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Customer Relationship Management consulting

At

Ahluwalia Associates Pvt. Ltd.

Executive Summary The project attempts to study the problems faced by Ahluwalia Associates Pvt Ltd which is Real Estate Consulting company which operates in the National Capital Region. It provides services to clients for negotiating sales-purchase deals and allied backup services for commercial renting sales-purchase of rented properties, residential flats, kothis and plots.

The company is facing problems of declining revenue trend and stiff competition from similar business firms. The objective of the study is to analyse the company in terms of customers, internal processes and structure and recommend suitable customer relationship management practices which will help the company is increasing customer satisfaction and consequently customer loyalty which will not only help arrest the decline in revenues but also increase profitability. The study was conducted by face to face interviewing of the organizations management in order to gather information about the various practices of the company in dealing with various aspects of its business. The data obtained was then analysed in order to observe the cause of the problem and for coming up with suitable solutions.

Analysis was done using the data collected from the company. We began by doing an analysis of customer profitability which helps us in taking a lot of strategic decisions by providing answers to important questions like, Which customers are most profitable to the organization? Can we group customers according to profitability so that we can allocate our resources to them optimally? We used distribution of profitability tool and Stobachoff curve to analyse the customer base. Then we analysed the organization's existing structure inorder to restructure it to a customer-centric one. Then we analysed the results and formulated recommendations. We recommended that the company focus its resources more on Sale or Purchase of offices and bigger B2B accounts as they are more profitable for the company. Then we recommended the existing organization structure to be changed from Geographic divisional structure to Market structure (Customer-centric). Lastly, we recommended implementation of CRM technology.

Table of Contents Contents


Table of Contents .................................................................................................................................... 2 Chapter 1: Introduction .......................................................................................................................... 3 1.1 Background ............................................................................................................................. 5

1.2 Objective ....................................................................................................................................... 8 Chapter 2: Methodology ......................................................................................................................... 9 2.1 Research Design ............................................................................................................................ 9 2.2 Data Collection ............................................................................................................................ 10 2.3 Sample of the study .................................................................................................................... 10 2.4 Field work .................................................................................................................................... 10 2.5 Analysis ....................................................................................................................................... 10 Chapter 3: Results ................................................................................................................................. 15 Chapter 4: Conclusions and Recommendations ................................................................................... 16 Chapter 5: Limitations ........................................................................................................................... 19 Annexure ............................................................................................................................................... 20 Bibliography ...................................................................................................................................... 20

References: ....................................................................................................................................... 20 Interview Schedule .............................................................................. Error! Bookmark not defined.

Chapter 1: Introduction
India is fast emerging as a key business location, predominantly in the services industry. Its encouraging demographics and robust economic growth make the nation an attractive place for property investors, since demand for property is determined by demographic needs and business development.

In recent years, the real estate sector in India has presented a trend towards greater transparency and organisation, complemented by a lot of regulatory reforms. This trend has brought about greater availability of funding by real estate developers. Delhi, Indias capital and second biggest city characterizes the central traffic hub in north India. Delhis office market spreads beyond Noida/Greater Noida in the east. As in the other metro cities, the main sources of demand are IT companies. Delhi has also established itself as a call centre hub, which pulls on the workforces terrific and accent-free English language skills. Demand for space has risen hugely in recent years.

The Central Business District is located in the centre of New Delhi. Banks and corporate service providers with close proximity to the ministries are also located there. The prime location, for retail and office use, is around Connaught Place, although there is scarce space for new buildings there. Therefore, rents are comparatively high and new office blocks are being constructed on the suburbs in the south of the metropolitan area and in peripheral districts.

Directly to the south of Delhi, Gurgaon was the first non-metropolitan city in which an international IT company (IBM) opened their office. Its huge supply of space and low office rents make it very attractive, increasingly recognised by media and technology companies (Nokia, Microsoftetc.).

Offices were trailed by residential developers for the staff, giving growth to a satellite town with excellent infrastructure that is very conveniently located for the international airport. Meanwhile, construction work can no longer keep up with growth in demand and as reserves of space decrease, so office rents are starting to rise in Gurgaon, too. However, they are still well below the Central Business District level.

The scarcity of space in Gurgaon makes other out of town places curious as well. Noida and Greater Noida are situated to the east of Delhi. Noida is around 10 kmsfrom the city, and Greater Noida is being built a further 20 kms of Noida. Both townships are based on a master plan assigning individual districts specific purposes.

Despite the massive investment potential there are certain difficulties related to investment in Indias real estate. Some of them are listed below.

Major Impediments to Real Estate Investments Complex Procedures Lack of Urban Planning Limited market history for property Title Insurance unavailability

Various challenges of investing in India linked to transparency, limited market history and problems in forecasting, as well as imperfections & title complexities. Land titles& ownership records are one of the major blind spots in property valuations. Also there is no title insurance in the state. While domestic funds are capable of negotiating these problems, foreign funds too are fast learning to handle them.

1.1 Background
Ahluwalia Associate is a professionally managed leading Real Estate Consultants & Developers with operations in National Capital Region. They are authorized associates of DLF & Unitech for both commercial and residential projects with their office in Defence Colony, New Delhi. It provides services to clients for negotiating sales-purchase deals and allied backup services for commercial renting salespurchase of rented properties, residential flats, kothis and plots.

Currently the company does not have any full proof method of customer relationship management. The company maintains customer records, primarily customer details like name, contact number, current address, budget, etc in MS-Excel files. These records are mainly used for record keeping which aids in the process of auditing and tax-filing. Currently the data is not used for either any formal customer relationship management or any kind of analysis. Presently the company deals with six categories of customers: 1. Real Estate builders 2. Buyers looking for purchasing flats, houses or land 3. Customers looking for rented accommodations. 4. Sellers looking for purchasing flats, houses or land 5. House owners looking for tenants for their rented accommodations. 6. Businesses looking for commercial space.

The company earns its revenue through commissions by facilitating deals between buyers and sellers or deals between House owners and tenants who are looking for a rented accommodation.

1.1.1 The Business Problem: Presently, there is a declining revenue trend for the company. The management of the company attributes this declining trend to an increasing cut-throat competitive scenario among similar business companies in the area.

1.1.2 Literature Review David Clements, pioneer in the development of CRM Software for Real Estate Industry, The Benefits of Customer Relationship Management Software is the subject of our literature review. He points out that handling prospective homebuyers has often been a time consuming job for the sales representatives who sell new households. The money & time spent in communications, developing marketing strategies and tracking sales often take a huge portion of a projects overall sales budget. This is until software designers introduced Customer Relationship Management (CRM) software for real estate developers, constructors, and sales and marketing companies. Sales representatives who work for companies that use this technology now manage and market to their customers online, from interest lists to occupancies. This increases the total time they spend out of the office showing properties.

FINANCIAL BENEFITS OF CRM FOR REAL ESTATE A quality CRM system deals complete summary reports on critical business information vital in taking decisions. Executives look at CRM for real estate sales management as financially path breaking. Many CRM platforms allow developers to control the scheduled issue of for-sale inventory, which improves profitability by neighbourhood phase, individual unit, or the whole project via sell out.

Sales managers can increase home prices online during peak selling periods, a great way to increase the profits of the superior-selling floor plans. Well-designed CRM software allows administrators to track, view and prepare purchase

agreements online via a central database. It leads to time saving and diminishes costly errors and lapses by eradicating the need for manual preparation and review of purchaser agreements.

Another way of utilizing real estate CRM is managing deposits of home sales that have already been secured. It makes it easier for sales reps to create flexible deposit schedules, and alert administrative or sales teams when homebuyer deposits are due, or past due.

Additional advantages of accepting a CRM platform include tracking commission plans, incentives, bonuses and special promotions of both outside brokers and internal reps. It enables developers and marketing companies to see who their top selling reps are and track the amount of business generated by outside brokers.

A VARIETY OF APPLICATIONS Real estate CRM is now accessible at sales centres and home offices, or from laptops anyplace in the world. The main purpose of CRM for home sales is to aid sales reps work smarter, with reduced effort, while providing better service to their customers. Even though platforms vary, most CRM Software provides everything users need to help them sell homes with controlled velocity. CRM makes profit growth easier and repeat business, from managing homebuyer databases and initiating targeted email campaigns, to directing purchase agreements. Various CRM platforms are designed by means of a dashboard that works in combination with sales reps homepages. Information regarding prospective buyers which is gathered in sales centers or on Web site registration pages is automatically routed via the CRM database to the salespersons homepage. It allows reps to address buyers needs immediately and be consistent with their follow up. Sales reps may also use the dashboard to manage their daily activities, manage customers, and view all contact history.

Some applications have been developed by a small number of CRM designers to aid sales reps nurture their relationships with buyers. The names from the online registrations are entered into the CRM program and assigned to sales reps. It allows

reps to effectively initiate their relationships with a potential buyer creatively and timely manner.

CRM allows support staff to screen traffic at the sales centres situated at new home developments. It aids them in effectively targeting buyers by demographic and monitor the response to certain email campaigns.

CRM designs aid administrators decrease mistakes by formulating and observing purchase agreements, upgrades and options from a central database. Inventory and unit pricing, revenue, deposits and additional aspects of the sales process are tracked and reported on quickly. It helps customer service personnel decrease the number of deficits and resolution time prior to owners occupancy.

Increasing number of developers are including CRM software in their sales strategies, assisting them in selling homes quicker, for more currency, and keeping their clients for life.

1.2 Objective
The objective of the study is to analyse the company in terms of customers, internal processes and structure and recommend suitable customer relationship

management practices which will help the company is increasing customer satisfaction and consequently customer loyalty which will not only help arrest the decline in revenues but also increase profitability.

Chapter 2: Methodology
This chapter mentions the methodology that was followed to obtain the solution for the business problem. It mentions the research design used for the study, the data collection process, the sample of the study, the field work done and the analysis that was carried out from the obtained data.

2.1 Research Design


The study was conducted by face to face interviewing of the organizations management in order to gather information about the various practices of the company in dealing with various aspects of its business. The data obtained was then analysed in order to observe the cause of the problem and for coming up with suitable solutions.

2.2 Data Collection


The data was collected directly from the organization. The organization had provided scanned copied of their financial statements, invoices and various receipts. Data related to organization structure and organization processes was obtained through face to face meeting with the organizations managers.

2.3 Sample of the study


The sample of the study was a single organization, Ahluwalia Associated Pvt. Ltd. All the data of the study was collected from this single source. Thus, the study used convenience sampling technique. Convenience sampling is a non-probability sampling technique where subjects are selected because of their convenient accessibility and proximity to the researcher.

2.4 Field work


The sample data was collected by using an Interview schedule, face to face interview with the owner of the organization. An appointment was sought 6 days before the proposed interview date and it was confirmed the following day. The interview began as per the scheduled time and lasted for 40 minutes duration.

2.5 Analysis
Before implementing any customer relationship management practices in the organization, it is important to understand the organizations customers and the various customer parameters.

We began by doing an analysis of customer profitability. This will help us in taking a lot of strategic decisions by providing answers to important questions like, Which customers are most profitable to the organization?

Can we group customers according to profitability so that we can allocate our resources to them optimally? Which customers are unprofitable to the organization? Can we make them profitable or should we get rid of them?

We can use distribution of profitability tool to analyse our customer base. Also, this will help us measure the sensitivity of the organizations customer base and tell us if the company is dependent on a few customers or not and it can also show the cross subsidizing effect in the customer base. In our study, we will use the Stobachoff curve that we have learned in order to analyse the customer base of the organization.

Customer Profitability analysis: Below is the client data upon which analysis has been carried out. We have classified clients into two categories. Category A clients are those which have maintained a continual business relationship with the company and category B clients are those which do not have a continual business relationship with the company. We can see from Column D below that 83.41% of the total profit of the company is coming from Category A clients, and if we drill down further, we observe that 76.32% profit comes from one single client- DLF alone. This is a very alarming situation because if the company loses this client then their profitability would be severely dented. In the figure below shows the business transactions of the company in FY20112012, Column A shows the client name, column C shows the nature of the transaction, column D shows the contribution of the transaction to the total profitability of the company in FY11-12, and column E mentions the category of client.

Fig Business transaction details for FY11-12 [Note: Column B has profit figures and has been hidden to maintain confidentiality as requested by the organization]

In the next figure below, the transactions have been combined together client-wise. And it has been arranged in descending order of profitability.

Columns F and G are x and y coordinate values of the Stobachoff curve that were computed in the excel sheet.

Fig. Clients in descending order of profitability

The Stobachoff Curve: The vertical axis shows the cumulative profitability of the customer base as a fraction of the aggregated customer base profitability. The customers are arranged in descending order of the magnitudes of their profitability from left to right on the horizontal axis.

Fig. The Stobachoff Curve

The x and y coordinated have been calculated as follows: Let the profitability distribution of the Kth customer (K=1,2,3,...,n) be represented by p1,p2,p3,...pn and let the total profitability of the customer base be represented by P. Then we obtain the x,y coordinates as:(0,0); (1/n, p1/P); (2/n, (p1+p2)/P); ... ; (1,1)

Organization Structure:

The figure below shows the current organization structure of the company. The overall operations and business is handled by the CEO. The Manager reports to the CEO. The manager supervises six Sales Representatives and one Accountant. The Sales representatives are responsible for each territory that they have been assigned. They report daily to the Manager. There is a clerk who takes care of adhoc office paper work. This is a smaller version of Geographic divisional structure, where responsibilities are divided geographic region wise(territory-wise).

A Sales representative has been assigned responsibilities region wise, so he/she handles both Category A and Category B clients belonging to his/her region.

We believe that this might not be a very efficient way of dividing responsibilities since all the clients from the same region are not equally profitable for the company. So there is a need to service different category of clients differently because some clients are more profitable to the company and hence more valuable that others.

Chapter 3: Results
This chapter mentions the results of the above analysis.

In the Stobachoff curve below, it clearly shows that 8.33% of the customers attribute for 76.33% of its profit, and 41.66% of the customers attribute for 97.62% of its profit. In this case there is no cross-subsidizing effect because none of the customers are unprofitable.

Also it can be observed that 74.63% of the total profit is coming from Office Space bookings type of transactions. Even the transactions relating to Sale or Purchase of offices irrespective of category are more profitable than other type of transactions.

In the figure below it can be seen that 83.41% of the total profit comes from category A customers. These are the customers which have a continual relationship with the company.

Fig. Percentage profit category-wise

Chapter 4: Conclusions and Recommendations


Based on the above analysis we suggest the following recommendations:

Clearly, it was observed that 74.63% of the total profit is coming from Office Space bookings type of transactions. Even the transactions relating to Sale or Purchase of offices irrespective of category are more profitable than other type of transactions. Thus, the company should focus its resources and sales efforts in searching and servicing such kind of deals which are very profitable for the company. Also, we have seen that 83.41% of the total profit comes from category A customers. These are the customers which have a continual relationship with the company. Thus, there is great scope of using CRM processes here to strengthen and build upon these relationships which will enhance the companys profitability.

Customer centric re-alignment:

Organizational Design and Change: The companys key focus should be on customer satisfaction. If the customer is satisfied it will increase customer loyalty. In order to service customers better, we recommend that the company change its organizational design to one which serves the new objectives better. Since, the new objectives focus on a customer centric approach, we recommend a Market Structure for the organization. In a market structure each division focuses on the distinct need of each type of customer group. Also the market structure focuses the activities of the organization on the needs of the customers. With this structure the organization can quickly sense changes in its customer needs and transfer skills and resources to satisfy the changing needs of this vital stakeholder.

We recommend that the current territory-wise division should be replaced with a customer group focused division as shown below.

Here, the sales representatives have been aligned to customer accounts. Since clearly from our analysis DLF is one of the most vital customers of the company, it is prudent to assign a dedicated Sales Representative to handle this client account. Also, other sales representatives have been assigned the responsibilities to either handle Office bookings or non-office booking deals like sales of houses and rented accommodations, etc.

Implementation of CRM technology We also recommend that the company make use of CRM software for maintain its customer and transaction records. Since the organization is small and complexity is less, the company can use a good open source CRM software that are available for free like VTiger, which is available in Windows as well as Linux platform. The features of the software are good enough to fit the needs of the company.

FreeCRM is another web based software solution for customer relationship management. Free CRM (free edition comes with banned ads) is good option for contact and lead tracking, sales and contact management, sales pipeline management, customer service and business management. This can also be used by the company.

Using the CRM software will provide many benefits to the company. The managers of the company can view summarized Dashboard consisting of sales figures, number of deals closed by each sales person on a weekly or monthly basis, the revenue contributions by each sales person (thus, compensation rewards can be managed more easily). Thus, close tracking of performances of the sales people will be easier.

Chapter 5: Limitations
As no solution is devoid of its limitations, there have been some limitations in this as well.

Although the recommendations that we provided have been accepted by the companys management, they are yet to be fully implemented within the company. Thus, the benefits and the effectiveness of the recommendations can only be measured and quantified after a certain period of time once the recommendations have been fully implemented.

Annexure

Bibliography
[1] Francis Buttle (2009). CRM Concepts and Technologies. India: Elsevier. p27-46. [2] Ed Peelan (2012). Customer Relationship Management. India: Pearson.

References:
http://www.crmforecast.com/strategy.htm , last accessed on August 12, 2012 http://en.wikipedia.org/wiki/Customer_relationship_management , last accessed on August 3, 2012