using an army of salesmen—and press
UP
___________________ forth the chair’s durability and ease of maintenance in the sales
pitch.
___________________
Moderna has the merit of being light and thus easy to move
___________________ around— which makes it convenient to clean floors and change
seating arrangements. Whenever one wants to keep a certain
___________________ number of chairs out of sight, they can easily be stacked one atop
the other in a corner.
The IX Asian Games hosted by Delhi gave Blowplast its first bulk
order -25,000 chairs for the Indira Gandhi indoor stadium. This
gave the chairs immense visibility, and a boost to the company’s
morale. Next, the company began selling its chairs for assorted
E-
applications, as ideal seating at restaurants, clubs, swimming
pools, gardens, balconies and verandas.
Salesmen went around with attractive catalogues, and direct
mailers were sent to schools, colleges and other frequent
organizers of functions. The product’s bright colours were turned
into an advantage. Offered in sunny lemons, flaming reds and
oranges, and vivid blues, the chairs could brighten up rooms. For
audience seating, Moderna was especially convenient, since, it
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allowed the use of colour schemes to demarcate groups and rows.

It was important not to let the consumer’s perception restrict the
product to just a few areas such as stadium, halls or restaurants.
The advertising positioned Moderna as a sturdy, multi-purpose
chair. Orders began pouring in from various quarters, and the
product found itself installed at hotels, shops, airport lobbies and
hospitals. In 1982-83, Moderna recorded sales of ` 40 lakh, double
the previous year’s figure. Things were looking up.
End of Solitude
Me-toos started appearing right from 1984. First came Nilkamal
Plastics with its Stylo range of moulded furniture. However it
didn’t dent Moderna just yet.
In 1985, Blowplast decided to strengthen its marketing effort,
(c)
having estimated the market’s true potential at ` 5 crore—far

above its actual turnover. A separate furniture division was
established to give Moderna the attention it deserved. By then,
the company was selling around 7,000 chairs a month. The newly
formed division doubled the number of dealers in Moderna’s
network, recruited more salesmen and widened the range of
chairs.
Contd…
257
The field force was sent out to target architects and interior
S
decorators, who have a big say in what kind of seating ought to be Notes
used in different settings. As plastic chairs caught on (for public
seating, mainly), the company decided to include tables, stools ___________________
and even push trolleys under Moderna’s range of moulded ___________________
furniture. They were launched in 1985, but did little to stir the
market. Non-chair products still made up less than 5 per cent of
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___________________
Moderna’s sales.
___________________
Monobloc Arrives
___________________
In 1987, the company launched a new type of all plastic chairs.
Named Moderna Monobloc, the product was available in various ___________________
UP
colours and ergonomic designs (that is, those claiming to meet
scientifically derived conditions for seating comfort). Touted as ___________________
the ‘anywhere chair’ and priced at ` 350 a unit, Monobloc banked
on its aesthetic superiority to the older product for success. ___________________
Within a year of launch, the product’s contribution to brand sales ___________________
had risen to about 25 per cent.
The original chair, in the meanwhile, began offering customized ___________________
variants (with frames and attachments-made locally by dealers-
for special needs). A chair with a special arm for a writing tablet,
for example, was designed for classrooms.
The Inputs Rise
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In 1987-88, prices of plastic began shooting up as part of a global
phenomenon. That, combined with a sharp excise duty hike (from
7.5 to 15 per cent) helped spring prices up greatly. A Monobloc
chair was now as expensive as ` 500; Moderna’s original moulded
chair rose from ` 175 to over ` 220 in a matter of just a few
months.
The average order quantity being high, the moulded furniture
buyer is price sensitive. The market slumped. Blowplast turned
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its attention to the home buyer, and directed its energy towards
marketing Monobloc. Print ads in 15 languages-showing how
Moderna could brighten up the seating arrangement both inside
and outside the house-were put out. Plus, markets in smaller
towns were explored for the first time since launch.
In 1991, Bombay-based Supreme Industries also entered the fray.
By manufacturing its products in Pondicherry, a zone which
enjoys tax concessions, the company kept its prices low. According
to market sources, Supreme is doing well in the south and has
managed to push the western market into a three way fight
(between Moderna, Nilkamal and itself).
More Newcomers
The shock of the price rise didn’t last too long. In 1993, the price
(c)
of plastic went down. Though it never quite returned to its pre-

stock level, it granted Blowplast relief. The market began picking
up again, with an annuals growth rate scaling 25 per cent. No
least because Moderna dropped its prices (to roughly what they
are today) in 1993-94. Monobloc went down in about ` 400 a piece,
while the regular chair fell to ` 200 or so. Moderna recorded sales
of ` 22 crore in a market estimated at ` 60 crore that year.
Contd…
258
Meanwhile, Moderna’s rivals had grown more aggressive. Earlier,
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Notes they were merely cloning its designs and selling their products at
prices roughly 25 per cent lower than the leader’s. In recent years,
___________________
however, they have begun battling Moderna even on the design
___________________ innovation aspect. Here Moderna has lost its advantage, which
thrusts the brand into a bitterly competitive field with more or
___________________ less a parity product.
E
___________________ In 1994-95, the market witnessed a fresh flurry of entrants –
Bombay based Cello and Udaipur-based Peacock being the
___________________ prominent ones among them. Supreme is reported to be forging
ahead, too.
___________________
UP
Although aggregate figures are still to come in, there is evidence
___________________ that last year the market grew far faster than did Moderna,
which claims sales of ` 30 crore. Moderna is retaliating by
___________________
speeding up its launch of new designs. Realizing new potential in
___________________ the market, the company has launched creatively designed baby
chairs, priced at ` 150 a piece and available at toy shops (in
___________________ addition to regular Moderna dealers).
The Survival Plan
The company has decided not restrict itself to plastic. In 1994,
Blowplast tied-up with a German furniture maker, Klober, and
entered the market for office furniture with cushioned chairs on
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steel frames. The same year saw another tie-up with Canada-
based Element Corp for element systems (lightweight panel
furniture supported by aluminium grids).
The idea is to use distribution synergy to emerge as a broad-port-
folio marketer of furniture made of non-conventional materials.
There are several need gaps in the market, feels Blowplast, which
it must fill before the competition does.
Questions:
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3. What is meant by distribution synergy?
Source: Excerpted from A&M, 31.7.1995, with permission

(c)
259
Case Study 2: Jewels from the Ground
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Notes
Having decided to concentrate on niche product categories, ___________________
Satnam Overseas is diversifying into high-growth areas such as
convenience foods and beverages ___________________
—Pritika Arora
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___________________
You can be competitive only if you have a manufacturing base and
competitive globally only if you have the best machinery. This is ___________________
the guiding principle of Satnam Overseas Ltd. (SOL; 1995-96 ___________________
turnover: ` 256 crore), set up in 1976 by brothers Jugal Kishore,
Satnam and Garnam Arora. The inception of the company was ___________________
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the direct result of the decanalisation of basmati rice exports by
the Indian government. At that time the company had just one ___________________
rice mill in Amritsar. The trio shifted base to Delhi in 1984 when ___________________
the Punjab problem got aggravated.
Since then, SOL has been using technology to market what is ___________________
essentially a primary sector product at margins few have thought ___________________
possible. By the mid-1980s, SOL was exporting its Super
Kohinoor basmati rice brand to the US and West Asia, markets
with large numbers of people from the Indian subcontinent. The
paddy was sourced from mandis (local markets where farmers
and traders meet) in the three basmati-growing states – Haryana,
Punjab and Uttar Pradesh.
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The company turned India-wards in a big way in 1984-85. “Unless
a company has a strong domestic presence, the export venture
won’t do well,” believes Gurnam Arora, Joint managing director.
In the company’s experience, foreign buyers almost always
wanted to know how well the brand was doing in India. High
domestic sales are seen as a mark of credibility.
In 1986-87, SOL set up a rice processing unit in Delhi, with hitech
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machines for sorting, grading, polishing and packaging. The

system first sorts out grain by colour, throwing alien matter out.
Then, it grades the rice by length (the longest grain commands
the highest price). Next, it polishes the grain. And finally, it uses
‘from-fill-seal’ machines to seal measured quantities into nitrogen
flushed, polyline-laminated packages (for greater hygiene and
longer shelf-life). The investment in plant and machinery was
around ` 3 crore back then.
Then came another hitech facility in 1988-89, this time at
Murthal in Haryana. The basmati grown in this state is superior
to that grown elsewhere, says SOL. The mere setting up of a
manufacturing base, found SOL, was not nearly enough in a
market already crowded with regional basmati players. The
company wanted to target the top-end consumer, for whom Lal
(c)
Quilla was the only branded option. And it wanted most of its rice
to reach the consumer’s kitchen the way it was packed. Other
players that were trying to pass off as consumer brands were
actually trade brands, selling basmati in 35 and 50-kg bags,
which the retailers sold loose. Though SOL and bulk packs, it
wanted a high proportion of its sales to come from user-friendly
packs of half, one, two, five 10 and 20 kg.
Contd…
260
For all, the Kohinoor needed a strong brand image. “For a
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Notes commodity like rice, you can’t do much except create attractive
packaging,” says V. M. Kaul, former general manager, marketing
___________________
(he’s just left the company). Thus, Super Kohinoor’s consumer
___________________ packs-designed in part by Forefront—not only had transparent
windows, they looked brighter than anything else available in
___________________ India. The window allowed the finicky and cautious Indian
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housewife to examine the grain before picking it up.
___________________
In all 817 and other popular brands were not making an effort to
___________________ create brand awareness,” says Arora. SOL, on the other hand, had
asked its agency, forefront, to create consumer pull. One ad film
___________________
showed some Arabs buying Super Kohinoor basmati rice in
UP
___________________ exchange for gold sovereigns.
The efforts paid off, and domestic sales of Super Kohinoor started
___________________
rising. Further gains came when SOL deployed separate market
___________________ antlers for different regions. In a pioneering effort, it delved into
the consumer’s rice-buying habits and sensitivities in different
___________________ parts of the country. This helped it decide what grain to sell
where, in what quantity and during which reason.
Among dozens of other things, the company found that the typical
Gujarati tends to hoard a year’s requirement of rice as soon as
kharif harvest season ends by early November. But the rest of the
country prefers to buy hardened old rice, so the marketer must
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store the grain 6-12 months before putting it on shop shelves.
Says Kaul, “The older the rice is, the better it is because it has
excess moisture when it is new and so doesn’t cook well”. In
Madhya Pradesh, the company sells broken basmati because
that’s how it is preferred there.
The brand was able to command a premium comfortably, and as
the perceived value has risen, so has the stage. Today, it delivers
a consistent set of benefits to consumers who value it. One kg of
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Super Kohinoor basmati rice currently retails for ` 55, about ` 20

higher than unbranded basmati.
The 1990s saw Indian basmati exports boom. “The export market
started attracting a lot of companies, large and small, who wanted
to profit from the boom. Since there were so many players,
suddenly, the company couldn’t absorb all the growth,” says Kaul.
This led to the realization that the company could not depend on
just one product to achieve its ambitions. So SOL decided to
stretch into markets where its competence could give it a
premium place.
The company had already established a rapport with distributors,
and Kohinoor was well regarded in many upmarket households.
Consequently, SOL came up with the idea of launching branded
pulses under the same brand in 1995.
(c)
“The rationale behind the launched was that every Indian

household has dal, and so we introduced totally dried, nitrogen-
flushed pulses in 21 different varieties,” says Arora. The pluses
were—and still are—available only in Delhi, though. The
company admits that it hasn’t been able to make much headway
in this category. Just cleaning and packaging don’t do the trick
Contd…
here, it seems. Unlike basmati, which had reputation of 261
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superiority as a generic product too, pulses are seen plainly as Notes
commodities, despite the fact that there is significant variation in
actual quality. So, says Arora, “We’re competing with grocer who ___________________
has no overheads, and people feel that dal is, after all dal. We are
waiting for other companies to come in and give us some ___________________
competition – only then can we expand the market.” But that
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___________________
might take some time for, as Kaul says, “pulses have become a
speculative commodity. Prices fall and rise every day and so it is a ___________________
very risky business. We are still learning the dals business.”
___________________
An offering would be defying the first principle of branding
consistency in value – if the retail price went up and down too ___________________
UP
often. In fact, the inability to tame price fluctuations has been the
bane of many the marketer trying to sell branded commodities. In ___________________
basmati, things are under control. The open market prices
___________________
fluctuate between ` 800 and ` 1,400 per quintal every collection
season. But SOL operates on the assumption that the costs ___________________
balance out in the end. Also, it has ensured that it adds enough
value through its refining and packaging to reduce the effect of ___________________
raw material prices on the final price (over ` 5,000 per quintal).
Long-term trends aren’t easy to plot for pulses, and since there
are so many varieties and so few codes on quality standards,
reliable information on what’s available where is sparse. Also,
smaller production volumes mean that much lower a chance for
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things to get evened out across the country. India’s total
production of dals is 12 million tonnes, a small figure in contrast
to rice, which stood at 88 million tonnes in 1995-96 (around 10
million tonnes sold through ration shops).
Nonetheless, SOL claims that it processes 50 tonnes (assorted
varieties) of pulses every day at its Delhi plant. Most of it is
exported to the UK, Sri Lanka, Dubai, Kuwait, Canada and
Japan.
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Last year, the company’s R&D department started a project to

develop branded, packaged, ready to-cook pulao. The outcome was
Rice & Spice, launched domestically in mid-1996 in single-meal
packs. Like Maggi, the contents can simply be emptied into
boiling water for a quick meal of garnished rice. According to
Arora, the brand is doing well. “Though it was conceived for
international markets, our distributors in India thought Rice &
Spice would do well here too, considering that so many women
had started working and convenience was the buzz word.
Moreover, this product is very well differentiated because it is the
only pre-mixed pulao in the market that uses basmati. “Priced at
` 22.50 for a 125-gm pouch, Rice & Spice offers eight variants.
The company claims to be producing 10,000 pouches every day, of
which 70 per cent are exported.
(c)
As for Super Kohinoor basmati rice, daily production is claimed to

have scaled 500 tonnes (from three mills, each working three
shifts). The company claims to be selling all that it produces.
The brand, Kohinoor, contributes about 80 per cent to the
company’s turnover. SOL claims to draw one in every tenth rupee
Contd…
262 of the Indian revenues from basmati (the export market is placed
S
Notes roughly at ` 1,500 crore, and the domestic, at ` 500 crore).
Since the company gets almost three-quarters of its revenues in
___________________
foreign exchange (1995-96 exports turnover: ` 185 crore), its tax
___________________ liability is rather low. According to Arora, the company’s strength
lies in the fact that it sells “international class products, and only
___________________ those that we can control the quality of”. In India, the company
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has 65 distributors and 200 stockists who supply SOL’s products
___________________
to about one lakh retail outlets. Distribution is geared to cater
___________________ mainly to A class cities’ four metros and eight mini-metros. But
overall, the distribution enfolds around 350-400 towns and cities
___________________ in its sweep.
UP
___________________ Surprisingly, the company is not as strong in the North as one
would imagine it to be. Says Arora, “Kohinoor’s strong markets
___________________ are the states where basmati is not grown. The largest-buying
state is Gujarat, while the best city for the brand is Mumbai.”
___________________
Though the company claims it is the domestic market leader in
___________________ basmati rice, rival Lal Qilla is No 1 in terms of consumer
perception, at least in Delhi and Chennai. This, despite company
having been the top exporter of basmati rice from India for the
last five years.
The company’s domestic ambitions have taken a new turn in
recent months. And now that the government has lifted some old
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regulations on rice milling (Union Budget 1997-98, competition is
likely to come trooping in some of it’s from big companies. Pepsi
Foods is testing waters with Season’s Harvest, and Brooke Bond
Lipton has an export brand of rice called Indus Valley which may
enter the domestic arena. DCW, marketer of Captain Cook wheat
flour, is also rumoured to be considering an entry into the field of
branded rice. All of these are rich companies, and this business is
notorious for how much capital needs to be tied up in year-round
inventories. SOL, for example, has invested a total of ` 12 crore in
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plant and machinery so far, and its working capital requirements

have been very high. And it wants to be India’s largest agro-foods
company some day.
Tall order? Perhaps, but the company is busy drawing up plans to
enter assorted markets for convenience foods.
The company’s latest foray has been in the market for beverages.
It is currently test-marketing Viceroy tea bags in Delhi. Available
in two varieties, Assam (` 56 for 100 tea bags and ` 15 for 25) and
Darjeeling (` 70 for 100 tea bags and ` 20 for 25), the tea is
claimed to have attracted the right kind of attention. Its present
agency, Anthem (the account shifted in 1992-93), has devised a
press campaign for Viceroy to target the upmarket consumer
enamoured of British lifestyle. The ad budget for 1995-96 was ` 2
(c)
crore (for all brands).

Tea bags, though, are a tiny market in contrast to the whole;
besides, the arena boasts some of India’s smartest and biggest
marketers. Yet, justifies Arora, the company has decided to place
an accent on niche products.”
Contd…
263
Questions:
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Notes
2. Write down the case facts. ___________________
3. “Long-term trends aren’t easy to plot for pulses”, Discuss. ___________________
E
Source: Excerpted from A&M 16.4.1997, with permission ___________________
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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(c)
264
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Notes
___________________
___________________
___________________
E
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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CC
(c)
UNIT 21: Sales Force Automation
265
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Notes
___________________
___________________
E
___________________
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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BLOCK-V
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(c)
266
S
Notes
UNIT 21: SALES FORCE AUTOMATION
___________________ UNIT 23: BPR and CRM
___________________
z Concept of Sales Force Automation z Business Process Reengineering
___________________
E
z Benefits of Sales Force Automation Software z Implications of Business Process Reengineering
___________________
z Experience CRM Success z Understanding Business Processes
___________________
z Sales Force Automation Solution – An Overview
___________________ UNIT 24: CREATING CUSTOMER-FOCUSED
UP
ORGANISATION
UNIT 22: CRM IN B2B AND B2C MARKETS
___________________
z Introduction
z Introduction
___________________
z Quality as an Organizational Culture
z B2C CRM
___________________
z Quality Practices in Six Sigma
z Difference between CRM in B2B and CRM in
___________________
B2C Markets z Growth through Customer Satisfaction
z Multiple Sales Processes

z Implementation of CRM in B2B
z CRM Techniques for B2B Marketers

E-
z Importance of Implementing CRM in B2B
Market
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(c)
Unit 21
267
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Notes
Sales Force Automation

___________________
___________________
E
___________________
Objectives
___________________
topics: ___________________
\ Meaning and features of sales force automation ___________________
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\ Advantages and disadvantages of SFA ___________________
\ Overview of SFA
___________________
___________________
Introduction
___________________
Any sales team in a company today, has to deal with various
constraints. They need to continuously be in touch with their office,
for updates on availability, prices and schemes for the products
they sell. While this external reliance is a bottleneck, even the
E-
information obtained is not always accurate. Sales Force
Automation enables a highly mobile sales force to increase
productivity on the field, react faster to customer requirements
and access and update sales related information anytime,
anywhere.
SFA is often used interchangeably with CRM; however, CRM does
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not necessarily imply automation of sales tasks.
Concept of Sales Force Automation

Sales force automation refers to automating all the actions related
to sales of an organization or business. This is a coordination of
applications that chiefly centre on scheduling and contact
management. Sales force automation actions are usually
incorporated with other systems that supply the status of orders,
inventory and products and other related information and can be a
part of a bigger program of customer relationship management.
Abbreviated SFA, a technique of using software to automate the
(c)
business tasks of sales, including order processing, contact

management, information sharing, inventory monitoring and
control, order tracking, customer management, sales forecast
analysis and employee performance evaluation.
268
Sales force automation helps by making all business actions
S
Notes
Activity
pertaining to sales, automatic. These actions include:
Write an article on Sales
___________________
Force Automation. z Keeping a track of orders.
___________________
z Meting out of orders.
___________________
E
z Contact management.
___________________
___________________
z Sharing sales information and statistics.
___________________ z Screening and control of inventory.
UP
___________________ z Analyzing future sales patterns and behaviour.
___________________ z Evaluating performance of employees in sales.

___________________ In short, sales force automation can help you to control your entire
___________________ sales process from head to toe.
Sales Force Automation (SFA) software is a type of program that
automates business tasks such as inventory control, sales
processing, and tracking of customer interactions, as well as
analyzing sales forecasts and performance. Businesses may have a
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custom version developed specifically for their needs or choose
from among the increasing number of sales automation software
products such as Interact Commerce’s ACT! and GoldMine
Software’s GoldMine. Sales automation software is sometimes
called sales automation software, and sometimes called Customer
Relations Management (CRM) software.
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Check Your Progress

Fill in the blanks:
1. ..................... refers to automating all the actions
related to sales of an organization or business.
2. A three-tiered architecture is typically used to
separate the database, server, and ..................... to
reduce programming demands on clients .................... .
Benefits of Sales Force Automation Software

(c)
The benefits of the software are as follows:

z Personalized Software: You can get sales force automation
solutions that are customized according to your specific
business. These solutions are completely configurable to meet
your individual business and sales automation needs.
269
z Complete Sales Solutions for Executives and Employees:
S
Notes
Activity
Sales force automation software can help executives to define
and set individual sales goals, share sales and advertising .With the help of internet,
___________________
collect more information on
information, analyze results and reports, and predict future Sales Force Automation. Give
___________________
5 examples of the companies
courses.
using the SFA.
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___________________
Sales employees can benefit as the solutions make it easy for
___________________
them to obtain leads, supervise their databases, set reminders
___________________
for schedules and appointments, and save numerous notes,
orders, and applications. ___________________
UP
z Swift Launch and Incorporation: Most sales force ___________________
automation software can easily be incorporated into your ___________________

unique sales programs and can be configured according to your
___________________
special needs. As a direct consequence of this, your sales team
___________________
can be fully functional in weeks rather than months or even
years.
z Provides Control: By using sales force automation software,
managers can find out how their sales team is doing at any
E-
given time and also take care of any possible problems before
they get out of hand. Sales representatives can quickly be
brought up to date by providing all the necessary sales
information in one common place.
z Safeguards Data: All sales force automation systems have
built-in security tools that help to safeguard all your data,
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statistics, and solutions. Advanced technology in security

enables complete protection of client and company data. Along
with this, these systems have data encryption and user
authentication facilities that help to back up the saved data
and also prevent unauthorized use of your sales solutions.
Thus, the advantages of sales force automation can be summarized
as:
“Speedy and hassle free launching of sales teams in the most
organized and efficient manner.”
Advantages to Sales People

(c)
Proponents claim that sales force automation systems can improve

the productivity of sales personnel. Here are some examples:
270
z Rather than write-out sales orders, reports, activity reports,
S
Notes
and/or call sheets, sales people can fill-in prepared e-forms.
___________________
This saves time.
___________________
z Rather than printing out reports and taking them to the sales
___________________ manager, sales people can use the company intranet to
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___________________ transmit the information. This saves time.
___________________ z Rather than waiting for paper-based product-inventory data,

sales-prospect lists, and sales-support information, they will
___________________
have access to the information when they need it. This could
UP
___________________
be useful in the field when answering prospects’ questions and
___________________ objections.
___________________ z The additional tools could help improve sales staff morale if
___________________ they reduce the amount of record keeping and/or increase the
rate of closing. This could contribute to a virtuous spiral of
beneficial and cumulative effects.
z These sales force systems can be used as an effective and
efficient training device. They provide sales staff with product
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information and sales technique training without them having
to waste time at seminars.
z Better communication and co-operation between sales
personnel facilitates successful team selling.
z More and better qualified sales leads could be automatically
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generated by the software.

z This technology increases the sales person’s ratio of selling
time to non-selling time. Non-selling time includes activities
like report writing, travel time, internal meetings, training,
and seminars.
Advantages to the Sales Manager

Sales force automation systems can also affect sales management.
Here are some examples:
z The sales manager, rather than gathering all the call sheets
from various sales people and tabulating the results, will have
(c)
the results automatically presented in easy to understand

tables, charts, or graphs. This saves time for the manager.
z Activity reports, information requests, orders booked, and
other sales information will be sent to the sales manager more
frequently, allowing him/her to respond more directly with 271
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advice, product in-stock verifications, and price discount Notes
authorizations. This gives management more hands-on control ___________________
of the sales process if they wish to use it.
___________________
z The sales manager can configure the system so as to
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___________________
automatically analyze the information using sophisticated
statistical techniques, and present the results in a user- ___________________
friendly way. This gives the sales manager information that is ___________________
more useful in: ___________________
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Providing current and useful sales support materials to ___________________
their sales staff \
___________________
Providing marketing research data: demographic,
___________________
psychographic, behavioural, product acceptance, product
___________________
problems, detecting trends
Providing market research data: industry dynamics, new
competitors, new products from competitors, new
promotional campaigns from competitors, macro-
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environmental scanning, detecting trends
Co-ordinate with other parts of the firm, particularly
marketing, production, and finance
Identifying your most profitable customers, and your
problem customers
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Tracking the productivity of their sales force by combining

a number of performance measures such as: revenue per
sales person, revenue per territory, margin by customer
segment, margin by customer, number of calls per day,
time spent per contact, revenue per call, cost per call,
entertainment cost per call, ratio of orders to calls,
revenue as a percentage of sales quota, number of new
customers per period, number of lost customers per period,
cost of customer acquisition as a percentage of expected
lifetime value of customer, percentage of goods returned,
number of customer complaints, and number of overdue
accounts. More complex models like the PAIRS model (by
(c)
Parasuraman and Day) and the Call Plan model (by

Lodish) can also be used.
272
Advantages to the Marketing Manager
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Notes
___________________ It is also claimed to be useful for the marketing manager. It gives

the marketing manager information that is useful in:
___________________
z Understanding the economic structure of your industry
___________________
E
___________________
z Identifying segments within your market
___________________ z Identifying your target market
___________________ z Identifying your best customers in place
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___________________ z Doing marketing research to develop profiles (demographic,
___________________
psychographic, and behavioural) of your core customers
___________________ z Understanding your competitors and their products
___________________ z Developing new products

z Establishing environmental scanning mechanisms to detect
opportunities and threats
z Understanding your company’s strengths and weaknesses
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z Auditing your customers’ experience of your brand in full
z Developing marketing strategies for each of your products
using the marketing mix variables of price, product,
distribution, and promotion
z Coordinating the sales function with other parts of the
promotional mix (such as advertising, sales promotion, public
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relations, and publicity)

z Creating a sustainable competitive advantage
z Understanding where you want your brands to be in the
future, and providing an empirical basis for writing marketing
plans on a regular basis to help you get there
z Providing input into feedback systems to help you monitor and
adjust the process.
Strategic Advantages
(c)
Sales force automation systems can also create competitive

advantage. Here are some examples:
z As mentioned above, productivity will increase. Sales staff will
use their time more efficiently and more effectively. The sales
manager will also become more efficient and more effective.
This increased productivity can create a competitive 273
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advantage in three ways: it can reduce costs, it can increase Notes
sales revenue, and it can increase market share. ___________________
z Field sales staff will send their information more frequently. ___________________
Typically information will be sent to management after every
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___________________
sales call (rather than once a week). This provides
management with current information, information that they ___________________
will be able to use while it is still valuable. Management ___________________

response time will be greatly reduced. The company will ___________________
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become more alert and more agile.
___________________
z These systems could increase customer satisfaction if they are
___________________
used with wisdom. If the information obtained and analyzed
with the system is used to create a product that matches or ___________________
exceeds customer expectations, and the sales staff uses the ___________________
system to service customers more expertly and diligently, then
customers should be satisfied with the company. This will
provide a competitive advantage because customer satisfaction
leads to increased customer loyalty, reduced customer
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acquisition costs, reduced price elasticity of demand, and
increased profit margins.
Disadvantages
Detractors claim that sales force management systems are:
z Difficult to work with – need for training
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z Require additional work inputting data

z Dehumanize a process that should be personal
z Require continuous maintenance, information updating, and
system upgrading
z Costly
z Difficult to integrate with other management information
systems.
Check Your Progress

(c)
Fill in the blanks

1. PAIRS model is given ...................
2. Call Plan model is given by .....................
274
Experience CRM Success
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Notes
Activity
Make a report on the Sales Force Automation (SFA) application gives businesses the
___________________
experience of CRM success.
upper hand with their sales data. Comprehensive and easy to
___________________ customize, the solution empowers companies to manage people and
___________________ processes more effectively, so reps can close more deals. With SFA,
E
___________________
reps spend more time selling and less time on administration.
___________________ Comprehensive On-demand SFA

___________________
z Point-and-click customization for SFA that fits the way you
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___________________ sell
___________________ z Real-time analytics empower your business to make better
___________________ decisions
___________________ z Instant global deployment for offline and online use

z Award-winning ease of use results in widespread adoption.
Loved by the Sales Force

E-
Reps need solutions that make their jobs easier, not more
complicated. SFA gives them fast access to data – online, offline
and via mobile devices – and links easily to popular tools like
Microsoft Office and Outlook. The user interface is simple and
intuitive. This is the one SFA solution every sales rep will love and
use.
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Critical for Sales Managers

Managers need visibility into the activities of their reps and
insight into where they stand with their pipelines. The solution
provides powerful opportunity management, forecasting, reporting,
and customization capabilities, so sales managers can be confident
their teams are producing at their full capacity.
Trusted by Executives
Executives need accurate information so they can evaluate their
company’s past performance while looking ahead to the future.
(c)
They want to answer critical business questions quickly without

sifting through reams of data. With the powerful analytics and
customizable dashboards that SFA provides, executives have the
real-time information they need to be effective.
275
Features of SFA
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Notes
z Sales Management
___________________
Lead Management ___________________
Opportunity Management
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___________________
Account and Contact Management ___________________
Activity Management ___________________
Approvals and Workflow ___________________
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Territory Management ___________________
Partner Management ___________________
___________________
z Analytics and Forecasting
___________________
Reports and Dashboards
Customizable Forecasting
Data Quality Management
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z Sales Information
Product Catalogue
Document Management
Contract Management
Email Templates
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Asset Management
z Desktop and Mobile
Mobile CRM Solutions
Microsoft Outlook Edition
Word and Excel Integration
z Customization and Integration
z AppExchange Applications
Other Features
(c)
Alerts: Messaging facility allows sales representative to receive

from as well as send alerts to central server.
Personal Information Management: These sets of applications
allow sales representatives to manage information on leaves,
travel, expenses and salary from the personal devices.
276
Sales Force Automation Solution – An Overview
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Notes
Activity
Write an essay on the SFA The SFA gives the sales team the ability to access and manage
___________________
solution. critical sales information using a PDA device. Synchronisation
___________________ provides a simple method of sharing data and merging new and
___________________ updated information between offline users and the Mobile Server.
E
___________________ The architecture is segmented into two main sub systems. They
___________________ are:
___________________ 1. Mobile Server: The Mobile Server is the key sub system of the
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entire solution. This server interfaces with Central Server and
___________________
(Oracle, or any) database at the Mobile Server. It manages the
___________________
Sales Representatives PDA and the requests from the PDA.
___________________ An administrative module helps in user authentication,
___________________ transaction monitoring and synchronisation. The server, based
on settings, hosts all the synchronisation logic.
2. Client Application: The client application is hosted in the
Sales Representative’s PDA device and has the ability to view
appointments, create orders, search for customer details and
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item details and synchronise with the Mobile Server using
GPRS.
Functional Features of SFA

The SFA client has the following features. The sample screen
layout for each of the features is also provided.
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Figure 21.1: SFA Solution Overview

(c)
1. Appointment Scheduling: This facilitates creating, viewing

and rescheduling appointments by a sales representative on
his PDA. A unique feature is re-routing of appointments to the
central server for allocation. This facility allows the Sales
Representative to view appointments for the current week/day.
They also have the option of rescheduling the appointments. 277
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(see Figure 21.2) Notes
___________________
___________________
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___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
Figure 21.2
The Sales Representative can also view the list of customers

available in the PDA. They can view the customers based on
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Customer ID or Customer Name.
2. Order Management: Sales representative can manage
inquiries, quotations and sales orders on their device. Basic
functionalities like capturing user requirements, suggesting
solutions, etc., are possible. Viewing order status is a key
feature of this module. (see Figure 21.3)
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(c)
Figure 21.3
278
3. Customer Management: This facilitates creation and
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Notes
viewing of customer information like contact information or
___________________ customer history. (see Figure 21.4)
___________________
___________________
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___________________
___________________
___________________
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___________________
___________________
___________________
___________________
Figure 21.4
4. Product Viewing: Real time information can be viewed on

the handheld device. The information on products can be
E-
viewed categorically or by alphabetical order. Information on
product prices, availability, description and other
specifications can be obtained. (see Figure 21.5)
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(c)
Figure 21.5
279
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Notes
___________________
___________________
E
___________________
___________________
___________________
___________________
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Figure 21.6
___________________
5. Delivery Instructions: The Sales Representative can enter a
Delivery Instruction if required and save the order. If they ___________________
choose to Synchronize the order, then it is saved and ___________________

synchronized with the server, provided GPRS connectivity is
___________________
available. There is also an option to clear and exit from the
order entry screen. (See Figure 21.6)
6. Synchronization: This module facilitates in synchronising
data on the device with the server using cradle or wireless
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synchronisation. Synchronisation has XML components on the
server and client side as well.
Check Your Progress

1. The mobile server is the key sub system of the entire
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solution.
2. Sales force automation systems can’t create
competitive advantage.
3. The SFA gives the sales team the ability to access and
manage critical sales information using a PDA device.
4. Real time information can be viewed on the handheld
device.
5. SFA packages typically include a Web-ready database,
an e-mail package, and customizable template.
(c)
Summary
Sales force automation refers to automating all the actions related
to sales of an organization or business. This is a coordination of
applications that chiefly centre on scheduling and contact
280 management. Sales force automation actions are usually
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Notes incorporated with other systems that supply the status of orders,
___________________ inventory and products and other related information and can be a
part of a bigger program of customer relationship management.
___________________
Sales force automation helps by making all business actions
___________________
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pertaining to sales, automatic.
___________________
___________________ Lesson End Activity

___________________ Make a detailed report on the use and concept of Sales Force
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___________________ Automation. Add sufficient examples in your report.
___________________
___________________ Keywords
___________________ Sales Force Automation: It refers to automating all the actions
related to sales of an organization or business.
Sales Force Automation (SFA) Software: It is a type of
program that automates business tasks such as inventory control,
sales processing, and tracking of customer interactions, as well as
E-
analyzing sales forecasts and performance.
Mobile Server: It is the key sub system of the entire sales force
automation system.
Client Application: The client application is hosted in the Sales
Representative’s PDA device and has the ability to view
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appointments, create orders, search for customer details and item

details and synchronise with the Mobile Server using GPRS.

1. What do you understand by sales force automation?
2. Describe the important features of sales force automation

system.
3. Discuss the advantages and disadvantages of sales force

automation.
(c)
4. Describe the benefits of sales force automation softwares.

Further Readings 281
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Notes
Books ___________________
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___________________
___________________
___________________
___________________
UP
___________________
___________________

Houston, 2000.
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Web Readings
www.impelcrm.in
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(c)
282
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Notes
___________________
___________________
___________________
E
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)
UNIT 22: CRM in B2B and B2C Markets
Unit 22
283
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Notes
CRM in B2B and B2C Markets

___________________
___________________
E
___________________
Objectives
___________________
topics: ___________________
\ B2B CRM ___________________
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\ CRM in B2B and B2C markets ___________________
\ Implementation of CRM in B2B market
___________________
___________________
Introduction
___________________
During the last few years, the topic of Customer Relationship
Management (CRM) has emerged as one of the most important
areas in marketing and in the overall management of the firm.
Numerous articles have been published that point to the
E-
importance of maintaining long-term relationships with customers
in Business-to-business (B2B) markets. When the careers advisor
says “go into marketing, young man”, few picture Business-to-
business (B2B) marketing. B2B marketers have always felt
themselves to be the poor relations of their Business-to-consumer
(B2C) cousins. And nowhere more so than in CRM. This is
particularly ironic considering that CRM started in the late 1980s
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as B2B relationship marketing; the investment in personal

relationship a vital ingredient in what used to be known as
‘industrial marketing’.
Customer Relationship Management (CRM) and Business-to-
business (B2B) are essential to the success of modern business.
Although they are two different modules, they share many
similarities. The integration of CRM and B2B will benefit all related
parties in business processes, including sales, marketing, customer
service, and information support. While B2C firms have come to
terms with need to manage the relationship with their customers,
(c)
all too many B2B companies have been too quick to expand, develop
technologies, win new accounts, integrate with other systems and,
forge strategic alliances rather than focus on the customers.
But the reality is that B2B organisations also need to adopt CRM
strategic initiatives to prosper or survive. They must analyse
284 information about their existing clients and provide products and
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Notes
Activity services that they value as well as attract new clients. The process
Write an article on B2C CRM.
___________________ of identifying and predicting the needs of the marketplace means
they need to leverage databases and systems for relevant business
___________________
information, collect new information, analyse it and act on it to
___________________
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enhance productivity and increase profitability. And that’s all
___________________ about the customer.
___________________
___________________ B2C CRM
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___________________ B2C CRM is quite tightly coupled with e-commerce, as the internet
___________________
is the most efficient way to reach customers. Hence, a stand-alone
CRM system that is de-coupled from your webstore is pretty
___________________
useless (and unfortunately for B2C customers, most CRM
___________________ applications today treat your website as an afterthought). From a
functionality standpoint, the emphasis tends to be around the
marketing automation (keyword tracking, e-mail marketing) and
customer service management, rather than sales force automation.
With the development of computer technology and network
E-
communications technology, e-commerce has a rapid development
on a global scale. B2C e-commerce as a new shopping channel,
because it has characteristics of providing sufficient information,
breaking time and space boundaries, low-cost and real time, has
rapid development. As a channel for transactions, B2C e-commerce
also needs to be supported by appropriate Customer Relationship
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Management (CRM).
So e-commerce companies need to do customer segmentation based
on their value, and then take appropriate customer relationship
management strategy. The long tail, as the basis of a new business
model, emphasizes the value of sporadic demand and small
customers. In this paper we propose a new customer value model
in the new economic environment based on the long tail and then
offer corresponding customer relationship management strategies.
In B2C markets, the nature of a seller-customer relationship
becomes somewhat paradoxical. The paradox is the problem of
(c)
trying to form a “relation-ship” with customers while at the same

time trying to make a profit by selling products and services to
them. The social nature of a relationship juxtaposed with
commercial reality suggests that only in certain types of situations
will special types of “relationship” be achievable. Recent research
suggests that customers understand this paradox. They do not
confuse commercial exchanges and the false intimacy proffered by 285
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companies as an interpersonal relationship. Notes
Customer Relationship Management is a seductive marketing ___________________

strategy. However, research suggests that many of the programs ___________________
used to implement CRM should not be expected to make significant
E
___________________
changes in customer purchasing patterns—especially for FMCG
brands. Given this prognosis, why do so many such programs exist ___________________
and why are more being started? There are three complementary ___________________
answers to this question, namely:
___________________
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z CRM seems to be a logical extension of the current customer- ___________________
focus logic of marketing. For this reason, it has intuitive
___________________
appeal to many marketers.
___________________
z A number of big, high-profile companies have launched such
schemes – hence, many managers perceive that there is a risk ___________________
of being left behind. “Often a direct competitor has a CRM
program – hence, a similar scheme is needed as a
countermeasure. At best, each of these reasons is only an
indicator of the potential success of a CRM program. From a
E-
manager’s point of view, the crucial question is how to achieve
the best return from their marketing budget. The
recommendations here are:
First, start with a good description of the characteristics of
the market – both customers and competitors.
From this basis, select the appropriate broad marketing
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objective, such as avoiding a price war or gaining share of
market or share of customer.
Then, explore the cost effectiveness of how various
marketing tactics will achieve this broad objective. For
example, would money be best spent increasing the
salience of the brand or the loyalty of current customers?
Consider how competitors may respond to each initiative.
Finally, determine the best way to collect information to
monitor the effectiveness of marketing programs. For
example, use a panel of customers’ representative of the
(c)
market or mine the in-house customer database. If a

(potential) CRM program can survive this scrutiny, then it
should be used. Otherwise, it should be ignored.
The broad approach to relationship marketing finds somewhat
different applications in Business-to-business (B2B) versus
286 Business-to consumer (B2C) markets. In B2B markets, the
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Notes importance of creating strategic partnerships and alliances and
___________________ obtaining long-term commitment with suppliers and distributors is
emphasized (Iyer 2003). In B2C markets, micro-segmentation and
___________________
specific targeting are stressed along with an emphasis on various
___________________
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monetary and non-monetary value creation approaches. Further,
___________________ the different approaches to CRM in B2B versus B2C markets are
___________________ driven by the assumed (and, often real) differences between the
nature of these markets, the types of buyer-seller relationships
___________________
that are sought, and degree to which the overall relationship is
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___________________ guided by a long-term contract.
___________________
It is also recognized that CRM is a process, and as such can be
___________________ understood either in terms of distinct phases of the relationships or
___________________ in terms of the strategic steps that need to be undertaken to
achieve relationship objectives (Heide 1994; Winer 2001). The
process can be summarized to include four stages of the buyer-
seller relationship: identification of relationship partners;
development of the relationship; maintenance of the relationship;
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and re-evaluation of the relationship or its termination. The
strategic steps, on the other hand, may include: customer/segment
identification; customer targeting; relationship marketing and
management; and, the evaluation of the relationship and firm
performance. B2B researchers prefer to understand CRM in terms
of its process stages, while B2C researchers frequently
conceptualize CRM in terms of its strategic activities. As such, the
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focus in B2B relationships appears to be centered around the

development of long-term relationships through building trust and
commitment among the exchange partners. On other hand, a
central role is given to the development of loyal customers in B2C
relationships.
Check Your Progress

Choose the suitable answer
1. B2B stands for:
(a) Back-to-Back
(c)
(b) Back-to-Business
(c) Business-to-Business
(d) None
Contd…
287
2. SCM stands for:
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Activity
Notes
(a) Supply Chain Management Make a report on the
___________________
difference between CRM in
(b) Source Content Management B2B___________________
and CRM in B2C
markets.
(c) Supply Chain Manager
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___________________
(d) None ___________________
___________________
Difference between CRM in B2B and CRM in B2C
___________________
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Markets
___________________
From a technology point of view, it’s not so much what’s different ___________________
as how the technology is applied. “B2B, B2C and the dreaded
___________________
B2B2C – essentially there is not a difference,” argues David
Arrowsmith, strategy manager for customer intelligence at SAS ___________________
UK. “To work effectively the goal is to use the knowledge that is
available to get relevant marketing messages to the customer.”
The point is reiterated by Jason Nash, CRM product manager for
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Microsoft Dynamics CRM. “Contrary to the common belief that
there are many differences between B2B and B2C customer
relationship management systems, they are in fact similar in many
ways,” he argues. “The approach to relationship management is
largely the same; from the purpose of relationship tracking, to
system features and requirements. Indeed, the majority of CRM
systems currently on the market work in both B2B and B2C
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environments, the key difference lies in how they are deployed.”

Specifically, the differences are of complexity and degree, which
doesn’t negate B2C marketing techniques in B2B, it just means
they have to be adapted. B2B marketing characteristics and its
related issues include:
z Greater relationship investment is needed at every
interaction. “How do we market to senior managers with huge
time constraints and gatekeepers?”
z Brand image is bound up in personal relationships, making
corporate culture very important. “How do we create a value
(c)
proposition for international corporates and/or SMEs?”

z Strategy has to be more adaptive to the forces of market
networks. Some business customers are end-users (e.g.
finance, labour, energy, and professional service) and some are
part of a supply chain (raw materials, components, services).
288 “How do we find out who supplies who in the market, and the
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Notes level of relationship? Who do we partner or outsource with for
___________________ enhanced capabilities?”
___________________ z There are more complex channels – often through
___________________ intermediaries and in alliance with others – but fewer direct
E
retail outlets. “How do we generate leads for customer
___________________
acquisition in hi-tech markets?”
___________________
z A more complex buying ‘unit’ exists, with purchasing processes
___________________ and political agendas, plus the addition of professional
UP
___________________ procurement to ensure profitability. It is a myth, however, that
___________________
the Decision Making Unit (DMU) is less emotionally driven,
even with procurement in tow. The ultimate ‘correct’ decision
___________________
is frequently based on the quality of interaction, however
___________________ complex the scoring criteria – people buy people. “How do we
bring ourselves to the attention of decision-makers, users and
influencers? How do we market to procurement?”
z It is often a much longer buying process, making acquisition
more expensive. “How do we follow through a two year
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decision making process?”
z Pricing is often based on relationship value. “How should we
construct risk and reward contracts?”
z Service is an integral part of the proposition, because of the
greater degree of interdependence. “How do we deliver to each
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decision influencer the right compelling service at exactly the

right time?”
z From the very start, the relationship is lubricated by the
transfer of and collaboration in knowledge – hence a greater
use of techniques such as white papers. B2B product
development is often driven by technical progress rather than
fashion and trends as in B2C. For the business customer a
deeper knowledge of the supplier and their skills reduces risk
and so has value. “How do we build strategic relationships
with our customers?”
Yet there is a much lower use in B2B or research and data
(c)
z
analytics. “How do we get a better understanding of our
customers from all this data?”
z There is much more personal promotion and greater use of
face to face, e.g. account management, trade shows, and
events. “How do we build key account management 289
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techniques? How do we get business people to breakfast Notes
seminars?” ___________________
But it is important to bear in mind that at the end of the day while ___________________
there are many differences between B2C and B2B, there is one key
E
___________________
similarity which is that organisations are selling to people, who
have some basic needs and requirements that need to be fulfilled ___________________
in order to enable a purchase decision. Obviously in a B2B decision ___________________

cycle there are likely to be far more interested parties whose needs ___________________
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and requirements have to be addressed. Who is the main target
___________________
market for any CRM activity? Is it procurement or legal or finance
or marketing or who? B2B marketers need to run integrated ___________________
campaigns that are created with customer and channel insight in ___________________
order to target the people with the most influence.
___________________
“The B2C customer tends to be a person, making decisions for him
or herself whereas a B2B customer tends to be a company,
represented by a person making decisions for that company (aka
an account),” notes Salesforce.com marketing director Clarence So.
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“In CRM technology terms, the B2C customer is typically called a
‘contact’ while the B2B customer an ‘account’. This distinction has
very significant implications for your process and technology. For
example a B2C CRM technology tends to store lots of contacts and
lots of little transactions to support say a lifetime relationship,
with millions of wealthy individuals, that bank with Merrill
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Lynch.”
In a B2B environment it is necessary to have a database that can
handle concepts such as accounts – which will be companies – and
contacts (employees). In most B2B environments there are
multiple constituents involved in the buying process so the CRM
system needs to be able to establish permanent relationships
between a single company and multiple employees.
“A B2B CRM technology tends to be account-centric such as a
lifetime relationship, with ADP or Cisco’s worldwide service or
distribution organisation,” says So. “But both require a focused
strategy, process and technology that put the ‘customer’ at the
(c)
centre of their universe. Keeping track of important customer

details enables you to do a better job meeting your customer’s
needs on an ongoing basis. At the end of the day, it’s seven times
more expensive to acquire new customers than to retain an
existing customer, according to The Harvard Business Review.”
290
Multiple Sales Processes
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Notes
In a B2B environment there are also likely to be multiple sales
___________________
processes that could be active within a single account at the same
___________________ time, being managed by multiple sales people or sales teams. The
___________________ CRM system needs to be set up in such a way to allow for multiple
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___________________
sales processes to be related to a single account or company while
also enabling sales people to share visibility into relevant customer
___________________
information.
___________________
Specific types of information need to be collected that are not
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___________________ relevant in the B2C environment such as the company website, the
___________________ management hierarchy, who is the assistant of the buyer and what
___________________
is his/her contact information, etc. The CRM system should be able
to store information about the industry of the prospect firm as well
___________________
as information on topics such as credit ranking, market
capitalisation and so on.
It’s also important to remember that B2B decision making will
take longer that B2C – you don’t do an impulse buy on a corporate
E-
payroll system, for example, or an outsourcing provider. B2B
customers are also likely to be more risk averse, with a few notable
exceptions. As such they will have preconceptions of who to buy
from and what to buy from them? You don’t get sacked for buying
from IBM, remember B2C customers are far more likely to want
risk and excitement in their purchasing decisions; B2B customers
want to know they’ll still have a job in six months’ time.
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Check Your Progress

Fill in the blanks:
1. ................... typically have fewer customers and
smaller product ranges which they will sell to
intermediaries in the consumer distribution chain
rather than directly to an end consumer.
2. In a B2B environment it is necessary to have a
.................... that provides for the concepts of Accounts
and Contacts.
(c)
3. Virtually every CRM system is built on relational data

base technology which makes it easy to establish the
....................
4. .................... is moving beyond traditional trade shows
or customer conferences.
Implementation of CRM in B2B 291
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Activity
Notes
Whether the company is selling in a B2B or B2C market, Write an assignment on
___________________
implementation could be as simple as signing up for a web based, implementation of CRM in
B2B.
vendor hosted solution. If the CRM solution is going to be deployed ___________________
on premise (owned and operated by the company vs. hosted by the
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___________________
vendor) then there could be a multitude of implementation issues.
___________________
But most will not be related to whether the company is in a B2B or
B2C market; they will be related to the installation, customization, ___________________
and deployment of the product, and training of the sales and ___________________
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marketing staff. ___________________
The primary differences related to the market (B2B vs. B2C) are ___________________
the type of information collected in the CRM system and the
___________________
functional requirements, not so much the implementation.
___________________
In a B2B environment it is necessary to have a data base structure
that provides for the concepts of Accounts (companies) and
Contacts (employees). In most B2B environments there are
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between a single company and multiple employees. Often in the
B2B environment there are also multiple sales processes that could
be active within a single account at the same time, perhaps being
managed by multiple sales people or sales teams. In this case the
CRM system needs to be set up in such a way to allow for multiple
sales processes to be related to a single account or company and
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have the ability to either allow or disallow sales people and/or sales
teams to share visibility into the relevant customer information. In
the B2B market, it is also important for the data base to be able to
establish relationships between the main HQ account and
subsidiaries. Specific types of information need to be collected that
are not relevant in the B2C environment such as the company
website, the management hierarchy (who reports to whom), who is
the assistant of the buyer and what is his/her contact information,
etc. The CRM should be able to store information about the
industry of the prospect. It may be important to know the
company’s legal status, credit rating, tax identification number,
(c)
etc. There are other distinctions as well but these are a few of the
main requirements for a CRM system used in a B2B market.
292
CRM Techniques for B2B Marketers
S
Notes
Activity
Prepare a chart for your The techniques are as follows:
___________________
display board on the CRM
techniques for B2B
___________________
marketers.
Internet and Digital Communications
___________________ E-mail – particularly newsletters and offers – and the internet are
E
___________________ key methods of both B2B customer communication and knowledge
sharing, greatly reducing costs of traditional print media and
___________________
telemarketing. But digital communication also offers new
___________________ communication techniques that personalise content and encourage
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___________________ interaction at different stages of the customer journey. These
include:
___________________
___________________ z Search marketing: understanding and tailoring websites to

search behaviour.
___________________
z Social networking: sites like Linked-in are useful for
reaching senior managers.
Customer Events and Experiential Marketing

E-
B2B event marketing is moving beyond traditional trade shows or
customer conferences. Business breakfasts, debates and interactive
sessions which have personal development value are growing in
popularity. MTV Networks, for example, has replaced its large
sales conferences, with a series of interactive client events held
throughout the year offering knowledge sharing, client to client
collaboration, and skill enhancement workshops. The client gains a
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service, the company gains research, and knowledge and customer

intimacy.
Intranet/Extranet Channels
53 percent of UK companies now use extranets with suppliers.
These help enormously to build engagement and knowledge
sharing between the employees of the customer, partner and
supplier organisations. They both create a customised service for
key accounts, and reduce relationship building costs for lower
value customers.
(c)
Account Management
There are 10 reasons why companies adopt Key Account
Management (KAM) practices. If you have business clients, at
least one of these will apply to you. For KAM is the suppliers’
counterbalance to professional procurement.
293
Key account management is a simple concept; a sensible approach
S
Notes
to complex customers. In fact, CRM started life in the early 1990’s
as better business to business account management; (before 1to1 ___________________
Marketing became book of the year in 1993). Yet, still too few do it ___________________
really well – Syngenat, IBM and some major airlines stand out
E
___________________
from the crowd – whilst others have tried it, returned to traditional
selling, then revived KAM again in a game of yo-yo. ___________________
___________________
For KAM is the antidote to growing buyer clout achieved through
professional procurement, supply chain networks and company ___________________
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mergers. If suppliers are not to become sellers of commodity priced ___________________
goods, they need relationship management and KAM practices to
___________________
even up the balance and provide greater value. But this is not see-
saw on the supply curve; it’s a fundamental change in the nature of ___________________
economic value. ___________________
A change that calls for an equally fundamental shift in mindset,

away from the old selling models, flagging from hidden cost, that
are so loved and revered. They are though what we know; that is
why KAM is so hard to adopt.
E-
More and more companies are putting KAM on their project list.
Insurance companies with brokers needing to become more
professional under FSA regulations; investment bankers, whose
customers now want portfolio management; pharmaceutical
companies who find themselves dealing with health trust
procurement, rather than individual GPs… the list grows.
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The ten reasons to adopt it are:
See-saw Risk Management

1. Consolidation of buyers into merged or global organisations
2. Professional procurement
3. Customer complexity – retention means understand their
business and supply chain
4. Competitors are doing it; clients expect it and request it in
tenders
(c)
Valuable Opportunities
5. Global clients want a uniform approach especially from
complex suppliers
294
6. Asset advantages from stable, known longer term
S
Notes
relationships
___________________
7. Ability to influence client lifetime value, especially through
___________________
solutions
___________________
E
8. More precise innovation through co-creation with clients
___________________
9. Greater market understanding and adaptiveness
___________________
10. Reduced costs and increased value through better resource
___________________
allocation.
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___________________
___________________
Integration of Sales, Marketing and Service into Customer
Lifecycle Management
___________________
Cisco has just overcome one of the biggest hurdles in B2B
___________________ marketing – the integration of sales and marketing through virtual
teams and joint targets. Led by market segment managers, sales
teams know exactly which types of customers are important and
what sort of mix is required and why. They can then manage how
much time, effort and resources to spend in attaining plans. Both
E-
sides of the divide have been educated in each others world and in
business.
Creating Partners
Collaboration between companies is good; it can widen margins,
extend market reach and fend off competition. All are possible. But
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approached in the half hearted manner companies, spurred on by

the gleam of new collaboration technology, can easily end in
divorce and brand damage.
Engaging Creative Pinpointing Customer Value Propositions

B2B companies have traditionally not been known for their
creativity, with branding just a logo and strapline, rather than the
building up of brand perception. But this too is slowly changing, as
the reality of brand delivery has dawned. B2B magazine recently
looked at a number of B2B brand straplines, and gauged how well
they promised (and delivered) a value proposition. B2B offerings
(c)
may be more complex but credibility need not come at the expense
of entertaining and thus engaging interaction.
At the Institute of Direct Marketing’s recent B2B conference,
David Silke, the EMEA marketing leader for Nortel, noted in this
case study that Nortel had undergone a transformation from an
R&D product company, to a customer communication capability 295
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company. Whilst, the role of research and development in Notes
Activity
marketing should definitely not be downplayed, that is still a Prepare a brief report on the
___________________
pretty fair assessment of the journey that B2B marketing is importance of implementing
CRM in B2B market.
___________________
currently making.
E
___________________
___________________
1. The basic idea behind CRM is that if a seller can ___________________
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create a strong and trusting relationship with its
___________________
buyers.
___________________
2. Customer Relationship Management is not a
seductive marketing strategy. ___________________
___________________
Importance of Implementing CRM in B2B Market

During the last few years, the topic of Customer Relationship
Management (CRM) has emerged as one of the most important
E-
areas in marketing and in the overall management of the firm.
Numerous articles have been published that point to the
importance of maintaining long-term relationships with customers
in Business-to-business (B2B) markets. The basic idea behind
CRM is that if a seller can create a strong and trusting
relationship with its buyers, then these buyers are more likely to
perceive value in the relationship and may create a long-term
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revenue stream for the seller. The buyer also benefits because of
the seller’s earnest attempts to satisfy the needs of the buyer by
becoming a dependable and high-quality supplier. Companies now
recognize that CRM can contribute to a value-creation strategy
because of the advantages associated with being a trusted
participant in the network or set of strategic alliances that are
maintained in a CRM relationship (Morgan and Hunt, 1994;
Morris, Brunyee, and Page, 1998). As a result, the use of CRM
strategies and tactics now serve as one of the major driving forces
behind many companies’ efforts to create superior value for their
customers and generate a long-term revenue stream for them.
(c)
(Kothandaraman and Wilson, 2000; Ulaga and Chacour, 2000).

Since the creation of a superior value for customers is needed to
generate and maintain a sustainable competitive advantage
(Slater, 1996), many companies now view their CRM activities as
an important part of their arsenal of competitive weapons.
296
At the same time that CRM has emerged as a major trend in the
S
Notes
business world, companies have also increased their ability to
___________________
organize, store, process, and analyze data from their own internal
___________________ business activities as well as from external sources. Improved
___________________ computer technologies, combined with more powerful software,
E
provided by companies who specialize in CRM applications, have
___________________
resulted in an ability to use data in ways never before possible in
___________________ developing competitive strategies. This data-processing capacity
___________________ has fuelled the CRM movement (Crosby and Johnson, 2000).
UP
___________________
Check Your Progress
___________________
___________________
1. The B2C customer tends to be a person, making
___________________ decisions for him or herself.
2. In B2C environment, there is generally a much longer
sales cycle.
E-
Summary
B2B organisations also need to adopt CRM strategic initiatives to
prosper or survive. They must analyse information about their
existing clients and provide products and services that they value
as well as attract new clients. During the last few years, the topic
of Customer Relationship Management (CRM) has emerged as one
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of the most important areas in marketing and in the overall

management of the firm. Numerous articles have been published
that point to the importance of maintaining long-term
relationships with customers in business-to-business (B2B)
markets. From a technology point of view, it’s not so much what’s
different as how the technology is applied. B2B, B2C and the
dreaded B2B2C – essentially there is no difference. Specifically,
the differences are of complexity and degree, which doesn’t negate
B2C marketing techniques in B2B, it just means they have to be
adapted.
In CRM technology terms, the B2C customer is typically called a
(c)
‘contact’ while the B2B customer an ‘account’. This distinction has

very significant implications for your process and technology. For
example a B2C CRM technology tends to store lots of contacts and
lots of little transactions to support say a lifetime relationship,
with millions of wealthy individuals, that bank with Merrill Lynch.
In a B2B environment it is necessary to have a data base structure 297
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that provides for the concepts of Accounts (companies) and Notes
Contacts (employees). In most B2B environments there are ___________________
___________________
E
between a single company and multiple employees. ___________________
___________________
Lesson End Activity ___________________
Make a presentation on the implementation of CRM techniques in ___________________
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B2B and B2C markets. ___________________
___________________
Keywords
___________________
Business-to-business (B2B): It is a term commonly used to ___________________
describe electronic commerce transactions between businesses, as
opposed to those between businesses and other groups, such as
business and individual consumers (B2C) or business and
government (B2G).
E-
Business-to-consumer (B2C): It describes activities of
e-businesses serving end consumers with products and/or services.
Customer Relationship Management (CRM): It refers to the
holistic approach an organization can take to manage their
relationships with customers, including policies related to contact
with customers, collecting, storing and analyzing customer
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information and the technologies needed to perform these tasks.

1. What do you understand by CRM in B2B market?
2. Distinguish between CRM in B2B market and CRM in B2C

market.
3. Discuss the process of implementation of CRM in B2B market.

4. What is the importance of B2B CRM? Discuss.
(c)
298
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Notes Further Readings
___________________
Books
___________________
___________________
E
___________________
___________________ Century, Tata McGraw Hill, 2005.
___________________
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___________________ Customer Relationships Management, Wiley, 2003.
___________________ Alex Berson, Stephen Smith, Kurt Thearling, Building Data
___________________ Mining Applications, 2004.
___________________ CGI Group Inc. White Paper, Building Competitive Advantages

Houston, 2000.
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Web Readings
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www.impelcrm.in
(c)
UNIT 23: BPR and CRM
Unit 23
299
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Notes
BPR and CRM

___________________
___________________
E
___________________
Objectives
___________________
topics: ___________________
\ Concept of business process reengineering ___________________
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\ Implication of business process reengineering ___________________
\ Business process management
___________________
\ Quality as an organizational culture
___________________
Introduction ___________________
Interest in the Business Process Reengineering (BPR) concept is

quite recent, the concept is currently very topical, however, and is
ubiquitous in recent organizational, management and information
E-
technology literature. This popularity is also reflected in the fact
that many organizations claim to be undertaking BPR projects and
many software vendors are offering products to support BPR.
However, several studies have recently appeared in the literature
which has critically examined the BPR phenomenon. The
progression of a concept from theory to sustained practice is
dependent on the development of its theoretical base, and the
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introduction of methodological approaches that are capable of

being used by practitioners.
Business Process Reengineering

Business Process Reengineering (BPR) is known by many names,
such as ‘core process redesign’, ‘new industrial engineering’ or
‘working smarter’. All of them imply the same concept that focuses
on integrating both business process redesign and deployment of
Information Technologies (IT) to support the reengineering work.
Business process reengineering ideas are based on the premise
(c)
that every organization needs a sense of direction. Without that

direction in the form of strategic plans and business plans, the
organization has no foundation upon which to build process
improvements.
300
BPR is a method of improving the operation and therefore the
S
Notes
Activity
Make a brief report on the outputs of organizations. Generally the topic of BPR involves
___________________
business process discovering how business processes currently operate, how to
reengineering.
___________________ redesign these processes to eliminate the wasted or redundant
___________________ effort, improve efficiency, and how to implement the process
E
changes in order to gain competitiveness.
___________________
The purpose of BPR is to find new ways to organize tasks, organize
___________________
people and redesign information technology so that the processes
___________________ support the organization’s goals. It means analyzing and altering
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___________________ the business processes of the organization as a whole.
___________________ For a thorough and effective reengineering project, organizations

should first meet certain conditions before starting such a project.
___________________
Initially, the management should abandon all the rules and
___________________ procedures that have been used up to that time. In addition they
should abandon other inadequate organizational and production
principles. At this point, the design of a renovated and redesigned
organization should begin.
Business process reengineering is, in computer science and
E-
management, an approach aiming at improvements by means of
elevating efficiency and effectiveness of the business process that
exist within and across organizations. The key to BPR is for
organizations to look at their business processes from a “clean
slate” perspective and determine how they can best construct these
processes to improve how they conduct business.
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Check Your Progress

1. BPR stands for:
(a) Business Process Request
(b) Business Program Request
(c) Basic Program Request
(d) Business Process Reengineering
2. Business process reengineering aims at:
(c)
(a) Elevating efficiency and effectiveness

(b) Depreciating efficiency and effectiveness
(c) None of the above
(d) Both (a) and (b)
Implications of Business Process Reengineering 301
S
Activity
Notes
Undoubtedly, Michael Hammer has garnered most of the BPR Write an article on the
implications of business
___________________
press because of the radical rhetoric with which he communicates. process reengineering.
However, the ideas expressed by Hammer (and later Hammer and ___________________
Champy) are similar to the new business process redesign concepts
E
___________________
of Davenport and Short. They agree that the processes should be
___________________
transformed holistically rather than by fixing bottlenecks in small
increments. Furthermore, they agree on the essential role IT ___________________
should play in business process transformation. Most importantly, ___________________
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their ideas point to a formulation of the process enterprise that is ___________________
different from the functional hierarchical organization with which
___________________
corporations had been aligned. In their writings, the founders of
BPR have repeatedly demonstrated the poor coordination of ___________________
functional organizations and the superiority of process ___________________
organizations in coordination and in achieving performance gains.
In its most radical form, the process enterprise is one that
eliminates functional structure in favour of an exclusive process-
based structure. The more realistic approach for becoming a
E-
process enterprise is to have a matrix structure of process-
hierarchy and functional-hierarchy. Table 23.1 illustrates the
differences between process organization and functional
organization.
Table 23.1: Functional versus Process Organization
Functional Organization Process Organization

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Work Unit Department Team

Key Figure Functional Executive Process Owner
Benefits Functional excellence Responsive to market
Easier work balancing requirements
because workers have Improved communication
similar skills and collaboration between
Clear management different functional tasks
direction on how work Performance measurements
should be performed aligned with process goals
Weaknesses Barrier to communication Duplication of functional
between different functions expertise
Poor handover between Inconsistency of functional
functions that affects performance between
customer service. processed
(c)
Lack of end-to-end focus to Increased operational

optimize organizational complexity
performance
Strategic Support cost leadership Supports differentiation
Value strategy strategy
302
As illustrated above, process enterprise holds the promise of being
S
Notes
more responsive to market requirements, and it is suited for
___________________
companies that offer differentiated products/services rather than
___________________ competing on cost alone. However, organizational realignment by
___________________ itself does not result in improvements. Organizational realignment
E
has to be accompanied by change in management practices and
___________________
mindsets. A 1996 Harvard Business Review article by Ann
___________________ Majchrzak and Qianwei Wang of University of Southern California
___________________ presents data supporting this viewpoint. A process is “a structured,
UP
measured set of activities designed to produce a specified output
___________________
for a particular customer or market.
___________________
In their study, the cycle times of 86 printed circuit board
___________________
assembling departments at electronic companies were analyzed.
___________________ These departments performed the same manufacturing processes
at large and small electronics companies. They labelled 31 of the
86 departments as process-complete, meaning these departments
perform manufacturing processes, support tasks, and customer
interfacing. The rest are traditional functional departments that
E-
do not perform most activities outside of the manufacturing
processes. To the authors’ surprise, they discovered process-
complete departments did not have faster cycle times than
functional departments. After more analysis, they found process-
complete departments had faster cycle times when management
practices were put in place to foster collective responsibility. These
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practices include jobs with overlapping tasks, group-based

rewards, open workspaces, and collaborative work procedures.
Analysis of the data, after taking into account these management
practices, revealed that process-complete departments that
implemented these practices achieve cycle times as much as 7.4
times faster than process-complete departments that have not
implemented these practices. Furthermore, process-complete
departments that operated on traditional functional mindsets have
cycle times as much as 3.5 times longer than functional
departments. Organizational restructuring alone does not
inherently bring about forecasted improvements. Structural
(c)
change has to be accompanied by changes in managerial practices

and mindsets to reach the desired objectives. In fact, as we will
discuss a little later, the lack of focus on the human side of change
is one of the biggest drawbacks of traditional BPR practices. In the
past, information technology has been applied to help improve
business operations.
303
What are the effects of BPR on corporate performance? Several
S
Notes
success stories have been widely publicized. Ford was able to
reduce 75 percent of its staff in its accounting department, Mutual ___________________
Benefit Life achieved 60 percent productivity improvement in its ___________________
insurance applications department, Hewlett-Packard improved on-
E
___________________
time delivery performance by 150 percent in its purchasing
department, and American Express was able to reduce average ___________________
time for transaction processing by 25 percent. However, by ___________________

Hammer’s own admission, 50 percent to 70 percent of business ___________________
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process reengineering projects failed. In addition to Hammer’s own
___________________
assessment of the failure rate, one study indicated that only 16
percent of corporate executives were fully satisfied with their BPR ___________________
implementations. ___________________
The degree of radical change is determined by respondents’ ___________________

perceived level of change in seven aspects of reengineering. The
seven aspects of reengineering are similar to those of the McKinsey
study: process work flows, roles and responsibilities, performance
measurements and incentives, organizational structure, IT, culture
E-
and skill requirements. Other interesting results from this study
are the importance of process evaluation, process transformation,
and social design. Respondents rate these three stages as most
important to success among the eight project stages. The eight
stages in sequence are as follows:
z Identification of BPR opportunities
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z Project preparation
z Analysis of existing process
z Development of process vision
z Technical design
z Social design
z Process transformation
z Process evaluation.
Respondents rated analysis of existing process and technical
(c)
design as least important to perceived success. The two studies

discussed here illustrate that successful BPR projects share a high
degree of radical change. We can also conclude from the second
study that existing processes and technical designs are not
important factors in BPR success. However, social design,
304 execution of process transformation, and the ability to evaluate
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Notes
Activity reengineered processes are important to the success of the BPR
Prepare an assignment on
___________________ implementations. These results correlate to the contention that
understanding business
processes. change management and the human side of implementations are
___________________
more important than the solutions themselves.
___________________
E
Early BPR results led to the formulation of a new generation of
___________________
BPR rhetoric from its founders. This revisionist BPR thinking
___________________ increasingly focuses on the cultural context of the organization.
___________________ The founders no longer stress the radical approach that was in the
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original BPR thinking. The new rhetoric of BPR emphasizes the
___________________
importance of people and the change management aspects of
___________________
implementation. Instead of dramatic and wide ranging process
___________________ changes, revised BPR thinking calls for a holistic approach to
___________________ reengineering that involves business processes, technology, and
social system issues (including culture). Revisionist BPR thinking
looks to redesign critical business processes that will confer the
most value through targeted changes to organization, processes,
technology, and culture. The aim is no longer to change the
E-
organization’s entire culture but only to target those aspects of
culture that are critical to the success of reengineering
implementation. An illustration of this is the case of instituting
multi-skilled jobs and job rotations in a culture that values
specialized trade skills. A blanket enforcement of this change will
undoubtedly engender widespread resistance.
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Check Your Progress

Fill in the blanks:
1. In the past, ................ has been applied to help
improve business operations.
2. ................ a structured, measured set of activities
designed to produce a specified output for a particular
customer or market.
Understanding Business Processes

(c)
Davenport & Short (1990) define business process as “a set of

logically related tasks performed to achieve a defined business
outcome.” It implies a strong emphasis on how work is done within
an organization” (Davenport 1993). In their view processes have
two important characteristics: (i) They have customers (internal or
external), (ii) They cross organizational boundaries, i.e., they occur
across or between organizational subunits. One technique for 305
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identifying business processes in an organization is the value chain Notes
method proposed by Porter and Millar (1985). ___________________
Processes are generally identified in terms of beginning and end ___________________
points, interfaces, and organization units involved, particularly the
E
___________________
customer unit. High Impact processes should have process owners.
Examples of processes include: developing a new product; ordering ___________________
goods from a supplier; creating a marketing plan; processing and ___________________

paying an insurance claim; etc. ___________________
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Processes may be defined based on three dimensions (Davenport & ___________________
Short 1990):
___________________
z Entities: Processes take place between organizational entities.
___________________
They could be Interorganizational (e.g. EDI), Interfunctional
___________________
or Interpersonal (e.g. CSCW).
z Objects: Processes result in manipulation of objects. These
objects could be Physical or Informational.
z Activities: Processes could involve two types of activities:
E-
Managerial (e.g., develop a budget) and Operational (e.g., fill a
customer order).
Concept of BPR
Business Process Reengineering (BPR) is a more radical approach
to improvement than Total Quality Management (TQM). Instead of
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tweaking the existing system in a series of incremental

improvements, in process reengineering a business process is
diagrammed in detail, questioned, and then completely redesigned
to eliminate unnecessary steps, to reduce opportunities for errors,
and to reduce costs. A business process is any series of steps that
are followed to carry out some task in a business. For example, the
steps followed by your bank when you deposit a check are a
business process. While process reengineering is similar in some
respect to TQM, its proponents view it as a more sweeping
approach to change. One difference is that while TQM emphasizes
a team approach involving people who work directly in the process,
(c)
process reengineering is more likely to be imposed from above and

to use outside consultants.
Process reengineering focuses on simplification and elimination of
wasted efforts. A central idea of process reengineering is that all
activities that do not add value to a product or service should be
306 eliminated. Activities that do not add value to a product or service
S
Notes that customers are willing to pay for are known as non value added
___________________ activities. For example moving large batches of work in process
from one work station to another is a non value added activity. To
___________________
some degree Just-in-Time (JIT) involve process reengineering as
___________________
E
does Total Quality Management (TQM). These management
___________________ approaches often overlap.
___________________ Process reengineering has been used by many companies to deal
___________________ with a wide variety of problem. For example, the EMI Records
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Group was having difficulty filling orders for its most popular CDs.
___________________
Retailers and recording stars were rebelling – it took the company
___________________
as much as 20 days to deliver a big order for a hit CD, and then
___________________ nearly 20% of the order would be missing. Small, incremental
___________________ improvements would not have been adequate, so the company
reengineered its entire distribution process with dramatic effects
on on-time delivery and order fill rates. Reynolds & Reynolds Co. of
Dayton, Ohio, produces business forms. Filling an order of a
customer used to take 90 separate steps. By reengineering, the
E-
number of steps was slashed to 20 and time required to fill an
order was cut from three weeks to one week. Massachusetts
General Hospital is even using process reengineering to
standardize and improve surgical procedure.
Definition of BPR
BPR was first introduced in a research program at MIT
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(Massachusetts Institute of Technology) in the early nineties. The

term was used in the description of Davenport and Short’s 1990
research project. They found out that the implementation of
modern information technology in organizations means not only
automation of managerial and production tasks but that it also has
a direct effect on the quality of the work done. Davenport (1993),
one of the fathers of BPR describes ‘business process redesign’ as:
“The analysis and design of workflows and processes within and
between organizations. Business activities should be viewed as
more than a collection of individual or even functional tasks; they
(c)
should be broken down into processes that can be designed for

maximum effectiveness, in both manufacturing and service
environments.”
It is argued by some researchers that there is no commonly agreed
definition of BPR. However, the book Reengineering the
Corporation: A Manifesto for Business Revolution by Hammer and 307
S
Champy (1993) is widely referenced by most BPR researchers and Notes
is regarded as one of the starting points of BPR. The following is ___________________
their definition of BPR:
___________________
“Reengineering is the fundamental rethinking and radical redesign
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___________________
of business processes. to achieve dramatic improvements in
critical, contemporary measures of performance, such as cost, ___________________
quality, service and speed.” ___________________
___________________
Need of BPR
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___________________
The need for businesses to improve the way they operate by
increasing the efficiency and effectiveness of their business ___________________
processes is a well-proven and documented approach. The rapid ___________________

developments in enabling technology and changing customer
___________________
needs, demands and sophistication have continued to fuel the need
for ever-changing process improvements.
Based on this need, PricewaterhouseCoopers continues to offer its
clients a superior business process improvement service, based on
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robust methodologies and tools and underpinned by a proven track
record of results, locally and across the globe. Process
reengineering services include:
z Process design and development
z Process modelling
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z Process analysis
z Process simulation
z Process implementation support.
Methodology
PricewaterhouseCoopers’ approach to process reengineering
assignments is underpinned by our Process Improvement Through
Benefits Management (PITBM) methodology.
In our approach, project success is achieved through benefits
realisation. Quite often, change projects have focused on the
(c)
traditional project measures of success-on-time, to cost and to

specification. However, this perspective may be too narrow as,
whilst the project may be a success using these traditional
measures, it still may be a failure from a business viewpoint if the
308 planned benefits from the change project are neither realised nor
S
Notes measured.
___________________
The PITBM methodology has a whole lifecycle approach to
___________________ obtaining beneficial returns on change and process improvement
___________________ project investments by ensuring that the benefits realisation
E
processes become an integral part of the organisational activities
___________________
that remain in place after project completion. Benefits
___________________ management addressed in this way is a business process and a
___________________ management philosophy and not just a technique for investment
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justification.
___________________
___________________
Benefits realisation management is enabled through:
___________________ z Focusing on business outcomes from the inception of the

change initiative and how they will be achieved and measured;
___________________
z Ensuring that the organisation’s change initiative is supported
throughout by a robust Business Case for change;
z Matching the use of appropriate cost/benefit techniques to the
desired business outcomes;
E-
z Incorporating comprehensive project, benefits, change and
transition management activities throughout the change
initiative.
Process Modelling Tool

In executing process reengineering assignments
CC
PricewaterhouseCoopers makes use of a comprehensive set of tools.

Our approach for business transformation, streamlining and
simplification, together with our access to our Global Best
Practices database and benchmarking tools enables us to fast-track
the identification of operational process issues and opportunities.
PWC has selected Casewise Corporate Modeller as our advanced
process modelling tool to complement other flowcharting tools
already used in our practice.
We acknowledge that some assignments may require only a simple
process mapping tool to manage a small number of “flat”
(c)
flowcharts. However, in other client engagements the processes

subject to improvement may require the capturing of additional
information or relationships between process components for
further analysis (i.e. transaction volumes, processing times, people,
locations, technologies). Thorough analysis may also require
simulation to facilitate resource planning, cycle time improvement,
queue management or bottleneck identification and resolution. 309
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Casewise Corporate Modeller is deployed where clients require a Notes
more advanced approach to process reengineering. ___________________
Principles of BPR ___________________
E
While BPR is usually portrayed as a new concept, a number of the ___________________
principles and concepts underpinning BPR have their antecedents ___________________

in other disciplines. For example, Strassman (1993) identifies the
___________________
contribution of the industrial engineering discipline in which
___________________
methods such as process analysis, activity costing and value-added
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measurement have been around for about 50 years. Earl (1994) ___________________
also discusses the contribution of a number of fields, including the ___________________
operations management domain (e.g. Juran, 1964), sociotechnical
___________________
systems thinking (Leavitt, 1964) and systems analysis. However,
BPR is now coming to the fore in a different business environment. ___________________
Certainly, the technological infrastructure is now very different,

offering capabilities that were not feasible in the past. Also, BPR
attempts to reorient the axis of the organisation away from the
traditional vertical management control of employee up to
E-
management, and towards a horizontal value orientation of vendor
to customer (Orr, 1993). The latter orientation is one where real
value may be added for the enterprise.
However, the technology has generally been applied as part of
process rationalisation, that is, the primary motivation behind the
use of technology is to automate or expedite existing manual
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processes, and the processes themselves have been largely left

intact. The futility of this approach has been bluntly summarised
by Drucker (1986) in his declaration: “there is nothing more
useless than to do efficiently that which shouldn’t be done at all”.
The application of information technology has resulted in
incremental gains, but this is still a long way short of the dramatic
10-fold improvement that has been identified as necessary. Also,
the incremental benefits from continuous improvement
programmes may be levelling out, and are perhaps finite anyway.
Continuous improvement programmes are most effective when
companies start from a higher level of efficiency and effectiveness
(c)
(such as is the case with many Japanese ones). Goss et al. (1993)
have argued that incremental improvement programmes are not
sufficient for most companies today – they do not need to change
‘what is’; rather they need to create ‘what is not’.
310
Check Your Progress
S
Notes
Choose the suitable answer:
___________________
___________________
1. TQM stands for:
___________________ (a) Total Quantity Management
E
___________________ (b) Total Quantity Manager
___________________ (c) Total Quality Management

___________________ (d) None
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___________________ 2. JIT stands for:
___________________ (a) Just in Time
___________________
(b) Just in Temperature
___________________
(c) Just in Temporary
(d) None
3. PITBM stands for:
E-
(a) Process Important Through Benefits Management
(b) Process Improvement Through Benefits
Management
(c) Process Improvement Through Basic
Management
(d) None
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Summary
In this unit, you learnt about business process reengineering.
Business Process Reengineering (BPR) began as a private sector
technique to help organizations fundamentally rethink how they
do their work in order to dramatically improve customer service,
cut operational costs, and become world-class competitors. A key
stimulus for reengineering has been the continuing development
and deployment of sophisticated information systems and
networks. Leading organizations are becoming bolder in using this
(c)
technology to support innovative business processes, rather than

refining current ways of doing work.
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Notes
Make a presentation on the relationship between BPR and CRM.
___________________
To enhance your presentation, add suitable examples with pictures
to your slides. ___________________
E
___________________
Keywords ___________________
Business Process Management: BPM is a business process ___________________

approach to improving business activity and creating automated ___________________
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applications that is supported by a group of new process modellers,
___________________
application generators, application interface engines, and
performance monitoring software. ___________________
Reengineering: It is the fundamental rethinking and radical ___________________
redesign of business processes to achieve dramatic improvements ___________________

in critical, contemporary measures of performance, such as cost,
quality, service, and speed.
Business Process Reengineering: The analysis and design of
E-
workflows and processes within and between organizations.
Business activities should be viewed as more than a collection of
individual or even functional tasks; they should be broken down
into processes that can be designed for maximum effectiveness, in
both manufacturing and service environments.

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1. Briefly explain the concept of business process reengineering.

2. What are the roles of IT in business process reengineering?
3. Differentiate between functional versus process organization.
4. What do you mean by business process?
Further Readings
Books
(c)

312
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Notes
___________________
___________________
___________________
E
___________________
UP
___________________ Houston, 2000.
___________________ Web Readings

___________________ en.wikipedia.org/wiki/Customer_relationship_management
___________________
www.impelcrm.in
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(c)
UNIT 24: Creating Customer-focused Organisation
Unit 24
313
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Notes
Creating Customer-focused
___________________
___________________
Organisation
E
___________________
___________________
Objectives ___________________
___________________
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topics:
___________________
\ Quality as an Organizational Culture
\ Quality Practices in Six Sigma ___________________
\ Growth through Customer Satisfaction ___________________
___________________
Introduction
Businesses are feeling the pressures of a constantly changing
marketplace and are experiencing difficulties differentiating their
products or services in the intensified competition of this
E-
environment. Many companies have lost focus of the reason for
their existence in this turbulent environment. Gone are the days of
the seller's market, so many companies enjoyed in the decades
past. It is important to remember that the fundamental purpose of
a business is to make money and survive. It can not do this unless
it has a customer focus throughout the entire organization.
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Customer Focus is about getting all employees to look at their job

through the eyes of the customer. Customer Focus involves
continually listening to the voice of your customers, obtaining their
input and feedback and using this information to make changes
which add value to your products and services. Customer Focus is
about adding value at all levels of your organization
Quality as an Organizational Culture

Quality management programs have been extensively applied
around the world, as companies seek to attain and sustain a
(c)
competitive advantage. Six Sigma is the newest quality

management program which helps companies increase both
customer satisfaction and financial benefits. This quality program
seeks to find and eliminate causes of defects or mistakes in
business processes by focusing on outputs that are important to
314 customers. Six Sigma is defined as “an organized and systematic
S
Notes
Activity method for strategic process improvement and new product and
Write an article on quality as
___________________ service development that relies on statistical methods and the
an organizational culture.
scientific method to make dramatic reductions in customer defined
___________________
defect rates.”
___________________
E
The Six Sigma successes in major companies including GE,
___________________
Honeywell, Sony, Caterpillar, and Johnson Controls, promote the
___________________ adoption of Six Sigma in industry. Nevertheless, as a
___________________ comprehensive quality program, Six Sigma implementation is a
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complicated process which requires substantial changes in the way
___________________
that companies operate and involves many problematic issues.
___________________
Organizational culture has been recognized as one major factor or
___________________ challenge to the Six Sigma implementation.
___________________ Organizational culture is viewed as the pattern of values, beliefs,
and assumptions shared by members in an organization, which are
perceived by the organization as the valid, correct way to perceive
and solve problems. These shared values, beliefs, and assumptions
in the organization bind its employees together and become the
E-
manner or strategies through which the organization achieves its
goals In the context of quality management, the values and beliefs
underlying an organization’s culture are able to shape its
philosophy and policies of managing business, which in turn
influence the development of the organization’s quality
management practices. It has been argued that for an organization
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to realize the value of implementing quality practices, it must have

a culture that is capable of fully supporting their implementation.
The role that culture plays in influencing an organization’s level of
quality management practices has received much attention in the
literature. There have been a number of studies that attempted to
identify the cultural characteristics conducive to quality
management implementation. However, a majority of prior studies
treated quality management as a uni-dimensional construct. As
Prajogo and McDermott (2005) found, the studies that examined
quality management as a single construct usually focused on the
cultural characteristics related to people and flexibility, and
(c)
overlooked the potential effect of cultural characteristics about

control and standardization.
Much of the quality management research to date has found that
quality management is a multidimensional construct which is
composed of multiple quality practices. These quality practices
have different functions and roles regarding continuous 315
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improvement. For example, a typical quality practice – workforce Activity
Notes
management – is to use the entire capacity of workers and to Make a brief report on the
___________________
quality practices in Six Sigma.
encourage employee commitment to organizational continuous
___________________
improvement efforts. Workforce management emphasizes the
E
organizational and people side of quality management and uses a ___________________
variety of techniques to facilitate changes, such as employee ___________________

participation in decisions, employee recognition, teamwork, and
___________________
the use of effective communications to create an awareness of
___________________
organizational goals. Another typical quality practice – process
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management – is concerned with using statistical and scientific ___________________
techniques to reduce process variation, which represents the ___________________
methodological and technical side of quality management.
___________________
Considering the different features of the quality practices, it is
___________________
very possible that cultural characteristics that support a certain
type of quality practice differ from those cultural characteristics
that support other types of quality practices. However, there are
relatively few studies that examine the different effect of cultural
E-
characteristics on different quality practices. Several studies that
appeared recently are the exceptions in the quality management
literature, for example, compare a unitarist model of quality
management (i.e., that considers quality management as a single
construct) with a pluralist model which considers quality
management with its multidimensional elements. Based on the
data drawn from 194 Australian companies, they find that the
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pluralist model better describes the relationship between culture

and quality management, which indicates that different cultures
are associated with different elements of quality management.
Empirical research examining implementation of Six Sigma
relative to culture is particularly sparse in today’s literature. The
purpose of this study is to add an understanding of the effect of
organizational culture on Six Sigma by empirically investigating
the relationship between culture and quality practices associated
with Six Sigma implementation in US manufacturing companies.
(c)
Quality Practices in Six Sigma

As defined by Dean and Bowen (1994), a quality management
program can be characterized by its principles, practices, and
techniques. The principles provide general guidelines, which are
implemented through the practices that are supported by several
316 techniques. When empirically evaluating the degree to which an
S
Notes organization implements a quality program, the quality practices
___________________ should be the operationalizable construct to be examined because
quality practices are the observable components of the quality
___________________
program, through which manager’s work to achieve continuous
___________________
E
improvements. In comparison, principles are too general for
___________________ empirical research and techniques are too detailed to obtain
___________________ reliable results (e.g., one quality practice may be implemented by
various optional techniques).
___________________
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The key practices are as follows:
___________________
___________________ Top Management Support

___________________ Senior managers’ support for Six Sigma determines the degree to
___________________ which other quality practices are implemented. During the process
of adopting a Six Sigma program, new rules need to be set up, new
procedures need to be followed, and new tools need to be learned.
Companies often encounter instability, confusion, and resistance in
this process. Managers’ consistent involvement in Six Sigma
E-
activities enables the restructuring of business processes and
facilitates changing employees’ attitudes toward continuous
improvement through the unstable transformation period. Some
companies link managers’ compensation to their efforts and
performance in Six Sigma implementation, which helps to reduce
the risk of managers’ having a temporary but quickly fading zeal
for quality improvement and to ensure a consistent and high level
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of top management support for Six Sigma.
Customer Relationship
To achieve quality, it is critical to understand what customers
want and to provide products or services that meet their needs and
expectations. Factors important to customers’ perception of quality
are taken into consideration when companies select, design, and
execute a Six Sigma improvement project. A formal evaluation
system of customer requirements is needed as a platform for
customers to input their voices, using techniques such as customer
survey, meetings with customers, and customer visits to the plant.
(c)
Critical-to-customer characteristics can be translated into metrics

which are then used to define the goal of a project, to monitor its
progress, and to evaluate its outcomes. Customer relationship is
strengthened if top management takes time to visit the major
customers and employees have access to the customers’ voice in
order to understand the importance of customers and to integrate 317
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customer requirements into their daily jobs. Notes
___________________
Supplier Relationship
___________________
Suppliers’ involvement in Six Sigma helps to provide a high quality
E
of products and services to the ultimate customers. Companies put ___________________
emphasis on obtaining significant benefits from Six Sigma projects, ___________________

which requires them to explore more avenues for improving
___________________
quality, including those related to their suppliers. A supplier
___________________
selection system is set up based on quality considerations and
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whether suppliers are wiling to cooperate, which helps to establish ___________________
a long-term working relationship between the company and a ___________________
small number of its suppliers. In addition, Six Sigma encourages
___________________
companies to engage their suppliers at the early stage of
improvement projects, i.e., Early Supplier Involvement (ESI). ESI ___________________
allows parallel development of product and service design in an

iterative interaction with the suppliers.
Workforce Management
E-
The Six Sigma implementation needs a competent and supportive
workforce who is willing to participate in the organization-wide
improvement efforts. In Six Sigma, management policies are taken
to strengthen job security, to motivate employees to speak out with
ideas, and to provide employees technical and psychological
supports. For example, a policy that links employees’ performance
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in Six Sigma projects with their compensation and promotion

motivates them to participate in and contribute to Six Sigma. Also,
continual education and training to management and employees
assist companies to develop knowledge and skills of its employees
for effective quality improvement. It is important that companies
manage the workforce in conjunction with a Six Sigma green and
black belt system, which is a role structure unique to Six Sigma, in
the areas of employee deployment and training.
Quality Information
Six Sigma relies on using extensive data and information to detect
(c)
and solve problems. Information and data are collected relating to

customer needs and expectations, business processes, and products
and services, which are then analyzed to generate improvement
ideas, examine improvement activities, and evaluate and maintain
improvement outcomes. Effective use of quality information in Six
318 Sigma is connected with the metrics used in Six Sigma. Six Sigma
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Notes emphasizes linking quality improvement with bottom-line benefits
___________________ and thus the metrics incorporate bottom-line performance
measures with the measures of quality defects. To provide
___________________
appropriate data for evaluating those metrics, the content of
___________________
E
quality information must include both operational and financial
___________________ data.
___________________
Product/Service Design
___________________
To achieve improved quality, it is important to design products for
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___________________ manufacturability and design quality into products and services.
___________________ Cross-functional teams, consisting of design, manufacturing, and
___________________
marketing functions, are formed to reduce the number of parts per
product, to standardize the parts, and to focus on improving
___________________
manufacturing processes. Moreover, Six Sigma applies Design for
Six Sigma (DFSS) in the design process. A feature of DFSS is to
use a structured, standardized product development procedure,
e.g., Plan-Identify-Design-Optimize-Verify (PIDOV). Also, DFSS
emphasizes satisfying customer needs with a product/service
E-
design that utilizes materials, technologies, and manufacturing
processes that are also financially beneficial for the organization. A
comprehensive set of tools are used in DFSS, such as phase-gate
project reviews, benchmarking, measurement system analysis,
voice of the customer, Quality Function Deployment (QFD), Pugh
concept selection technique, design failure modes and effects
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analysis, and so forth.
Process Management
Six Sigma emphasizes reducing the variability of the processes
that manufacture products and deliver services. Process
management means ongoing improvement to manufacturing,
transactional, and/or service processes to satisfy customers’ needs
and expectations by using preventive maintenance, workplace
organization, and use of line-stop capability. Six Sigma emphasizes
conducting process improvement as projects. Companies work on
improvement projects to solve problems in the processes that
(c)
critical to customer satisfaction and the organization’s strategic

goals. The potential bottom-line benefits of the project are
identified during the project planning period, and the project is
continually reviewed throughout the process to evaluate whether
the expected benefits are fulfilled.
319
Check Your Progress
S
Notes
Activity
Fill in the blanks
Prepare a draft of an
___________________
1. ................... is the newest quality management program assignment on strategies of
business success.
___________________
which helps companies increase both customer
E
satisfaction and financial benefits. ___________________
___________________
2. ................... characteristics can be translated into
metrics which are then used to define the goal of a ___________________
project, to monitor its progress, and to evaluate its ___________________
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outcomes.
___________________
___________________
Growth through Customer Satisfaction
___________________
There are two strategies of business success and these are:
___________________
z Employee satisfaction
z Customer satisfaction
Productivity of corporate resources including people, money and
E-
machinery in all aspects of business operations ranging from
research and development, manufacturing ad operations, to sales
and services depends on how employees and customers feel about
the business.
Selecting the right employees, motivating them correctly, and
rewarding them handsomely for their hard work becomes
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extremely important in the early hard work of a company’s life

cycle. In the process the company begins to be driven by its
employees and internal operations and forgets that you also need
satisfied customers to succeed in their business.
Furthermore, as business grows, so does its bureaucratic structure,
which further isolates the company from its customers. Indeed, it
is not uncommon for the company’s employees and procedures to
feel that the customer s a bloody nuisance, who refuses to go along
with their sales forecasts, who has the audacity to criticize and
complain, and who wants to change them to suit his requirements.
Thus, when business grows and the company reaches the maturity
(c)
stage of its life cycle, it is common to find satisfied employees but

dissatisfied customers. Smart management, therefore, must focus
on the external world of customers and their needs in addition to
the internal world of employees and their operations. It must
realize that the company now depends much more on its customers
320 and not the other way around that customers have other choice,
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Notes and that customers are both technically sophisticated and
___________________ financially capable to produce products and services rather than
buy them from anyone in the market place.
___________________
___________________ Unless the company is willing to reorient its people and reorganize
E
its operations to be customer driven, excellence in R&D,
___________________
manufacturing, and marketing are unable to stop decline in
___________________ market share, corporate growth and business profitability. It is not
___________________ a question of doing it right; it is a question of doing the right thing.
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Furthermore, it doesn’t matter whether you are a big company or a
___________________
small company, market leader or a niche player. Nor does it matter
___________________
whether you are in agriculture, chemical, consumer electronics,
___________________ automobile, financial services, health care or telecommunications.
___________________ Lack of customer focus, especially at the maturity stage of the life
cycle, creates a significant negative impact on the company’s
profits and growth performance.
And once you start losing profits, growth and market share, you
also lose employee confidence, morale and productivity. Ultimately,
E-
excellent employees start to leave the company resulting in
employee dissatisfaction. In other words, employee satisfaction
also depends on customer satisfaction.
We discuss six major competitive advantages a company gain
through customer satisfaction. All of them contribute positively
toward the dual financial objectives of profits and growth.
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Figure 24.1: Six Competitive Advantages through Customer Satisfaction

(c)
Figure 24.1 summarizes these six competitive advantages which

contribute toward the corporate bottom line. A company’s profit
objectives are attained by the following three competitive
advantages:
321
z Economy if sale through lower cost of doing repeat business.
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Notes
z Higher prices commanded through differentiation.
___________________
z Protection from satisfied customer’s in a crisis situation.
___________________
Similarly, a company’s growth objectives are attained by the other
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___________________
three competitive advantages:
___________________
z Product diversification growth through one-stop shopping.
___________________
z New market growth by word of mouth.
___________________
UP
z New product development through lead users. ___________________
Fill in the blanks: ___________________
1. There are two strategies of business success and these ___________________
are: ................... and ...................

2. When business grows and the company reaches the
maturity stage of its life cycle, it is common to find
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satisfied ................... but dissatisfied ....................
3. Lack of customer focus, especially at the ...................
stage of the life cycle, creates a significant negative
impact on the company’s profits and growth
performance.
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Summary
Strong customer focus is the glue that holds successful
organizations together. It is the fuel for an improved bottom line.
Customer Focus is a process that will require the commitment and
dedication of every employee in the organization.
Businesses that neglect creating a true customer focus will feel the
unnecessary high costs of poor service through the active word of
mouth of dissatisfied customers and increasingly expensive
advertising and marketing to attract new customers. Short-term
savings of poorly conceived ideas such as outsourcing with out
(c)
considering the customer impact will evaporate along with the

customer base. Customers are the life blood that allows your
organization to realize its main goal - make a profit and survive.
322
Lesson End Activity
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Notes
With the help of internet, collect more information and pictures on
___________________
Six Sigma and its quality practices. Make a collage for your display
___________________ board from the information collected.
___________________
E
___________________ Keywords
___________________ Customer Focus: It involves continually listening to the voice of
___________________ your customers, obtaining their input and feedback and using this
UP
information to make changes which add value to your products and
___________________
services.
___________________
Six Sigma: It is defined as “an organized and systematic method
___________________
for strategic process improvement and new product and service
___________________ development that relies on statistical methods and the scientific
method to make dramatic reductions in customer defined defect
rates.
Organizational culture: It is viewed as the pattern of values,
E-
beliefs, and assumptions shared by members in an organization,
which are perceived by the organization as the valid, correct way to
perceive and solve problems.
Process management: It means ongoing improvement to
manufacturing, transactional, and/or service processes to satisfy
customers’ needs and expectations by using preventive
maintenance, workplace organization, and use of line-stop
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capability.

1. What are the reasons of growth behind customer satisfaction?
2. What do you understand by quality as an organizational
culture?
3. Describe the quality practices in Six Sigma.
4. How can growth through customer satisfaction be achieved?
(c)
5. Explain the two strategies of business success.

Further Readings 323
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Notes
Books ___________________
E
___________________
___________________
___________________
___________________
UP
___________________
___________________

Houston, 2000.
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Web Readings
www.rewardlicious.com/PDFs/3_differentiators.pdf
www.isb.edu/cee/BuildingaCustomer.Shtml
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www.impelcrm.in
(c)
324
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Notes
___________________
___________________
___________________
E
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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(c)
Unit 25
325
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Notes
Case Studies
___________________
___________________
E
___________________
Objectives
___________________
___________________
Case Study 1: Identifying Customers and Meeting their needs
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– An Argos Case Study ___________________
___________________
Introduction
Marketing is about making sure that a business is providing the ___________________
goods and services that customers want. It involves identifying ___________________
and anticipating what consumers want today and will want in the
future. The marketing department then plays an important role
in taking these goods and services to market through all the
channels the business sells through. This case study focuses on
the way in which Argos makes sure that it meets the needs of its
customers.
E-
Argos was founded in 1973 and is now the UK's leading general
merchandise retailer with sales of over £3.3 billion. Argos is
owned by GUS plc and is part of the Argos Retail Group with over
580 stores in the UK and Republic of Ireland, as well as
distribution centres, call centres and its head office in Milton
Keynes, employing over 23,000 people in total. Approximately
98% of the UK population live within 10 miles of an Argos store.
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In the modern world of retailing consumers can have their needs

met in a variety of ways such as High Street shopping, out of
town shopping centres, and by direct delivery from Internet
orders. Competition among retailers is increasingly getting tough.
Differentiation is therefore the key to developing a compelling
competitive advantage and winning loyal customers.
Differentiation is the process of making your business stand out
from rivals - making it different and better.
Marketers at Argos therefore are continually concerned with
addressing the questions:
z Who are our customers? (Argos needs to find out as much as
possible about its customers in order to meet their needs.)
z Are we offering the right combination of choice, value and
convenience?
(c)
z How can we create a compelling competitor advantage? (How

is Argos different from the competition?)
z How can we defend what business we already have and how
can we grow?
z How do we effectively communicate to our customer base?
Contd…
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Since it first started, Argos has established a very strong, trusted
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Notes brand focused on value, choice and convenience. It is the UK's
number one retailer for toys and small electrical appliances; it has
___________________
a major presence in many other markets including DIY and
___________________ gardening, consumer electronics and furniture and a significant
market share in jewellery (being No. 1 in terms of volume) and
___________________ sports equipment.
E
___________________ Consumers are offered a multi-channel approach to shopping.
Argos publishes two catalogues a year, the spring/summer edition
___________________ in January and the autumn/winter catalogue in July.
___________________ Mission Statement
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___________________ All organisations need to have a sense of direction or purpose.
This is usually set out in one or a few short sentences known as
___________________ the mission statement. Argos' mission statement is:
___________________ ' Argos publishes two catalogues a year, the spring/summer

edition in January and the autumn/winter catalogue in July.'
___________________
This statement clearly sets out the main areas which differentiate
Argos from its rivals, namely by offering its customers:
z Value for money, and
z Convenience (mainly through use of the catalogue at home).
Meeting Customer Needs
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Argos recognises that its many customers have different needs
and prefer to shop in different ways. About 80% of Argos
customers have already decided what they want to buy before
visiting the store.
One of the prime reasons these customers choose to shop with
Argos is because they know that they will get value for money. In
general, retail space is very expensive. The more goods there are
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on display in a shop, the more space is taken up and the higher

the prices as you will only be too aware when you examine prices
in High Street shops.
Argos is able to offer the customer value for money prices, because
it has a low cost business model with limited product displays. In
addition it benefits from economies of scale because as a popular
national chain, it is able to buy in bulk and, by organising
national distribution systems, is able to reduce logistics costs to a
minimum.
Convenience
Argos provides a very convenient way for customers to shop. They
are able to look through a catalogue at their leisure and choose
from an extremely broad product range. The range of what is
offered is not limited by the display space in-store and can be
(c)
accessed in a variety of ways.

Customers and Segmentation
Within markets, not all groups of customers are the same - they
do not have the same taste and incomes or want the same things.
It is helpful to think of a market as an orange. When you look at
the orange from the outside you see a shiny orange skin that all
Contd…
looks the same. However, when you peel off the skin you find that 327
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it is made up of a number of segments, each of which exists within Notes
the whole. The segments in an orange are more or less identical,
but in markets, by contrast, they are different in terms of size and ___________________
character.
___________________
A segment, therefore, is a group of consumers who share common
characteristics that are different from other groups. Different
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___________________
segments may require different versions of the product, they may
pay different prices and they may buy the product in different ___________________
places.
___________________
The most common way of segmenting a market is by
demographics. Demography is the study of population. ___________________
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Demographic segmentation recognises that different sections of ___________________
the population have different buying patterns and preferences to
others. For example, there is a difference in taste and spending ___________________
patterns between the old and the young, between men and
women, according to locality etc. ___________________
Argos tested out demographic approaches but found that this was ___________________
not a very accurate basis for segmentation. A much more helpful
basis has proved to be the frequency of visitors (i.e. the number of
times customers visit the website, or visit stores).
A distinction is often made in business between the internal and
external customers of an organisation. The external customers of
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a retailing business are the shoppers who want to be served in an
efficient and friendly way. Internal customers are fellow
employees that we work alongside in a place of work. If we treat
them as customers then we help them to serve external customers
well.
The Argos way of working is built on a belief that the external
customer is the most important customer. Argos people are a
team of colleagues who work together to meet customers needs.
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Questions:
1. What was the mission statement of Argos and how did it plan
to meet the customer needs?
2. Write a short note on the customers and segmentation of
Argos.
3. Find out the strategy that would be suitable for the company?
Source:http://businesscasestudies.co.uk/argos/identifying-customers-and-meeting-their-
needs/customers-and-segmentation.html#axzz2LE2k3dYf
(c)
328
Case Study 2: Building Sound Customer Relationships – A
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Notes Royal & SunAlliance Case Study
___________________
Introduction
___________________ Customer service is the whole activity of identifying customer
___________________
needs, satisfying them fully and keeping them satisfied. In service
E
industries in particular, customer service is best achieved through
___________________ relationship management, which involves building firm,
enduring, business relationships with customers.
___________________
Royal & SunAlliance is one of the world’s major insurers, with
___________________ operations in around 50 countries it carries out business in over
130 countries. The company looks to meet the needs of the
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___________________ brokers with which it deals and who are its direct customers. This
case study shows how the company has successfully developed
___________________
relationship management with its brokers using an approach
___________________ called ‘Energy’.
Like many other industries, the insurance industry operates in a
___________________
dynamic global environment. Individual insurance businesses
face high levels of competition from rivals which use latest
technologies to update the way they operate continually.
Insurance companies also face the uncertainty of an inter-
dependent world in which change can be dramatic and
unexpected, as evidenced by the terrible events of September 11th
E-
2001. The terrorist attacks have had massive knock-on effects not
only in terms of human suffering but also in the form of a multi-
billion pound insurance clearing up operation.
Like other service industries, insurance companies are faced by
consumers whose requirements are becoming increasingly
sophisticated and whose willingness to switch to another supplier
is on the increase. To compete successfully and thrive in this
environment, companies must be forward thinking in their
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approach to customers and in applying new techniques.

This case study shows how Royal & SunAlliance has applied
successful customer segmentation and relationship management
to achieve successful partnerships with its key customers.
Segmentation
Customer segmentation is the process of gathering information
about customers, identifying distinct segments of the overall
market and then developing approaches to meet the needs of
these segments.
Relationship management is the process of developing one-to-one
relationships with customers. In a market in which products are
increasingly similar, the key to differentiating one brand from
another is through customer relations.
(c)
Background
Royal & SunAlliance sells most of its commercial business
through insurance brokers, who place the business with the
company on behalf of their industrial and commercial customers.
The most successful brokers have a strong service ethic and work
Contd…
hard at their technical and claims service. This approach wins 329
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clients and also helps to retain them. Notes
Royal & SunAlliance believes that in the long term the number of
brokers will reduce. The winners of the future will be brokers who ___________________
currently run successful businesses and who demonstrate vision, ___________________
adaptability and innovation. Qualitative research carried out has
shown that these brokers need support from insurers who are
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___________________
prepared to put the same amount of energy into the relationship
to enable them to achieve their goals. Using this information, ___________________
Royal & SunAlliance introduced a proposition for key independent
___________________
brokers that brought them service and resources to support them
in winning, retaining and servicing clients. This proposition was ___________________
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called ‘Energy’.
___________________
Responding to the Research Evidence
In order to deliver a solution that would meet customer needs, ___________________
Royal & SunAlliance consulted a sample of its top 200 ___________________
independent brokers. The results of this research revealed the key
elements that brokers were looking for in a partner: ___________________
z Relationships at all levels with individuals who are
empowered to make decisions
z A proposition exclusive to themselves
z Financial support to aid their strategic goals.
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The proposition required that Royal & SunAlliance should change
its focus. Instead of conducting business on a highly product
based, transactional and price focussed level, the Energy
proposition required Royal & SunAlliance to change its approach
and instead sell solutions giving added value, focusing on
promoting long term relationships. The aim was to follow through
a specific process to help brokers to achieve their aims by:
Analysing and understanding key customers’ business plans
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z Analysing and understanding the organisation’s total

relationship with these customers
z Joint planning with key customers
z Giving a total relationship, incorporating all sectors of Royal
& SunAlliance including commercial, Life and Personal lines.
Having established these aims, it was then possible to start to
build strategic partnerships with key customers and a long-term
mutual outlook that enables both parties to achieve their goals.
Choosing the Brokers
A vital part of building on the Royal & SunAlliance brand was to
choose the brokers best suited for joint development of the Energy
proposition. Because selling insurance is so competitive, it was
(c)
essential to focus on working with high quality brokers who had a

positive attitude to business and innovation as well as clear long
term goals. Royal & SunAlliance chose to work with independent
brokers who could demonstrate a loyal customer base.
z A strong service ethic
z A desire for a long term strategic partnership
Contd…
330
z Promising future prospects.
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Notes
The Nature of Strategic Partnership
___________________
Strategic partnerships are long term, exclusive partnerships
___________________ between Royal & SunAlliance and key brokers using the Energy
proposition. They are designed to secure the future success of all
___________________ partners and are based on:
E
___________________ z A shared vision of the future
z Common goals
___________________
z Clear understanding and commitment from everyone involved
___________________
z Mutual benefits
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___________________ z Innovation and integrated solutions.
___________________ The partnership is not about offering special discount on price but
about allowing brokers to gain advantages by using other benefits
___________________ and resources to win and secure long term customers.
___________________ Why Energy?
The name Energy was chosen because it symbolises the values
and behaviours of Royal & SunAlliance people and broker
partners. Having selected 150 broker partners, the objective was
to help them to grow their businesses and by doing so to increase
Royal & SunAlliance’s share of that business. The emphasis was
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on customer service levels as well as providing additional first
class value-added benefits. Energy works because those operating
it:
z Understand each customer’s unique needs
z Plan and achieve mutual goals
z Provide the tools, resources and service to achieve goals.
Because no two brokers are identical, the Energy proposition is
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designed to provide a unique match to each Energy Broker. A

‘relationship manager’ looks after each Energy Broker to aid the
understanding and analysis of the customer’s needs and goals. A
joint development plan is then agreed which highlights what
Royal & SunAlliance needs to deliver to support the relationship.
Every plan is unique. Service levels are mutually agreed and form
the basis of delivery. Previously, the relationship with customers
had been focused through one individual whose responsibility was
for the management of a broker account, and almost all
communication, negotiations, and contact was transacted through
that one person, despite the backup of sound underwriting and
claims teams.
This often resulted in a classic ‘process bottleneck’, which slowed
down the delivery and created difficulties in maintaining the
(c)
required service level. Energy required a fundamental change in

the nature of the relationship between brokers and Royal &
SunAlliance. A ‘relationship manager’ controls the overall
business plan and acts as a co-ordinator between different
business divisions and the customer. However, on a day-to-day
business the relationship is disseminated to empowered
Contd…
individuals who produce relationships at all levels, hence 331
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eliminating bottlenecks. Notes
Benefits
___________________
Energy provides a number of important benefits to key customers.
Services include: ___________________
z Training either on-line or in-house
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___________________
z Marketing support
___________________
z Knowledge sharing e.g. It and finance
___________________
z Use of Royal & SunAlliance facilities
z Advice lines e.g. Legal, financial, health and safety and stress ___________________
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counselling ___________________
z Financial assistance.
___________________
Energy participants have already gained from these additional
benefits. For example, joint marketing combined with sales ___________________
training has led to increases in new business for Royal &
___________________
SunAlliance as well as the broker.
E-Technology
E-Technology has been a major driver for change in service
industries. Royal & SunAlliance therefore, created a web-site
dedicated to Energy brokers. It is password protected and each
E-
broker has an individual user ID in order to gain access. The
website includes on-line training materials, risk management
guidance, a technical library, details of consultancy available,
terms of business agreements and links to other useful Royal &
SunAlliance sites. There is also a facility for sharing of
information between Energy brokers. The site is regularly
updated and will soon provide the facility to access claim details
on-line.
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Questions
Source:http://businesscasestudies.co.uk/royal-sunalliance/building-sound-customer-
relationships/monitoring-success.html#axzz2LE2k3dYf
(c)
332
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Notes
___________________
___________________
___________________
E
___________________
___________________
___________________
UP
___________________
___________________
___________________
___________________
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(c)
Glossary
Glossary
333
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Notes
___________________
Acquisition: It is a stage in which customers are acquired for an ___________________
organization’s business. It means increasing number of new customers.
E
___________________
Articulated needs: These needs are something more than the minimum
___________________
basic expectations from the product.
___________________
Attitudinal Brand Loyalty: The attitudinal brand loyalty approach
takes the view that loyalty involves mush more than repeat purchase ___________________
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behaviour. ___________________
Balanced Scorecard: It is a strategic planning and management system ___________________

that is used extensively in business and industry, government, and non-
___________________
profit organizations worldwide to align business activities to the vision
and strategy of the organization, improve internal and external ___________________
communications, and monitor organization performance against strategic
goals.
Basic needs: These are the basic minimum requirements expected from
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out of a product.
Brand Equity: Brand equity is the value a brand adds to the product.
Brand-building: The goal in brand building is to carefully manage a

company’s name, brands, slogans and symbols, otherwise known as brand
equity.
Business Analysts: These employees are the functional experts. They

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provide input on business processes and flow that are enterprise specific.
Business Process Management: BPM is a business process approach to

improving business activity and creating automated applications that is
supported by a group of new process modellers, application generators,
application interface engines, and performance monitoring software.
Business Process Reengineering: The analysis and design of workflows

and processes within and between organizations. Business activities
should be viewed as more than a collection of individual or even
functional tasks; they should be broken down into processes that can be
designed for maximum effectiveness, in both manufacturing and service
environments.
(c)
Business-to-business (B2B): It is a term commonly used to describe

electronic commerce transactions between businesses, as opposed to those
between businesses and other groups, such as business and individual
consumers (B2C) or business and government (B2G).
334
Business-to-consumer (B2C): It describes activities of
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Notes
e-businesses serving end consumers with products and/or services.
___________________
Call Centre: With the increased use of phone technology to handle
___________________ incoming phone calls and manage outbound sales calls, companies have
___________________ long housed those resources into a single functional group called the call
E
centre, service centre or interaction centre.
___________________
Capturing of needs: It is concerned with understanding the differing
___________________
needs of the customers and from their own perceptual viewpoint.
___________________
Client Application: The client application is hosted in the Sales
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___________________ Representative’s PDA device and has the ability to view appointments,
___________________ create orders, search for customer details and item details and
synchronise with the Mobile Server using GPRS.
___________________
CLTV: It is a reflection of the possible future business a company can
___________________
expect from a loyal customer.
Codifying: It means specification of attributes and other conditions to

codify the needs.
Complaint Handling: Effective complaint handling is a value-added

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service that is appreciated, remembered and talked about by consumers.
Continuity Marketing: These programs are generally aimed at

retaining customers and enhancing their loyalty.
CRM Framework: It maximizes the possibility of CRM implementation.
CRM program: It can help companies more effectively turn leads into
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sales and establish repeat business.
Cross-selling: Cross-selling is the act of selling a product or service to a

customer as a result of another purchase.
Cultural Change: CRM requires a cultural change that aligns a

company, its employees and its systems towards customers and away
from traditional product or process-centric models.
Customer Care: It relates to the relationship between a product or

service provider and those people who use or buy its products or services.
Customer Equity: It is the Net Present Value of a customer from the

perspective of a supplier.
(c)
Customer Focus: It involves continually listening to the voice of your

customers, obtaining their input and feedback and using this information
to make changes which add value to your products and services.
Glossary
335
Customer Knowledge: It refers to understanding your customers, their
S
needs, wants and aims is essential if a business is to align its processes, Notes
products and services to build real customer relationships. ___________________
Customer Loyalty: Building customer loyalty is the basic platform of ___________________

E
___________________
Customer relationship management (CRM) applications: They
___________________
enable travel and tourism providers to maintain brand value and perform
___________________
more competitively in their dynamic marketplaces.
___________________
Customer Relationship Management (CRM): It is a model for
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managing a company’s interactions with current and future customers. It ___________________
is emerging as the core marketing activity for businesses operating in
___________________
fiercely competitive environments. It refers to the holistic approach an
organization can take to manage their relationships with customers, ___________________
including policies related to contact with customers, collecting, storing ___________________

and analyzing customer information and the technologies needed to
perform these tasks.
Customer Retention: It enables the organization to minimize expenses

in terms of acquisition of new customers.
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Customer Service and Support Applications: These applications have
gained a major importance for effective customer retention and in many
cases profitability depends on providing superior service.
Customer Value Analysis (CVA): CVA compares price and quality (or
value) of a product against competitors.
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Customer: He is a person who buys goods or services for some price.
Database Marketing: It was used to refer to the procedure of creating

customer focus groups that could be used to speak to some of the
customers of the company.
e-CRM: e-CRM is integration between the traditional CRM and e-

business application. This is a web based Sales Force Automation tool
that helps you to focus on un-covered customer-revenue opportunities
that are not possible in a manual sales process.
Employee Relationship Management (ERM): The interest of HR in

CRM lies in its systematic approach to managing relationships.
(c)
Event-based Marketing: The best definition of event-based marketing is

a time-sensitive marketing or sales communication reacting to a
customer-specific event.
Exciting needs: Under this category of need the customer wants to fulfil
more than his level of expectation, in terms of the above two categories.
336
Expansion: It means increasing profitability by encouraging customers
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Notes
to purchase more products and service.
___________________
Follow-up: Contact the customer following your response to verify
___________________ whether or not the matter has been resolved satisfactorily.
___________________ FUD: Fear, Uncertainty and Doubts.
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___________________ G-SPOT: This stands for Goals, Strategies, Plans, Objectives, and
___________________ Tactics,
___________________ High-Roller Customer: This customer is the one who expects the
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absolute best and is willing to pay for it.
___________________
Lifetime Customer Value: It is a reflection of the possible future
___________________
business a company can expect from a loyal customer.
___________________
Logos and mascots: This is not unique to service firms but has been
___________________
effectively used by them to overcome intangibility.
Mass Marketing: It is a market coverage strategy in which a firm

decides to ignore market segment differences and go after the whole
market with one offer.
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Mass Production: It is a system of manufacturing based on principles
such as the use of interchangeable parts, large-scale production, and the
high-volume Assembly Line.
Meek Customer: This customer is the one who generally will not
complain.
Mobile Server: It is the key sub system of the entire sales force
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automation system.
Networking Staff: People who are maintaining and setting up the

network and its software, should ensure that there is no significant
downtime or problems during the implementation period.
Objectives: These are the measurable goals of each plan, such as

maintaining a 60 per cent customer retention rate or lowering product
return rates to less than 20 per cent.
Organizational culture: It is viewed as the pattern of values, beliefs,

and assumptions shared by members in an organization, which are
perceived by the organization as the valid, correct way to perceive and
solve problems.
(c)
Over-marketing: A service marketer targets for more customers than he

has the capacity to serve.
Perishability: It prevents a service marketer from storing his offers.
Portal: It is a gateway to an array of services to an optimal community.

Glossary
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Process management: It means ongoing improvement to
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manufacturing, transactional, and/or service processes to satisfy Notes
customers’ needs and expectations by using preventive maintenance, ___________________

workplace organization, and use of line-stop capability.
___________________
Reengineering: It is the fundamental rethinking and radical redesign of
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___________________
business processes to achieve dramatic improvements in critical,
contemporary measures of performance, such as cost, quality, service, and ___________________
speed. ___________________
Referrals: The recommendation of a satisfied client or a professional ___________________
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colleague is often the most effective way of bringing in new clients.
___________________
Relationship marketing: It is aimed to create strong, long lasting,
___________________
fruitful relationships by developing long-term bonds through its various
instruments of personal connections as a result customer start ___________________
identifying, associating themselves with the product, prefer and accept ___________________
company’s product and service over competitor’s offerings, buys again,
and recommend others to buy.
Retention: It means increasing the amount of time customers stays.

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Sales Force Automation (SFA) Software: It is a type of program that
automates business tasks such as inventory control, sales processing, and
tracking of customer interactions, as well as analyzing sales forecasts and
performance.
Sales Force Automation: It refers to automating all the actions related

to sales of an organization or business.
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Service business: It entails selling a product that does not exist until the
customer pays for it.
Service Marketing: Marketing based on simple relationship and value.
Six Sigma: It is defined as “an organized and systematic method for

strategic process improvement and new product and service development
that relies on statistical methods and the scientific method to make
dramatic reductions in customer defined defect rates.
Tactics: Tactic imply how you achieve the objectives that are part of the
plans to implement the strategies to achieve the goals.
Total Quality Management (TQM): It is a management strategy aimed

(c)
at embedding awareness of quality in all organizational processes.
Tourism: Various types of companies make money by offering travellers

hospitality services, tours, transportation and other services and goods on
their vacations and trips.
Voluntary: It means not expressly required by law

338
Web Browser: This model preserves the fundamental value of the
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Notes
Internet as a communication medium, and provides a common platform
___________________ for independent access to data anytime and anywhere.
___________________ Zero Demand: The market may not be having a need of a particular
___________________ service offer because of various demographic, socio-economic and
E
sometimes geo-demographic factors.
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
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(c)

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Customer Relationship Management

Dr S R Das Dr Sanjay Mittal Prof V K Nangia

SLM Development Team

Mr Kapil Mehra Mr A N Sinha

Manager – Material Sr Manager – Printing

Course Code: MBCM-772D

Course Name: Customer Relationship Management

Version: July 2013

© MPower Applied Learning Enterprise

Unit 1 Introduction to CRM....................................................................................................... 3

Unit 6 CRM: A New Mantra in Travel and Tourism ............................................................. 71

Unit 11 Customer Loyalty ....................................................................................................... 131

Unit 16 Consumer Complaints Management Initiatives....................................................... 197

Unit 17 Service Characteristics............................................................................................... 213

Unit 22 CRM in B2B and B2C Markets.................................................................................. 283

Unit 23 BPR and CRM............................................................................................................. 299

Unit 25 Case Studies................................................................................................................ 325

Glossary ............................................................................................................................................ 333

\ Meaning and Importance of CRM ___________________

interaction between producers and customers as between farmers

acquired customer knowledge in every area of the company, from

4 organisations to profitably meet the lifetime needs of customers

problem with these newer systems is the price. A number of

some of the customers of the company. The clients who were

analyzing the information. As time went on, companies begin to 5

relationship systems, CRM was a dual system. Instead of merely ___________________

allowed people to make better decisions about which companies

needs of companies that compete in a variety of different

6 organization that wants to succeed must constantly be ready to

Mass production techniques maximized the profit making ability of

between management and employees intensified as workers

attempting to sell through persuasion) of a product to a wide 7

largest potential market, which leads to lowered costs.

Feigenbaum grabs on to an idea that sparked many scholars

8 Ishikawa, known as the big four, also contributed to the body of

Total = Quality involves everyone and all activities in the

improve on Customer Relationship Management by making it

e-CRM: This is a web based Sales Force Automation tool that

10 stumbling block of remote accessibility of information across your

Customer Relationship Management refers to the holistic approach

objective of CRM is to increase marketing efficiency and

update and enhance business methods to improve customers’ ___________________

through the integration of people, process and technology, taking

integrating data-base knowledge with long-term customer

12 collaborative relationships between the firm and its customers and

anywhere in the world through the internet.

immediate response and a personalized touch meeting their 13

focus now is on channel operations and customer relationships, ___________________

and services is the only real way to make a difference winning

Check Your Progress

2. With the product quality at all time highs,

___________________ z Offer better customer services

with the organisation. However, by maintaining an overall

The strategic benefits of customer relationship management allow

established players the ability to react like a new market entrant,

benefits generally fall into three categories; cost savings, revenue 15

through up selling, cross-selling, etc. ___________________

z Reduced costs: The ability to differentiate between customers ___________________

services as self-services further reduces the cost. ___________________

Cost of CRM to Organization

Benefits of CRM to Customers

contact points Customers get increased satisfaction and a

___________________ Check Your Progress