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What's So Hard About Customer Service?
One person's excellent service may represent barely adequate service to someone else. What impresses one customer may make absolutely no impression on another. To complicate matters, what a customer believes to be good service in one context may be unacceptable in another situation or at another time. Service is perceptual; it is individualized; and it is situational. So how can you figure out what customers want from you in terms of service? The kind and level of service that you must deliver depends on who the customer is, what her expectations are, what experience she has had with you and other firms, what your strategy is and what role customer service plays in its delivery—along with a host of other things.
Many managers and executives are uncomfortable with this notion of variable service delivery; they would much prefer to be able to pin down service and to be able to standardize it so that it can be consistently delivered. But I don't believe service should be the same for everyone. In fact, the value of service as a relationship-building tool is its customizability. Simply out, some customers require and deserve better service than others. In some situations, you will want to be able to provide service that will impress customers so as to make an emotional connection. Whenever your employees can say to a customer, "Let me take care of that for you," you are delivering a higher level of service than the customer was expecting.
Yet customer service gets far less attention than it deserves in many companies, simply because managers do not realize or accept its importance in influencing customer satisfaction and loyalty. Many view customer service provision as a cost, rather than an investment. Many spend a great deal of time looking for ways to reduce that cost, without appreciating the impact it has on the customer's feelings toward the firm. At the same time, managers tend to focus on what I call the functional side of service provision:
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the speed and accuracy of service delivery, in particular. Do we arrive on time? Do we have things in stock? Do we answer incoming calls within 20 seconds? These are the aspects of service with which managers in many firms are most comfortable, mainly because they are most easily and frequently measured in conventional customer satisfaction surveys. But they are a dangerously limiting view of service and not nearly as all-encompassing as the customer's view of service. Four levels of service Another element that gets in the way of impressive service delivery is management's very simplistic view of customer service. I can think of at least four levels of customer service, each of which involves the creation of progressively more emotional value for customers.
To the customer, service involves more than just the functional delivery of service (the first level, which, in a world where companies like FedEx have practically perfected technical service provision, customers take as a given). Customers care how easy you make it for them to communicate with you. This opens the door to a discussion of your phone system, your web site and your customer service center—not to mention whether customers can find someone to serve them in your store. Increasingly, when you keep them on hold for 20 minutes, don't respond to their email inquiries and ask them to deal with unknowledgeable and unhelpful staff, they will walk away.
At the third level, companies need to understand how customer service is linked to the people they employ. My experience suggests that customers are most likely to equate the notion of service with the way they are treated by employees. Finally, the level of service that customers experience is a powerful influence on how customers feel emotionally toward a company. Poor service can make a customer feel neglected, unimportant, frustrated, angry or even humiliated. Surprisingly good service leads to emotions such as comfort, relief, delight or excitement.
That holistic view again Yet, many companies have a less-than-holistic view of their value proposition. Customer service must be seen to be an integral part of what we offer the customer. I recently encountered a major company that has separate marketing, sales and customer service departments, each of which prepares its own annual plan and sets its own budgets, without consulting with the others. In that firm, customer service is defined mainly as the operation of the call center. To the customer, service means much more. It is far too simplistic to ask customers to rate your customer service on the predictable 10-point scale. It's much too complex a concept for customers to reduce it to a single number. You can't interpret it, anyway. So last month they gave us a rating of 8.1 on customer service. What does that mean? Very little. There's no direction on how we can improve. Anyway, the only people who are rating you are current customers. How would those customers who stormed out or hung up in disgust rate your customer service? You will never know. Yet theirs is a much more important number.
Customer service is not optional. It's not trivial. And it's not easily standardized. Don't make the mistake that one Canadian bank made of treating customer service as a promotion. That bank offered customers $5 if they had to wait in line more than five minutes in its branches. Customers were generally not impressed. To them, a wait time of five minutes was not the issue. Of course, wait time is important—but not nearly as important as being served politely and efficiently once you reach the counter.
Customer service is extremely complex, much like value, satisfaction and the increasingly popular customer experience. To apply such concepts effectively, management must appreciate their complexity. To utilize customer service to increase customer loyalty, to reinforce the positioning of the brand and to gain a competitive advantage, companies much have a strategy to guide its development and implementation.
What is Customer Relationship Management?
Before we begin to examine the conceptual foundations of CRM, it will be useful to define what CRM is. A narrow perspective of customer relationship management is database marketing emphasizing the promotional aspects of marketing linked to database efforts.
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 individuals 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”. In today’s hyper competitive scenario, more than three quarters of the money and time spent by companies go towards acquiring and retaining customers. Customer-centricity has become the buzzword and the ones with clear and relentless focus on customers, enjoy a better competitive position. This is proved time and again. Yet, companies go through meticulous processes to gradually and consistently mature into an “organization for the customers”. But, how would you mature into a customer-focused or customer-centric organization? The answer is: By reading and understanding your customers. Yes, this is all you need to do! And this you need to do not just once, but regularly and consistently over the lifetime of your customer and beyond. Reading the customer demographics and understanding their needs (both explicit and implicit) is what customer insight is all about. Customer insight is the basic point or the foundation for building a customer centric organization. Everything in the value chain revolves around this. This is the raw material. This is more a conversion process rather, since the end product is Customer Loyalty! Over decades, many organizations had successfully completed the conversion process and tasted higher returns, most organizations miserably failed in their efforts. Customer Insight goes through a set of processes to get converted into Customer Loyalty- the finished product. The set of processes include use of machine, process and people to obtain the final outcome - just like a manufacturing process in a factory. The machine here is technology information technology to be precise, process - the custom made steps based on set objectives;
and people - those who are trained to efficiently carry out the conversion process. This whole scheme of activities that begin from customer information and end in processes and interactions that result in customer loyalty - in entirety, is what CRM is all about. CRM relies on customer data to create customer loyalty. The concept of CRM was again the result of an evolution born out of necessity. When companies understood the need to obtain and maintain customer data, which was exhaustive and scattered in nature and were desperately looking for a tool that could compile, preserve use the data in a way they want, technology came to the rescue with exclusive methods called data mining, data warehousing and thus data base management techniques were born. Technology is mechanistic and didn’t know what is required and what is not. A managerial tool was needed to perform the director’s role in order to decide the path and processes. Thus CRM was engineered as a tool to manage customer data using ITenabled techniques. CRM gives a framework for the activities. It decides on what to do - the objectives, what is required to do it - the resources, who should do it - the people, how to do it - the processes, how long to do it - the time frame. CRM could be ready made, tailor-made or hand made depending on the specific objectives it is set to achieve. CRM is unique in the respect that it follows a set of pre-determined processes to accumulate and manage customer data, which was hitherto unpracticed. Hence, CRM is defined as: “Customer relationship management (CRM) is a business strategy to acquire and manage the most valuable customer relationships. CRM requires a customer-centric business philosophy and culture to support effective marketing, sales and service processes. CRM applications can enable effective customer relationship management, provided that an enterprise has the right leadership, strategy and culture.”
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 organisation, he is a part of the organisation.
Purpose of CRM
CRM, in its broadest sense, means managing all interactions and business with customers. This includes, but is not limited to, improving customer service. A good CRM program will allow a business to acquire customers, service the customer, increase the value of the customer to the company, retain good customers, and determine which customers can be retained or given a higher level of service. A good CRM program can improve customer service by facilitating communication in several ways : • Provide product information, product use information, and technical assistance on web sites that are accessible 24 hours a day, 7 days a week.
Identify how each individual customer defines quality, and then design a service strategy for each customer based on these individual requirements and expectations. Provide a fast mechanism for managing and scheduling follow-up sales calls to assess post-purchase cognitive dissonance, repurchase probabilities, repurchase times, and repurchase frequencies.
Provide a mechanism to track all points of contact between a customer and the company, and do it in an integrated way so that all sources and types of contact are included, and all users of the system see the same view of the customer (reduces confusion).
Help to identify potential problems quickly, before they occur. Provide a user-friendly mechanism for registering customer complaints (complaints that are not registered with the company cannot be resolved, and are a major source of customer dissatisfaction).
• • • • • •
Provide a fast mechanism for handling problems and complaints (complaints that are resolved quickly can increase customer satisfaction). Provide a fast mechanism for correcting service deficiencies (correct the problem before other customers experience the same dissatisfaction). Use internet cookies to track customer interests and personalize product offerings accordingly. Use the Internet to engage in collaborative customization or real-time customization. Provide a fast mechanism for managing and scheduling maintenance, repair, and ongoing support (improve efficiency and effectiveness). The CRM program can be integrated into other cross-functional systems and thereby provide accounting and production information to customers when they want it.
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
Differentiating Offerings 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.
Keeping Existing Customers Grading customers from very satisfied to very disappointed should help the organisation in improving its customer satisfaction levels and scores. As the satisfaction level for each customer improves, so shall the customer retention with the organisation.
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 mindshare 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.
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 6. Acquiring new customers
Why CRM is necessary?
Several companies are turning to customer-relationship management systems and strategies to gain a better understanding of their customer's wants and needs. Used in association with data warehousing, data mining, call centers and other intelligence-based applications, CRM "allows companies to gather and access information about customers' buying histories, preferences, complaints, and other data so they can better anticipate what customers will want. The goal is to instill greater customer loyalty." Other benefits includes: • • • • • • Faster response to customer inquiries. Increased efficiency through automation. Deeper understanding of customers. Increased marketing and selling opportunities. Identifying the most profitable customers. Receiving customer feedback that leads to new and improved products or services
Benefits of CRM
Implementing a customer relationship management (CRM) solution might involve considerable time and expense. However, there are many potential benefits. A major benefit can be the development of better relations with your existing customers, which can lead to: • • • • • • • increased sales through better timing due to anticipating needs based on historic trends identifying needs more effectively by understanding specific customer requirements cross-selling of other products by highlighting and suggesting alternatives or enhancements effective targeted marketing communications aimed specifically at customer needs a more personal approach and the development of new or improved products and services in order to win more business in the future enhanced customer satisfaction and retention, ensuring that your good reputation in the marketplace continues to grow increased value from your existing customers and reduced cost associated with supporting and servicing them, increasing your overall efficiency and reducing total cost of sales
Once your business starts to look after its existing customers effectively, efforts can be concentrated on finding new customers and expanding your market. The more you know about your customers, the easier it is to identify new prospects and increase your customer base. Even with years of accumulated knowledge, there's always room for improvement. Customer needs change over time, and technology can make it easier to find out more about customers and ensure that everyone in an organisation can exploit this information.
History of CRM
Customer Relationship Management (CRM) is one of those magnificent 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 volume of records needed accurately and constantly update them. 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 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. 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 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 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. True CRM comes of age Real Customer Relationship Management as it’s thought of today really began in earnest in the early years of this century. As software companies began releasing newer, more advanced solutions that were customizable across industries, it became feasible to really use the information in a dynamic way. Instead of feeding information into a static database for future reference, CRM became a way to continuously update understanding of customer needs and behavior. Branching of information, sub-folders, and custom tailored features enabled companies to break down information into smaller subsets so that they could evaluate not only concrete statistics, but information on the motivation and reactions of customers. The Internet provided a huge boon to the development of these huge databases by enabling offsite information storage, where before companies had difficulty supporting the enormous amounts of information. The Internet provided new possibilities and CRM took off as providers began moving toward Internet solutions. With the increased fluidity of these programs came a less rigid relationship between sales, customer service and marketing. CRM enabled the development of new strategies for more cooperative work between these different divisions through shared information and understanding, leading to increased customer satisfaction from order to end product. Today, CRM is still utilized most frequently by companies that rely heavily on two distinct features: customer service or technology. The three sectors of business that rely most heavily on CRM -- and use it to great advantage -- are financial services, a variety of high tech corporations and the telecommunications industry.
The financial services industry in particular tracks the level of client satisfaction and what customers are looking for in terms of changes and personalized features. They also track changes in investment habits and spending patterns as the economy shifts. Software specific to the industry can give financial service providers truly impressive feedback in these areas. In recent years however, several factors have contributed to the rapid development and evolution of CRM. These include: 1. The growing de-intermediation process in many industries due to the advent of sophisticated computer and telecommunication technologies that allow producers to directly interact with end-customers. For example, in many industries such as airlines, banks insurance, software or household appliances and even consumables, the de-intermediation process is fast changing the nature of marketing and consequently making relationship marketing more popular. Databases and direct marketing tools give them the means to individualize their marketing efforts. 2. Advances in information technology, networking and manufacturing technology have helped companies to quickly match competition. As a result product quality and cost are no longer significant competitive advantages. 3. The growth in service economy. Since services are typically produced and delivered at the same institution, it minimizes the role of the middlemen. 4. Another force driving the adoption of CRM has been the total quality movement. When companies embraced TQM it became necessary to involve customers and suppliers in implementing the program at all levels of the value chain. This needed close working relationships with the customers. Thus several companies such as Motorola, IBM, General Motors, Xerox, Ford, Toyota, etc formed partnering relations with suppliers and customers to practice TQM. Other programs such as JIT and MRP also made use of interdependent relationships between suppliers and customers. 5. Customer expectations are changing almost on a daily basis. Newly Empowered customers who choose how to communicate with the companies across various available channels. Also nowadays consumers expect a high degree of personalization. 6. Emerging real time, interactive channels including e-mail, ATMs and call centre that must be synchronized with customer’s non-electronic activities. The speed of business change, requiring flexibility and rapid adoption to technologies.
7. In the current era of hyper competition, marketers are forced to be more concerned with customer retention and customer loyalty. 8. As several researches have found out retaining customers is less expensive and more sustainable competitive advantage than acquiring new ones. 9. On the supply side it pays more to develop closer relationships with a few suppliers than to develop more vendors. 10. The globalization of world marketplace makes it necessary to have global account management for the customers.
Chapter 2: CRM Programs & Activities
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 aftermarketing 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.
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. 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.
Missing process of CRM
Traditionally customer relationship management (CRM) revolves around the three functions of selling, marketing and support. Various process models have been built around how these functions are integrated and operated in a customer oriented enterprise. There is however a fourth critical function that is lacking in most CRM models.
The fourth function that often is the source of a competitive edge is that of innovation. Companies must continually reinvent themselves to deliver an improved and often a totally new value offering to their customer base. CRM must provide the customer intelligence that feeds information back into the enterprise’s knowledge management processes where it can trigger new innovation processes. When CRM is integrated into the innovation process, significant value can be derived from faster time to market cycle times and with new processes and services.
Marketing automation must ensure that the innovation processes are actually market driven. A market driven innovation process must include both strategies that are focused on satisfying customer requirements as well as strategies focused at redefining customer requirements. Sales automation should be integrated with the innovation process by ensuring that all sales channels are prepared and ready to take new processes and services to market before competitive forces can react. Customer service automation must be designed to empower the customer with the option of assisting with the design of the value offering. Redefining CRM around innovation, sales, marketing and service can identify new competitive opportunities for an enterprise.
The remaining question is whether companies are prepared to take the initiative and expand the definition of customer relationship management to include the process of innovation. The pressure to deliver results within the traditional definition of CRM already overwhelms companies. The dialog must start rather earlier than later because the competitive window of traditional CRM is decreasing and customer demands for a more innovative and responsive enterprise will increase
Architecture of CRM
There are three parts of application architecture of CRM: • • • Operational - automation to the basic business processes (marketing, sales, service) Analytical - support to analyze customer behavior, implements business intelligence alike technology Collaborative - ensures the contact with customers (phone, email, fax, web, sms, post, in person)
Operational CRM Operational CRM means supporting the "front office" business processes, which include customer contact (sales, marketing and service). Tasks resulting from these processes are forwarded to resources responsible for them, as well as the information necessary for carrying out the tasks and interfaces to back-end applications are being provided and activities with customers are being documented for further reference. Operational CRM provides the following benefits: • • • Delivers personalized and efficient marketing, sales, and service through multi-channel collaboration. Enables a 360-degree view of your customer while you are interacting with them. Sales people and service engineers can access complete history of all customer interaction with your company, regardless of the touch point. The operational part of CRM typically involves three general areas of business:
Sales force automation (SFA) SFA automates some of the company's critical sales and sales force management functions, for example, lead/account management, contact management, quote management, forecasting, sales administration, keeping track of customer preferences, buying habits, and demographics, as well as performance management. SFA tools are designed to improve field sales productivity. Key infrastructure requirements of SFA are mobile synchronization and integrated product configuration.
Customer service and support (CSS) CSS automates some service requests, complaints, product returns, and information requests. Traditional internal help desk and traditional inbound call-center support for customer inquiries are now evolved into the "customer interaction center" (CIC), using multiple channels (Web, phone/fax, face-to-face, kiosk, etc). Key infrastructure requirements of CSS include computer telephony integration (CTI) which provides high volume processing capability, and reliability.
Enterprise marketing automation (EMA)
EMA provides information about the business environment, including competitors, industry trends, and macro-environmental variables. It is the execution side of campaign and lead management. The intent of EMA applications is to improve marketing campaign efficiencies. Functions include demographic analysis, variable segmentation, and predictive modeling occurs on the analytical (Business Intelligence) side. Integrated CRM software is often also known as "front office solutions." This is because they deal directly with the customer. Many call centers use CRM software to store all of their customer's details. When a customer calls, the system can be used to retrieve and store information relevant to the customer. By serving the customer quickly and efficiently, and also keeping all information of a customer in one place, a company aims to make cost savings, and also encourage new customers. CRM solutions can also be used to allow customers to perform their own service via a variety of communication channels. For example, you might be able to check your bank balance via your WAP phone without ever having to talk to a person, saving money for the company, and saving your time. Analytical CRM In analytical CRM, data gathered within operational CRM and/or other sources are analyzed to segment customers or to identify potential to enhance client relationship. Customer analysis typically can lead to targeted campaigns to increase share of customer's wallet. Examples of Campaigns directed towards customers are: • • • • • • • • • Acquisition: Cross-sell, up-sell Retention: Retaining customers who leave due to maturity or attrition. Information: Providing timely and regular information to customers. Modification: Altering details of the transactional nature of the customers' relationship. Decision support: Dashboards, reporting, metrics, performance etc. Predictive modeling of customer attributes Strategy and research. Contact channel optimization Contact Optimization
Analysis typically covers but is not limited to:
Analysis of Customer data may relate to one or more of the following analyses:
• • • • • • • • • •
Customer Acquisition / Reactivation / Retention Customer Segmentation Customer Satisfaction Measurement / Increase Sales Coverage Optimization Fraud Detection and analysis Financial Forecasts Pricing Optimization Product Development Program Evaluation Risk Assessment and Management
Data collection and analysis is viewed as a continuing and iterative process. Ideally, business decisions are refined over time, based on feedback from earlier analysis and decisions. Therefore, most successful analytical CRM projects take advantage of a data warehouse to provide suitable data. Business Intelligence is a related discipline offering some more functionality as separate application software. Collaborative CRM Collaborative CRM facilitates interactions with customers through all channels (personal, letter, fax, phone, web, e-mail) and supports co-ordination of employee teams and channels. It is a solution that brings people, processes and data together so companies can better serve and retain their customers. The data/activities can be structured, unstructured, conversational and/or transactional in nature. Collaborative CRM provides the following benefits: • • • • Enables efficient productive customer interactions across all communications channels Enables web collaboration to reduce customer service costs Integrates call centers enabling multi-channel personal customer interaction Integrates view of the customer while interaction at the transaction level
Chapter 3: Tools for CRM
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 Centre A call centre is a centralized office used for the purpose of receiving and transmitting a large volume of requests by telephone. A call centre is operated by a company to administer incoming product support or information inquiries from consumers. Outgoing calls for telemarketing, clientele, and debt collection are also made. In addition to a call centre, collective handling of letters, faxes, and e-mails at one location is known as a contact centre. A call centre is often operated through an extensive open workspace, with work stations that include a computer, a telephone set/headset connected to a telecom switch, and one or more supervisor stations. It can be independently operated or networked with additional centres, often linked to a corporate computer network, including mainframes, microcomputers and LANs. Increasingly, the voice and data pathways into the centre are linked through a set of new technologies called computer telephony integration (CTI). Most major businesses use call centres to interact with their customers. Examples include utility companies, mail order catalogue firms, and customer support for computer hardware and
software. Some businesses even service internal functions through call centres. Examples of this include help desks and sales support. 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. 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.
Chapter 4: Implementation of CRM
How to implement CRM
The implementation of a customer relationship management (CRM) solution is best treated as a six-stage process, moving from collecting information about your customers and processing it to using that information to improve your marketing and the customer experience.
Stage one - Collecting information
The priority should be to capture the information you need to identify your customers and categorise their behaviour. Those businesses with a website and online customer service have an advantage as customers can enter and maintain their own details when they buy.
Stage two - Storing information
The most effective way to store and manage your customer information is in a relational database - a centralised customer database that will allow you to run all your systems from the same source, ensuring that everyone uses up-to-date information.
Stage three - Accessing information
With information collected and stored centrally, the next stage is to make this information available to staff in the most useful format.
Stage four - Analysing customer behaviour
Using data mining tools in spreadsheet programs, which analyse data to identify patterns or relationships, you can begin to profile customers and develop sales strategies.
Stage five - Marketing more effectively
Many businesses find that a small percentage of their customers generate a high percentage of their profits. Using CRM to gain a better understanding of your customers' needs, desires and self-perception, you can reward and target your most valuable customers.
Stage six - Enhancing the customer experience
Just as a small group of customers are the most profitable, a small number of complaining customers often take up a disproportionate amount of staff time. If their problems can be identified and resolved quickly, your staff will have more time for other customers.
Types for implementing CRM
The final way to implement CRM is to find a full-service vendor of customer-service solutions, which might include phone assistance, e-mail handling, real-time chat and even creation of a knowledge base for your site. If you outsource your CRM, then you won't need any customer-
service infrastructure, including customer-service representatives; however, you will need to make sure that your marketing teams can access the business-intelligence components.
Purchasing or Licensing Software
Owning the software and running it on your own servers is ideal if you have highly customized enterprise resource planning, or ERP, or order-management system, or OMS, software. If you have third-party software for your back-office processes (accounting, ERP, OMS, etc.) and your front-end systems (content management, merchandising, checkout, personalization engine), then you should be able to find CRM software that works with at least some of your systems without extensive customization. It's unavoidable that you will have to do some customization, but, by working with vendors that have partnerships and interfaces with your existing vendors and their software — or with vendors that have partnerships with the ASPs that host your existing solutions — you can keep customization to a minimum. Customization is not only expensive when you first install third-party software, but it's also expensive every time you try to apply a patch or an upgrade. The advantages of purchasing or licensing the software and implementing it on your own servers are that you have complete control over the software and over the data. There aren't any of the privacy issues that might arise from having your data residing with a third party. If you already have a customer-service department with trained associates, and you don't expect rapid growth — or you believe you're equipped to handle rapid growth — then there's no point in paying to train CSRs elsewhere.
CRM Via ASP
Only recently have CRM services become available via an ASP. There are two kinds of ASPs providing CRM solutions. With one type, of which ShopTok is one example, the ASP hosts its own CRM software. The other type hosts a best-of-breed third-party solution. The disadvantage of the second type is that when something isn't working with the software, you don't always know whether the problem rests with the ASP or with the software, and you can't necessarily get it fixed. With ASPs that host their own software, the vendor hears your requirements for new features and your complaints about existing functionality. When you work with an ASP, the first thing you'll want to know is the degree to which you can customize the interface and the software so that your other business software will talk to your CRM software. After all, your CSRs need to know what a customer has purchased to handle
inquiries from that customer, requiring integration between the order-management system and the CRM system. If the customer database doesn’t talk to the CRM system, then your marketing department can’t segment customers based on purchases and use the analytical tools frequently built into CRM software to make intelligent decisions on what kind of promotions to make to attract the highest-value customers. There are several advantages to either kind of ASP described above. First, the cost of getting started is usually low — certainly much lower than the cost of implementing software on your own servers. Second, the implementation time is usually short. Finally, no additional infrastructure or support are required from your IT department. However, some ASPs will tell you that they'll implement whatever CRM software you'd like (at your expense, of course), in which case you don't get to take advantage of speed, reduced cost, or experienced tech support. Rather than choosing the software and the ASP separately, let the software dictate the ASP you select.
Outsourcing Customer Service
While you can outsource customer service, which is one component of CRM, you can't outsource business intelligence, which is the strategic component of CRM. If you don’t need to integrate with existing systems, or you only need limited integration, then the fastest route to take is to outsource your customer service to a full-service provider who will give you Web access to the business-intelligence tools. Most full-service customer-service providers will work with the best-of-breed CRM vendors and offer you a choice of CRM systems with which to manage your customers. Some are also willing to purchase and install the CRM software of your choice on their servers, but be aware that this will eliminate the advantage of a quick implementation, lower entry costs and CSRs who already know the software. The cost associated with outsourcing CRM is usually a significant startup cost for developing your materials, their training materials and your knowledge base, then a monthly fee based either on the number of hours of CSR you want available or on the number of calls/messages they receive for your site. The pay-as-you-go model can be very attractive to smaller merchants. The ability to grow quickly can be an advantage for any size Web merchant.
Critical Success Factors for Implementation of CRM Systems
Critical success factors have been defined as the elements that make a project a success, and as the ‘events and conditions in a few key areas which absolutely must go right for the business to succeed’. These include trust, effective communication, and top management support. For this to occur, proper measurement tools and metrics must be utilized to effectively control the project. The key CSF for CRM projects are: Key Stakeholder Support Support from all stakeholders in the organization, including top management and all management levels, employees, government, suppliers, strategic partners, and investors. Includes the timely reporting of the project status with accurate information. Sufficient Resources Resources of money, equipment and expertise available with appropriate support structures in place. Includes time and budget allocations for training. Clearly Defined Objective A clearly defined mission with a set of defined goals and objectives communicated to all stakeholders through clearly defined communication channels, with alignment of project and corporate goals. This is managed through a detailed project plan. Managing Change Project changes are implemented through a formally defined process with appropriate approvals sought. Any scope changes are mutually agreed and documented, with appropriate analysis of resource requirements.
Challenges of CRM Implementation
Organizations face a number of key challenges in implementing CRM systems. These include: Methodology driven by end users IT personnel do not have knowledge or authority to influence corporate decision makers Lack of executive sponsorship CRM projects are mostly driven by a functional head, such as a VP or sales/marketing, and rarely produce an enterprise view of customers Lack of customer centric culture An acceptable return on investment will no be achieved if the organization does not have a strong customer centric culture
Inappropriate design approach CRM is designed to model a single functional view not an enterprise wide customer view, resulting in failure Over automation Focus on functionality and process design leads to highly automated business functions Lack of network infrastructure Inadequate IT infrastructure and networking facilities prevent the CRM from being implemented enterprise wide As can be seen from the challenges faced, it is important for organizations to realize that a CRM system implementation will only succeed when it is supported by a customer focused organizational culture. The CRM system will be the main driver for a paradigm shift, becoming an enabler for communication between the organization and its customers, and within the organization itself.
Chapter 5: CRM Related Concepts
• Knowledge Management Knowledge Management (KM) refers to a range of practices used by organizations to identify, create, represent, and distribute knowledge for reuse and learning across the organization. Knowledge Management programs are typically tied to organizational objectives and are intended to lead to the achievement of specific business outcomes such as improved performance, competitive advantage, or higher levels of innovation. While knowledge transfer (an aspect of Knowledge Management) has always existed in one form or another, for example through on-the-job discussions with peers, formally through apprenticeship, through the maintenance of corporate libraries, through professional training and mentoring programmes, and — since the late twentieth century — technologically through knowledge bases, expert systems, and other knowledge repositories, Knowledge Management
programs attempt to explicitly evaluate and manage the process of creation or identification, accumulation, and application of knowledge or intellectual capital across an organization. Knowledge Management, therefore, attempts to bring under one set of practices various strands of thought and practice relating to: – – – – intellectual capital and the knowledge worker in the knowledge economy the idea of the learning organization; various enabling organizational practices such as Communities of Practice and corporate Yellow Page directories for accessing key personnel and expertise; various enabling technologies such as knowledge bases and expert systems, help desks, corporate intranets and extranets, Content Management, wikis, and Document Management. While Knowledge Management programs are closely related to Organizational Learning initiatives, Knowledge Management may be distinguished from Organizational Learning by its greater focus on the management of specific knowledge assets and development and cultivation of the channels through which knowledge flows. The emergence of knowledge management has generated new organizational roles and responsibilities an early example of which was the Chief Knowledge Officer. In recent years, Personal Knowledge Management (PKM) practice has arisen in which individuals apply KM practice to themselves, their role in the organisation and their career development. Knowledge Management is a continually evolving discipline, with a wide range of contributions and a wide range of views on what represents good practice in Knowledge Management. Knowledge Management Plays a Key Role in CRM Success
CRM and knowledge management (KM) were once considered entirely different disciplines, with the two sharing little but perhaps the same data warehouse hardware and a vague understanding that both efforts were meant to improve business efficiency and customer satisfaction. It has become clear, however, that the two disciplines were really working toward the same goal, and that to deliver continuous improvement to business clients, they would have to start speaking the same language.
KM focuses largely on finding the right solution to a problem that requires detailed insight, be it locating the right expert at the right time, or ensuring that the solution to a complex problem can be written once but reused many times. It is not difficult to understand why that capability is of great interest to CRM strategists. Industry estimates suggest that upwards of three quarters of variable support costs come from the time and energy put into the resolution of customer support inquiries, rather than routing and post-call management.
Better KM/CRM integration can help companies navigate complex support problems more easily. Many manufacturers, such as computer companies, sell a single product that may incorporate dozens or even hundreds of other components. Being able to cross-reference the entire collected library for technical support and conflict resolution can make the difference between first-call resolution and a lingering headache. Many companies still have not attained the level of deep integration that ties knowledge base activity (particularly at the self-service level) to a CRM-facing customer record, but companies like computer peripheral manufacturer Adaptec use the intersection of CRM and KM to guide product and service decisions and attempt to waylay customer service overloads before they begin. Conquering their own individual demons will not mean the end of the road for CRM and knowledge management leaders, as they must join forces to realize even more value from the spheres of customer and product knowledge. • Regain Management “The cost of acquiring a new customer is 9 to 12 times that of holding on to an existing customer.” - Philip Kotler Goal of customer regain management is to reinitiate valuable customer relationships, which have beenalready terminated. Regain management has to detect such ‘lost’ customers, select valuable relationships and attempt to regain them in an effective and effic ient way, for which a systematic process is necessary. Addition to this process structure, there is an information base needed, which enables the exchange of collected information along the customer regain process. - An incentive strategy tempts to regain business relations by offering customers some form of incentives like for example tickets for events, gifts and discounts. - A compensation strategy aims to compensate some (real or perceived) disservices, which as the motive for termination. For example the company could offer some form of vouchers. - A dialogue strategy tries to regain trust through a dialog (e.g. personal call). - A convincing strategy aims to persuade customers by means of use argumentations and explanation of some product advantage.
CRM in Supply Chain Management (SCM)
Supply Chain Management (SCM) is a business system of enterprise strategies, business processes and information technologies for improving the planning, execution and collaboration of material flows, information flows, financial flows and workforce flows in the supply chain. SCM is supported by modular software applications that integrate activities across organizations, from demand forecasting, product planning, parts purchasing, inventory control, manufacturing, product assembly to product distribution. In the context of SCM, where alliances and partnerships are keys to success, CRM plays an important role in building long-term relationships. The success of relationships depends upon sharing of savings from the supply chain, which may be reinvested to further enhance its efficiency, and sustain the competitive advantage. The supply chain of tomorrow will look like a virtual organisation, seamlessly integrated through sharing data and savings as well. The bonding between partners will be closely held by CRM practices. Goals of SCM – – – to reduce inventory cost, to increase sales to improve the coordination and the collaboration with suppliers, manufacturers and distributors. • CRM-ERP Integration ERP’s foundation (which evolved from either manufacturing-based manufacturing resources planning (MRP) applications and its later incarnation, MRPII applications), it is based on creating internally stable business functions and predictable process control. The concept of ERP was the integration of all back-office functions so that the basic problems responsible for interruptions and breaks in the processes were smoothed out and the incompatibilities of the best of processes were smoothened and the incompatibilities of the best-of-breed applications were eliminated or reduced. This doesn’t work with CRM, which is external. How can you be in command of the processes when they are based on your customers’ behaviour? Conceptually, one important reason for CRM is real-time response to the constantly liquid-shifting of customer demands, which is not controlled internally at all. It also means the psychology of the frontoffice is quite different from the psychology of the back-office.
The simplest option is to hire a systems integrator to come in and integrate the systems. However, the obvious hazard here is that they are not only dealing with ERP and CRM applications they may not know much about, they are also dealing with your legacy systems, which they know nothing about. But integrating all of that is what you could hire the ERP vendor for and implement the ERP vendor’s CRM solution. But many of the solutions remain vapourware or poorly integrated. The third solution is what many companies are increasingly turning to Enterprise Application Integration (EAI). EAI applications, previously known as middleware, can be the most cost-effective way of integrating the back and front offices. EAI’s purpose is mainly to integrate data between disparate applications that don’t natively speak with each other.
What is eCRM?
In simple terms, eCRM provides to companies a means to conduct interactive, personalised and relevant communication with customers across both electronic and traditional channels. It utilises a complete view of the customer to make decisions about messaging, offers, and channel delivery. It synchronises communications across disjointed customer-facing systems. It focuses on understanding how the economics of customer relationships affect the business. Advocates of eCRM recognize that a comprehensive understanding of customer activities, personalization, relevance, permission, timeliness and metrics is a means to an end optimizing the value of your most important asset: your customers. For Fortune 500 companies, evolving to eCRM requires process and organisational changes, a suite of integrated applications and a non-trivial technical architecture to support both the eCRM process and the enterprise applications that automate the process. Mid-size companies may benefit from less sophisticated and easier-it-implement (and affordable), hosted solutions offered through Application Service Providers. But regardless of the size of the firm, you have no choice but to evolve to eCRM quickly. eCRM v/s CRM: The Differences Being able to take care of your customer via the Internet, or, customers being able to take care of themselves online: That’s the difference between CRM and eCRM. It implies a myriad of issues, questions, approaches, technologies, and architecture that are different from client/server-based
CRM. Many of them are issues general to the Internet. Others are issues related to the creation of applications for the Internet. The third group is related directly to eCRM and its actual value to business. Companies agree that eCRM is critical to their business, but unfortunately very few understands exactly what it is or how to evolve from their existing database marketing practices to an eCRM solution. Basic Requirements of eCRM or Six “E” of eCRM • Electronic Channels New electronic channels such as the Web and personalised eMessaging have become the medium for fast, interactive and economic customer communications, challenging companies to keep pace with this increased velocity. • Enterprise Through eCRM, a company gains the means to touch and shape a customer’s experience across the entire organization, reaching beyond just the bounds of marketing to sales, services and corner offices – whose occupants need to understand and assess customer behaviour. An eCRM strategy relies heavily on the construction and maintenance of a data warehouse that provides a consolidated, detailed view of individual customer behaviour and communication history. • Empowerment In this new age, eCRM strategies must be structured to accommodate customers 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. • Economics Too many companies execute communication strategies withlittle effort or ability to understand the economics of customer relationships and channel delivery choices. Yet customer economics drives smart asset allocation decisions, directing resources and efforts at individuals likely to provide the greatest return on customer communication initiatives. • Evaluation 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 returns, through customer analytic reporting. Evaluation of results allows companies to continuously refine and improve efforts to optimise relationships between companies and their customers. • External Information The use of consumer-sanctioned external information can be employed to further understand customer needs. This information can be gained from sources such as third-party information networks and Webpage profiler applications, under the condition that companies adhere to strict consumer opt-in rules and privacy concerns. The Need to Adopt 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 messaging to the Web and e-mail. •Co-ordinate marketing activities across all customer channels. •Leverage customer information for more effective eMarketing and eBusiness. •Focus business on improving customer relationship and earning a greater share of each customer’s business through consistent measurement, assessment and “actionable” customercontact strategies.
Chapter 6: Problems and Drawbacks
There are several reasons why a customer relationship management (CRM) solution might not have the desired results. There could be a lack of commitment from people within the company to the implementation of a CRM solution. Adapting to a customer-focused approach may require a cultural change. There
is a danger that relationships with customers will break down somewhere along the line, unless everyone in the business is committed to viewing their operations from the customers' perspective. The result is customer dissatisfaction and eventual loss of revenue. Poor communication can prevent buy-in. In order to make CRM work, all the relevant people in your business must know what information you need and how to use it. Weak leadership could cause problems for any CRM implementation plan. The onus is on management to lead by example and push for a customer focus on every project. If a proposed plan isn't right for your customers, don't do it. Send your teams back to the drawing board to come up with a solution that will work. Trying to implement CRM as a complete solution in one goes is a tempting but risky strategy. It is better to break your CRM project down into manageable pieces by setting up pilot programs and short-term milestones. Consider starting with a pilot project that incorporates all the necessary departments and groups but is small and flexible enough to allow adjustments along the way. Don't underestimate how much data you will require, and make sure that you can expand your systems if necessary. You need to carefully consider what data is collected and stored to ensure that only useful data is kept. You must also ensure you comply with the eight principles of the Data Protection Act that govern the processing of information on living, identifiable individuals. For more information, see their guide on how to comply with data protection legislation. Avoid adopting rigid rules which cannot be changed to be more flexible to the needs of individual customers.
Reasons for CRM Implementation Failure
An understanding of the challenges and critical success factors is paramount to project success. In this way, the organization is aware of those factors by which success can be measured, and will ensure the CRM system is implemented in a manner to satisfy all stakeholders. The main reasons for CRM failures include: Customer focus Organizational culture is not customer focused, with limited involvement of customer facing personnel in the design and implementation phase
Lack of support and understanding form senior management, lack of CRM understanding, lack of communications and changing business needs Project Management Misalignment between project and business requirements, with unrealistic goals, timelines, coupled with a lack of planning and insufficient reporting and control Team Members Lack of support, incentives, and lack of technical knowledge Data & Warehouse Requirements Poor quality data, inconsistent data between different systems Technical Factors Short term solution focus not aligned to long term architectural infrastructure growth, no prototyping or testing, misunderstanding technical requirements. CRM is failing because the correct capabilities are not being built at the enterprise level. The requisite changes in organizational culture, behavior and attitude are not being implemented. Overall, in failed projects, there is little or no alignment between stakeholders on success criteria, critical success factors, performance metrics, project drivers, nor on the dynamics of how these parameters may change over the project life cycle. The requirements of the customer are either misunderstood, or not taken into account. The result is an inconsistency in focus, with less than optimum system design and implementation. Hence CRM is failing due to two primary reasons: a) technical; due to the size, complexity, and lack of knowledge of technology, and b) human behavior; due to general change management issues in the organization. What is required is a coherent, all encompassing strategy that focuses on key stakeholder requirements. Companies underestimate the complexities of CRM projects, lack clearly defined business objectives, and tend to invest inadequately in the provision of CRM software.
Chapter 7: CEM: Future Concept
Customer experience management (CEM) is "the process of strategically managing a customer's entire experience with a product or a company" Marketing research has shown that about 70 to 80% of all products are perceived as commodities that are, seen as being more-or-less the same as competing products. This makes marketing the product difficult. Marketers have taken various approaches to this problem including: branding, product differentiation, market segmentation, and relationship marketing. Relationship marketing, (also called loyalty marketing) focuses on establishing and building a long term relationship between a company and a customer. There are several approaches that have been espoused including customer experience management, customer relationship management, loyalty programs, and database marketing.
CEM's critique of traditional marketing
The development of customer experience management originally started with a critique of three existing marketing concepts. It concluded that the following three concepts do not go far enough: Marketing concept--Since the 1970s there has been a gradual shift from a product-, technology-, and sales-focused orientation towards a customer- and market-oriented approach by determining the wants and needs of customers and satisfying them more efficiently or effectively as compared to competitors. However, the approach is still mostly functional, with similarities and differences between competitors being defined mostly by product features and customer benefits. In addition, the customer is perceived as being rational, which is in most cases not the case, as e.g. Kahneman and Tversky's Prospect theory has proven
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