UNIT 1 CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management Fundamentals- Theoretical perspectives of relationship

Customer relationship management (CRM) is a term that refers to practices, strategies and
technologies that companies use to manage and analyze customer interactions and data throughout
the customer lifecycle, with the goal of improving business relationships with customers, assisting in
customer retention and driving sales growth. CRM systems are designed to compile information on
customers across different channels -- or points of contact between the customer and the company --
which could include the company's website, telephone, live chat, direct mail, marketing materials and
social media. CRM systems can also give customer-facing staff detailed information on customers'
personal information, purchase history, buying preferences and concerns.

THEORETICAL PERSPECTIVE OF RELATIONSHIP IN CRM

Customer Relationship Management, commonly referred to as CRM, is defined as the customer-

oriented approach of a business that comprises of analysis, planning, controlling and co-ordinating of
the relationship between a company and its customers; the relationship is developed and nurtured by
means of various state-of-the-art technologies required for information gathering and database
maintenance Buttle (2008). According to Siems (2010), it is viewed as the combination of three key
elements i.e. customer strategies, technology and business processes; when these three aspects are
taken into account, an organisation can get in-depth information about its customers and achieve
much enhanced customer loyalty and increased profitability.

The primary role of CRM is to engage each customer in a productive exchange of dialogue that will
help a company to customize its product or service offerings in ways that will ensure that the
customers are attracted, cordial relations with them are developed and they can be retained for long
time by offering them higher level of offerings

EVOLUTION OF RELATIONSHIP MARKETING

Since CRM is an organisation wide strategy, it is important that its business strategy comprises of
specific target market that it will be focussing on for attracting them, developing long-term relations

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with them and then taking adequate measures to make them loyal to the company for long period.
According to Kim, Zhao and Yang (2008), the essence of CRM theory has origination from three
important notions of marketing management i.e. relationship marketing, customer orientation and
database marketing. As the Information and Communication Technology (ICT) has enhanced, all
three marketing views are merged together in the CRM model (Roberts, Liu & Hazard, 2005).

As the customers are exposed to various marketing activities from unlimited companies and reaching
them by using traditional mass advertising mediums has become an outdated concept; the only way
to gain access to the target market's attention is by making effective use of CRM activities (Buttle,
2008). Although in some cases, the companies have faced severe loses because they developed their
strategy on the basis of wrong data but such mistakes can be avoided by ensuring that appropriate
research methods are used for research on customers along with compatible analysis tools (Li, XU &
Li, 2005).

There is no concrete definition available for understanding the concept of CRM as it has been defined
by many researchers in different ways. For instance, Buttle (2008) defined the concept of CRM as an
overall process used by a firm for creation and maintenance of customer relationships that are
profitable by fulfilling the promise of delivering excellent customer value proposition and
satisfaction. This definition has more emphasis on the marketing aspect that focuses on value creation
and employee satisfaction.

On the other hand, Becker, Greve and Albers (2009) give a more technical perspective definition of
CRM by stating that it is a strategy used by an organisation that relies on information technology to
assist it is providing a detailed, genuine and integrated perspective of its customers which can help it
in ensuring that all business processes and interaction with customers support it in maintaining and
enhancing relationships that are equally favourable for both parties (customers and organisation).

In addition to these two specific perspectives of CRM, there is one more which is most commonly
cited by the marketing management researchers i.e. integrated perspective of CRM that ensures that
there is a good blend of technological and business perspectives so that all factors required for proper
and effective implementation of CRM are adequately planned (Hutt & Speh, 2007; Palmiater et al.,
2008).

Broadly speaking, there are two theoretical perspective of CRM i.e. technical or technological
perspective and business i.e. customer-centric perspective. From technical aspect, CRM is important
both for operational and analytical purposes that implies that proper systems need to be implemented
in the organisation so that they can provide proper foundations for analysis of different customer
segments. While, business perspective of CRM emphasizes that relationship marketing should be
integrated with marketing mix (product, price, place and promotion) so that a valuable outcome is
achieved i.e. customer satisfaction, loyalty and value creation (Siems, 2010).

According to Buttle (2008) and Siems (2010), CRM is a result of an effective blend of both
technological and business innovation; CRM is successful with all vital and crucial perspectives of
individuals are compiled together and then taken into consideration when developing the marketing
strategy. It implies that IT and marketing should be properly aligned within the organisations so that
the CRM efforts designed for the customers will prove to be beneficial for the organisation. In order to
make successful progression in the dynamic business environment, it is important that all
organisational and strategic aspects are properly taken into consideration.

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Since CRM is among the vital constituents of the organisational processes as it supports identification
of the customers, knowledge creation, development of relationships with the customers and
incorporating their demands in the company's product or service offering, it helps in ensuring that
the marketing mix is designed in accordance with the customer requirements (Palmiater et al., 2008).

For instance, when Toyota introduced economical cars meaning low priced cars to meet the demands
of the middle class people, it was a big failure for the company as its loyal customer's perceived
reduction in the quality of the company's products and started switching to other companies. In order
to recover from the loss, the Toyota Company had to call back its economical cars and run ads on
Television emphasizing that no compromise is made on the quality of its cars.

Similarly, when Unilever realized that its Sunsilk customers were unhappy with the shampoo
packaging, it instantly launched new packaging in about a month to meet the demands of the
customers. In order to create new image in the customer's minds, it engaged in various CRM activities
such as organizing events like fashion shows, getting the product endorsed by the leading celebrities
and allowing the customers to avail free hair wash opportunities. Hence, when effective CRM
activities are designed, only then the companies are able to attract the customers, develop cordial
relations with them and retain them for long period of time.

In order to have a successful implementation of CRM in an organisation, there are four key areas that
should be present in its business operations so that it can effectively develop cordial relations with its
customers i.e. people, strategy, technology and processes (Hutt & Speh, 2007). According to Roberts,
Liu and Hazard (2005), the successive CRM implementation process encompasses four key features
i.e. keeping a close focus on the key customers, developing effective CRM plans in accordance with
the customers' requirements, proper knowledge management processes so that information can be
stored and used appropriately and applying technology within the organisation that supports CRM
based strategies.

Conclusion

Since an organisation's success is largely determined by the processes that are employed to develop
cordial relations with customers that help them in developing products and services in accordance to
the market demands, it is important to ensure that all appropriate and effective mechanisms are in
place that will support proper development of CRM strategy. It has become vital for every
organisation to develop a CRM strategy on the basis of accurate and up-to-date information about its
respective customers so that it is able to enhance its performance in the market. When information
about the customers is collected on an ongoing basis, it helps a company to monitor its performance
and unleash any unmet needs and demands of the customers.

With the help of an effective CRM process, the organisations are able to offer a diverse range of
customized products and services, improve the quality level of existing offerings, enhance the
customer value proposition and improve the customer retention rate by exceeding the expectation of
the important and valuable customers who are an important constituent for profit generation.
However, it is important for the organisations that they define their CRM strategy appropriately as it
can affect their CRM plans which can have negative impact as well. It is vital for the organisations to
first customer-centric work environment so that everyone is sharing same values and beliefs; this is
the most common mistake found in various organisations (Buttle, 2008). Hence, every organisation
that wants to make a leading name in the market will have to ensure that it develops a practical and

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well-defined CRM strategy that will help it in attracting the customers in right way and then retaining
them so that they can survive in such tough and dynamic business environment.

STAGES OF CUSTOMER RELATIONSHIP MANAGEMENT

ISSUES OF RELATIONSHIP

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PURPOSE OF RELATIONSHIP MARKETING

Relationship marketing is a facet of customer relationship management (CRM) that focuses on

customer loyalty and long-term customer engagement rather than shorter-term goals like customer
acquisition and individual sales. The goal of relationship marketing (or customer relationship
marketing) is to create strong, even emotional, customer connections to a brand that can lead to
ongoing business, free word-of-mouth promotion and information from customers that can generate
leads.

Relationship marketing stands in contrast to the more traditional transactional marketingapproach,

which focuses on increasing the number of individual sales. In the transactional model, the return
on customer acquisition costmay be insufficient. A customer may be convinced to select that brand
one time, but without a strong relationship marketing strategy, the customer may not come back to
that brand in the future. While organizations combine elements of both relationship and transactional
marketing, customer relationship marketing is starting to play a more important role for many
companies.

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Implementing a relationship marketing strategy

Relationship marketing is based on the tenets of customer experience management(CEM), which

focuses on improving customer interactions to foster better brand loyalty. While these interactions

can still occur in person or over the phone, much of relationship marketing and CEM has taken to the

Web

With the abundance of information on the Web and flourishing use of social media, most consumers
expect to have easy, tailored access to details about a brand and even expect the opportunity to
influence products and services via social media posts and online reviews. Today, relationship
marketing involves creating easy two-way communication between customers and the business,
tracking customer activities and providing tailored information to customers based on those
activities.

APPROACH TOWARDS MARKETING: A PARADIGM SHIFT, HISTORICAL PERSPECTIVE

Marketing discipline is undergoing a change in its orientation from transactions to relationships. This
change is the result of a dynamic focus of marketing that has shifted over the years. Beginning with
the commodity and institutional schools, the marketing discipline has witnessed the rise and falls of
functional, managerial, and exchange schools of thought over the years. The exchange view of
marketing, that gained prominence in the 1970s and 80s, is currently under question as to its ability to
offer a general paradigm for understanding marketing role in the organization (Webester 1992).
Current marketing practices suggest that enlightened companies are moving away from an exchange
and transactions a road) towards relationship marketing. Such an orientation of marketing seeks to
develop dose interactions with selected customers, suppliers and competitors for value creation
through cooperative and collaborative efforts.

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This paper examines the factors that have led to the emergence of a relationship orientation in
marketing. It traces the historical development of marketing thought and establishes that early
marketing thinkers were not as concerned with exchanges as they were concerned with the functions
performed by marketing institutions that created value for the consumers. However, in the 1960s,
proponents of the functionalist school of marketing thought, such as Wroe Alderson (Alderson and
Martin 1965) and William McInnes (1964), launched the exchange perspective ci marketing. This was
further boosted by Kotler when he called transaction the core concept of marketing (Kotler 1972). In a
series of related articles. Bagozzi (1974, 1975. 1978. 1979) presented his conception of exchange as the
fundamental foundation of marketing.

Some critics of the exchange perspective also emerged, for example, Ferrell and Perrachione (1980),
but Hunt (1983), after reviewing the debate, proclaimed a decisive victory in favour of the exchange
perspective by suggesting that the basic subject matter marketing is the exchange relationship or
transaction. However, the debate was not over. Sheth, Gardener and Garrett (1988) maintained that
the social exchange perspective had limitations in offering concepts on which a general theory of
marketing could be developed. More specifically, they argued that market transactions should not be
the fundamental unit of analysis in marketing (Sheth, Gardener, and Garrett 1988).
In this paper it is argued that the exchange view of marketing is the legacy of the discipline’s growth
as an offshoot of economics. The concern for trade and transactions has remained in marketing disc to
the influence of institutional economic thinking and because of the axiom that marketing was
essentially an economic activity. Even those who wanted to broaden the concept of marketing to
include non-economic activities (Kotler and Levy 1969), were not willing to totally isolate themselves
from the prevailing economic concerns. Bagozzi (1979) used economic equations to formalize his
theory of marketing exchanges, although his theory purported to, offer a social exchange perspective
of marketing.

The exchange view of marketing many inherent assumptions that may not be tenable according to
our observations of current marketing practices. Most noticeable among them ii the implied
assumption of the exchange view that each party’s market behavior is exchange driven. However, we
notice in several situations that exchange is not the primary concern of all interacting parties. Some
marketing interactions are devoid of any explicit or implicit expectation of exchange. For example,
when two or more parties share resources, ideas and skills to develop a new product, or carryon joint
advertising, or jointly participate in a community development activity, they don’t seek exchange
from one another. Their god is to create superior market value through shared activities. Exchanges, if
any are incidental and of very little significance in shaping the market behaviour of the interacting
parties.
Today’s marketplace realities further suggest that marketers are not anymore focusing on exchanges
an much they are concerned with customer satisfaction and relationships. The shift towards
relationships, and away from exchanges, is the result of the emergence of global and saviour
economies that have compelled marketers to seek greater commitment from their automat and
suppliers. Also intense competition in several sectors of the business reinforced the med for retaining
customers. Exchanges (or sales) as a measure of success of marketing is not anymore as popular as it
was some years ago. Customer satisfaction and the share of the life-time revenue of the customer are
being advocated as better measures of marketing success.

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Our paper critically examines the impact of the exchange paradigm on marketing practice and
thinking. It argues that some ci the effects of the exchange paradigm were that it created an excessive
focus on sales, functional independence, adversarial relationships, and inconsistent reward systems in
the organizations. On the other hand, the relationship orientation of marketing offers the prospect of
creating value though synergistic efforts of marketing institutions, cross-Functional integration, short
development cycles, and long term view of customers.

CRM DEFINITIONS

Customer relationship management (CRM) refers to the principles, practices, and guidelines that an
organization follows when interacting with its customers. From the organization's point of view, this
entire relationship not only encompasses the direct interaction aspect, such as sales and/or service
related processes, but also in the forecasting and analysis of customer trends and behaviours, which
ultimately serve to enhance the customer's overall experience.

EMERGENCE OF CRM PRACTICES

The Past:

Looking back at a snapshot history of marketing, we can see the following clear developments and
progression over the last four decades:

• 1960’s – the era of Mass Marketing, when Gibbs SR toothpaste began the first marketing of this kind
with its black and white campaign.

• 1970’s – saw the beginning of segmentation, direct mail campaigns and early telemarketing (such as
publishing)

• 1980’s – where Niche marketing made millionaires of those who were best at it.

• 1990’s – Relationship Marketing. The explosion of telemarketing and call centres, all set up to
develop relationships with customers. The recognition of the true value of retention and the use of
Lifetime Value as a business case.

In addition to this, a number of key marketing concepts can also be used to see where CRM has
developed from:

• Satisfying Needs, Customer Orientation

• The organisation needs to be arranged so that all functions contribute

• Profit must be the consequence of delighting customers (Kotler)

Developing customer relationship has historical antecedents going back into the pre industrial era.
Similarly artisans often developed customized produce for each customer. Such direct interaction led
to relational bonding between the producer and the consumer. It was only after industrial era’s mass
production society and the advent of the middlemen that there were less frequent interactions
between producers and the consumers leading to transactions oriented marketing.

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The production and consumption factions got separated leading to marketing functions being
performed by the middle men and middlemen are in general oriented towards the economic aspects
of buying since the largest cost is often the cost of goods sold.

In recent years however, several factors have contributed to the rapid development and evolution of
CRM. These include:

-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. Advances in
information technology, networking and manufacturing technology have helped companies to
quickly match competition. As a result product quality and cost are no longer significant competitive
advantages. The growth in service economy. Since services are typically produced and delivered at
the same institution, it minimizes the role of the middlemen. Another force driving the adoption of
CRM has been the total quality movement. When companies embraced TQM it became necessary to
involve customers and suppliers in implementing the program at all levels of the value chain. This
needed close working relationships with the customers. Thus several companies such as Motorola,
IBM, General Motors, Xerox, Ford, Toyota, etc formed partnering relations with suppliers and
customers to practice TQM. Other programs such as JIT and MRP also made use of interdependent
relationships between suppliers and customers. Customer expectations are changing almost on a
daily basis. Newly Empowered customers who choose how to communicate with the companies
across various available channels. Also nowadays consumers expect a high degree of personalization.
Emerging real time, interactive channels including e-mail, ATMs and call centre that must be
synchronized with customer’s non-electronic activities. The speed of business change, requiring
flexibility and rapid adoption to technologies. In the current era of hyper competition, marketers are
forced to be more concerned with customer retention and customer loyalty. As several researchers
have found out retaining customers is less expensive and more sustainable competitive advantage
than acquiring new ones. On the supply side it pays more to develop closer relationships with a few
suppliers than to develop more vendors. In addition several marketers are concerned with keeping
customers for life than making one time sale. The globalization of world marketplace makes it
necessary to have global account management for the customers.

CRM CYCLE

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In customer relationship management (CRM), customer life cycle is a term used to describe the
progression of steps a customer goes through when considering, purchasing, using, and maintaining
loyalty to a product or service. Marketing analysts Jim Sterne and Matt Cutler have developed a
matrix that breaks the customer life cycle into five distinct steps: reach, acquisition, conversion,
retention, and loyalty. In layman's terms, this means getting a potential customer's attention, teaching
them what you have to offer, turning them into a paying customer, and then keeping them as a loyal
customer whose satisfaction with the product or service urges other customers to join the cycle. The
customer life cycle is often depicted by an ellipse, representing the fact that customer retention truly
is a cycle and the goal of effective CRM is to get the customer to move through the cycle again and
again.

STAKEHOLDER AND CRM

 Both need each other to advance

 The interdependence of business and society implies that both business decisions and social
policies must follow the practices of shared value exchange.
 They are interrelated.
 Creating meaningful interactions between various stakeholders enable the identification of
shared objectives, design of solutions that account for various perspectives, and creation of
representative program strategies required to scale up important high-impact capacity
development strategies.
 Creating meaningful interactions between various stakeholders enable the identification of
shared objectives, design of solutions that account for various perspectives, and creation of
representative program strategies required to scale up important high-impact capacity
development strategies.

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SIGNIFICANCE OF CRM

Looking at some broader perspectives given as below we can easily determine why a CRM System
is always important for an organization.

1. A CRM system consists of a historical view and analysis of all the acquired or to be acquired
customers. This helps in reduced searching and correlating customers and to foresee
customer needs effectively and increase business.
2. CRM contains each and every bit of details of a customer, hence it is very easy for track a
customer accordingly and can be used to determine which customer can be profitable and
which not.
3. In CRM system, customers are grouped according to different aspects according to the type of
business they do or according to physical location and are allocated to different customer
managers often called as account managers. This helps in focusing and concentrating on each
and every customer separately.
4. A CRM system is not only used to deal with the existing customers but is also useful in
acquiring new customers. The process first starts with identifying a customer and
maintaining all the corresponding details into the CRM system which is also called an
‘Opportunity of Business’. The Sales and Field representatives then try getting business out of
these customers by sophistically following up with them and converting them into a winning
deal. All this is very easily and efficiently done by an integrated CRM system.
5. The strongest aspect of Customer Relationship Management is that it is very cost-effective.
The advantage of decently implemented CRM system is that there is very less need of paper
and manual work which requires lesser staff to manage and lesser resources to deal with. The
technologies used in implementing a CRM system are also very cheap and smooth as
compared to the traditional way of business.
6. All the details in CRM system is kept centralized which is available anytime on fingertips.
This reduces the process time and increases productivity.
7. Efficiently dealing with all the customers and providing them what they actually need
increases the customer satisfaction. This increases the chance of getting more business which
ultimately enhances turnover and profit.
8. If the customer is satisfied they will always be loyal to you and will remain in business
forever resulting in increasing customer base and ultimately enhancing net growth of
business.

In today’s commercial world, practice of dealing with existing customers and thriving business by
getting more customers into loop is predominant and is mere a dilemma. Installing a CRM system
can definitely improve the situation and help in challenging the new ways of marketing and business
in an efficient manner. Hence in the era of business every organization should be recommended to
have a full-fledged CRM system to cope up with all the business needs.

TYPES OF CRM

Three Types of CRM…Operational, Collaborative & Analytical

There are three types of CRM: operational, collaborative and analytical.

 Operational CRM generally refers to products and services that allow an organization to take
care of their customers. It provides support for various business processes, which can include
sales, marketing and service. Contact centres, data aggregation systems and web sites are a few
examples.

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  Collaborative CRM is communication with customers and covers direct interaction with
customers including feedback and issue reporting. Interaction can take place through web
pages, email, Automated Voice Response. Collaborative CRM greatly improves on services
offered.
 Analytical CRM addresses the analysis of customer data for a host of different purposes. In
general it is used to design and execute targeted marketing campaigns that optimize marketing
effectiveness. Analytical CRM takes into account product and service decision making, pricing
and new product development.

SUCCESS FACTORS IN CRM

1. Establish Measurable Business Goals:- There are CRM solutions that address all of these
objectives, so you must prioritize what you want to accomplish and select the CRM
technology accordingly
2. Align Your Business and Your Information Technology Operations While CRM is driven by
technology, it’s not about technology. The point of CRM is to improve your customer-facing
business processes; technology is only a means to achieving that end. Every successful
implementation begins by recognizing this fact—and by creating operational structures that
reinforce it.
3. Get Executive Support Up Front Because CRM projects are strategic initiatives, top
management must actively support them. Without executive endorsement—including an
explanation of how the new system will support organizational goals—a CRM initiative
might be dismissed as a gimmick or a fad. If CRM is critical to your company’s survival—
which is increasingly the case for organizations everywhere—top executives, from the CEO
down, must drive that message.
4. Let Business Goals Drive Functionality solutions with a list of detailed business
requirements—not generic wishes such as “improve customer service,” but specific goals
such as “reduce service response times by 25 percent.” The deployments that work best target
concrete pain points. Just as a CRM project must be driven by business goals, so must every
configuration decision. If a feature doesn’t directly help your company better serve
customers, you probably don’t need it
5. Minimize Customization by Leveraging Out-of-the-Box Functionality Over-customization is
one of the most common causes of budget overruns and missed deadlines in CRM
implementations. A project team sets out to adopt a “vanilla” application but quickly falls
victim to “feature creep” and ends up with a more specialized product than business
functions require. Or the project team falls into the trap of customizing the CRM software to
mirror the customizations made to legacy systems. Many of these experiments are abandoned
midstream. But even those that succeed do so by straining budgets and trashing schedules
6. Use Trained, Experienced—software consultants frequently make bold claims regarding their
ability to meet a company’s implementation requirements. To ensure that your systems
integrator can actually deliver a CRM project on time and on budget, look for consultants
who are not only thoroughly trained in implementation methodologies for the applications
you are considering, but also have real experience in deploying those applications
7. Actively Involve End Users in Solutions Design.
8. Invest in Training to Empower End Users.

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 9. Use a Phased Rollout Schedule.

CRM COMPREHENSION

A services company’s marketing programme consists of the offers, tangible, service delivery,
employee behaviour and grievance handling. When these get exposed to customers, they evaluate the
whole process.

This customer evaluation process is done based on customer’s expectation from the service and its
perceived performance. Cognitive ability also plays an important role in this process. if perceived
performance is more than that of customer expectation, it results into customer satisfaction which has
a lot of advantages associated with the company such as repeat purchase , customer retention, cross
sell and up-sell. If perceived performance is less than that of customer expectation, it leads to
customer dissatisfaction and results into a behaviour that is detrimental to the company’s interest as
negative publicity, loss in sale and so on.

CRM IMPLEMENTATION

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UNIT-2 CUSTOMER SATISFACTION

Customer satisfaction is a marketing term that measures how products or services supplied by a
company meet or surpass a customer’s expectation. Customer satisfaction is a term frequently used
in marketing. While it's often abbreviated as CSAT, it is more correct to abbreviate it as CSat. It is a
measure of how products and services supplied by a company meet or surpass customer expectation.
Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose
reported experience with a firm, its products, or its services (ratings) exceeds
specified satisfaction goals." In a survey of nearly 200 senior marketing managers, 71 percent
responded that they found a customer satisfaction metric very useful in managing and monitoring
their businesses.

It is seen as a key performance indicator within business and is often part of a Balanced Scorecard. In
a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a
key differentiator and increasingly has become a key element of business strategy.

Customer satisfaction is important because it provides marketers and business owners with a metric
that they can use to manage and improve their businesses.

Here are the top six reasons why customer satisfaction is so important:

 It’s a leading indicator of consumer repurchase intentions and loyalty

 It’s a point of differentiation

 It reduces customer churn

 It increases customer lifetime value

 It reduces negative word of mouth

 It’s cheaper to retain customers than acquire new ones

COMPONENTS OF CUSTOMER SATISFACTION

It basically consists of:-

Customers are satisfied whenever they consistently receive:

A perfect product

Delivered by a caring, friendly person

In a timely fashion

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. . . with (because any of those three elements may misfire)

The support of an effective problem resolution process.

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CUSTOMER SATISFACTION MODEL

1.Teboul model

2.

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.

3. KANO MODEL

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MEASURING OF CUSTOMER SATISFACTION

1. Surveys to Measure Overall Satisfaction

This assesses your customers' experience with your product or service. It’s the direct response to
perceived quality based on the perceived needs and expectations customers had.

2. Objective Measurement Approach for Loyalty

Customer loyalty is an excellent mirror for customer satisfaction as it’s used to describe the behaviour
of repeat customers, as well as those who offer good ratings, reviews and testimonials. Loyalty can
also be measured via a survey after the purchase process, it is however more powerful to measure the
actual behaviour than the intention.

3. Apps for Attributional Satisfaction

One of the best ways to measure the satisfaction regarding a certain product or feature (could be with
your support service) is by providing a reasonable context which customers can relate to. Asking
your customers whether the support team was friendly or whether they felt rushed allows you to
understand how important these elements are for the whole picture.

One popular tool to assess attributional satisfaction is Qualaroo a platform which allows you to
gather the answers from these questions as well as set up the linking web pages from your website in
order to make it easy for your customer’s to let you know their review.

4. Measure your Exit and Abandonment Rates With Tracking Tools

A high exit or abandonment rate measured in your analytics tool is a direct behavioural indication of
customer dissatisfaction. Exits and abandonments are natural phenomenon’s in ecommerce, but an
unnatural high percentage indicates that your page and process could be optimised.

5. Net Promoter Score

This may well be the most popular way of measuring your clients' loyalty. It measures the likeliness
of a customer referring you to someone else. The customer is asked how likely he would recommend
you on a scale from 1 to 10.

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6. "Things gone wrong"
This is a negative measure and your goal is to minimise its score to zero points. What you’ll be
measuring with the TGW is the rate of complaints per product you sell. In the worst possible scenario
your score is 1 or higher, meaning that you get at least 1 complaint per unit sold. TGW is calculated
by dividing the number of complaints by the total number of units sold.

MARKETING PROGRAM EVALUATION

Customer Satisfaction Best Practices

The importance of measuring customer satisfaction and its related construct, customer loyalty,
continues to grow. Also, the “State of the Science” has improved dramatically as more companies
have focused on generating customer satisfaction, which inevitably raises the bar for all. We thought
you might enjoy reviewing our take on the top 10 best practices for improving customer satisfaction.

Top 10 Best Practices

1. Satisfaction is a relative measure vis-à-vis customer expectations –understanding expectations

and fulfilment against those expectations is critical.
2. The use of regression analysis and other dependency models to derive the importance of
attributes relative to an outcome measure is now considered a must.
3. To improve resource allocation, attributes should be separated into “Cost of Entry”, Performance
Drivers (more is better) and “Delighters”.
4. Satisfaction, perceived value and customer loyalty are different from each other. They interact
with each other to predict customer retention.
5. The effect of customer satisfaction on profitability is clearly exerted through an intervening
variable such as retention.

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 6. Some companies have developed robust models that permit management to test the effects of
changes in customer satisfaction on customer retention and profitability … allowing for explicit
cost-benefit analysis and planning.
7. Customer satisfaction surveys benefit from highly structured design, measurement and analytic
approaches – trending over time adds to the power of the data.
8. A two-stage nested structure can be very desirable – it links specific operational actions to
primary dimensions of quality or satisfaction and then to overall satisfaction and/or loyalty.
9. While products/services that require little introspection on the part of the consumer is an
exception, experience across a variety of industries suggests that placement of the overall
satisfaction measure toward the end of the survey yields dependence models with greater
explanatory power.
10. Voice-of-Customer (VOC) and Voice-of-Market (VOM) are two different constructs: one impacts
customer retention, the other impacts customer acquisition. Understanding how proposed
changes in service quality impact both groups can be critical.

CASE STUDY

Studies carried out by companies like Argos and Cadburys have found very high levels of customer
satisfaction. It is not surprising because these companies emphasise market research and marketing as
the tools to find out what customers want. Knowing what your customer wants then makes it
possible to tailor everything you do to pleasing the customers e.g. providing the goods that customers
want, in the packaging that they want, in retail outlets which are convenient to use and well placed.
There are many factors which lead to high levels of customer satisfaction including:
 Products and services which are customer focused and thence provide high levels of value for money.
 Customer service giving personal attention to the needs of individual customers.
 After sales service - following up the original purchase with after sales support such as maintenance
and updating (for example in the updating of computer packages).
What is clear about customer satisfaction is that customers are most likely to appreciate the goods and
services that they buy if they are made to feel special. This occurs when they feel that the goods and
services that they buy have been specially produced for them or for people like them. This relates to a
wide range of products such as razors that are designed for ease of use and good quality finish, petrol
products that are environmentally friendly and customised to meet the needs of particular types of
engines, etc.

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 UNIT -3

SERVICE QUALITY- CONCEPT OF QUALITY

A business with high service quality will meet customer needs whilst remaining economically
competitive.[2] Improved service quality may increase economic competitiveness.

This aim may be achieved by understanding and improving operational processes; identifying
problems quickly and systematically; establishing valid and reliable service performance measures
and measuring customer satisfaction and other performance outcomes.

A customer's expectation of a particular service is determined by factors such as recommendations,

personal needs and past experiences. The expected service and the perceived service sometimes may
not be equal, thus leaving a gap.

Ten determinants that may influence the appearance of a gap were described by
Parasuraman, Zeithaml and Berry. In the SERVQUAL model: reliability, responsiveness, competence,
access, courtesy, communication, credibility, security, understanding the customer and tangibles.

Factors influencing customer expectation and perception

UNDERSTANDING CUSTOMER expectations is a prerequisite for delivering superior service;

customers compare perceptions with expectations when judging a firm’s service.1 However, the
nature of customer service expectations and how they are formed has remained ambiguous.
Researchers have defined customer service expectations in a variety of ways but with no conceptual
framework to link different types of expectations or indicate their interactions in influencing
perceptions of service performance.2

Motivated by the pivotal role of customer expectations in service quality assessments, and by the
limited knowledge about their structure and formation, we have undertaken a study designed to
answer several fundamental questions:

 What is the nature of customers’ service expectations? Are there different types of expectations?

 What factors influence the formation of these expectations?

 How stable are the expectations? Do they change over time? Do they vary across service situations
and across customers?

 How can companies manage expectations to enhance customers’ perceptions of service?

 What can companies do to exceed customers’ expectations?

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Also

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TYPES OF SERVICE QUALITY MODEL

1. GAP MODEL:-

The five gaps that organizations should measure manage and minimize:

 Gap 1 is the distance between what customers expect and what managers think they expect –
Clearly survey research is a key way to narrow this gap.
 Gap 2 is between management perception and the actual specification of the customer
experience - Managers need to make sure the organization is defining the level of service they
believe is needed.
 Gap 3 is from the experience specification to the delivery of the experience - Managers need to
audit the customer experience that their organization currently delivers in order to make sure it
lives up to the spec.
 Gap 4 is the gap between the delivery of the customer experience and what is communicated to
customers - All too often organizations exaggerate what will be provided to customers, or discuss
the best case rather than the likely case, raising customer expectations and harming customer
perceptions.
 Finally, Gap 5 is the gap between a customer's perception of the experience and the customer's
expectation of the service - Customers' expectations have been shaped by word of mouth, their
personal needs and their own past experiences. Routine transactional surveys after delivering the
customer experience are important for an organization to measure customer perceptions of
service.

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SERVEQUAL:-

SERVQUAL, later called RATER, is a quality management framework. SERVQUAL was first
published in 1977 by Valarie Zeithaml, A. Parasuraman & Leonard Berry to measure quality in the
service sector.

The SERVQUAL service quality model was developed by a group of American authors, 'Parsu'
Parasuraman, Valarie Zeithaml and Len Berry, in 1988. It highlights the main components of high
quality service. The SERVQUAL authors originally identified ten elements of service quality, but in
later work, these were collapsed into five factors - reliability, assurance, tangibles, empathy and
responsiveness - that create the acronym RATER.

Businesses using SERVQUAL to measure and manage service quality deploy a questionnaire that
measures both the customer expectations of service quality in terms of these five dimensions, and
their perceptions of the service they receive. When customer expectations are greater than their
perceptions of received delivery, service quality is deemed low.

In addition to being a measurement model, SERVQUAL is also a management model. The

SERVQUAL authors identified five Gaps that may cause customers to experience poor service
quality.

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Gap 3: between service quality specification and service delivery

This gap may arise through service personnel being poorly trained, incapable or unwilling to meet
the set service standard. The possible major reasons for this gap are:

 Deficiencies in human resource policies such as ineffective recruitment, role ambiguity, role
conflict, improper evaluation and compensation system
 Ineffective internal marketing
 Failure to match demand and supply
 Lack of proper customer education and training
Gap 4: between service delivery and external communication

Consumer expectations are highly influenced by statements made by company representatives and
advertisements. The gap arises when these assumed expectations are not fulfilled at the time of
delivery of the service. For example, the hospital printed on the brochure may have clean and
furnished rooms, but in reality it may be poorly maintained, in which case the patients' expectations
are not met. The discrepancy between actual service and the promised one may occur due to the
following reasons:

 Over-promising in external communication campaign

 Failure to manage customer expectations
 Failure to perform according to specifications
Gap 5: between expected service and experienced service

This gap arises when the consumer misinterprets the service quality. For example, a physician may
keep visiting the patient to show and ensure care, but the patient may interpret this as an indication
that something is really wrong.

DETERMINNTS

The ten determinants that may influence the appearance of a gap are:

1. Competence is the possession of the required skills and knowledge to perform the service.
For example, there may be competence in the knowledge and skill of contact personnel,
knowledge and skill of operational support personnel and research capabilities of the
organization.
2. Courtesy is the consideration for the customer's property and a clean and neat appearance of
contact personnel, manifesting as politeness, respect, and friendliness.
3. Credibility includes factors such as trustworthiness, belief and honesty. It involves having
the customer's best interests at prime position. It may be influenced by company name,
company reputation and the personal characteristics of the contact personnel.
4. Security enables the customer to feel free from danger, risk or doubt including physical
safety, financial security and confidentiality.

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 5. Access is approachability and ease of contact. For example, convenient office operation hours
and locations.
6. Communication means both informing customers in a language they are able to understand
and also listening to customers. A company may need to adjust its language for the varying
needs of its customers. Information might include for example, explanation of the service
and its cost, the relationship between services and costs and assurances as to the way any
problems are effectively managed.
7. Knowing the customer means making an effort to understand the customer's individual
needs, providing individualized attention, recognizing the customer when they arrive and so
on. This in turn helps to delight the customers by rising above their expectations.
8. Tangibles are the physical evidence of the service, for instance, the appearance of the
physical facilities, tools and equipment used to provide the service; the appearance of
personnel and communication materials and the presence of other customers in the service
facility.
9. Reliability is the ability to perform the promised service in a dependable and accurate
manner. The service is performed correctly on the first occasion, the accounting is correct,
records are up to date and schedules are kept.
10. Responsiveness is the readiness and willingness of employees to help customers by
providing prompt timely services, for example, mailing a transaction slip immediately or
setting up appointments quickly.

By the early 1990s, the authors had refined the model to five factors that enable the acronym RATER:

1. Reliability: the ability to perform the promised service dependably and accurately
2. Assurance: the knowledge and courtesy of employees and their ability to convey trust and
confidence
3. Tangibles: the appearance of physical facilities, equipment, personnel and communication
materials
4. Empathy: the provision of caring, individualized attention to customers
5. Responsiveness: the willingness to help customers and to provide prompt service

The simplified RATER model allows customer service experiences to be explored and assessed
quantitatively and has been used widely by service delivery organizations.

Nyeck, Morales, Ladhari, and Pons (2002) stated the SERVQUAL measuring tool “appears to remain
the most complete attempt to conceptualize and measure service quality” (p. 101). The SERVQUAL
measuring tool has been used by several researchers to examine numerous service industries such as
healthcare, banking, financial services, and education (Nyeck, Morales, Ladhari, & Pons, 2002).

CRITICISM

Francis Buttle critiques SERVQUAL in the article “SERVQUAL; review, critique, research agenda"
and comes up with two clusters of criticisms based on theoretical and operational criteria.

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DIMENSIONS OF SERVICE QUALITY

A customer's expectation of a particular service is determined by factors such as recommendations,

personal needs and past experiences. The expected service and the perceived service sometimes may
not be equal, thus leaving a gap. The service quality model or the ‘GAP model’ developed by a group
of authors- Kevin, Kristine and Berry at Texas and North Carolina in 1985, highlights the main
requirements for delivering high service quality. It identifies five ‘gaps’ that cause unsuccessful
delivery. Customers generally have a tendency to compare the service they 'experience' with the
service they 'expect' . If the experience does not match the expectation, there arises a gap. Ten
determinants that may influence the appearance of a gap were described by
Parasuraman, Zeithaml and Berry. in the SERVQUAL model: reliability, responsiveness, competence,
access, courtesy, communication, credibility, security, understanding the customer and tangibles.

Later, the determinants were reduced to five: tangibles; reliability; responsiveness; service assurance
and empathy in the so-called RATER model

MEASURING SERVICE QUALITY

Measuring service quality may involve both subjective and objective processes. In both cases, it is
often some aspect of customer satisfaction which is being assessed. However, customer satisfaction is
an indirect measure of service quality.

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UNIT-4 Customer Relationship Management: Technology Dimensions

E- CRM in Business
Electronic customer relationship management (e-CRM) involves the integration of Web channels
into the overall enterprise CRM strategy with the goal of driving consistency within all channels
relative to sales, customer service and support (CSS) and marketing initiatives. It can support a
seamless customer experience and maximize customer satisfaction, customer loyalty and revenue.

What is e CRM about?

• Customer Selection

• Customer Acquisition

• Customer Retention

• Customer Extension

Customer Selection

• Who do you target?

• What value do they bring to your objectives?

• What is their lifecycle?

• Where do we find these customers?

Customer Acquisition

• Focus on the right segments and target them

• Minimise acquisition costs

• Make customer relationship and service quality a priority

• Approach the appropriate platforms

Customer Retention

• Know customers’ needs individually in order to develop a good e CRM strategy

• Offer value continuously in order to retain online interest and improve customer relationship

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• Focus on delivering service quality to the utmost standard

• Choose the right channels for your strategy

Customer Extension

• Recognize the customer’s relationship interest and respond

• “Cross Sell” and “Up Sell”

• Service Quality

• Use appropriate platforms/channels

CRM-A CHANGING PERSPECTIVE

Fifty-two years ago Peter Drucker wrote: “The true business of every company is to make and keep
customers”. Prophetic? Maybe, but we think not. From the beginning of time or at least from the first
transaction we believe it has been intuitive nature to keep customers happy and keep them coming
back. It was easy then because it was a one-on-one transaction without the need for a process. Now
it’s not so easy. Enter CRM. The origin of CRM, as we have come to know it, began in the early 1970’s.
When academics and consultants had an epiphany determining it would be better for companies to
become “customer centric” vs. “product centric”. CRM was born out of this thoughtful insight. But
everyone knows it is less costly and more profitable to retain a customer than to find a new one. The
same dynamic impact regarding employees happens but at a much higher non-budgeted item on the
bottom line. Additionally, customer spending typically accelerates over time, satisfied customers give
referrals along with testimonials, and loyal customers are not as price sensitive. So what was new? A
process, a rigorous process to resolve breakdowns in handling customer concerns in a proactive
manner vs. a reactive manner. CRM is a philosophy and process for managing relationships with
customers that transcends the entire organization. It is based on 3 simple but powerful principles:

- Protecting the customer base

- Nurturing the customer base

- Increasing the asset value of the customer base

Yet the simplest and least obvious reason for CRM is: Customer Relationship Management is about
relations between people. Business is done by people, not companies. No process can change the
human desire to take care of the concerns of customers if the desire is not there to begin with. Cross-
functional relationships are just as an important part of CRM as the process of managing customer
relationships. Software and processes do not take this dynamic into account. Therefore, managing
employee relationships should be a strategic initiative equally important to CRM. With the advent of
sophisticated technology and software, CRM can now provide company-wide information designed
to reduce costs and increase profitability by improving customer loyalty. CRM software brings

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 together information from every area of a company giving a complete 360-degree view of a customer.
A panacea it’s not. With all the success stories available on the Internet there are thousands of horror
stories of complete failures implementing CRM applications. Virtually all these failures had nothing
to do with managing customer relationships. These failures were due to strife and conflict with
employee relationships. For CRM to be truly effective, an organization must convince its staff that
change is good. Again, this requires effective Employee Relationship Management (ERM). That
sounds simple, but in today’s environment the complexity of employee relationships and the
dynamics between divisions, departments, remote manufacturing and engineering operations along
with managing global customers, Employee Relationship Management (ERM) becomes even more
important and valuable. The bottom line is that the basic behavioural desire to take care of the
concerns of customers and employees must be woven into the fabric of the organization along with a
rigorous process to fulfill that desire. If not, no amount of software or consulting will make a
difference which could result in abject failure.

In the world prior to e-business, the telephony-based call center was sufficient to the needs of
companies’ service and support requirements. Then, as new communications channels emerged, the
call center evolved into a media-blended contact center. However, simple multi-channel connectivity
is not adequate to the new demands of an e-business world. These market dynamics have created a
pressing need to elevate CRM to a strategic corporate level. More specifically, this situation entails
consistent, unified customer interactions across:
 All communications channels: Web, phone, fax, e-mail, and video
 All applications: front- and back-office
 All business functions: sales, marketing, and customer service.
This need for a strategic approach to CRM is by now clear to all, and it is much discussed. Much less
discussed is how this has to be done, given the myriad ways that businesses already interact with
their customers, as well as companies’ extensive legacy investments in customer business and
communications systems. Customers are using new communications channels; now it’s time to do the
hard work of integrating them. Which approach makes the most sense, given the significant existing
infrastructure and high volatility being experienced by most markets? In this white paper, Aberdeen
examines the drivers and realities of these issues; discusses the needs that a solution must address;
and briefly describes a promising approach that Aspect Communications recently unveiled.

FEATURES OF E-CRM

Regardless of a companies objectives an e-CRM solution must possess certain key characteristics. It
must be:

 Driven by a data warehouse.

 Focused on consistent metrics to assess customer actions across channels
 Built to accommodate the new market dynamics that place the customer in control.
 Structured to identify a customer's profitability or profit potential, and to determine effective
investment allocation decisions accordingly, so that most profitable customers could be

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 identified and retained and the resources could be invested In relationships, which are most
profitable.

Technological and Business issues involved

The technology and business issues involved in e-CRM are,

 Switching Costs: involved in shifting to the new system.

 Scalability and Reliability: Whether the system would be able to adapt to new levels of
usage and functionality.
 Security: The information risks arising because of the threats to data integrity, violations of
confidentiality and data integrity should be taken care of.

ADVANTAGES OF E-CRM

The benefits which those channels confer on the enterprises include the following:
i. Fostering Relationship with Customers: Trust is one of the scarcest commodities in dealing with
customers and it is not easily obtained. Traditionally, it was the practice to just acquire the
preferences of the customers but with the increased competition and demands coupled with their
awareness, it is now far more important to initiate proactive programs to stimulate one-on-one
communication with customers geared towards fostering trust and loyalty. e-CRM enables
enterprises to create trust, get co-operation and then guarantee satisfaction with the customers.
ii. Provision of Personalized Services: Although it is not an easy task to achieve personalization
successfully and sustain it, if achieved, it can result in huge positive gains for the enterprise. This is
because it is difficult for competitors to replicate a successful program due to its uniqueness. It
furthermore drives more sales and ensures efficacy and efficiency.
iii. Quality of Service & Delivery: Service delivery has become a major determinant in the selection
of service providers by customers. It is a major factor in determining their retention and loyalty.
Service quality possesses five proportions; responsiveness, assurance, reliability, empathy and
reliability.
iv. Transaction and Processing Speed: The backbone offered by the internet has enabled enterprises
to establish e-CRM platforms via which they are able to cut down on the time taken for processing
customer queries, acknowledgment of their orders, information regarding their payments as well as
delivery of the orders. This has gained time which can be easily converted to other important issues
thus resulting in higher efficiency.
v. Convenience: The ability to provide a convenient option to customers to access its services has
become a major determinant for the selection of service providers by customers. This is very common
in the banking sector as customers seek options which will ensure that they go through as little stress
as possible in accessing their accounts and carrying out their transactions.

TECHNOLOGIES OF CRM

1.VOICE PORTAL:- Voice portals are the voice equivalent of web portals, giving access to
information through spoken commands and voice responses. Ideally a voice portal could be an access
point for any type of information, services, or transactions found on the Internet. Common uses
include movie time listings and stock trading.

In telecommunications circles, voice portals may be referred to as interactive voice response (IVR)
systems, but this term also includes DTMF services.

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Advantages

 No dependency on the access device; even low end mobile handsets can access the service
 Voice portals talk to users in their local language
 Reduced customer learning required for using voice services compared to Internet/SMS based
services
Limitation

Voice is the most natural communication medium, but the information that can be provided is limited
compared to visual media.

For example, most Internet users try a search term, scan results, then adjust the search term to
eliminate irrelevant results. They may take two or three quick iterations to get a list that they are
confident will contain what they are looking for. The equivalent approach is not practical when
results are spoken, as it would take far too long. In this case, a multimodal interaction would be
preferable to a voice-only interface.
2. WEB-PHONES

The mobile Web refers to the use of browser-based Internet services from handheld mobile devices,
such as smart phones or feature phones, through a mobile or other wireless network.

Traditionally, access to the World Wide Web has been via fixed-line services on laptops and desktop
computers. However, the Web is becoming more accessible by portable and wireless devices.
3.BOTs

"Bot" is actually short for robot – not the kind found in science fiction movies or on the production
line in a manufacturing business. Bots are one of the most sophisticated types of crime ware facing the
Internet today. Bots are similar to worms and Trojans, but earn their unique name by performing a
wide variety of automated tasks on behalf of their master (the cybercriminals) who are often safely
located somewhere far across the Internet. Tasks that bots can perform run the gamut from sending
spam to blasting Web sites off the Internet as part of a coordinated "denial-of-service" attack. Since a
bot infected computer does the bidding of its master, many people refer to these victim machines as
"zombies."

Bots sneak onto a person's computer in many ways. Bots oftentimes spread themselves across the
Internet by searching for vulnerable, unprotected computers to infect. When they find an exposed
computer, they quickly infect the machine and then report back to their master. Their goal is then to
stay hidden until they are awoken by their master to perform a task. Bots are so quiet that sometimes
the victims first learn of them when their Internet Service Provider tells them that their computer has
been spamming other Internet users. Sometimes a bot will even clean up the infected machine to
make sure it does not get bumped off of the victim's computer by another cybercriminal's bot. Other
ways in which a bot infects a machine include being downloaded by a Trojan, installed by a malicious
Web site or being emailed directly to a person from an already infected machine.

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Bots do not work alone, but are part of a network of infected machines called a "botnet." Botnets are
created by attackers repeatedly infecting victim computers using one or several of the techniques
mentioned above. Each one of the zombie machines is controlled by a master computer called the
command and control server. From the command and control server, the cybercriminals manage their
botnets and instructs the army of zombie computers to work on their behalf. A botnet is typically
composed of large number victim machines that stretch across the globe, from the Far East to the
United States. Some botnets might have a few hundred or a couple thousand computers, but others
have tens and even hundreds of thousands of zombies at their disposal.

4. VIRTUAL CUSTOMER REPRESENTATIVE

In customer relationship management (CRM), a virtual agent (sometimes called an intelligent virtual
agent, virtual rep or v-rep) is a chatterbot program that serves as an online customer service
representative for an organization. Because virtual agents have a human appearance and respond
appropriately to customer questions, they lend automated interactions a semblance of personal
service. Combining artificial intelligence (AI) with a graphical representation, virtual agents are
increasingly used in CRM to help people perform tasks such as locating information or placing orders
and making reservations.

Customer response to the use of virtual agents has been largely positive. Typically, people talk to a

virtual agent longer than they do to an actual person, perhaps because talking to a responsive,

personalized computer program is a novelty. Virtual agents are usually scripted to respond to a wide

variety of questions and remarks. According to eGain,

 a virtual agent provider, an automated representative can reduce support costs, encourage

self-service, encourage customer loyalty, and serve as a branding tool for the enterprise.

 Virtual agent is also used to refer to a human agent who works over the Internet at some

distance from the employer's organization.

CUSTOMER RELATIONSHIP PORTALS

A customer portal is a private, secure Website that enables businesses to share documents, calendars,
and project information with customers. Commonly known as a customer extranet, a customer portal
enhances customer relationships by providing complete 24x7 access to collaborative tools with just an
Internet connection.

Connect with Customers and Vendors through a Customer Portal

Your customers expect access to the most reliable, accurate, and up-to-date information. A hosted
customer portal provides a cost-effective solution without the anxieties and costs inherent with

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supporting complex virtual private networks (VPN). Provide each customer with access to an online
portal to share important project documents, schedules, billing notices, and much more.

FUNCTIONAL COMPONENTS OF CRM

CRM applications are a convergence of functional components, advanced technologies and channels.

Functional components and channels are described below: Sales applications

Common applications include calendar and scheduling, contact and account management;

compensation; opportunity and pipeline management; sales forecasting; proposal generation and

management; pricing; territory assignment and management; and expense reporting.

Marketing applications

These include web based and traditional marketing campaign planning, execution, and analysis; list

generation and management; budgeting and forecasting; collateral generation and marketing

materials management. Customer service and support applications-These include customer care;

incident, defect and order tracking; field service; problem and solution database; repair scheduling

and dispatching; service agreements and contracts; and service request management.

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 Also, There are Three Types of CRM

1) Operational CRM

 Marketing automation

 Sales force automation

 Service automation

2) Analytical CRM

3) Strategic CRM

 Amplifying commitment

 Building a valuable project team

 Requirement analysis

DATABASE MANAGEMENT: DATABASE CONSTRUCTION

 A customer relationship management, or CRM, database is a technology used for the collection and
analysis of customer data as part of a CRM marketing program. Many customer- or client-centered
companies rely on them as a major component of business operations. A CRM database is often
referred to as the heart of a CRM program. The business system known as CRM evolved from basic
customer retention and loyalty principles at the turn of the 21st century. Database technology
provided the means necessary for massive collection and interpretation of customer data.

Data Collection and Analysis

 Prior to database technology, companies had to collect and retrieve customer and business data using
conventional filing systems. With a capable CRM database, a company can collect infinite fields of
data on limitless amounts of customers. More importantly, retrieval of data through a process known
as data mining is extremely efficient. You can perform queries to pinpoint customers or data through
defined parameters.

Marketing and Advertising

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 Sometimes referred to as database marketing, CRM is generally regarded as a model for marketers to
create more individualized and targeted marketing and advertising campaigns. CRM data retrieved
from the database is analyzed and interpreted for target market identification, pattern and trend
recognition, and eventually used for marketing, advertising and loyalty programs.

DATA WAREHOUSE

In computing, a data warehouse (DW or DWH), also known as an enterprise data

warehouse (EDW), is a system used for reporting and data analysis. DWs are central repositories of
integrated data from one or more disparate sources. They store current and historical data and are
used for creating analytical reports for knowledge workers throughout the enterprise. Examples of
reports could range from annual and quarterly comparisons and trends to detailed daily sales
analyses.

The data stored in the warehouse is uploaded from the operational systems (such as marketing, sales,
etc., shown in the figure to the right). The data may pass through an operational data store for
additional operations before it is used in the DW for reporting.

ADVANTAGES

A data warehouse maintains a copy of information from the source transaction systems. This
architectural complexity provides the opportunity to :

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 Congregate data from multiple sources into a single database so a single query engine can be
used to present data.
 Mitigate the problem of database isolation level lock contention in transaction processing systems
caused by attempts to run large, long running, analysis queries in transaction processing
databases.
 Maintain data history, even if the source transaction systems do not.
 Integrate data from multiple source systems, enabling a central view across the enterprise. This
benefit is always valuable, but particularly so when the organization has grown by merger.
 Improve data quality, by providing consistent codes and descriptions, flagging or even fixing bad
data.
 Present the organization's information consistently.
 Provide a single common data model for all data of interest regardless of the data's source.
 Restructure the data so that it makes sense to the business users.
 Restructure the data so that it delivers excellent query performance, even for complex analytic
queries, without impacting the operational systems.
 Add value to operational business applications, notably customer relationship
management (CRM) systems.
 Make decision–support queries easier to write.

DBMS ARCHITECTURE

The design of a DBMS depends on its architecture. It can be centralized or decentralized or

hierarchical. The architecture of a DBMS can be seen as either single tier or multi-tier. An n-tier
architecture divides the whole system into related but independent n modules, which can be
independently modified, altered, changed, or replaced.

In 1-tier architecture, the DBMS is the only entity where the user directly sits on the DBMS and uses
it. Any changes done here will directly be done on the DBMS itself. It does not provide handy tools
for end-users. Database designers and programmers normally prefer to use single-tier architecture.

If the architecture of DBMS is 2-tier, then it must have an application through which the DBMS can
be accessed. Programmers use 2-tier architecture where they access the DBMS by means of an
application. Here the application tier is entirely independent of the database in terms of operation,
design, and programming.

3-tier Architecture

A 3-tier architecture separates its tiers from each other based on the complexity of the users and how
they use the data present in the database. It is the most widely used architecture to design a DBMS.

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  Database (Data) Tier − At this tier, the database resides along with its query processing
languages. We also have the relations that define the data and their constraints at this level.

 Application (Middle) Tier − At this tier reside the application server and the programs that
access the database. For a user, this application tier presents an abstracted view of the
database. End-users are unaware of any existence of the database beyond the application. At
the other end, the database tier is not aware of any other user beyond the application tier.
Hence, the application layer sits in the middle and acts as a mediator between the end-user
and the database.

 User (Presentation) Tier − End-users operate on this tier and they know nothing about any
existence of the database beyond this layer. At this layer, multiple views of the database can
be provided by the application. All views are generated by applications that reside in the
application tier.

Multiple-tier database architecture is highly modifiable, as almost all its components are
independent and can be changed independently.

DATA MINING

Data mining is an interdisciplinary subfield of computer science. It is the computational process of

discovering patterns in large data sets ("big data") involving methods at the intersection of artificial
intelligence, machine learning, statistics, and database systems. The overall goal of the data mining
process is to extract information from a data set and transform it into an understandable structure for
further use. Aside from the raw analysis step, it involves database and data management aspects,
data pre-processing, model and inference considerations, interestingness
metrics, complexity considerations, post-processing of discovered structures, visualization,

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 and online updating. Data mining is the analysis step of the "knowledge discovery in databases"
process, or KDD.

The Foundations of Data Mining

Data mining techniques are the result of a long process of research and product development. This
evolution began when business data was first stored on computers, continued with improvements in
data access, and more recently, generated technologies that allow users to navigate through their data
in real time. Data mining takes this evolutionary process beyond retrospective data access and
navigation to prospective and proactive information delivery. Data mining is ready for application in
the business community because it is supported by three technologies that are now sufficiently
mature:

 Massive data collection

 Powerful multiprocessor computers
 Data mining algorithms

Commercial databases are growing at unprecedented rates. A recent META Group survey of data
warehouse projects found that 19% of respondents are beyond the 50 gigabyte level, while 59% expect
to be there by second quarter of 1996.1 In some industries, such as retail, these numbers can be much
larger. The accompanying need for improved computational engines can now be met in a cost-
effective manner with parallel multiprocessor computer technology. Data mining algorithms embody
techniques that have existed for at least 10 years, but have only recently been implemented as mature,
reliable, understandable tools that consistently outperform older statistical methods.

In the evolution from business data to business information, each new step has built upon the
previous one. For example, dynamic data access is critical for drill-through in data navigation
applications, and the ability to store large databases is critical to data mining. From the user’s point of
view, the four steps listed in Table 1 were revolutionary because they allowed new business questions
to be answered accurately and quickly.

Evolutionary Step Business Question Enabling Product Characteristics

Technologies Providers

Data Collection "What was my total Computers, tapes, IBM, CDC Retrospective,
revenue in the last five disks static data
(1960s) years?" delivery

Data Access "What were unit sales in Relational databases Oracle, Sybase, Retrospective,
New England last (RDBMS), Structured Informix, IBM, dynamic data
(1980s) March?" Query Language Microsoft delivery at
(SQL), ODBC record level

Data "What were unit sales in On-line analytic Pilot, Retrospective,

Warehousing & New England last March? processing (OLAP), Comshare, dynamic data
Drill down to Boston." multidimensional Arbor, Cognos, delivery at
databases, data Microstrategy multiple levels

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 warehouses
Decision Support

(1990s)

Data Mining "What’s likely to happen Advanced algorithms, Pilot, Lockheed, Prospective,
to Boston unit sales next multiprocessor IBM, SGI, proactive
(Emerging Today) month? Why?" computers, massive numerous information
databases startups delivery
(nascent
industry)

Table 1. Steps in the Evolution of Data Mining.

The core components of data mining technology have been under development for decades, in
research areas such as statistics, artificial intelligence, and machine learning. Today, the maturity of
these techniques, coupled with high-performance relational database engines and broad data
integration efforts, make these technologies practical for current data warehouse environments.

TECHNIQUES OF DATA MINING

The most commonly used techniques in data mining are:

 Artificial neural networks: Non-linear predictive models that learn through training and
resemble biological neural networks in structure.

 Decision trees: Tree-shaped structures that represent sets of decisions. These decisions
generate rules for the classification of a dataset. Specific decision tree methods include
Classification and Regression Trees (CART) and Chi Square Automatic Interaction Detection
(CHAID) .

 Genetic algorithms: Optimization techniques that use processes such as genetic combination,
mutation, and natural selection in a design based on the concepts of evolution.

 Nearest neighbor method: A technique that classifies each record in a dataset based on a
combination of the classes of the k record(s) most similar to it in a historical dataset (where k ³
1). Sometimes called the k-nearest neighbor technique.

 Rule induction: The extraction of useful if-then rules from data based on statistical
significance.

Many of these technologies have been in use for more than a decade in specialized analysis tools that
work with relatively small volumes of data. These capabilities are now evolving to integrate directly
with industry-standard data warehouse and OLAP platforms. The appendix to this white paper
provides a glossary of data mining terms.

How Data Mining Works

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How exactly is data mining able to tell you important things that you didn't know or what is going to
happen next? The technique that is used to perform these feats in data mining is called modeling.
Modeling is simply the act of building a model in one situation where you know the answer and then
applying it to another situation that you don't. For instance, if you were looking for a sunken Spanish
galleon on the high seas the first thing you might do is to research the times when Spanish treasure
had been found by others in the past. You might note that these ships often tend to be found off the
coast of Bermuda and that there are certain characteristics to the ocean currents, and certain routes
that have likely been taken by the ship’s captains in that era. You note these similarities and build a
model that includes the characteristics that are common to the locations of these sunken treasures.
With these models in hand you sail off looking for treasure where your model indicates it most likely
might be given a similar situation in the past. Hopefully, if you've got a good model, you find your
treasure.

This act of model building is thus something that people have been doing for a long time, certainly
before the advent of computers or data mining technology. What happens on computers, however, is
not much different than the way people build models. Computers are loaded up with lots of
information about a variety of situations where an answer is known and then the data mining
software on the computer must run through that data and distill the characteristics of the data that
should go into the model. Once the model is built it can then be used in similar situations where you
don't know the answer. For example, say that you are the director of marketing for a
telecommunications company and you'd like to acquire some new long distance phone customers.
You could just randomly go out and mail coupons to the general population - just as you could
randomly sail the seas looking for sunken treasure. In neither case would you achieve the results you
desired and of course you have the opportunity to do much better than random - you could use your
business experience stored in your database to build a model.

As the marketing director you have access to a lot of information about all of your customers: their
age, sex, credit history and long distance calling usage. The good news is that you also have a lot of
information about your prospective customers: their age, sex, credit history etc. Your problem is that
you don't know the long distance calling usage of these prospects (since they are most likely now
customers of your competition). You'd like to concentrate on those prospects who have large amounts
of long distance usage. You can accomplish this by building a model. Table 2 illustrates the data used
for building a model for new customer prospecting in a data warehouse.

Customers Prospects

General information (e.g. demographic data) Known Known

Proprietary information (e.g. customer Known Target

transactions)

Table 2 - Data Mining for Prospecting

An Architecture for Data Mining

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To best apply these advanced techniques, they must be fully integrated with a data warehouse as well
as flexible interactive business analysis tools. Many data mining tools currently operate outside of the
warehouse, requiring extra steps for extracting, importing, and analyzing the data. Furthermore,
when new insights require operational implementation, integration with the warehouse simplifies the
application of results from data mining. The resulting analytic data warehouse can be applied to
improve business processes throughout the organization, in areas such as promotional campaign
management, fraud detection, new product rollout, and so on. Figure 1 illustrates an architecture for
advanced analysis in a large data warehouse.

Figure 1 - Integrated Data Mining Architecture

The ideal starting point is a data warehouse containing a combination of internal data tracking all
customer contact coupled with external market data about competitor activity. Background
information on potential customers also provides an excellent basis for prospecting. This warehouse
can be implemented in a variety of relational database systems: Sybase, Oracle, Redbrick, and so on,
and should be optimized for flexible and fast data access.

An OLAP (On-Line Analytical Processing) server enables a more sophisticated end-user business
model to be applied when navigating the data warehouse. The multidimensional structures allow the
user to analyze the data as they want to view their business – summarizing by product line, region,
and other key perspectives of their business. The Data Mining Server must be integrated with the
data warehouse and the OLAP server to embed ROI-focused business analysis directly into this
infrastructure. An advanced, process-centric metadata template defines the data mining objectives for
specific business issues like campaign management, prospecting, and promotion optimization.
Integration with the data warehouse enables operational decisions to be directly implemented and
tracked. As the warehouse grows with new decisions and results, the organization can continually
mine the best practices and apply them to future decisions.

This design represents a fundamental shift from conventional decision support systems. Rather than
simply delivering data to the end user through query and reporting software, the Advanced Analysis
Server applies users’ business models directly to the warehouse and returns a proactive analysis of
the most relevant information. These results enhance the metadata in the OLAP Server by providing a
dynamic metadata layer that represents a distilled view of the data. Reporting, visualization, and
other analysis tools can then be applied to plan future actions and confirm the impact of those plans.

Profitable Applications

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A wide range of companies have deployed successful applications of data mining. While early
adopters of this technology have tended to be in information-intensive industries such as financial
services and direct mail marketing, the technology is applicable to any company looking to leverage a
large data warehouse to better manage their customer relationships. Two critical factors for success
with data mining are: a large, well-integrated data warehouse and a well-defined understanding of
the business process within which data mining is to be applied (such as customer prospecting,
retention, campaign management, and so on).

Some successful application areas include:

 A pharmaceutical company can analyze its recent sales force activity and their results to
improve targeting of high-value physicians and determine which marketing activities will
have the greatest impact in the next few months. The data needs to include competitor
market activity as well as information about the local health care systems. The results can be
distributed to the sales force via a wide-area network that enables the representatives to
review the recommendations from the perspective of the key attributes in the decision
process. The ongoing, dynamic analysis of the data warehouse allows best practices from
throughout the organization to be applied in specific sales situations.
 A credit card company can leverage its vast warehouse of customer transaction data to
identify customers most likely to be interested in a new credit product. Using a small test
mailing, the attributes of customers with an affinity for the product can be identified. Recent
projects have indicated more than a 20-fold decrease in costs for targeted mailing campaigns
over conventional approaches.
 A diversified transportation company with a large direct sales force can apply data mining to
identify the best prospects for its services. Using data mining to analyze its own customer
experience, this company can build a unique segmentation identifying the attributes of high-
value prospects. Applying this segmentation to a general business database such as those
provided by Dun & Bradstreet can yield a prioritized list of prospects by region.
 A large consumer package goods company can apply data mining to improve its sales
process to retailers. Data from consumer panels, shipments, and competitor activity can be
applied to understand the reasons for brand and store switching. Through this analysis, the
manufacturer can select promotional strategies that best reach their target customer
segments.

Each of these examples have a clear common ground. They leverage the knowledge about customers
implicit in a data warehouse to reduce costs and improve the value of customer relationships. These
organizations can now focus their efforts on the most important (profitable) customers and prospects,
and design targeted marketing strategies to best reach them.

ADVANTAGES OF DATA MINING

Marketing / Retail

Data mining helps marketing companies build models based on historical data to predict who will
respond to the new marketing campaigns such as direct mail, online marketing campaign…etc.
Through the results, marketers will have appropriate approach to sell profitable products to targeted
customers.

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Data mining brings a lot of benefits to retail companies in the same way as marketing. Through
market basket analysis, a store can have an appropriate production arrangement in a way that
customers can buy frequent buying products together with pleasant. In addition, it also helps the
retail companies offer certain discounts for particular products that will attract more customers.

Finance / Banking

Data mining gives financial institutions information about loan information and credit reporting. By
building a model from historical customer’s data, the bank and financial institution can determine
good and bad loans. In addition, data mining helps banks detect fraudulent credit card transactions to
protect credit card’s owner.

Manufacturing

By applying data mining in operational engineering data, manufacturers can detect faulty
equipments and determine optimal control parameters. For example semi-conductor manufacturers
has a challenge that even the conditions of manufacturing environments at different wafer production
plants are similar, the quality of wafer are lot the same and some for unknown reasons even has
defects. Data mining has been applying to determine the ranges of control parameters that lead to the
production of golden wafer. Then those optimal control parameters are used to manufacture wafers
with desired quality.

Governments

Data mining helps government agency by digging and analyzing records of financial transaction to
build patterns that can detect money laundering or criminal activities.

Disadvantages of data mining

Privacy Issues

The concerns about the personal privacy have been increasing enormously recently especially when
internet is booming with social networks, e-commerce, forums, blogs…. Because of privacy issues,
people are afraid of their personal information is collected and used in unethical way that potentially
causing them a lot of troubles. Businesses collect information about their customers in many ways for
understanding their purchasing behaviours trends. However businesses don’t last forever, some days
they may be acquired by other or gone. At this time the personal information they own probably is
sold to other or leak.

Security issues

Security is a big issue. Businesses own information about their employees and customers including
social security number, birthday, payroll and etc. However how properly this information is taken

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care is still in questions. There have been a lot of cases that hackers accessed and stole big data of
customers from big corporation such as Ford Motor Credit Company, Sony… with so much personal
and financial information available, the credit card stolen and identity theft become a big problem.

Misuse of information/inaccurate information

Information is collected through data mining intended for the ethical purposes can be misused. This
information may be exploited by unethical people or businesses to take benefits of vulnerable people
or discriminate against a group of people.

In addition, data mining technique is not perfectly accurate. Therefore if inaccurate information is
used for decision-making, it will cause serious consequence.

CALL CENTRE

A call centre is a physical place where customer and other telephone calls are handled by an
organization, usually with some amount of computer automation. Typically, a call centre has the
ability to handle a considerable volume of calls at the same time, to screen calls and forward those to
someone qualified to handle them, and to log calls. Call centres are used by mail-order catalogue
organizations, telemarketing companies, computer product help desks, and any large organization
that uses the telephone to sell or service products and services. Two related terms are virtual call
centre and contact centre.

MULTIMEDIA CONTACT CENTRE

A contact centre (also referred to as a customer interaction centre or e-contact centre) is a central point in
an enterprise from which all customer contacts are managed. The contact centre typically includes
one or more online call centres but may include other types of customer contact as well, including e-
mail newsletters, postal mail catalogs, Web site inquiries and chats, and the collection of information
from customers during in-store purchasing. A contact centre is generally part of an enterprise's
overall customer relationship management (CRM).

A contact centre would typically be provided with special software that would allow contact
information to be routed to appropriate people, contacts to be tracked, and data to be gathered. A
contact centre is considered to be an important element in multichannel marketing.

UNIT-5

EMPLOYEE-ORGANISATION RELATIONSHIP

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Employees are the most essential elements of an organisation and they help in achieving the objective
of the organisation. They don’t work alone hence the relations are to be managed so they can perform
efficiently and keep the business running/ functioning smoothly.

EMPLOYEE-CUSTOMER LINKAGE

How well do your employees know your customers? Can they accurately represent the 'voice of your
customers'? By conducting an employee 'mirror' study, you can find out.

In an employee mirror study, employees complete the same or very similar survey as customers.
They are instructed to answer the questions as they think customers will respond. If your employees
are on the mark, meaning, their answers match up with how customers responded, they can
accurately represent the 'voice of the customer' within the organization to mitigate problems before
they happen. If your employees are not in synch with your customers, perceptions can vary
significantly and can provide different or even contrary stories about performance.

When both employees and customers evaluate specific interactions consistently, it reflects that similar
performance expectations are in effect. Similar expectations likely lead to actions between customers
and employees that are reflective of mutual goals and understanding.

There are a variety of ways to conduct a mirror assessment of employee and customer perceptions.
Some of these can provide the basis for actually linking perceptions between the two groups
quantitatively. A quantitative link can help a company determine the specific impact that employee
change can have on customer loyalty. It is a basis for prioritizing improvements and assessing the
return.

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FACTO’S AFFECTING EMPLOYEES’ CUSTOMER ORIENTED BEHAVIOUR

Since the intangible and interactive characteristics through service delivering process, customer-
contact employees’ behaviour plays a key role during customers’ decision making process. In fact, the
customer-oriented behaviour of customer-contact employees is important for service firms to make
long-term profit. In recent years, the number of the companies which invested programs for
enhancing customer-oriented behaviour of customer-contact employees is growing rapidly. The
boundary-spanning nature of service employees often results in some emotional or affective reactions
during service delivering. As the result, it is important to study the factors that can influence
customer-oriented behaviour of customer-contact employees. Previous researches have indicated that
emotional or affective responses (e.g., job satisfaction, job stress) of customer-contact employees will
influence their customer-oriented behaviour. Furthermore, the extent to which employees show the
customer-oriented behaviour relies on the efforts that customer-contact employees engage in. It is
known that job-related factors would influence customer-oriented behaviour. In addition, since
customer-contact employees are emotional labours, the moderated effect of emotional intelligence
also effects. The way they communicate with the customers. Emotional intelligence can be defined as
the abilities concerning the recognition and regulation of emotion in the self and others. We argue
that customer-contact employees’ emotional intelligence would moderate the relationship between

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job stress and customer-oriented behaviour. Specifically, customer-contact employees whose
emotional intelligences are higher than others’ would have lighter negative effect from job stress to
customer-oriented behaviour.

Our rationales are as follows: Emotional intelligence is a psychological mechanism that can prevent
individuals from a harmful stress condition. Some evidences revealed that the higher customer-
contact employees’ emotional intelligence, the lower job stress they have. Otherwise, emotional
intelligence can be an important adaptive mechanism for helping individuals to adjust the
interactions with their environment. Thus, we expect that customer-contact employees with higher
emotional intelligence would adjust the harmful affections to a good way, and would eventually
diminish the influence from job stress to customer-oriented behaviour. Consistent with the affect
theory of social exchanges, in this study we found that job satisfaction and job involvement can
positively enhance customer-oriented behaviour of customer-contact employee; job stress can
negatively affect customer-oriented behaviour. We also found evidence supporting an adaptive
mechanism to explain why some customer contact employees may react more favourable customer-
oriented behaviour than others. That is, emotional intelligence was a significant moderator of the
relationship between job stress and customer-oriented behaviour. As the emotional intelligence
increased, the higher emotional intelligence customer-contact employees have the lighter influence of
job stress on customer-oriented behaviour. Because higher emotional intelligence affords them the
ability to adjust their harmful affections (e.g., job stress), and thereby show the better customer-
oriented behaviour than others.

SERVICE FAILURE AND RECOVERY MANAGEMENT, RECOVERY PARADOX

Service Failures

Even with the best service organizations, failures can just happen – they may be due to the service

not available when promised, it may be delivered late or too slowly (some times too fast??), the

outcome may be incorrect or poorly executed, or employees may be rude or uncaring. All these types

of service failures bring about negative experiences. If left unfixed they can result in customers

leaving, telling others about the negative experiences or even challenging through consumer courts.

Research has shown that resolving the problems effectively has a strong impact on the customer

satisfaction, loyalty, and bottom-line performance. Customers who experience service failures, but

are ultimately satisfied based on recovery efforts by the firm, will be more loyal.

The Recovery Paradox.

It is suggested that customers who are dissatisfied, but experience a high level of excellent service

recovery, may be more satisfied and more likely to repurchase than are those who are satisfied at the

first place. For example, a hotel customer who arrives & finds there is no room available. In an effort

to recover, the front-desk person immediately upgrades this guest to a better room at the same price.

The customer is so thrilled with this compensation that he is extremely satisfied with this experience,

is even more impressed with the hotel than he was never before, and vows to be loyal into future. The

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logical, but not very rational, conclusion is that companies should plan to disappoint customers so

they can recover &gain even greater loyalty from them as a result. This idea is known to be

as Recovery Paradox. The recovery paradox is more complex than it seem. First of all it is expensive

to fix mistakes and would appear ridiculous to encourage service failure-as reliability is the most

important aspect of service quality. According to a research it is observed that a customer weight

their recent experiences heavily in their decision to buy again. If the experience is negative, overall

feelings about the company will decrease and repurchase intentions will also reduce. If the recovery

effort is absolutely superlative then the negative impression can be overcome.

There is a recent study which shows no support to recovery paradox. It shows the overall satisfaction

was consistently lower for those customers who had experienced a service failure than for those who

had experienced no failure, no matter what the recovery effort is. The explanation for why no

recovery paradox is suggested by the magnitude of the service failure in this study it is-a three hour

airplane flight delay. This type of failure may be too much to be overcome by any recovery effort.

Considering mixed opinions on if recovery paradox exists it is safe to say “doing it right the first

time” is the best and safest strategy. When a failure does occur then every effort at superior recovery

should be made. In cases where the failure can be fully overcome the failure is less critical, or the

recovery effort is clearly superlative, it may be possible to observe evidence of the recovery paradox.

How Customers Respond to Service Failure

If customers initiate action following service failure, the action can be various types. A dissatisfied

customer can choose complaint on the spot to the service provider, giving the company the

opportunity to respond immediately. This is often the best-case scenario for the company it has the

second chance right at that movement to satisfy the customer, keep his or her business in the future,

and potentially avoids any negative word of mouth.

Some customer chooses not to complaint directly to the provider but rather spread negative word of

the mouth about the company to friend, relatives, and coworkers. This negative word of mouth can

be extremely detrimental because it can reinforce the customer’s feeling of negativism and spread that

negative impression to other as well. Further, the company has no chance to recover unless the

negative word of mouth is accompanied by a complaint directly to the company.

When there is a failure, customer can respond in a variety of ways. It is assumed that following are

the failure, dissatisfaction at some levels will occur for the customer. In fact, research suggest that

variety of negative emotion can occur following service failure, including such feeling as anger,

discontent, disappointment, self-pity and anxiety. Many customers are very passive about their

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dissatisfaction, simply saying or doing nothing, take action or not, at some point the customer will

decide weather to stay with that provider or switch to a competitor.

Service Recovery Strategy

When the company fails to stand for its promises made to the customer on the basis they build

expectation, it’s to be said that there is service failure. When the service failure occurs, there can be

again severe ramification. Customer is considered to be the bread and butter, hence retaining them is

the biggest challenge, and however service failure acts as an obstacle to it. In such failures,

 The customer wants what they were promised.

 Customer wants personal attention

 Customer wants a decent apology

 Customers want that they should not be made to feel that they are the cause of the problem.

(Though in many cases they are responsible for nuisance)

There are again five steps involved in order to deal with service failure. They are mentioned as below

1. Acknowledgement and apology for the fact.

2. Listening to the customers.

3. Avoid defending the company and offer a rational explanation.

4. Offer some extra benefits

5. Have a proper follow up and make sure no mistakes this time, so that he can easily forget

about the service failure and is retained.

A customer expects three shorts of fairness in case of service recovery. They are mentioned as below.

1. Interaction fairness: when there is service failure, first the company is supposed to

acknowledge the customer. Due to this the customer might dissatisfied, but he still expects

fairness and courtesy in the language and tone used by the addresser.

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 2. Procedure fairness: to know in detail about the incidence of service failure or to avail the

compensation. There should be simplicity in procedure, which is involved. Service failure and

complexity in procedure both together might result in a disaster as far as customer is concern.

3. Outcome fairness: now when the company realizes that there is service failure they should

end up compensating, arranging for some alternative mode of transporting or complies with the

customer condition. The outcome should be taken by considering the customer, his needs and the

company’s policy.

CUSTOMER LIFE TIME VALUE

In marketing, customer lifetime value (CLV) (or often CLTV), lifetime customer value (LCV), or life-
time value (LTV) is a prediction of the net profit attributed to the entire future relationship with a
customer. The prediction model can have varying levels of sophistication and accuracy, ranging from
a crude heuristic to the use of complex predictive analytics techniques.

Customer lifetime value can also be defined as the dollar value of a customer relationship, based on
the present value of the projected future cash flows from the customer relationship. Customer lifetime
value is an important concept in that it encourages firms to shift their focus from quarterly profits to
the long-term health of their customer relationships. Customer lifetime value is an important number
because it represents an upper limit on spending to acquire new customers. For this reason it is an
important element in calculating payback of advertising spent in marketing mix modelling.

When margins and retention rates are constant, the following formula can be used to calculate the
lifetime value of a customer relationship:

Customer lifetime value ($) = Margin ($) * (Retention Rate (%) ÷ [1 + Discount Rate (%)]) *
Retention Rate (%))

The model for customer cash flows treats the firm’s customer relationships as something of a
leaky bucket. Each period, a fraction (1 less the retention rate) of the firm’s customers leave and
are lost for good.

The CLV model has only three parameters:

(1) constant margin (contribution after deducting variable costs including retention spending) per
period,

(2) constant retention probability per period, and

(3) discount rate. Furthermore, the model assumes that in the event that the customer is not
retained, they are lost for good. Finally, the model assumes that the first margin will be received
(with probability equal to the retention rate) at the end of the first period.

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 The one other assumption of the model is that the firm uses an infinite horizon when it calculates
the present value of future cash flows. Although no firm actually has an infinite horizon, the
consequences of assuming one are discussed in the following.

Under the assumptions of the model, CLV is a multiple of the margin. The multiplicative factor
represents the present value of the expected length (number of periods) of the customer
relationship. When retention equals 0, the customer will never be retained, and the multiplicative
factor is zero. When retention equals 1, the customer is always retained, and the firm receives the
margin in perpetuity. The present value of the margin in perpetuity turns out to be the Margin
divided by the Discount Rate. For retention values in between, the CLV formula tells us the
appropriate multiplier.

CUSTOMER PROFITABILITY

Customer profitability (CP) is the profit the firm makes from serving a customer or customer group
over a specified period of time, specifically the difference between the revenues earned from and
the costs associated with the customer relationship in a specified period. According to Philip Kotler,
"a profitable customer is a person, household or a company that overtime, yields a revenue stream
that exceeds by an acceptable amount the company's cost stream of attracting, selling and servicing
the customer."

Calculating customer profit is an important step in understanding which customer relationships are
better than others. Often, the firm will find that some customer relationships are unprofitable. The
firm may be better off (more profitable) without these customers. At the other end, the firm will
identify its most profitable customers and be in a position to take steps to ensure the continuation of
these most profitable relationships. However, abandoning customers is a sensitive practice, and a
business should always consider the public relations consequences of such actions.

PURPOSE

Although CP is nothing more than the result of applying the business concept of profit to a customer
relationship, measuring the profitability of a firm’s customers or customer groups can often deliver
useful business insights.

The purpose of the “customer profit” metric is to identify the profitability of individual customers.
Companies commonly look at their performance in aggregate. A common phrase within a company is
something like: “We had a good year, and the business units delivered $400,000 in profits.” When
customers are considered, it is often using an average such as “We made a profit of $2.50 a customer.”
Although these can be useful metrics, they sometimes disguise an important fact that not all
customers are equal and, worse yet, some are unprofitable. Simply put, rather than measuring the
“average customer,” we can learn a lot by finding out what each customer contributes to our bottom
line.

CUSTOMER RECALL MANAGEMENT

 To identify the key issues in product complaint and recall handling

 To understand the specific requirements for organization, procedures and resources

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  To understand and develop actions to resolve current issues applicable to you

Reasons for Recall

 Customer complaint

 Detection of GMP failure after release

 Result from the ongoing stability testing

 Request by the national authorities

 Result of an inspection

 Known counterfeiting or tampering

 Adverse reaction reporting

RURAL CRM

Customer Relationship Management (CRM) is an enterprise-wide business strategy to cut down on

cost and boost profitability by solidifying customer loyalty. Moreover, CRM gets together information
from all data sources within a business (and if possible, from outside the business) to provide one and
holistic view of each customer in real time. This allows customer-facing-employees in such areas as
customer support, sales, and marketing to formulate fast informed decisions from cross-selling and
up selling prospects to target marketing strategies and competitive positioning tactics. Effective
customer relationship management technology needs much more than simply tracking buying
behaviour

CRM IN RETAIL INDUSTRY, AVIATION, HOSPITALITY, BANKING AND TELECOM INDUSTRY

CHARACTERISTICS OF CRM

CRM has four characteristics (Xu et al, 2002):

 Customer Service and Support: CRM improves the customer retention rate by incorporating a real
time monitoring of customer service. It also helps the organisation in incorporating exemplary
customer service. Companies can assign each query to the appropriate expert, who can then resolve
the issue at the earliest.
 Marketing Automation: CRM provides up-to-date information on consumer trends so that the most
effective marketing campaigns can be achieved. The innovation of various technologies offered by
CRM systems can be combined to enable companies to address customers’ individual needs
effectively.
 Sales-Force Automation: CRM applications effectively manage customer information, allowing for a
singular view of each customer which contains all contact information and sales history. This allows
for a better mapping of the customer’s spending habits and allows the companies to develop their
products and marketing scheme accordingly.
 Field service: Remote staff can effectively communicate with customer service personnel to meet
customers’ individual expectations, utilising the organization’s CRM system. Utilising a knowledge-

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base, the organization can nominate the correct technician or personnel to a customer, based on their
location. Furthermore, service instructions can be accessed for a better quality of customer service.

CRM IN AVIATION

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IN TELECOM

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