CONSUMER BEHAVIOR (18MBAMM301)

Unit 6: Consumer Influence and Diffusion of Innovations

Opinion Leadership: Dynamics of opinion leadership process, Measurement of opinion

leadership, Market Mavens, Opinion Leadership & Marketing Strategy, Creation of Opinion
Leaders.
Diffusion of Innovations: Diffusion Process, Adoption Process: Stages, categories of
adopters, Post Purchase Processes.
Customer Relationship Management: Meaning & Significance of CRM, Types of CRM
Strategies for building relationship marketing, e-CRM, Meaning, Importance of e-CRM,
Difference Between CRM & e-CRM.
6.1 OPINION LEADERSHIP –

DYNAMICS OF OPINION LEADERSHIP PROCESS.

Opinion Leader is individual whose ideas and behavior serve as a model to others. Opinion
leaders communicate messages to a primary group, influencing the attitudes and behavior
change of their followers.

Opinion Leadership is the process by which the opinion leader informally influences the
actions or attitudes of others, who may be opinion seekers or opinion recipients.

DYNAMICS OF THE OPINION LEADERSHIP PROCESS.

Credibility: opinion leaders (OL) are highly credible sources of information because they usually are
perceived as the objective concerning the product or service information or advice they dispense.
Their intentions are perceived as being in the best interests of the opinion recipients because they
receive no compensation for the advice & apparently have no “ax to grind”. Because opinion leaders
often base their product comments on firsthand experience, their advice reduces for opinion receivers
the perceived risk or anxiety inherent in buying new products

Positive & negative product information: Information provided by marketers is invariably favorable
to the product & or brand. Thus the very fact that the opinion leaders provide both favorable &
unfavourable information adds to their credibility. An example of unfavorable or negative product
comment is that the” the problem with those inexpensive kitchen knives is that they soon go from
being sharp to being dull”. Compared with positive or neutral comments, negative comments are
relatively uncommon. For this reason consumers are specially note such information & to avoid
product or brands that receive negative evaluations. Over the years motion pictures have failed due to
negative buzz about the film & negative word of mouth about new food products have retarded the
sales or caused the early death of a product

Information & advice: OLs are the source of information & advice. They may simply talk about the
experience with a product relate, what they know about a product or more aggressively advice others
to buy or avoid a specific product. The kinds of product or service information that opinion leaders
are likely to transmit during a conversation include the following:

Which of the several brands is best: “In my opinion when you compare picture versus price, Sony
offers the best value in small digital cameras”

How to best use a specific product: “I find that my walls look best when I paint with roller rather
than a brush”
Where to shop: “when Brooks Brothers has a sale, the values are terrific:”

Who provides the best service: “Over the past years, I have had my car service & repaired at Tom’s
Garage & I Think its service can’t be beat?”

OLs leadership is category specific: OLs tends to be category specific that is opinion leaders
specialize in certain product categories about which they offer information & advice. When other
product categories about which they offer information & advice. When other product categories are
discussed, however they are just as likely to reverse roles & become opinion receivers. A person who
is considered particularly knowledgeable about home electronics may be opinion leaders in terms of
subject, yet to come to purchasing a new washing machine, the same person may seek advice from
someone else who has sought advice on home electronics

OL is a two way street: consumers who are opinion leaders in one product situation may become
opinion receivers in another situation even for the same product

6.2 MEASUREMENT OF OPINION LEADERSHIP

Consumer researchers are interested in identifying & measuring the impact of Opinion Leadership
process on consumption behavior. In measuring Opinion Leadership the researcher has a choice of
four basic measurement techniques:

Self-designating method: in this method, respondents are asked to evaluate the extent to which they
have provided others with information about a product category or specific brand or have
alternatively influenced the purchase decisions of others

Socio-metric method: this method measures the person to person informal communication of
consumers concerning products categories. In this method respondents are asked to identify:

The specific individuals to whom they provided the advice or information about the product or brand
under study

The specific individuals who provided them the advice or information about the product r brand
under study

Key informant method: Opinion Leadership can also be measured through the use of key
informant, a person who is keenly aware of knowledgeable about the nature of social
communications among the members of specific group. The key informant is asked to identify those
individuals in the group who are most likely to be opinion leaders

Objective method: Determining Opinion Leadership is much like a controlled experiment. It

involves placing new products or new product information with selected information with selected
individuals & then tracing the resulting “web” of interpersonal communication concerning the
relevant products

6.3 MARKET MAVENS

Market Mavens belong to a special class of opinion leaders who have market involvement rather
than the product involvement of the normal opinion leader. They are people who actively seek
market information which they feel may be useful for friends &acquaintances& are great source of
information like-which place offers the best deal, where there are discounts at the time of year, what
new brands are present in the market, which outlet to visit for which product, the new outlets in
town.

Market Mavens not only like to collect information but also share it willingly, & like normal opinion
leaders may or may not be early purchasers or users of the product /brand they recommend.

However although they appear to fit the profile of opinion leaders in that they have high level of
brand awareness & tend to try more brands, unlike opinion leaders their influence extends beyond
the realm of high involvement products. For example, Market Mavens may help diffuse information
on such low-involvement products as razor blades & laundry detergent. Furthermore, market mavens
appear to be motivated by sense of obligation to share information a desire & the feeling of pleasure
that comes with telling others about products

6.4 OPINION LEADERSHIP AND MARKETING STRATEGY.

The importance of Opinion Leadership varies from product to product & from target market to target
market. Therefore, the initial step in using Opinion Leaders is to determine through research,
experience, or logic the role of Opinion Leadership has in the situation at hand. Once this is done
marketing strategies can be devised to make use of Opinion Leadership.

1. Advertisements stimulating opinion leadership

2. Strategy designed to stimulate buzz
Influencing the opinion leaders
Rationing the supply
Exploiting the supply
Being in the category top lists
Nurture the grass roots
3. Viral Marketing
4. Blog
Types of blogs
Personal blogs
Corporate and organizational blogs
By Genre
By Media Type
Be Device

6.5 CREATION OF OPINION LEADERS.

Marketing strategies realize that if they could segment their market into Opinion Leaders & opinion
receiver’s promotional efforts would be significantly improved. Now they could direct their
promotional messages directly to the people most likely to “carry the word” to the messages. Though
there are difficulties inherent in identifying appropriate Opinion Leaders, it might be fruitful to create
product specific Opinion Leaders. For example, a group of socially influential high school students,
class presidents, spots captains were asked to become members of panel that would rate newly
released records. They were encouraged to discuss their record choice with friends. Some of the
records that the group evaluated made the top 10 charts in cities where they lived. These same
records did not make the top 10 in any other city. Thus product specific Opinion Leaders can be
created by taking socially involved or influential people & deliberately increasing their enthusiasm
for product category

6.6 DIFFUSION OF INNOVATIONS: DIFFUSION PROCESS.

The introduction of new products & services is vital to the customer, the marketer & the world
economy. For the consumer new products & services represent increased opportunities to satisfy
personal, social, & environmental needs. For the marketer, new products & service provide an
important mechanism for keeping the firm competitive & profitable. For entire countries of
geographic regions or even the world, new products & services represent potential improvements in
quality of life for billions of people.

The framework for exploring consumer acceptance of new products is drawn from the area of
research known as diffusion of innovations. Consumer researchers who specialize in diffusion of
innovations are primarily interested in understanding two closely related processes. The diffusion
process & adoption process.
In the broadest sense diffusion is macro process concerned with spread of new product from its
source to consuming public. In contrast adoption is a micro process that focuses on the stages
through which an individual consumer passes when deciding to accept or reject a new product

DIFFUSION PROCESS:

Is concerned with how innovations spread that is, how they are assimilated within the market. More
precisely diffusion is the process by which the acceptance of innovation is spread by communication
to members of social system over a period of time

According to Rogers “Is the process by which an innovation is communicated through certain
channels over time among the members of a social system”

In other words the study of diffusion of innovation is the study of how, why &what rate new ideas &
technology spread through cultures

Basic Elements of Diffusion Process:

According to the definition given b Roger’s the four basic elements of Diffusion Process are as
follows:

INNOVATION: Not universally accepted definition of the terms “ product innovation” or “new
product” exists instead various approaches have been taken to define a new product or new service;
these can be classified as firm- product, market, & consumer oriented definitions of innovations:

Firm oriented definitions: A firm oriented approach treats the newness of product from the
perspective of company producing or marketing it. When the product is “new” to the company, it is
considered new. This definition ignores whether or not the product is actually new to market place
(that is competitors to consumers)

Product oriented Definitions: In contrast to firm oriented, a product approach focuses on the
features inherent in the product itself & on these effects these features are likely to have on
consumers established usage patterns. Once product oriented framework considers the extent to
which a new product oriented framework considers the extent to which a new product is likely to
disrupt established behavior patterns. It defines the following three types of product innovations

1. Continuous Innovations: have the least disrupting influence on established consumption patterns.
Product alteration is involved rather than establishment of totally new product. Examples of products
that are representative of this situation are fluoride toothpaste, new model automobile changeovers &
menthol cigarettes
 2. Dynamically Continuous Innovations: have more disrupting effects than do continuous
innovations, although they do not alter established patterns. These may involve creation of new
products or alteration of existing items. Examples, of this would include electric toothbrushes,
electric autos, wall sized television screens, & video telephones

3. Discontinuous Innovations: involve the establishment of new products with new behavior
patterns. Examples of these situations would include television, computers & automobiles

Market oriented definitions: Approach judges the newness of the product in terms of how much
exposure consumers have towards new products. Two market oriented definitions of product
innovation have been used extensively in consumer studies:

A product is considered new if it has been purchased by relatively small percentage of potential
market
A product is considered new if it has been on the market for a relatively short period of time
Both of these market oriented definitions are basically subjective, because they leave the researcher
with task of establishing degree of sales penetration within the market that qualifies the product as
an innovation or how long the product can be on market & still be considered “new”

Consumer oriented Definitions: Although each of three approaches described above have been
useful to consumer researchers in their study of diffusion of innovations, some researchers have
favored consumer oriented approach in defining innovation. In this context “new” product is any
product that potential customers judges to be new. In other words newness is based on consumer’s
perception of the product rather than on physical features or market realities. Although the consumer
oriented approach has been endorsed by some advertising & marketing practitioners, it has been
received little systematic research attention

COMMUNICATION CHANNELS: How quickly an innovation spreads through market depends

to great extent on communication between the marketer & consumers, as well as communication
among consumers. In recent years a variety of new channels of communication have been developed
to inform customers of innovative products & services. Consider the growth of interacting marketing
messages, in which the consumer becomes an important part of communication rather than just
“passive” message recipient

SOCIAL SYSTEM: the diffusion of innovation of new product usually takes place in social setting
frequently referred to as social system. In the context of consumer behavior, the terms market
segment & target market are synonyms with the term social system used in diffusion research. A
social system is physical social or cultural environment to which people belong & within which they
function. For example, new hybrid sweet corn, the social might consist of all farmers in number of
 local communities. For new drug, the social system might include all residents of a geriatric
community. As these examples indicate, the social system serves as the boundary within which the
diffusion of new product is examined

The orientation of social system with its own special values or norms is likely to influence the
acceptance or rejection of new products. When a social system is modern in orientation the
acceptance of innovations is likely to be high. In contrast when a social system is traditional in
orientation, innovations that are perceived as radical or as infringements on established customs are
likely to be avoided

The following characteristics typify a modern social system:

Positive attitude towards change

Advanced technology & skilled labor force
General respect for education & science
Emphasis on rational & ordered social relationships rather than on emotional ones
Outreach perspective in which members can readily see themselves in quite different roles
TIME: it is the backbone of diffusion process. It pervades the study of diffusion in three distinct but
interrelated ways:

Purchase Time: refers to the amount of time that elapses between consumers initial awareness of
new product or service & the point at which they purchase or reject it

Adopter categories: the concept categories involve a classification scheme that indicates where a
consumer stands in relation to other consumers in terms of time. Five adopter categories are
frequently cited in diffusion literature: innovators, early adopters, early majority, late majority &
laggards

Rate of adoption: is concerned with how long it takes a new product or service to be adapted by
members of social system that is: how quickly it takes new product to be accepted by those who will
ultimately adopt it. The general view is the rate of adoption for new products is getting faster or
shorter. Fashion adoption is a form of diffusion, one which rate of adoption is important. Cyclical
fashion trends or fads are extremely fast whereas fashion classics may be extremely slow or long
cycles
6.7 ADOPTION PROCESS: ADOPTION STAGES.
The second major process in the diffusion of innovation is adoption. The focus of this process is the
stages through which an individual consumer passes while arriving at a new decision to try or not to
try to continue using or to discontinue using a new product

STAGES IN ADOPTION PROCESS:

Awareness: at this stage the potential adopter finds out about the existence of a product but has very
little information & no well- informed attitudes about it

Comprehension: this stage represents the customer having knowledge & understanding of what the
product is & what it can do

Attitude: Here the consumer develops favorable or unfavorable behavior predispositions towards
product. Termination of the adoption process is likely at this stage. If attitudes are not favorable
toward the product

Legitimating: here the consumer becomes convinced that the product should be adopted. This stage
is predicated upon favorable attitudes towards the innovation, & consumer may use information
already gathered as well as additional information in order to reach a decision

Trial: the consumer tests the product to determine its utility. Trial may take place cognitively that is
whereby the individual vicariously uses the product in hypothetical situation or it may be actually
used in limited or total way depending on the innovations nature

Adoption: at this stage the consumer determines whether or not to use the product in a full scale
way. Continued purchase & use of item, fulfills the adoption process
 6.8 POST PURCHASE PROCESSES: CUSTOMER SATISFACTION &
CUSTOMER COMMITMENT:

Once the customer makes decision to purchase a product a product there can be several types of
additional behavior associated with that decision. Two activities are of primary importance:
Decisions on product set-up & use: All consumers who have purchased consumer durables are
familiar with the need to have their product set up or installed. The product must be made
ready for the buyer to use, As with car for example. Many other durables could be cited
which necessitate some set-up order for them to be properly used Televisions, stereos,
furniture, clothes washers & air conditioners. All must be carefully set up if the consumer is
to find satisfaction from their us
Of course another element of product set-up & the use concerns instructions given by buyer for
assembly & operation of the item. Products such as autos, calculators, microwave ovens &
so forth may require detailed explanations as to methods of operation
Decisions on related products or services: it often happens that a buyer of one item becomes a
candidate for all sorts of options & related products or services. For example, Fords
extended service plan, which is a service contract, is promoted to new car buyers
POST PURCHASE DISSONANCE:

Post purchase dissonance is basically an after purchase cognitive behavior. While evaluating the
benefits after a purchase it is common for customers to be concerned about their purchase decision. It
is caused by cognitive dissonance. Here the customer thinks that if he had purchased some other item
it would have been better than the one he bought. Simply he is not completely satisfied with purchase
& is most likely to switch brands

Conditions leading to Dissonance:

Once a minimum threshold of dissonance tolerance is passed. That is consumers may tolerate a
certain level of inconsistency in their lives until this point is reached
The action is irrevocable. For instance when the consumer purchases a new car there is little
likelihood that he will be able to reverse his decision & get his money back
Unselected alternatives have desirable features. In our camera, example, earlier the Pentax,
Canon, etc. all had attractive features
There are several desirable alternatives. In fact research indicates that those consumers who
experience greater difficulty in making purchase decisions, or who consider a wider range of
store & brand options are more likely to experience greater magnitudes of post-purchase
 dissonance
Available alternatives are quite dissimilar in their qualities. For instance, although there are
many automobile models each one may have some unique characteristics
Buyer is committed to his decision because it has psychological significance. A large &
important living room furniture purchase is likely to have greater impact to the buyer
because of its dramatic reflection of one’s decorating tastes, philosophy, & life style
There is no pressure applied to the consumers subjected to outside pressure he will do what he is
forced to do without letting his own viewpoint or preference really be challenged

Reducing Dissonance:

Change his evaluation of the alternative: One of the ways consumers seek to reduce dissonance
is to reevaluate product alternatives. This is accomplished by the consumer’s enhancing the
attributes of the products selected while decreasing the importance of the unselected
products attributes
In some cases selective retention may operate to allow the consumer to forget positive features
of unselected alternative & negative features of the chosen product while remembering
negative attributes of the unchosen item along with favorable features of chosen alternative
Seeking new information: a second way consumers may reduce dissonance is by seeking
additional information in order to confirm the wisdom of their product choice. According to
dissonance theory, dissonant individuals would be expected to actively avoid information
that would tend to increase their dissonance & seek information supporting their decision. It
seems reasonable to assume that consumers would seek out advertisements for products they
have purchases& tend to avoid competing ads
PRODUCT USE & NON USE:

Post purchase evaluation includes consumer decision for product use & non-use depend on its
satisfaction level

Product Use: most consumers’ purchases involve nominal or limited decision-making & therefore
arouse little or no post-purchase dissonance. Instead the purchaser or some other member of the
household uses the product without first worrying about the wisdom of purchase

Marketers need to understand how consumers use their products for a variety of reasons.
Understanding both the functional & symbolic ways in which a product is used can lead to more
effective product designs. For example, Nike uses observation of basketball players at inner city
courts to gain insights into desired functional & style features. One insight gained through these
observations is that the process of pulling tin & tying/buckling basketball shoes before a match is full
of meaning & symbolism. In many ways it is the equivalent of a knight putting on armor before a
jousting match or combat. Nike has used this insight in several aspects of its shoe designs

Retailers can frequently take advantage of fact that the use of one product may require or suggest the
use of other products. Consider the following product sets: houseplants, & fertilizer, bikes &
helmets, cameras & carrying cases, sport coats & ties, & dresses & shoes. In each case the use of
first product is made easier more enjoyable or safer by the use of the related product .retailers can
promote such items jointly, display them together or train sales personnel to make relevant
complementary sales

Product Non-use: occurs when a consumer actively acquires a product that is not used or used
sparingly relative to its potential use

For many products & most services the decisions to purchase & to consume are made
simultaneously. A person who orders a meal in a restaurant is also deciding to eat the meal at that
time. However a decision to purchase food at a supermarket requires a second decision to prepare &
consume the food. The second decision occurs at different point in time & in a different environment
from the first. Thus non use can occur because the situation or the purchaser changes between the
purchase & the potential usage occasion. For example, a point of purchase display featuring a new
food item shown as part of an appealing entrée might cause a consumer to imagine an appropriate
usage situation & to purchase the product. However without the stimulus of display, the consumer
may not remember the intended use or may just never get around to it.

PRODUCT DISPOSITION:

A disposition is a habit a preparation a state of readiness or tendency to act in a specified way. The
terms dispositional belief & concurrent belief refer in the former case, to a belief that is held in the
mind but not currently being considered & in the latter case to belief that is currently being
considered by the mind

One must decide whether or not to accept the product as is & claim in that regard or refuse the goods
& ownership of product is called product disposition

The disposition of what the consumer has purchased is of important concerns. It is important from
public policy perspective as well as from marketing management orientation to better understand
how consumers make disposition decisions for a product
 There are various alternatives for disposing of a product. At present little is known about the factors
that influence the disposition choice made by consumer. The following categories of factors have
been suggested

Psychological characteristics of Decision Maker: personality attitudes, emotions, perception,

learning, creativity, intelligence, social class, level of risk tolerance, peer pressure, social conscience
& so on. Although consumer demographic variables have not proved to be very enlightening in
understanding disposition behavior, lifestyle factors have proved to be moderately useful

Factors intrinsic to the product: condition, age, size, value, color, power source of product
technological innovations, adaptability, reliability, durability, initial cost, replacement cost & so on

Situational Factors extrinsic to the product: Finances, storage space, urgency, fashion changes,
circumstances of acquisition, functional use, economics, legal considerations & so on

PRODUCT DISPOSITION & MARKETING STRATEGY:

For the most desirable goods consumers are reluctant to purchase a new item until they have
“gotten their money’s worth” from the old one. These consumers mentally depreciate the
value of durable item overt time. If the item is not fully mentally depreciated they are
reluctant to write off by disposing of it acquire a new one. Allowing old items to be traded in
is one way to overcome reluctance
Disposition sometimes must occur before acquisition of replacement because of space or
financial limitations. For example, because of lack of storage space, a family living in an
apartment may find it necessary to dispose of an exciting bedroom set before acquiring a
new one. Or someone may need to sell his current bicycle. Thus it is to manufacturers &
retailers advantage to assist the consumer in disposition process
Frequent decisions by consumers to sell, trade, or give away used products may result in large
used product market that can reduce the market for new products. A consumer to consumer
sale occurs when one customer sells a product directly to another with or without assistance
of a commercial intermediary
Another reason for concern with product disposition is that the India is not completely a throw-
away society. Many Indians continue to be very concerned with waste & how their purchase
decisions affect waste. Such individuals might be willing to purchase example, a new
vacuum cleaner if they were confident that the old one would be re-built & re-sold. However
they might be reluctant to throw their old vacuums away or to go to the effort of re-selling
the machines themselves. Thus manufacturers & retailers could take steps to ensure that
 products are re-used
The environmentally sound disposition decisions benefit society as a whole & thus the firms that
are part of society & environment as many of their consumers. Their environment & lives
are affected by the disposition decisions of consumers. Therefore it is their best interest to
develop products, packages, & programs that encourage proper disposition decisions

6.9 CUSTOMER RELATIONSHIP MANAGEMNT: MEANING AND

SIGNIFICANCE.
Customer Relationship Management can be defined as a business philosophy and set of
strategies, programs, and systems that focuses on identifying and building loyalty with a
marketer's profitable customers. It is based on the business philosophy that all customers are
not profitable in the same way and marketers' can increase their profitability by building
relationships with their better customers. The goal is to develop a base of loyal customers
who patronise the marketer frequently.

According to Gartner, "CRM is a business strategy designed to optimise profitability,

revenue, and customer satisfaction".

According to PWC Consulting, "CRM is a business strategy that aims to

understand/appreciate, manage and personalise the needs of an organisation's current and
potential customers”.

According to Parvatiyar and Sheth, "CRM is a competitive strategy and process of acquiring,
reacting and partnering with selective customers to create superior value for the company and
the customer".

CRM consists of three definitional components in its architectural structure:

1) Customer: The customer is the only source of the company's present profit and future
growth. Information technologies can provide the abilities to distinguish and manage
customers.

2) Relationship: The relationship between a company and its customers involves continuous
bi-directional communication and interaction. The relationship can be short-term or long-
term, continuous or discrete, and repeating or one-time.
3) Management: CRM is not an activity only within a marketing department. Rather it
involves continuous adaptation in corporate culture and processes. CRM required a
comprehensive change in the functioning of organisation and the attitude of its people.

CRM is quite a new phenomenon in marketing industry. The philosophy of Information

Technology enabled Relationship Marketing forms the basis of Customer relationship
management and accelerates its need into the current marketing world as it uses variety of
tools like MIS, Data warehouses, Spreadsheets, MS access, Telephones, E-mail, Mail, SMS,
Fax, Loyalty Cards, ATM's, etc. to compile and process the mountains of customer data to
facilitate analysis and to refine customer service practices in order to increase customer
loyalty and ensure prosperous business.

Process of Relationship Management + IT = CRM

Thus we can obviously say that CRM in itself is the use of IT techniques in managing
relationship with the customers.

SIGNIFICANCE OF CRM
1) Increased Sales Revenues and Reduced Cost of Sales: Increased sales result from spending
more time with customers, which results from spending less time chasing, needed
information. Reduced costs, because the right things are being done. A strong point in
customer relationship management is that it is making the customer a partner in the business,
not just a subject.

2) Increased Customer Satisfaction: Increased customer satisfaction, because they are getting
exactly what they want. The customer feels that he is more "part of the team" instead of just a
subject for sales and marketing (the proverbial number), customer service is better, his needs
are anticipated. There is no doubt that customer satisfaction will go up.

3) Lower Costs of Recruiting Customers: CRM ensures savings on marketing, mailing,

contact, follow-up, fulfilment, and services, and so on. In presence of CRM there is no need
to recruit so many customers to maintain a steady volume of business (especially in business-
to-business marketing environments).

4) Increased Customer Retention and Loyalty: Customers stay longer, buy more, contact for
their requirements (which increases the bonding relationship), and customers buy more often.
CRM, therefore, increases the opportunity and accomplishment of real lifetime value. A
better served and delighted customer gradually becomes loyal
5) Evaluation of Customer Profitability. Knowing which customers are truly profitable,
which customers should be changed from low/no profit through cross-selling/up-selling,
which customers might not ever become profitable; which customers should be managed by
external channels, and which customers drive future business.

6) Excellent Customer Service: CRM manages to drive customer interaction forward. CRM is
an approach to customers that looks at basically strengthening the relationship. Customer
loyalty is a natural by product as CRM provides for better allegiance with customers. It helps
them to create and retain loyal customers. CRM gives the consumer incentive to remain loyal
and increase his purchases over his lifetime.

7) Customer Knowledge: It makes possible a shared knowledge base that is easily accessible
to all employees within the organisation. It enables a company to basically look into the
stored data and provide accurate information to employees about customers. It helps the
organisation to make informed and correct decisions. It also helps the organisation to stay
close to the customer, so that it can anticipate upcoming needs and cater to those needs.

8)Customisation: CRM deliver customised solutions that are specifically built for the small
and medium industry market and that are not complex. Ease of integration with other
business processes is the key word OF CRM, CRM provide for customisation and the ability
to change in accordance with business needs. Configuration with ease using interfaces and
workflow processes becomes possible contributing to increased ease in customisation.

9) Positive Referral Creation: A satisfied customer often spreads positive things about the
company. Such positive opinion proves to be more reliable and authentic than companies
propaganda, including advertisements and consequently brings in more customers.

10) Reduced Costs through Customer Self-Service: The vast majority of calls placed to
customer service representatives are made to ask a short and predictable list of questions.
User profiles allow enterprises to anticipate customer support needs and prepare answers
automatically. As customer care dialogue occasionally provides opportunities for cross- and
up-selling, customer relationship applications can even help increase revenues.

11) Opportunity to Cross-Sell and Up-Sell: A satisfied customer is expected to come back to
the same company to repeat purchase. In case of any cross-sell and up-sell, he comes back to
the same company and with no extra expense, the company is able to get him for more
products,
12) Decreased General Sales and Marketing Administrative Costs: This decrease occurs since
the company has specified its target segment customers, it knows their needs better, and thus
it is nor wasting money and time, for example, on mailing information to all customers in all
existing and potential target segments.

6.10 TYPES OF CRM

CRM has gained a lot of importance for running a successful business in the last few years.
Various approaches of CRM are Operational, Analytical and Collaborative CRM. Together
these components of CRM support and feed into each other. Successful CRM, which results
in a superior customer experience, requires integration of all three of these component parts.
Collaborative CRM enables customers to contact the enterprise through a range of different
channels and undergo a common experience across these channels. Operational CRM
facilitates the customer contacts with the organisation and subsequent processing and
fulfilment of their requirements. Analytical CRM enables the right customers to be targeted
with appropriate offers and permits personalisation and one-to-one marketing to be
undertaken through superior customer knowledge. While historically, operational and
collaborative CRM had the greatest emphasis, enterprises are now more cognisant of the need
for analytical CRM to enable better optimisation of their customer-facing activities and
creation of value for the customer and enterprise.

Operational CRM

Operational CRM is mainly focused on automation, improvement and enhancement of

business processes which are based on customer-facing or customer supporting. The
automation of horizontally integrated business processes involving front office customer
touch points - sales, marketing, and customer service (call centre, field service) – via
multiple, interconnected delivery channels and integration between front office and back
office. Operational CRM renders automated support for businesses that have a direct
interaction with their customers. Every interaction with a customer and their personal
preferences are recorded for use by the different departments of an organisation to retrieve
customer information. The operational CRM is a process or an approach, which involves the
areas where direct customer contact is possible. Operational CRM represents the automation
of business processes involving customers. Its purpose is to provide transaction level data
about individuals and products, and provide support for customer facing processes, such as
direct mail, phone interactions, web-based communications, and point of sale information.
Because operational solutions directly affect the customer, they are very appealing and often
are the first implemented components of a CRM strategy,

Collaborative CRM

Collaborative CRM deals with synchronisation and integration of customer interaction and
channels of communications like phone, email, fax, web etc. with the intent of referencing the
customers a consistent and systematic way. The idea is not only enhancing the interactions
but also to increase and improve customer retention and liberty. Collaborative CRM
entangles various departments of organisation like sales, marketing, finance and service and
shares the customer information among them to highlight better understanding of customers.
For example, the information of preferred products could be shared with marketing
department so that analysis can be performed in this aspect to provide preferred products to
customers.

The information regarding varied cost or price of a particular product in market defined by
customers can be delivered to finance department so that strategies could be created to match
the product cost with similar products in market and after analysis bring an affordable and
efficient product in market. The information regarding a specific service which is not
installed in the company's environment and intimated by the customers can be transferred to
service department to improve or install that particular service in-house. All this is done
efficaciously within the range of channels so that the process automates the needs and
minimal time is required for fulfilling these needs.

Analytical CRM

Analytical CRM supports organisational back-office operations and analysis. It deals with all
the operations and processes that do not directly deal with customers. Hence, there is a key
difference between operational CRM and Analytical CRM. Unlike from operational CRM,
where automation of marketing, sales-force and services are done by direct interaction with
customers and determining customers' needs, analytical CRM is designed to analyse deeply
the customers' information and data and unwrap the intentions of customers which can be
capitalised by the organisation. Primary goal of analytical CRM is to develop, support and
enhance the work and decision making capability of an organisation by determining strong
patterns and predictions in customer data gathered from different operational CRM systems.

The analysis of data created on the operational side of the CRM equation for the purpose of
business performance management, Analytical CRM is inextricably tied to data warehouse
architecture and is most often manifested in analytical applications that leverage data marts.
Analytical CRM is the synthesis and interpretation of operational data to identify
opportunities, optimise customer interactions, and manage business performance. It also
provides the insight into customer behaviour needed to implement intelligent personalisation.
Analytics involves the capture, storage, extraction, processing, interpretation, and reporting
of customer data. It works on data gathered from multiple sources; from marketing
campaigns, key accounts and market or product group, and is used as a strategic planning
support tool. Analytical CRM takes the information that operational CRM so diligently
gathers, and runs algorithms over it for analysis and interpretation purposes, to provide the
insight and data interpretation that is lacking in operational CRM.

6.11 e-CRM , MEANING AND IMPORTANCE.

e-CRM is the use of technology to support customer interactions with little or no human
intermediation on the supplier side. This consists of two elements:

1) The use of direct-to-customer channels, principally e-mail and the web but also channels
such as chat, WAP, ATMs, and kiosks. 2) The use of technology to select relevant material to
be presented to the customer in terms of content, offers, and support information.

IMPORTANCE
1) Lowers the Cost: Availability of various CRM functionalities such as links to e-mail and
related sites, lists of Frequently Asked Questions (FAQs), and ongoing discussion groups can
be developed and maintained for much less than the cost of the customer service
representatives. This is possible because Internet service providers are now commodity items.
The tools available for web design are mature enough to be used by anyone. Most of the cost
are usually associated with creating content for a Website.

2) Adaptability to New Technology: A variety of evolving web-based technologies can be

applied to e CRM. Vast amount of customer data can be gathered from the web, technologies
such as data warehousing, and other data-intensive applications may have even more
applicability on the web compared to data from other touch points.

3) Availability: The Web is available to most customers on a 24/7 basis. Call centers are
another tech-based initiatives that carry-out most of the customer requirements.
4) Integration with the System: The web can be integrated with business processes to a
degree only approachable by other touch points. Another aspect of integration is the benefit
of being able to print.

5) Helps Data Construction: Customers can be tracked in their use of websites, providing the
company with data on the information the customers seek and, by extension, value most.
Similarly, if customers transact business through a Website, the demographic and other
customer information are immediately available for marketing and other purposes.

6) Increased Customer Interaction: A website designed for CRM can enable the customer to
interact with the company at whatever time one wishes to.

7) Manoeuvrability: The web provides an opportunity to easily manoeuvre as per the time
requirement. Given the wide variety of affordable web-development software tools available,
it is possible to modify a website, including content, focused at particular customers, to fit
their changing needs or to accommodate a new product.

8) Managing Data Reservoir: The web enables the company to manage the data reservoir thus
created with the expanding reach and growing business of the company.

9) Lesser Response Time: For today's customer, immediate gratification is the norm, hence
the immediacy of the web is a highly purposeful attribute. Many tools are available to aid
immediacy, including powerful search engines that allow rapid, intuitive navigation through
the information-rich web space.

10) Lower Marginal Cost: Once a website is constructed, the cost of adding an additional web
customer is typically very low. In case of Internet Service Provider (ISP) hosting the website,
the ISP assumes responsibility for accommodating the additional customer web traffic.

11) New Customer Service Opportunities: The extent to which the web is technologically-
based, new CRM service options can be tried in a variety of scenarios.

12) Reach and Service Personalisation: Information on websites can be personalised to fit the
specific needs of particular customers.

13) Automatic Self-Documentation: When used with e-mail, the web is a self-documenting
touch point. The customer is intimately involved in creating documentation of the problems
and questions about a product or service,

14) User Control: Customer can be given the ability to self-direct their search for
information. The web becomes a self-service CRM station.
6.12 DIFFERENCE BETWEEN CRM & e-CRM .

Dimensions CRM e-CRM

Push and sell a uniform message Provide information in response

Advertising
to all customers to specific customer inquiries

Identify and respond to specific

Targeting Market segmentation customer behaviors and
preferences

Promotions and
Same to all customers Individually tailor to customer
Discounts offered

Distribution Through intermediaries chosen by Direct or through intermediaries –

channels the seller customers choice

Pricing of
products or Set by the seller for all customers Negotiated with each customer
services

New Product Determined by the seller based on Created in response to customer

features research and development demands

Measurement
Customer retention: total value of
used to manage
Market share : profit the individual customer
the customer
relationship
relationship