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What is Customer Relationship management?
Customer relationship management is creating a team relationship among sales, marketing, and customer support activities within an organization. Another narrow, yet relevant, viewpoint is to consider CRM only as customer retention in which a variety of after marketing tactics is used for customer bonding or staying in touch after the sale is made. Shani and Chalasani define relationship marketing as “an integrated effort to identify, maintain, and build up a network with individual consumers and to continuously strengthen the network for mutual benefit of both sides, through interactive, individualized and value-added contacts over a period of time”. The core theme of all CRM and relationship marketing perspectives is its focus on co-operative and collaborative relationships between the firm and its customers, and/or other marketing actors. CRM is based on the premise that, by having a better understanding of the customers’ needs and desires we can keep them longer and sell more to them. Growth Strategies International (GSI) performed a statistical analysis of Customer satisfaction data encompassing the findings of over 20,000 customer surveys conducted in 40 countries by Info quest. The conclusions of the study were: • A Totally Satisfied Customer contributes 2.6 times more revenue to a company as a Somewhat Satisfied Customer.
A Totally Satisfied Customer contributes 17 times as much revenue as a Somewhat Dissatisfied Customer.
• A Totally Dissatisfied customer decreases revenue at a rate equal to 1.8 times what a Totally Satisfied Customer contributes to a business.
• By reducing customer defection (by as little as 5%) will result in increase in profits by 25% to 85% depending from industry to industry.
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An important facet of CRM is “customer selectivity”. As several research studies have shown not all customers are equally profitable (Infact in some cases 80% of the sales come through 20% of the customers). The company must therefore be selective and tailor its program and marketing efforts by segmenting and selecting appropriate customers for individual marketing programs. In some cases, it could even lead to “ outsourcing of some customers” so that a company better utilize its resources on those customers it can serve better and create mutual value. However, the objective of a company is not to really prune its customer base but to identify appropriate customer programs and methods that would be profitable and create value for the firm and the customer. Hence, CRM is defined as: Customer Relationship management is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. As is implicit in the above definition, the purpose of CRM is to improve marketing productivity. Marketing productivity is achieved by increasing marketing efficiency and by enhancing marketing effectiveness. In CRM, marketing efficiency is achieved because cooperative and collaborative processes help in reducing transaction costs and overall development costs for the company. Two important processes for CRM include proactive customer business development and building partnering relationship with most important customers. These lead to superior value creation. The basic concept is that the customer is not someone outside the organization, he is a part of the organization.
Key CRM principles
Differentiate Customers: All customers are not equal; recognize and reward best customers disproportionately. Understanding each customer becomes particularly important. And the same customers’ reaction to a cellular company operator may be quite different as compared to a car dealer. Besides for the same product or the service not all customers can be treated alike and CRM needs to differentiate between a high value customer and a low value customer. What CRM needs to understand while differentiating customers is? – Sensitivities, Tastes, Preferences and Personalities – Lifestyle and age – Culture Background and education - Physical and psychological characteristics
→ Low value customer requiring high value customer offerings → Low value customer with potential to become high value in near future → High value customer requiring high value service → High value customer requiring low value service
Low value customers who Require high levels of service Must either purchase the higher level of service or become our competitors low value/high cost customers
High value customers who require a high level of service are maintained without expanding the costly offering to the entire customer population
Fig. 1 Customer value – Service Matrix
Keeping Existing Customers
Grading customers from very satisfied to very disappoint should help the organization in improving its customer satisfaction levels and scores. As the satisfaction level for each customer improve so shall the customer retention with the organization. • Maximizing Life time value
Exploit up-selling and cross-selling potential. By identifying life stage and life event trigger points by customer, marketers can maximize share of purchase potential. Thus the single adults shall require a new car stereo and as he grows into a married couple his needs grow into appliances. • Increase Loyalty
Loyal customers are more profitable. Any company will like its mind share status to improve from being a suspect to being an advocate. Company has to invest in terms of its product and service offerings to its customers. It has to innovate and meet the very needs of its clients/ customers so that they remain as advocates on the loyalty curve. Referral sales invariably are low cost high margin sales.
(Fig 2. Categorizing Customers)
Strategi c Import ance To Your Busines s Plan
*You have No Choice But To
Handle Them Very Carefully. Will Consume Energy
Spend Energy. Go Out Of Your Way.
# Think Of Innovative Ways of Getting them On Your Side, But The ‘Cost Of Acquisition’ Must
#Think Of Strategies TO Move Them Away From Competition.
*Focus On Short Term Profitability. Spend Minimum Energy To Meet Your Objectives.
*Very cautious decision needed. Reexamine business Plan & Strategy. Evaluate That Your Loss (i.e. Your competitor’s gain) Doesn’t become nightmare for you.
Low Opportunity As It Comes. Use Low
Short Term Acquisition Shouldn’t Affect
#Needs In-depth strategic review as acquisition alone and dissatisfaction later High could be more harmful
Relationship & Profitability Potential
Summarizing CRM activities: The CRM cycle can be briefly described as follows:
1. Learning from customers and prospects, (having in depth knowledge of customer) 2. Creating value for customers and prospects 3. Creating loyalty 4. Acquiring new customers 5. Creating profits
Learning from customers & prospects Acquiring new customers
5 3 4
Creating value for customers & prospects
Creating loyal customers
Customer Relationship Life Cycle CRM facilitates closed- loop customer interactions through all phases of the customer relation life cycle including: 1. Customer Engagement 2. Business Transaction and Lead
Marketing Telemarketing Generation
• • • • • •
Order Acquisition Internet Configuration E-Selling Telesales Field Sales Profitability Analysis One Step Buying and Selling Pricing and
Opportunity Management Sales Activity and Contact Management
Customer Collaborative Management
Product, and Service Profiling
3. Order Fulfillment
4. Customer Service Life Cycle
• • •
Interaction Center Internet Customer Self-Service Service Management Claims Management Field Service -- Mobile Service Field Service -- Dispatch Integration Services of Marketplace
• • • • •
Real-Time Availability Checks Contract, Billing, and Financials Management Fulfillment Visibility and Order Tracking
Customer Engagement • Marketing Planning and Campaign Management -- Enables complete marketing campaigns, including content development, audience definition, market segmentation, and communications
Telemarketing and Lead Generation -- Facilitates customer segmentation, lead qualification, call list management, and monitoring of campaign progress by using integrated analytical CRM functionality
Opportunity Management -- Provides sales tracking and sales forecasting; helps plan sales approaches, identify key decision makers, and estimate potential-to-buy and potential closing dates
Sales Activity and Contact Management -- Organizes daily workloads and customer contact information for display in calendar application; provides links to Business Intelligence reporting capabilities
Business Transaction In the business transaction phase of the relationship life cycle Customer Relationship Management supports the following key functional areas:
Order Acquisition -- Enables planning, organizing, and implementation of sales strategy; monitors sales pipeline, sales portfolio, and sales budget; facilitates coordination of budgets, forecasts, and reports on product and pricing trends
Internet Pricing and Configuration -- Delivers online systems that allow users to configure products online and compare prices across different catalogs and marketplaces; includes shopping basket functions
E-Selling -- Provides solution for selling products and services via the Internet; covers all phases of sales cycle, including one-to-one marketing, catalog browsing, search, order placement, payment, contract completion, and customer support
Telesales -- Manages inbound and outbound calls; handles high call volumes; provides efficient user interface; integrates sales information from back-office systems and product information from online catalogs
Field Sales -- Delivers key customer and prospect information to sales personnel at any place, at any time; facilitates planning and maintenance of sales activities, such as appointments, visits, and calls, and provides activity reports; creates quotations and takes orders; includes support for mobile and wireless devices
Order Fulfillment In the order fulfillment phase of the relationship life cycle Customer Relationship Management supports the following key functional areas:
Complete Order Life Cycle Process -- Provides the ability to track and trace orders at all points along order management, manufacturing, distribution, and service processes; proactively notifies customers of changes that affect delivery
Real-time Availability Checks -- Enables allocation of resources in real-time at the front-end; includes real-time access to inventory levels, production capacity, and leadtime requirements across the entire supply chain; enables visibility into product and service delivery dates
Contract, Billing, and Financials Management -- Provides information about customer contracts, billing status, and accounts; integrates back-office functions Fulfillment Visibility and Order Tracking -- Enables real-time tracking of order fulfillment; provides unique, customized and "guided" content for customers; allows sharing of information with customers via the Internet
Customer Service In the customer service phase of the relationship life cycle Customer Relationship Management supports the following key functional areas:
Interaction Center -- Provides inbound and outbound call processing, e-mail management, and activity management to track, monitor, and enhance all customer contact; supports multiple channels for customer communication, including telephony and Web; integrates industry-leading eFrontOffice call center applications from Nortel Networks Clarify; provides certified interfaces to leading computer telephony integration (CTI) solutions
Internet Customer Self-Service -- Offers customers and prospects access to information and customer service functions via Internet; supports effective customer self service; includes case-logic system featuring advanced decision support for problem determination and resolution Service Management -- Meets varied demands of service management business; handles customer installations; facilitates simple and complex services; supports services carried out at customer site or in-house repair center (depot); supports involvement of external service providers; integrates contract management; checks customer warranties when
services are performed; calculates services charges; integrates information from materials management, cost accounting, billing, and accounts receivable; monitors day-to-day operations; helps decision makers with strategic management issues
Claims Management -- Facilitates handling of entire claims process Field Service - (Mobile Service) -- Delivers and tracks customer and account information for field service personnel; provides service planning and forecasting, scheduling, and dispatching functionality through tight integration with fulfillment systems; includes support for mobile and wireless devices
Field Service - (Dispatch) -- Enables rapid allocation of service engineers and materials to meet incoming service requests
Integration of Marketplace Services -- Provides access to a broad range of applications and services hosted on virtual marketplace
Figure 4 Customer Life Cycle Management
Customer Retention and referrals for new customers
Customer Engagement Order Fulfillment
The Emergence of CRM Practice
The Past: Looking back at a snapshot history of marketing, we can see the following clear developments and progression over the last four decades:
1960’s – the era of Mass Marketing, when Gibbs SR toothpaste began the first marketing of this kind with its black and white campaign.
1970’s – saw the beginning of segmentation, direct mail campaigns and early telemarketing (such as publishing) 1980’s – where Niche marketing made millionaires of those who were best at it. 1990’s – Relationship Marketing. The explosion of telemarketing and call centers, all set up to develop relationships with customers. The recognition of the true value of retention and the use of Lifetime Value as a business case.
In addition to this, a number of key marketing concepts can also be used to see where CRM has developed: • •
Satisfying Needs, Customer Orientation The organization needs to be arranged so that all functions contribute Profit must be the consequence of delighting customers (Kotler)
Developing customer relationship has historical antecedents going back into the pre industrial era. Similarly artisans often developed customized produce for each customer. Such direct interaction led to relational bonding between the producer and the consumer. It was only after industrial era’s mass production society and the advent of the middlemen that there were less frequent interactions between producers and the consumers leading to transactions oriented marketing. The production and consumption factions got separated leading to marketing functions being performed by the middle men and middlemen are in general oriented towards the economic aspects of buying since the largest cost is often the cost of goods sold.
In recent years however, several factors have contributed to the rapid development and evolution of CRM. These include: -
The growing de-intermediation process in many industries due to the advent of sophisticated computer and telecommunication technologies that allow producers to directly interact with end-customers. For example, in many industries such as airlines, banks insurance, software or household appliances and even consumables, the de-intermediation process is fast changing the nature of marketing and consequently making relationship marketing more popular. Databases and direct marketing tools give them the means to individualize their marketing efforts.
Advances in information technology, networking and manufacturing technology have helped companies to quickly match competition. As a result product quality and cost are no longer significant competitive advantages.
The growth in service economy. Since services are typically produced and delivered at the same institution, it minimizes the role of the middlemen. Another force driving the adoption of CRM has been the total quality movement. When companies embraced TQM it became necessary to involve customers and suppliers in implementing the program at all levels of the value chain. This needed close working relationships with the customers. Thus several companies such as Motorola, IBM, and General Motors, Xerox, Ford, Toyota, etc formed partnering relations with suppliers and customers to practice TQM. Other programs such as JIT and MRP also made use of interdependent relationships between suppliers and customers. Customer expectations are changing almost on a daily basis. Newly Empowered customers who choose how to communicate with the companies across various available channels. Also nowadays consumers expect a high degree of personalization.
Emerging real time, interactive channels including e-mail, ATMs and call centre that must be synchronized with customer’s non-electronic activities. The speed of business change, requiring flexibility and rapid adoption to technologies.
In the current era of hyper competition, marketers are forced to be more concerned with customer retention and customer loyalty.
CRM Formation Process
In the formation process, three important decision areas relate to defining the purpose (or objectives) of engaging in CRM, selecting parties (or customer partners) for appropriate CRM programs and developing programs (or relational activity schemes) for relationship engagement with the customer.
Increase Planning Process Effectiveness
Role Specification Relationship Performance Strategic Process Alignment Financial Marketing Monitoring Process → Retention
Account Management Retention Marketing Communication
Evolution • Enhancement
Fig 5. CRM Process Framework
Business Objectives From CRM
The following are some of the strategic objectives offered by the Sales Applications in the CRM suite: • Increased Revenue Focus your sales force on increasing your company’s revenues through better Information and better incentives to drive top line growth. Through a CRM integrated solution, sales reps can access and share account and contact management information throughout the enterprise, facilitating team selling that will lead to closing more deals, faster. It also allows sales reps to effectively target their selling efforts to focus on high-value deals and meet revenue targets. • Improve Global Forecast and Pipeline Management Improve information access, forecasting and pipeline management to improve your organization's ability to close deals. Field Sales Online provides up-to-the minute pipeline and forecasting information to an account manager, sales manager, or territory manager. For an account, sales rep, or sales group, a pipeline analysis is available real time by sales channel, sales status, and sales stage. Field Sales Online's multi-currency consolidation of divisional forecasts provides sales executives with a higher, global visibility of their company revenue forecast. Sales reps can review and monitor the health of their sales pipeline through graphical views. Sales reps can easily manage and view any combination of won, forecasted, upside or lost pipeline opportunities by depicting their sales information through this fully interactive interface. Sales reps can also define a forecasting window on a "rolling" schedule for any number of predefined periods. This gives your sales organization the flexibility to project forecasts for multiple periods, freeze forecasting periods, and retain historical information for trend and win/loss analysis. Sales reps can also generate sales forecasts in units as well as currency. • Improve Win Probability
Improve the focus of your sales efforts with better information to close deals. Global -line view of their entire sales pipeline-across business units and products. With this view, sales organizations can better qualify leads and assign organizations have a top their top sales reps to the top accounts that have the highest win probability. Sales reps also have access to competitive information collected from deals lost through pipeline management features, thus
increasing the chances for a successful sale. Through mobile functionality, sales reps have the ability to download complete territory information to their laptops for better account management while on the road. Account, contact, activity, and opportunity information can be accessed and updated throughout the sales cycle, completely disconnected from the corporate network. Next time the sales rep connects to the network, the information is uploaded and is available throughout the organization. • Reduce Cost of Sales New technologies can lower the cost of deploying sales automation solutions and at the same time improve the effectiveness of your sales efforts. Field Sales Online reduces implementation time as well as promotes sustained use of the application by the sales force, reducing the cost of deploying sales automation solutions within your organization. Field Sales Online's Web architecture enables global deployment and upgrade to remote users as well as easy customization. Dynamic menus and tabs facilitate navigation and eliminate the need for user training. Users can access summary information for their customers, opportunities, and compensation by a single click of the mouse, export the information to their preferred spreadsheet or drill-down to the lowest level of detail. This reduces costs and extends the mobility of sales one step further with the introduction of application support for mobile hand-held devices.
Increase Sales Rep Productivity.
Reduce the steps involved in tracking and quoting customer data with integration of sales capabilities across your enterprise. Field Sales Online provides sales managers with an efficient tool to monitor sales force performance. Opportunities and pipeline are tracked at each stage of the sales funnel by channel, sales group, sales rep, or partner sales rep. In addition, sales managers and executives can identify their top and bottom performers. Managers can then analyze background, training, and tools used by their top performers to replicate successful profiles within the sales organization to maximize its efficiency and performance. • Promote Sales Representation Retention
Empower your sales force to proactively track and monitor their performance and compensation levels to better incentive them to achieve goals and be successful within their positions and for your company. Sales applications enable sales reps to view their compensation summary, the breakdown of their commission by deal, product line, and period, adjustments and transactions. In addition, sales reps can "blind-rank" themselves at anytime to measure their performance against a group of peers. Sales reps can forecast their future compensation and commissions based on their current pipeline and focus their selling time on the most valuable opportunities. Effective tracking and reporting options provide verification to the sales force that they are receiving appropriate compensation, so they can track their own performance. Sales Compensation offers flexible reporting access, letting you define the information users can access. For example, you can allow users to create reports for only their commission and performance data, or sales managers to create reports related to the sales people who are assigned to them within the salesperson hierarchy.
The objectives for Marketing Applications offered by a CRM suite are as follows • Closed- loop Marketing Improve marketing management and programs with a comprehensive marketing system that supports planning, campaign management, execution, Internet support and analysis. Marketing Applications automates the entire marketing process from demand creation to revenue recognition. Designed specifically for marketing professionals, the application automatically collects campaign results and tracks campaign effectiveness across different sales channels, by market segments, and even individual customer results. This level of detail enables marketers to reduce costs while increasing the effectiveness of their marketing efforts. • Better Information for Better Management Implement highly focused, targeted campaigns with better returns on your marketing investments. Marketing applications are tightly integrated with the other applications of the CRM suite as well as the ERP applications. This integration enables marketers to tap into the wealth of data collected through every customer "touch" with their company whether through field sales, a call
center, or the Web. Without a dependence on simple demographics, marketers will be able to profile customers based on any number of criteria including sales cycle, payment preference, and purchase frequency, to tailor messages and campaigns with better accuracy for highly focused, individualized marketing campaigns. • Expand Marketing Channels Through Utilize the power of the Internet to increase your marketing reach and effectiveness. In addition to supporting traditional marketing and demand creation channels such as direct mail and telebusiness, many vendors are enhancing the integrated closed-loop marketing application through relationships with several strategic third-party vendors.
The combination of these applications will expand the automation of the marketing planning and execution process over multiple deployment channels and sales models, specifically through the Web. By leveraging the Web as a channel, Marketing applications will help companies capitalize on this rapidly expanding opportunity to reach a larger audience with their marketing campaigns. The objectives for Service Applications offered by a CRM suite are as follows • Service Increases Profitability Create a profit center out of your service organization using operational and customer information to reduce costs and generate more revenues. Service application enables organizations to reduce costs by providing a comprehensive closed loop support and service information management system. Its comprehensive resource management capabilities enable organizations route the calls to the right agent to reduce call resolution time. Its enterprise wide customer management ability enables you to reduce billing time with built-in integration between contracts, warranties, resource usage and the billing system. Further, with interfaces to customer care, organizations can track total customer contact history to increase customer knowledge and reduce redundancies and resolution time. Fast parts rotation enables reduced inventory levels and therefore, reduced costs. • Service Improves Service Delivery Create an efficient and effective service business using integrated enterprise-wide information available in other Front Office and ERP applications. Many of the features that increase profitability also streamline and improve organization’s service delivery. Service Applications provides complete support for the aftermarket service
cycle enabling companies to improve response times by sending the right engineer to a field service call, or improve customer service by routing a support call to the agent trained in supporting a particular product. The Customer Care features of Service Applications also provide the customer management information to allow agents to respond to a variety of customer inquiries during one call without transferring the customer from person to person. • Service Helps organizations to Delight Customers Provide enhanced customer care, service and customer information management across your organization to improve customer satisfaction and loyalty. With an end-to-end Customer Care and Service Solution, Organizations can achieve a full 360degree view of their customer. This translates into better response to customer's needs; an ability to extend proactive customer management programs as well as have the information at your disposal to better understand the customer. Service applications also track all product defect information, which enables organizations to proactively manage customer issues, so that they are well informed and can also accurately inform customers of service issues. The built-in selflearning knowledge base enables companies to leverage employee knowledge and achieve skills transfer, increasing employee retention and reducing customer churn. Additionally, Service Applications enables organization’s customers to communicate with the company though many different venues, web, call centers, and directly with Field Representatives, offering customers flexibility in interacting with the company. This integrated customer contact capability ensures that the organization’s customers receive consistent service and information, thus reduce his need to turn to one of the competitors for new products or services. • Service Helps organizations Differentiate their Product Distinguish business by offering service as a differentiator using multiple channel communications with customers, full enterprise wide view of customer information. As products become commoditized, the next purchase decision customers make is increasingly based on either the quality of service or the perceived care they receive from the company. Service Applications by enabling both improved product service, and customer care, help organization’s provide their customers with a positive experience in dealing with the company, maximizing the likelihood of additional product purchases.
Service Applications Grows Company’s "Share of Customer Wallet"
Service Applications help to leverage expanded business opportunities extending beyond company’s service needs, as well as tailoring the service offering to specifically address any customer’s needs. Service Applications provides companies to turn support service into a high return profit center. Service enables the company to attract new service market opportunities by servicing third party products with its ability to track competitive products and service repair information. The Companies can also anticipate their customer needs and proactively build and sell new support and service offerings. Further, they can tailor Service Contracts individually, by customer, by product or by business, enabling new revenue streams with customized service. Additionally, they can also maximize the logistics and costs within their expanding service business with integrated sales and spare parts forecasting.
A careful review of literature and observation of corporate practices suggest that there are three types of CRM programs: continuity marketing; one-to-one marketing; and, partnering programs.
These take different forms depending on whether they are meant for end-consumers, distributor consumers, or business-to-business customers.
Table 1 presents various types of CRM programs developed for different types of customers. Custom er Types Program Types Continuity Marketing • • • • • • • AfterMarketing Loyalty Programs One-to-One Marketing Partnering/ CompanyMarketing Cross-Selling Permission Marketing Personalization Affinity Partnering Co-Branding • • • Customer Business Development Logistics Partnering Joint Marketing • • • • • Key Account Global Account Strategic Partnership Co-Design CoDevelopment • Mass Markets Distributors • Continuous Replenishment ECR Programs Business Business Markets • Special Sourcing Arrangements to
Continuity Marketing Programs Take the shape of membership and loyalty card programs where customers are often rewarded for their member and loyalty relationships with the marketers. The basic premise of continuity marketing programs is to retain customers and increase loyalty through long-term special services that has a potential to increase mutual value through learning about each other.
One-to-one Marketing Meeting and satisfying each customer’s need uniquely and individually. In the mass markets individualized information on customers is now possible at low costs due to the rapid development in the information technology and due to availability of scalable data warehouses and data mining products. By using online information and databases on individual customer interactions, marketers aim to fulfill the unique needs of each mass-market customer. Information on individual customers is utilized to develop frequency marketing, interactive marketing, and after marketing programs in order to develop relationship with high-yielding customers. In the context of business-to-business markets, individual marketing has been in place of quite sometime. Known as Key Account Management Program, here marketers appoint customer teams to husband the company resources according to individual customer needs.
Partnering Programs The third type of CRM programs is partnering relationships between customer and marketers to serve end user needs. In the mass markets, two types of partnering programs are most common: co-branding and affinity partnering.
CRM and Related Concepts
Knowledge Management (KM) with focus on CRM As Peter Drucker defined “Information is data endowed with relevance and purpose”. To effectively implement a CRM solution it is very important to identify real knowledge about different types of customers (Viz. Most valued customers, Most grow able customers, below zero customers) from plethora of internal and external data, figures, surveys, etc. A straightway technique is to create a data warehouse, thereafter information which is required to effectively implement principles of CRM, could be mined out of this data warehouse. Marketing, sales after-sales people would be knowledge workers. Front office could be more productive if they could utilize customer knowledge. Knowledge Management (KM) is about embracing a diversity of knowledge resources, like legacy systems, existing data warehouses, portals, websites, customers, suppliers, partners, external marketing research agencies and cultivating the knowledge where it resides.
Metrics, ROI, Balance Scorecard method, benchmarking are some of the common technique of KM system evaluation. KM implementation is the key to CRM. It’s a proven fact that 80% of organization revenues come form 20% of its customers, it becomes imperative to design CRM solutions keeping in mind these most valuable customers and to leverage 80% non structured data of about 20% of these most valuable customers. Just as more tangible corporate assets like computer systems have a finite shell life, so too does knowledge, it must be available at the right time to be able to act upon it. Retaining tacit knowledge (derived from experiences, data and documents) means retaining the individual,
which is invariably not possible. It is possible to generate explicit knowledge from tacit knowledge, but it’s a complex exercise.
The key ingredient of this exchange is face-to-face sharing of knowledge or virtual environmental tools like Lotus Notes, which can facilitate tacit knowledge exchange. Hence for tacit knowledge exchange text mining is very useful and important. There are ways to do text mining, like search engines, web solutions, text analysis tools, etc. The key to successful customer KM is personalization, i.e. how to extract the knowledge that is pertinent to the user and translate it into a format that is easily understood. The choice of Customer Knowledge Management (CKM) architecture should have a layered approach. Existing systems should be seamlessly linked with the proposed layer. The choice for CKM system could be Web (Enterprise information portal) or a packaged solution such as Lotus Notes, Microsoft solution.
ERP and CRM Like ERP, CRM solutions focus on automating and improving business processes, albeit in frontoffice areas such as marketing, sales, customer service, and customer support. Whereas ERP implementation can result in improved organizational efficiency, CRM aims to provide organizational effectiveness by reducing sales cycle and selling cost, identifying markets and channels for expansion, and improving customer value, satisfaction, profitability, and retention. While CRM applications provide the framework for embodying, promoting and executing best practices in customer facing activities, ERP provides the backbone, resources and operational applications to make organizations more efficient in achieving these goals.
Technological Tools for CRM
Tools •Customer database A good customer information system should consist of a regular flow of information, systematic collection of information that is properly evaluated and compared against different points in time, and it has sufficient depth to understand the customer and accurately anticipate their behavioral patterns in future. The customer database helps the company to plan, implement, and monitor customer contact. Customer relationships are increasingly sustained by information systems. Companies are increasingly adding data from a variety of sources to their databases. Customer data strategy should focus on processes to manage customer acquisition, retention, and development. Call Center helps in automating the operations of inbound and outbound calls generated between company and its customer. These solutions integrate the voice switch of automated telephone systems (e.g. EPABX) with an agent host software allowing for automating call routing to agents, auto display of relevant customer data, predictive dialing, self service Interactive Voice Response
systems, etc. These systems are useful in high volume segments like banking, telecom and hospitality. Today, more innovative channels of interacting with customers are emerging as a result of new technology, such as global telephone based calls centers and the Internet. Companies are now focusing to offer solutions that leverage the Internet in building comprehensive CRM systems allowing them to handle customer interactions in all forms.
•Systems Integration While CRM solutions are front office automation solutions, ERP is back office automation solution. An ERP helps in automating business functions of production, finance, inventory, order fulfillment and human resource giving an integrated view of business, where as CRM automates the relationship with customer covering contact and opportunity management, marketing and product knowledge, sales force management, sales forecasting, customer order processing and fulfillment, delivery, installation, pre-sale and post-sale services and complaint handling by providing an integrated view of the customer.
It is necessary that the two systems integrate with each other and complement information as well as business workflow. Therefore, CRM and ERP are complementary. This integration of CRM with ERP helps companies to provide faster customer service through an enabled network, which can direct all customer queries and issues through appropriate channels to the right place for speedy resolution. This will help the company in tracking and correcting the product problems reported by customers by feeding this information into the R&D operations via ERP.
Traditional Approach to CRM
Fig 7: CRM – A FRAMEWORK
Web-Enabled & Integration Approach • Customer Information System
• Customer Contact by Telephone Mail In Person • Personal Selling • After Sales Service
• Customer Database • Electronic Point of Sale • Sales Force Automation • Automation of Customer
Integration with technology (Web & Internet)
Data Mining for CRM: Some Relevant issues Data mining is an important enabler for CRM. Advances in data storage and processing technologies have made it possible today to store very large amounts of data in what are called data warehouses and then use data mining tools to extract relevant information. Data mining helps in the process of understanding a customer by providing the necessary information and facilitates informed decision-making. Operational CRM solutions involve integration of business processes involving customer touch points. Collaborative CRM involves the facilitation of collaborative services (such as e-mail) to facilitate interactions between customer and employees. All this effort produces rich data that feeds the Analytical CRM technologies.
Fig.8 Interactions between CRM Technologies
Information Requirements Of An Effective CRM Solution The employees of a firm employing CRM would require rich information about their firm and customer base including: • • • •
Information about the market Information about the firm The current segment Demographic Distribution (by age, sex, education, income, marital status, etc)
The firm’s best customers and the segment they belong to, products they buy, preferences, habits and tastes of each segment.
Individual level information consisting of: → Customer personal details such as name, address, family details, education, etc → The customer group /segment to which the individual belongs → History of present and past behavior → Likes, dislikes, habits and preferences → Events coming up in their personal life etc.
The existing CRM Solutions
Delivering the ‘360 view’ requires automation to bring together all the data concerning a customer. This implies the organisation has to change from:
Mass Marketing Product Focus Economies of Scale One way communication Response Time
Product Focus Customer Focus Economies of time Interactive Real Time
Present CRM Alternatives
Present CRM solutions are offered by host of vendors that are to a great extent not industry specific. While there are some vendors, who have come up with industry specific solutions, the broad model around which the CRM solutions are built remain the same. Adopting a similar or a look a like solution across industries servicing a customer. Typical offerings of the current CRM Apps or MySap.com, etc) vary from typical CRM offerings consist of: Customer Development Service Centre Sale management and support Market Analysis Field sales, Tele sales, Internet Sales Call Centres, Field Service Internet Customer Service Service Interaction Centre solutions (such as Siebel, Oracle solution to solution. However is what causes major strain in
Internet, Tele marketing Product and brand management
Business Partner Collaboration
What is eCRM? In simplest terms eCRM provides companies with means to conduct interactive, personalized and relevant communications with customer across both electronic and traditional channels. It utilizes a complete view of the customer to make decisions about messaging, offers and channel delivery. It synchronises communication across otherwise disjoint-customer facing systems. It adheres to permission-based practices, respecting individual’s preferences regarding how and whether they wish to communicate with you and it focuses on understanding how the economics of customer relationship affect the business.
eCRM Vs CRM CRM is essentially a business strategy for acquiring and maintaining the “right” customers over the long term. Within this framework, a number of channels exist for interacting with customers. One of these channels is “electronic” – and has been labeled “e-commerce” or “e-business”. This electronic channel does not replace the sales force, the call Centre, or even the fax. It is simply another extension, albeit a powerful new one, to the customer. The thrust of eCRM is not what the organisation is “doing on the web” but how fully the organisation ties its on-line channel back to its traditional channels, or customer touch points.
Why employ eCRM? Companies need to take firm initiatives on the eCRM frontier to
•Optimize the value of interactive relationship •Enable the business to extend its personalized reach •Company-ordinate marketing activities across all customer channels.
customer information for more effective emarketing and ebusiness
•Focus the business on improving customer relationship and earning a greater share of each customer’s business through consistent measurement, assessment and “actionable” customer strategies.
The six “E’s” of eCRM 1. Electronic channels 2. Enterprise 3. Empowerment 4. Economics 5. Evaluation 6. External Information
eCRM Architecture The primary inputs to this module are mainly from the eCRM Assessment and strategy alignment modules. During this stage the company will try and develop a Connected Enterprise Architecture (CEA) within the context of the company’s own CRM strategy. The following is a set of technical eCRM capabilities and applications that collectively and ideally comprise a full eCRM solution: •Customer Analytical Software •Data mining software •Campaign Management software
•Business Simulation •A real time decision engine
Categories of CRM solutions
Any enterprise, which wants to implement CRM solutions can choose from four categories of solutions Integrated applications suite
Interfaced applications bundle Interfaced best of breed solutions Best of cluster
Selecting an interfaced best of breed approach for pure functionality or a front office application suite solely for integration limits enterprise choices. Enterprises need to start with a clear picture of the basic truths of integration, interfacing and functionality. An integrated application suite is a set of application that employs a common architecture, referencing a common logical database with a single schema. Some suites are more often interfaced application bundle i.e. a set of interfaced application from a single vendor containing more than one technical architecture or more than one logical database- frequently assembled by the vendor through the process of acquisition or partnership An alternative approach to suites is an interfaced best of breed solution – an approach whereby an enterprise selects from multiple vendors a set of applications that must be interfaced to work together, either by the enterprise, one of the selected vendors or a third party integrator. The individual applications are not the best in any objective sense. Rather, some enterprises select the applications because they best meet the particular needs. The challenge of this approach is that, in some cases, the enterprise fails to complete the necessary interfaces to get the individual applications working together; consequently, the applications remain stovepipes. Best of cluster is similar to best of breed except that here best is chosen from the cluster and they are interfaced.
Key requirements for CRM solutions
Some of the functional and technical requirements for CRM solutions are as listed below: •Business intelligence and analytical capabilities •Unified channels of customer interactions •Support for web based functionality •Centralized repository for customer information •Integrated work flow •Integration with ERP applications
Functional Components of CRM solution
CRM applications are a convergence of functional components, advanced technologies and channels. Functional components and channels are described below: Sales applications Common applications include calendar and scheduling, contact and account management; compensation; opportunity and pipeline management; sales forecasting; proposal generation and management; pricing; territory assignment and management; and expense reporting. Marketing applications These include web based and traditional marketing campaign planning, execution, and analysis; list generation and management; budgeting and forecasting; collateral generation and marketing materials management. Customer service and support applications.
These include customer care; incident, defect and order tracking; field service; problem and solution database; repair scheduling and dispatching; service agreements and contracts; and service request management.
Organising for CRM
Assessing Need How do you know your business requires CRM? It is very easy for a business to get caught in the latest ‘customer trap’ when it is being driven by the information technology (IT) market. Every business does require CRM; the question is to what level? Trends Many businesses are pushed by the current trend to change their business strategy, especially around CRM. There are basically three trends that effect a business: Consumer The customer is an ever-changing image, to be really successful with CRM you must recognize the customer trends that are effecting the business. If a business does not understand a customer profile and the changes that have occurred then it is not possible to provide true customer relationship management. Products
It is the business providing the products that meet the changing customer trends. Products need to be reviewed constantly perhaps enhanced or even removed. Supermarkets are a perfect profile to look at for viewing ‘product trends’, they constantly add and remove products and they constantly view customer buying profiles and set out the pattern of the store to meet the strongest buying trend. This may not always be by using the latest ‘technology’, it could be by just reviewing shells at the end of the day, but the super market is at the minimum watching for the two basic trends in CRM.
Technology Ensure that the business is ready to install the new technologies, is the customer data upto it, or is it time to start again? Do you need to review every technology being used or just one area. Will it assist the business, is it going to grow with the business requirements or is the technology just another ‘trend’? Relationship management should not be an alternative to existing functions/technology; it could be a logical extension to enhance those in existence, though it could radically change some of the operational processes.
Does CRM really matter? Whatever the business activity is all companies have to ask themselves is CRM the real factor for their company to succeed. Some customers do not need long-term relationship with their suppliers; therefore only minimal information is required from that customer. That however is still a form of CRM. Other companies have high quality and high value customers that they need to know information about, they need to provide exceptional service, the ‘pedigree’ of CRM. Whatever the business is, if it has customer it has to ask, does customer relationship management matter? What does it man to them in business terms? At what cost? What is the overall loss if not adhered to?
CRM: Yes it does really matter – the strategy needs to last, be constantly reviewed and can evolve over time.
Financial Framework for CRM
There are organisational constraints encountered in execution of CRM programs. Mainly they are as follows:
•A mismatch between resource allocated and service levels desired for building customer relationship •Absence of financial business case and ROI for investments in Customer Relationship
non alignment of organisations to customers line of sight
to be achieved between maximisation of revenue and customer satisfaction.
Direct selling machinery would have costs that are significantly higher than referral sale – hence the need to invest in customer relationship with an eye on acceleration of referrals so as to bring down costs or increase productivity of sales. (higher cold call to order ratio) Figure 1 illustrates the phenomenon that organisations can drive referral sale line in a manner that can reduce time T1 and with that in figure 1(a) the overall unit selling cost (average of direct sales cost + referral sale cost) can be reduced with higher sales productivity.
% 50% of overall sale
Unit Selling cost
Time Fig. 1. (a) Sale Cost Line
Fig. 1. ‘Torpedo Graph’
Figure 2 illustrates that with a given investment in direct sale channel the productivity can at best be only slightly increasing line, while a referral line will be an exponentially increasing trend line with growing subscriber numbers. This creates a multiplier effect that quickly overtakes the direct sale numbers. Organisation dependency on direct sale can gradually be reduced since they stand to account for reduced numbers in the overall sums.
Sale Unit No. Referral Sale
Organisational measure of referral propensity can be taken through customer feedback on their willingness to recommend the product to their friend and acquitances. referrals.
CRM in select Services
1) Taj Air Caterers & Singapore Airlines
Taj actively participates in product designs and influences service design, wherever necessary. This has evolved after getting an insight into Singapore Airlines’ customer profile and their needs. The product is designed to reflect their passengers’ preferences, which are quite different in Delhi and Mumbai, and on different sectors ex-Mumbai. TAJ Chefs conduct an annual workshop on Indian Cuisine for Singapore Airlines’ caterers worldwide. Taj staff gets trained at Singapore Airlines’ catering subsidiary, SATS. Taj Ctareres share a lot of information and can access technology issues with Singapore Airlines.
2) Taj Air Caterers & GE Capital Services There is e-mail connectivity between the service provider i.e. Taj and GE (for canteen and food supply). Taj customer relations responds within a stipulated time frame directly to GE employees and analyses their satisfaction. Also on cards is a ‘fitness program’ where taj’s experts will share information of food nutrition, exercise, etc with GE staff. Similarly, a loyalty program is being designed where in for purchases snacks and confectionery, GE employees can obtain attractive discounts at Taj outlets/hotels. With another company Taj is involved in cafeteria design and selection of equipment.
3) Titan Watch Repair Services What did Titan Do? The Titan Signet CRM initiative was undertaken in May 1995 to provide that “extra” touch to its special customers at the exclusive World of Titan stores. Its mission was to create a sense of belonging of the customer to the store and vice versa by: • Building a special relationship with high life time value Titan customers • • Recognizing and rewarding his/her loyalty to Titan Providing a platform for direct feedback from these valued customers to the
Where? It initially started in 6 showrooms in Bangalore. Today the titan Signet has been extended to 102 World of Titan showrooms across 59 cities all over India
Behind The Scenes While the program has taken customer bonding one step further in Titan, there are many behindthe-scene activities that ensure that the program is run efficiently, effectively and with the level of enthusiastic participation. These are : • • Showroom Personnel are trained not only in the preparation of the program at the
showroom but also in the finer details of CRM. Enrolments in the program are tracked on a monthly basis for each showroom,
along with data on purchases made by Signet members who have returned to the showroom to buy again. • Signet operations form a part of the quarterly appraisal for their showrooms, there
by ensuring that they earn more marks on their efficient and effective performance.
A grievance redressal system is in place to ensure that out valued customers are
responded to within stipulated time frame.
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