Professional Documents
Culture Documents
BBCM-154D
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BBA (Aviation Operations)
Customer Relationship
Management PE
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Aviation Marketing Management
Course Design
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Advisory Council
Chairman
Dr Parag Diwan
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Members
Dr Kamal Bansal Dr Anirban Sengupta Dr Ashish Bhardwaj
Dean Dean CIO
Author
Ekta Rastogi
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other means,
without permission in writing from MPower Applied Learning Enterprise.
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Contents
Block-I
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Unit 2 CRM Programs and Marketing Initiatives ................................................................. 19
Unit 3 CRM Implementation................................................................................................... 31
Unit 4 CRM Projects in Other Disciplines.............................................................................. 49
Unit 5 Case Studies.................................................................................................................. 61
Block-II
Block-III
Block-IV
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Block-V
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Unit 21 Sales Force Automation ............................................................................................. 267
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Glossary ............................................................................................................................................ 333
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UNIT 1: Introduction to CRM
1
Notes
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Detailed Contents Customer Relationship Management
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UNIT 1: INTRODUCTION TO CRM
___________________ UNIT 3: CRM IMPLEMENTATION
z Introduction z Introduction
___________________
z History of CRM z CRM: A Comparison with CMM Levels
___________________
z Meaning of CRM z Drawbacks of CRM Implementation
___________________
z Needs of CRM z A Framework for Successful CRM
___________________
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z Goals of CRM z Customer Strategy for CRM Implementation
___________________
z Significance of CRM z Implementing CRM: A Step-by-step Process
___________________
UNIT 2: CRM PROGRAMS AND MARKETING UNIT 4: CRM PROJECTS IN OTHER DISCIPLINES
___________________
INITIATIVES
z Introduction
___________________
z Introduction
z Five Phases of CRM Projects
___________________
z Decisions of CRM
z Development of Customizations
z Types of CRM Programs
z CRM in Marketing
z CRM Marketing Initiatives
z CRM in Human Resource
Unit 1
3
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Introduction to CRM
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
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\ Meaning and Importance of CRM ___________________
\ Interface between Marketing and CRM ___________________
\ Benefits of CRM to the Organization as well as to the Customers
___________________
___________________
Introduction
___________________
Customer satisfaction has always been a key element in the
pursuit of corporate goals and objectives. However, the current
competitive environment fostered by liberalization and
globalization of the economy, and the rising customer expectations
for quality; service and value have prompted many companies to
organize their business around customers they serve, rather than
around product lines or geographic business units. This is partly
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because customer contact, care and insight have been rendered
increasingly more practicable and economical through computers,
telecom technology and internet, historically, customer
relationship existed even in the pre-industrial era due to the direct
interaction between producers and customers as between farmers
and buyers of agricultural products, or as artisans and craftsmen
produced customized products for each customer. It was when
mass production of goods in the industrial era led to the emergence
of middlemen and transaction-oriented marketing, that direct
interaction between producers and customers became less
frequent.
Sophisticated analytical techniques are then applied to this
customer information to better understand and predict customer
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Make a brief report on the
___________________
history of CRM.
___________________ History of CRM
___________________ Customer Relationship Management (CRM) is a model for
___________________ managing a company’s interactions with current and future
customers. It provides a 360 degree view of customer data. It
___________________
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involves using technology to organize, automate, and synchronize
___________________
sales, marketing, customer service, and technical support.
___________________ Customer Relationship Management is a concept that became very
___________________ popular during the 1990s. It offered long-term changes and
benefits to businesses that chose to use it. The reason for this is
___________________
because it allowed companies to interact with their customers on a
___________________ whole new level. While CRM is excellent in the long-term, those
who are looking for short term results may not see much progress.
One of the reasons for this is because it was difficult to effectively
track customers and their purchases. It is also important to realize
that large companies were responsible for processing tremendous
amounts of data. This data needed to be updated on a consistent
basis.
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In the last few years, a number of changes have been made to
customer relationship management that has allowed it to advance.
These capabilities have allowed CRM to become the system that
was once envisioned by those who created it. However, the biggest
problem with these newer systems is the price. A number of
personalized Internet tools have been introduced to the market,
and this has driven down the cost of competition. While this may
be a bane for vendors who are selling expensive systems, it is a
bonanza for small companies that would otherwise not be able to
afford CRM programs. The foundation for CRM was laid during
the 1980s.
During this time, it was referred to as being database marketing.
The term “database marketing” was used to refer to the procedure
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needed to know what their customer purchased, how much they ___________________
spent, and what did they do with the products they purchased.
___________________
The 1990s saw the introduction of a number of advances in this
___________________
system. It was during this time that term Customer relationship
management was introduced. Unlike previous customer ___________________
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gathering information for the purpose of using for their own ___________________
benefit, companies started giving back to the customers they
___________________
deserved. Many companies would begin giving their customers
gifts in the form of discounts, perks, or even money. The companies ___________________
believed that doing this would allow them to build a sense of ___________________
loyalty in those who bought their products.
___________________
Customer relationship management is the system that is
responsible for introducing things such as frequent flyer gifts and
credit card points. Before CRM, this was rarely done. Customers
would simply buy from the company, and little was done to
maintain their relationship. Before the introduction of CRM, many
companies, especially those that were in the Fortune 500 category,
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didn’t feel the need to cater to the company. In the minds of the
executives, they have tremendous resources and could replace
customers whenever it became necessary. While this may have
worked prior to the 1980s, the introduction of the Information Age
allowed people to make better decisions about which companies
they would buy from, and global competition made it easier for
them to switch if they were not happy with the service they were
getting.
Today, CRM is being used to achieve the best of both worlds.
Companies want to maintain strong relationships with their
clients while simultaneously increasing their profits. The CRM
systems of today could be called “true” CRM systems. They have
become the systems that were originally envisioned by the pioneers
of this paradigm. Software companies have continued to release
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___________________
Table 1.1: Landmarks in the History of CRM: 1960-2010
___________________ 1960s Mass Production/Mass Product
___________________ 1970s Mass Market
1980s Total Quality Management
___________________
1990s Customer Relationship Management (CRM)
___________________
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2000s Customer Relationship Management (CRM)
___________________ 2010s e-Customer Relationship Management (e-CRM)
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largest number of people possible. Traditionally mass marketing ___________________
has focused on radio, television and newspapers as the medium
___________________
used to reach this broad audience. By reaching the largest
audience possible exposure to the product is maximized. In theory ___________________
this would directly correlate with a larger number of sales or buy ___________________
in to the product. As the name says it’s mass so you are trying to
___________________
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get as many as you can.
___________________
Mass marketing or undifferentiated marketing has its origins in
___________________
the 1920s with the inception of mass radio use. This gave
corporations an opportunity to appeal to a wide variety of potential ___________________
customers. Due to this, variety marketing had to be changed in ___________________
order to persuade a wide audience with different needs into buying
___________________
the same thing. It has developed over the years into a worldwide
multi-billion dollar industry. Although sagging in the Great
Depression it regained popularity and continued to expand
through the 40s and 50s. It slowed during the anti-capitalist
movements of the 60’s and 70’s before coming back stronger than
before in the 80’s, 90’s and today. These trends are due to
corresponding upswings in mass media, the parent of mass
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marketing. For most of the twentieth century, major consumer-
products companies held fast to mass marketing- mass producing,
mass distributing and mass promoting about the same product in
about the same way to all consumers. Mass marketing creates the
largest potential market, which leads to lowered costs.
Total Quality Management: Total Quality Management (TQM),
a buzzword phrase of the 1980’s, has been killed and resurrected
on a number of occasions. The concept and principles, though
simple seem to be creeping back into existence by “bits and pieces”
through the evolution of the ISO 9001 Management Quality
System standard.
“Total Quality Control” was the key concept of Armand
Feigenbaum’s 1951 book, Quality Control: Principles, Practice, and
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___________________
The American Society for Quality says that the term Total Quality
___________________ Management was used by the U.S. Naval Air Systems Command
___________________ “to describe its Japanese-style management approach to quality
improvement.” This is consistent with the story that the United
___________________
States Navy Personnel Research and Development Centre began
___________________ researching the use of Statistical Process Control (SPC); the work
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___________________ of Juran, Crosby, and Ishikawa; and the philosophy of W. Edwards
Deming to make performance improvements in 1984. This
___________________
approach was first tested at the North Island Naval Aviation
___________________
Depot.
___________________
Companies who have implemented TQM include Ford Motor
___________________ Company, Phillips Semiconductor, SGL Carbon, Motorola and
Toyota Motor Company.
The latest changes coming up for the ISO 9001:2000 standard’s
“Process Model” seem to complete the embodiment. TQM is the
concept that quality can be managed and that it is a process.
Total Quality Management (TQM) is a management strategy
aimed at embedding awareness of quality in all organizational
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processes. TQM has been widely used in manufacturing, education,
government, and service industries, as well as NASA space and
science programs.
Total = Quality involves everyone and all activities in the
company.
Quality = Conformance to Requirements (Meeting Customer
Requirements).
Management = Quality can and must be managed.
TQM = A process for managing quality; it must be a continuous
way of life; a philosophy of perpetual improvement in everything
we do.
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was simply so difficult and expensive to track and keep the high 9
volume of records needed accurately and constantly update them. Notes
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In the last several years, however, newer software systems and ___________________
advanced tracking features have vastly improved CRM capabilities ___________________
and the real promise of CRM is becoming a reality. As the price of
___________________
newer, more customizable Internet solutions have hit the
marketplace; competition has driven the prices down so that even ___________________
relatively small businesses are reaping the benefits of some custom ___________________
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CRM programs. ___________________
In the beginning… ___________________
The 1980’s saw the emergence of database marketing, which was ___________________
simply a catch phrase to define the practice of setting up customer
___________________
service groups to speak individually to all of a company’s
___________________
customers.
In the case of larger, key clients it was a valuable tool for keeping
the lines of communication open and tailoring service to the clients
needs. In the case of smaller clients, however, it tended to provide
repetitive, survey-like information that cluttered databases and
didn’t provide much insight. As companies began tracking
database information, they realized that the bare bones were all
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that was needed in most cases: what they buy regularly, what they
spend, what they do.
Advances in the 1990’s: In the 1990’s companies began to
improve on Customer Relationship Management by making it
more of a two-way street. Instead of simply gathering data for their
own use, they began giving back to their customers not only in
terms of the obvious goal of improved customer service, but in
incentives, gifts and other perks for customer loyalty.
This was the beginning of the now familiar frequent flyer
programs, bonus points on credit cards and a host of other
resources that are based on CRM tracking of customer activity and
spending patterns. CRM was now being used as a way to increase
sales passively as well as through active improvement of customer
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service.
e-CRM: This is a web based Sales Force Automation tool that
helps you to focus on un-covered customer-revenue opportunities
that are not possible in a manual sales process. The architecture of
the product brings your Customers/Sales Teams/Channel partners
into a single centralized structure. This will help you overcome the
Customer Relationship Management
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Write an article for a business
___________________ deployment and effective implementation will streamline your
magazine on CRM.
sales process quickly and in a cost effective way. It records
___________________
enquiries, follow ups, complaints and details of any other
___________________
interaction with the client which helps to build and maintain life
___________________ long relation with the customer.
___________________
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Check Your Progress
___________________
Choose appropriate answer:
___________________
1. CRM stands for:
___________________
(a) Customer Retention Management
___________________
(b) Customer Retention Mathematics
___________________
(c) Customer Relationship Management
(d) None
2. Customer relationship management is a concept that
became very popular during
(a) 1670 (b) 1990
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(c) 1790 (d) 1975
Meaning of CRM
Customer Relationship Management refers to the holistic approach
an organisation can take to manage their relationships with
customers, including policies related to contact with customers,
collecting, storing and analyzing customer information and the
technologies needed to perform these tasks. You should think of
CRM as a strategic process that will help you understand your
customer’s needs and how you can meet those needs and enhance
your bottom line at the same time. CRM (Customer Relationship
Management) is a comprehensive strategy and process of
acquiring, retaining and partnering with selective customers to
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create superior value for the company and the customer. The basic
objective of CRM is to increase marketing efficiency and
effectiveness. It is co-operative and collaborative processes that
help in reducing transaction costs and overall development costs of
the company.
UNIT 1: Introduction to CRM
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CRM can be defined as an alignment of strategy, processes and
Notes
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technology to manage customers and all customer-facing
departments & partners. CRM in short is about effectively and ___________________
profitably managing customer relationships throughout the entire ___________________
lifecycle.
___________________
Most CRM initiatives begin with a strategic need to manage the
___________________
process of handling customer related information more effectively.
___________________
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For beginners it could simply mean better lead management
capabilities or sales pipeline visibility. However, as organisations ___________________
mature in their CRM initiatives, shall visualize as a tool to acquire ___________________
strategic differentiators, t includes adoption of IT related systems,
___________________
training of employees and amendments in business processes
related to customers. It is not just software but an approach to ___________________
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Make a draft of
___________________ an programs now envisage a wider spectrum of efforts other than
assignment on the needs of
CRM.
data-based one-to-one relationship with customers, which
___________________
characterizes relationship marketing.
___________________
The development of CRM as a strategy is attributable to certain
___________________
emerging factors. One is the process of disinter-mediation in many
___________________ industries i.e., direct interaction with end-consumers. This is due
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___________________ to the easy accessibility of companies to the sophisticated computer
and telecom technologies. Thus, in the case of financial institutions
___________________
including banks, insurance companies, computer software,
___________________
household appliances and even consumables, the process of
___________________ disinter mediation is making relationship marketing more popular.
___________________ This development is also due to the growth of service sector. In so
far as services are supplied directly to the customers, it minimizes
the role of middlemen. There is inevitably a greater emotional
interaction between service provider and user, which is found
necessary to be sustained and enhanced.
Needs of CRM
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Customer relationship management currently, a much talked
about issue is not a fad, but is very vital for companies in the
present highly competitive scenario. However, across the
organization the attitude towards customer service should be
inculcated and this should be driven from the top most downwards.
z Companies have to increasingly pursue a customer
centric competitive strategy rather than a product-
centric one: Two trends have brought CRM to the forefront.
First, with increased global competition and easy access to the
latest technology, products have become harder to
differentiate; hence companies are increasingly pursuing a
customer-centric competitive strategy rather than a product
centric one. Second, now it is possible to put customer
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alone can satisfy. ___________________
z Focus is shifting from supply chain to demand chain ___________________
effectiveness: With the product quality at all time highs,
___________________
manufacturers find it increasingly difficult to gain competitive
advantage based solely on product attributes. Therefore the ___________________
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when there is great potential for adding value and ___________________
differentiating the offerings. Increasingly companies are
___________________
applying sophisticated information technology to identify,
acquire and retain the most profitable customers by ___________________
continuously improving the highest levels of customer ___________________
experience, and creating and sustaining the highest levels of
___________________
customer satisfaction. Thus, in the era of e-business, the key
source of competitive advantage is shifting. Thinking firms are
revising their strategy to focus on demand chain effectiveness
that is, a continuously improving their ability to identify,
acquire and retain profitable customers.
z Better understanding and intelligent management of
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customer relationships is essential for survival: The effect
of increased commoditization of products and production
processes is that customers now have more and more choices.
Hence giving them better, more personalized product offerings
and services is the only real way to make a difference winning
the battle for share of mind and share of wallet in this new
economy depends on understanding and intelligently
managing relationships with customers. It is no longer the
privileged domain of particularly successful companies; it has
become the make-or-break challenge for every company.
literature.
2. With the product quality at all time highs,
manufacturers find it increasingly difficult to gain
................... based solely on product attributes.
Customer Relationship Management
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Goals of CRM
Notes
Activity
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Prepare a short report on the
___________________
goals of CRM for an
The idea of CRM is that it helps businesses use technology and
organization. human resources to gain insight into the behaviour of customers
___________________
and the value of those customers. With an effective CRM strategy,
___________________ a business can increase revenues by:
___________________ z Providing services and products that are exactly what your
___________________ customers want
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___________________ z Offer better customer services
Significance of CRM
The benefits of customer relationship management are considered
abound. It allows organisations not only to retain customers, but
enables more effective marketing, creates intelligent opportunities
for cross selling and opens up the possibility of rapid introduction
of new brands and products. To be able to deliver these benefits,
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organisations must be able to customize their product offering,
optimize price, integrate products and services and deliver the
service as promised and demanded by the customer base. Keeping
the customer happy is obviously one way of ensuring that they stay
with the organisation. However, by maintaining an overall
relationship with the customer, companies are able to unlock the
potential of their customer base and maximize the contribution to
their business. Whilst the value of customer relationship
management has been identified by organisations, the full
implications and benefits are yet to be evaluated. Those
responsible for delivery are perhaps the most informed about these
strategic benefits yet the transformation is a long-drawn-out
process.
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___________________
Benefits of CRM to Organization
___________________
The benefits of CRM to organization are:
___________________
z Increased revenue through acquisition of new customers,
retaining existing customers, and increased share of wallet ___________________
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z Reduced costs: The ability to differentiate between customers ___________________
on the basis of their long-term profitability helps the ___________________
organisation to plan better, cost-effective marketing strategies
___________________
to derive better returns on marketing investments.
Automation of many services and ability to provide many ___________________
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Notes Cost of CRM to Customers
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___________________ Costs of CRM to customer are:
___________________ z Possible or inevitable loss of privacy. Many customers don’t
___________________ want a company to collect and store information about them.
Online companies must disclose their privacy policies to the
___________________
customers and give them the right not to have their
___________________ information stored in a database.
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___________________
z Opportunity cost associated with ignoring other offers from
___________________ competitive sources – once a habit is formed most customers
___________________ would refrain from exerting the effort to assess the options and
prices offered by others.
___________________
Summary
CRM is a comprehensive approach which provides seamless
integration of every area of business that touches the customer –
namely marketing; sales, customer service and field support –
through the integration of people, process and technology, taking
advantage of the revolutionary impact of the Internet. CRM
creates a mutually beneficial relationship with your customers. In
the rapidly expanding world of e-Commerce, there is a new
generation of empowered customers emerging who demand
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Keywords 17
Notes
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CLTV: It is a reflection of the possible future business a company
___________________
can expect from a loyal customer.
___________________
Customer Relationship Management (CRM): It is a model for
managing a company’s interactions with current and future ___________________
customers. ___________________
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creating customer focus groups that could be used to speak to some ___________________
of the customers of the company.
___________________
Mass Production: It is a system of manufacturing based on
___________________
principles such as the use of interchangeable parts, large-scale
production, and the high-volume Assembly Line. ___________________
___________________
Mass Marketing: It is a market coverage strategy in which a firm
decides to ignore market segment differences and go after the
whole market with one offer.
Total Quality Management (TQM): It is a management strategy
aimed at embedding awareness of quality in all organizational
processes.
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e-CRM: This is a web based Sales Force Automation tool that
helps you to focus on un-covered customer-revenue opportunities
that are not possible in a manual sales process.
Further Readings
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
Customer Relationship Management
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Paul Greenberge, CRM – Essential Customer Strategies for the 21st
Notes
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Century, Tata McGraw Hill, 2005.
___________________
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
___________________
Customer Relationships Management, Wiley, 2003.
___________________
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
___________________ Mining Applications, 2004.
___________________
CGI Group Inc. White Paper, Building Competitive Advantages
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___________________ through Customer Relationship Management, January 2001.
___________________ Anderson, Paul and Art Rosenberg, The Executive’s Guide to
___________________ Customer Relationship Management, Doyle Publishing Company,
Houston, 2000.
___________________
searchcrm.techtarget.com/definition/CRM
www.impelcrm.in
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www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
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UNIT 2: CRM Programs and Marketing Initiatives
Unit 2
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Notes
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CRM Programs and Marketing
___________________
___________________
Initiatives ___________________
___________________
Objectives ___________________
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After completion of this unit, the students will be aware of the following
___________________
topics:
___________________
\ Decisions of CRM
\ Types of CRM Programs ___________________
___________________
Introduction
In recent years, however, several factors have contributed to the
rapid development of direct interaction between producers and
customers. The concept of customer relationship management as a
co-operative and collaborative process has thus tended to be more
common. Its purpose is mutual value creation on the part of the
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marketer and customer. Customer Relationship Management
(CRM) solutions provide customer-oriented services for planning,
developing, maintaining, and expanding customer relationships,
with special attention paid to the new possibilities offered by the
Internet, mobile devices, and multi-channel interaction. CRM
enables a company to capture a consolidated customer view
through multi-channel interactions in a data warehouse solution.
Decisions of CRM
The following factors contribute to the decision making process for
the installation of an effective CRM:
z Clearly define the management objective and strategy
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While selecting the software solution for implementation, one
Notes
Activity
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should ensure the below dimensions are satisfied:
Make a brief report on the
___________________
decisions of CRM. z It can manage both data and process
___________________
z It is easy to implement and roll out
___________________
z It is simple to use
___________________
___________________
z Total cost of ownership
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___________________ z The risk exposure.
Analytical CRM
Analytical CRM is responsible for analyzing customers’ behaviour
in terms of sales, marketing or any other service provided. It
utilizes database and sometimes data warehouse to extract
appropriate data regarding different customers.
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Communication/Collaborative CRM
Communication/Collaborative as the name implies, is responsible
for efficient collaboration/association with the customers through
e-mails, fax, phone, SMS or face to face communication.
Organisations intending to improve their customer relations,
surely implement for their business processes. IT helps to gain and
retain customers and provide services to them efficiently.
UNIT 2: CRM Programs and Marketing Initiatives
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Alerts and Interfaces Notes
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In order to ensure efficient Customer Relationship Management, ___________________
companies/organisations should provide various means of
___________________
communication to the subscribers. Some alerts or interfaces should
be provided by company/organisation to offer good customer care. ___________________
___________________
Customer care allows subscribers to serve themselves via various
means offered by the service providers. It reduces cost and ___________________
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monitoring overhead at providers’ end, thus ensuring lower churn ___________________
rate and greater customers’ satisfaction. Customer care can be
___________________
provided via various means such as website, FAQs (Frequently
Asked Questions), knowledge base and forums explaining various ___________________
Trouble Tickets
Trouble Ticket System collects and manages queries/requests from
the customers to facilitate organisation with customer
management. Every time a customer sends a support query, a
ticket is assigned to him/her by the software. This ticket has a
ticket number which acts as a reference number to customer’s
problem. Trouble tickets in this way facilitate tracking of
customers’ problems and help customers as well as company in
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Churn Rate
Churn rate is also known as turn over rate. It is determined by the
number of customers who end/discontinue their relation with an
organisation (for any reason). This term is mostly used for
Customer Relationship Management
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Write an article on the various
___________________ subscription.
types of CRM programs.
___________________
Check Your Progress
___________________
Fill in the blanks:
___________________
1. ................... is responsible for automating all sales
___________________ related processes.
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___________________
2. ................... is responsible for automation of marketing
___________________ related processes.
___________________ 3. .................... allows subscribers to serve themselves via
___________________ various means offered by the service providers.
___________________
Types of CRM Programs
Till recently, most marketers focused on traditional models of
marketing to segment and acquire new customers from its target
segments, using the tools and techniques developed for mass
marketing in the industrial era, as a way to generate growth. In
the present competitive era, this is proving to be highly ineffective.
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Today, there is a different approach to business that involves
relationship marketing, customer retention and cross-selling,
leading to customer extension, which is a far cry from the
traditional segmentation model. Based on the prevailing practices
and review of literature, it is possible to distinguish between three
main types of CRM programs which do actually have variations
attempted by innovative marketers. The three main types of CRM
programs are:
Continuity Marketing
These programs are generally aimed at retaining customers and
enhancing their loyalty. The basic premise is that of offering long-
term special services with potentiality of increased mutual value.
For end-users in mass markets, attempt is made to offer rewards
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In the case of business-to-business markets, continuity marketing ___________________
may include preferred customer programs or special sourcing ___________________
arrangements, or just-in-time sourcing.
___________________
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needs which is fully satisfying and uniquely customized. In the ___________________
mass markets, information on individual customers becomes the
___________________
basis of individual customer interactions and attempt is made to
fulfil the unique needs of each as well as develop frequency ___________________
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Notes
CRM Marketing Initiatives
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___________________
Companies simply do not purchase CRM products to automate
___________________
campaign management without a clear view of what they want to
___________________ do. After all, companies devoid of a marketing vision rarely have
___________________ sufficient budget for CRM software. Those who do, have a variety
of tactics in mind for increasing customer value and loyalty.
___________________
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___________________ Cross-selling
___________________ Cross-selling is the act of selling a product or service to a customer
___________________ as a result of another purchase. The example of a new mother
purchasing products for the newborn; at the same time buying
___________________
clothes for her is an example of cross selling. Cross selling is all the
___________________ rage nowadays, because selling more services to an existing
customer increases revenue from that customer and costs less than
acquiring a new one. Cross-selling means understanding that not
every customer is a good candidate for cross-selling. For instance,
credit card customers have proven to be poor cross-selling
candidates because favourable interest rates and low fees – not the
card itself or even the issuer – are the dominant determinant of
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consumer response to credit card offers. Understanding the ways
by which customers evaluate how and whether to respond to such
promotions is critical. Not surprisingly, the desire to improve
cross-selling business practices accounts for much of the popularity
of CRM marketing automation technologies.
Up-selling
Likewise, companies are frantically looking for opportunities to up-
sell, or motivate their existing customers to trade up to high priced
products for profitability.
The art of cross-selling and up-selling is understanding which
products will increase, rather than decrease, a customer’s and
subsequently company’s overall profitability. Simply cross-selling a
customer an unprofitable product might actually render that
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Behaviour Prediction
Although not so much a marketing practice as a marketing
enabler, behaviour prediction helps marketing departments
determine what customers are likely to do in the future. This
UNIT 2: CRM Programs and Marketing Initiatives
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purchase; (ii) Next sequential purchase – Predicting what product ___________________
or service a customer is likely to buy next; (iii) Product affinity
___________________
analysis – Understanding which products will be purchased with
other products. Also known as “market basket analysis”, it can be ___________________
PE
Determining the optimal price for a given product, often for a given
___________________
customer or customer segment.
___________________
Marketing Decisions
___________________
By understanding consumer behaviour, a company can make a
___________________
host of marketing decisions based on this knowledge such as:
___________________
z Pre-emptively offering discounts or fee waivers to existing
customers who are at risk of churning.
z Refining target marketing campaigns to smaller customer
segments or specific products.
z Packaging certain products together and fixed-pricing to sell
more products and increase their profitability.
)U
z Marketing automation, the goal is to offer the right message to
the right customer at the right time. For instance, a new
customer whose use of online banking services has steadily
increased might prefer to be e-mailed a new offer along with
regular statement, whereas a retiree who enjoys visiting the
neighbourhood branch might be delighted when the branch
manger offers a cup of coffee and a brochure on a new annuity
product. Indeed, banking customers have range of choices
when it comes to their preferred channels.
z Cross-selling products are likely to be purchased with other
products. The key to all this analysis, and especially to the
actions that result, is the knowledge of the company’s best
customers.
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___________________
A customer can be unprofitable but could have referred three high-
___________________ value customers to a firm, thereby rendering himself very
___________________ valuable. Despite not being currently profitable, a recent college
graduate shows several signs of emerging profitability and thus
___________________
might be considered valuable over the lifetime.
___________________
PE
___________________
Customer Value
Different companies in different industries will have different
___________________
value metrics. It refers to a Customer’s Lifetime Value (LTV),
___________________
potential value, or competitive value (also known as wallet share).
___________________ Many firms have formalized the practice of value modelling,
___________________ allowing them to score a customer based on one relative worth to
the company over long-time. The score is then used in a variety of
ways to tune communications with that customer. For instance, a
brick-and-mortar retailer recognizes a shopper with a frequent-
buyer card who nevertheless visits the store only during advertised
sales. The customer has been assigned a low value score. The
retailer sends the customer a pre approved credit card to increase
his value and thus his corresponding revenue contribution. The
)U
credit card might result in raising the number of monthly shopping
trips, as well as boosting the customer’s average purchase amount.
Measurement of Value
Irrespective of the level of customer value being modelled,
customer value measurement is data-intensive. The challenge of
value modelling is that it is only as accurate as the customer
information data – and the analysis statistically correct. Historical
customer behaviours, product costs, support costs, customer
profitability, and channel usage should all figure into the overall
value of a customer. Basing customer value on only a single metric
puts companies at risk of making erroneous decisions about how to
communicate with customers, which could ultimately decrease
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data, past purchases, click stream data, and web survey responses ___________________
to determine, for instance, what product the customer is most
___________________
likely to purchase next or whether the customer is at-risk and thus
deserving a discount offer to lure him back. A personalized ___________________
PE
z Event-based Marketing: The best definition of event-based ___________________
marketing is a tie-sensitive marketing or sales communication
___________________
reacting to a customer-specific event. Event-based marketing –
also called event-driven marketing – can apply to a segment of ___________________
customers or to individual customers. For instance, mailing an ___________________
application for an increase in collision damage insurance to all
___________________
customers who have recently had traffic accidents is an
example of event-based marketing to a largely
undifferentiated segment of the existing customer base.
The marketing campaigns to be more reactive, real-time
customer communications highly focused on the individual
customer’s profile. In our previous example, the insurance
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company would suggest to each individual customer how much
collision damage insurance would be appropriate given specific
factors such as the customer’s current coverage, claims history,
and demographic. Such event-based marketing tactics combine
personalization techniques with process design to ensure that
the right action targets the right customer at the right time.
The ideal goal of event-based marketing is to be able to react
to customer events in near real-time, soon after the actual
event occurs. A simple example of this is the grocery store
receipt featuring coupons on the back for merchandise a
customer is likely to be interested in, but might not readily
buy if unprompted. Such real-time, event-based marketing
means detecting and responding to events quickly, often using
complex data-mining capabilities and requires an intimate
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Check Your Progress
Notes
S
State True or False:
___________________
___________________
1. Churn rate is also known as turn over rate.
PE
different value metrics.
___________________
___________________
Summary
___________________
Companies simply don't purchase CRM products to automate
___________________ campaign management without a clear view of what they want to
___________________ do. After all, companies devoid of a marketing vision rarely have
sufficient budget for CRM software. Those who do, have a variety
of tactics in mind for increasing customer value and loyalty.
Further Readings 29
Notes
S
Books ___________________
PE
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert, ___________________
Customer Relationships Management, Wiley, 2003.
___________________
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
___________________
Mining Applications, 2004.
___________________
CGI Group Inc. White Paper, Building Competitive Advantages
___________________
through Customer Relationship Management, January 2001.
Web Readings
)U
en.wikipedia.org/wiki/Customer_relationship_management
searchcrm.techtarget.com/definition/CRM
www.impelcrm.in
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
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Customer Relationship Management
30
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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UNIT 3: CRM Implementation
Unit 3
31
Notes
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CRM Implementation
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
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\ CRM: A Comparison with CMM Levels ___________________
\ Drawbacks of CRM Implementation ___________________
\ A Framework for Successful CRM
___________________
\ The Key to Accomplishing CRM Success
___________________
\ Customer Strategy for CRM Implementation
\ Implementing CRM: A Step-by-step Process ___________________
Introduction
When one choose the right Customer Relationship Management
(CRM) solution one can immediately increase the effectiveness of
)U
sales, marketing, and support organizations and understand where
marketing campaigns are most effective, where the most profitable
customers come from, how effective sales cycle is, what types of
customs support problems are faced, and how quickly they can be
resolved.
In case a company picks a wrong solution, it will land up in
spending resources for an overly complex system that goes unused,
wasting precious IT/IS resources on an unproductive project, and
compromising organization’s ability to succeed in an ever-
competitive marketplace.
S
Write an article on comparison
___________________ sales get made and accounts are serviced. However, sometimes
of CRM with the CMM levels
lead conversion rates are 20 per cent, sometimes they are even one
___________________
per cent. Sometimes deals close in three days, sometimes in one
___________________
year. Sometimes customer satisfaction ratings are near 100
___________________ percent, sometimes they are in the pits. The problem is – nobody
___________________ can explain why these things happen.
PE
___________________ The success of a level one firm is not dependent on processes
because there are no any standards. Instead, it is based solely on
___________________
the skill levels of individual marketing, sales and support
___________________
personnel. If there are no CRM processes in place, it is impossible
___________________ to implement a sophisticated CRM system, as there is nothing to
___________________ automate. A firm at this level of maturity would be best served by
providing its people with CRM tools that focus on increasing
individual efficiency (contact mangers, word processors,
presentation systems, and e-mail) versus organisational
effectiveness. Such companies need to do a lot of work on process
definition before they try to expand their CRM technology plans.
done-not only the accepted way of doing things, but also the only 33
way a to do them. Because these processes are so ingrained into Notes
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daily operations, they can be analysed and improved. This type of ___________________
company is rarely caught by cadges in its marketplace. It can
___________________
detect very early on, when product requirements being to shift,
when competitive strategies are becoming more effective, or when ___________________
PE
sophisticated CRM system. Processes are so well dispersed ___________________
throughout the enterprise that these companies can successfully
___________________
absorb technological innovations such as marketing automation
systems, sales-coaching systems, interactive selling systems, and ___________________
systems for marketing, sales, and support performance analysis. ___________________
These companies will probably have no trouble implementing e-
___________________
business extensions to their CRM systems, to allow channel
partners access to the tools.
S
With the help of internet, find
out___________________
how to overcome the
drawbacks of CRM Drawbacks of CRM Implementation
___________________
implementation.
Selecting the right CRM solution is not an easy task. Before one
___________________
make final decision, one need to have a clear sense of how much it
___________________ is going to cost and how long it is gong to take to implement. That
___________________ means that one has to be assertive enough to ask tough questions.
PE
___________________
After all, to make assure the vendors in consideration are
responsive to the needs. Look at the customer list to see if they
___________________
have a good track record of serving companies; competitors to the
___________________ organisation. The good news is that there are some very good
___________________ products and services out there to help maximize an organisation’s
potential. All a company has to do is find the right ones.
___________________
There is no such thing as an easy implementation. Even installing
Microsoft Word or Excel can be problematic on network for multiple
users. CRM and e-CRM are very complex implementations involving
multiple elements and frequently, back-office integration. It could
involve coming with multiple software packages that already
installed in the corporate system. Issues such as scalability – it can
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help the software handle the amount of use and number of users it
is going to get – are paramount even prior to the selection of the
software. Some CRM applications are focused on the smaller and
mid-size companies, others on the Fortune 1000-sized enterprises.
Large companies with multiple locations have a different set of
problems than small companies with a single location and multiple
users. Because each company has a different process and culture,
each company will have a unique set of issues to solve with the
implementation-technical, functional, and cultural. Even a perfect
technical installation and carefree customization can fail if one has
employees who do not take care of the system.
S
A CRM framework maximizes the possibility of CRM Write an article on the
___________________
implementation success that will be among the 32 per cent of framework for successful
CRM.
projects that succeed (as opposed to the 68 per cent that don’t). ___________________
Companies that have successfully implemented CRM solutions are ___________________
reporting excellent results and the interest surrounding the topic
___________________
is grater than ever.
___________________
PE
A recent study indicated that only 31 per cent of CRM initiatives
___________________
lead to significant improvements in sales performance. Of the rest,
37 per cent recorded only minor improvements and 32 per cent ___________________
stated that there was no noticeable improvement at all. While ___________________
these results represent a significant improvement from the 60 per
___________________
cent to 80 per cent failure rates reported a few years ago, there is
still clearly cause for concern. ___________________
New Solutions
As further complication is the persisting excited activity in the
CRM solution marketplace, new solutions are arriving almost
weekly, bringing with them fantastic claims of technological
breakthroughs. In this environment, it is extremely difficult to
determine what will work in a particular business situation.
Employee Involvement
CRM involves much more than instilling any one application,
embracing a new technology, or even committing to one vendor’s
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Cultural Change
Notes
Activity
CRM requires a cultural change that aligns a company, its
S
Prepare a short report on the
___________________
customer strategy for CRM employees and its systems towards customers and away from
implementation.
___________________ traditional product or process – centric models. Companies that are
unresponsive to the shift will soon find themselves scrambling for
___________________
scraps left behind by those that are.
___________________
PE
___________________ Due to the transparent complexity and diversity of CRM solutions,
there are no simple off-the-shelf methodologies that will guarantee
___________________
results. However, the following important principle will help to
___________________ guide the network:
___________________
Adopt a Suitable Framework
___________________
A simple framework will help to understand the full scope of a
CRM solution and also help to focus on areas that need attention.
A useful framework will encompass the following elements:
z Customer strategy: This will ensure that the company is
focused on achieving specific customer goals, and will provide
direction to the selection and deployment of CRM applications.
)U
z Customer insight: This encapsulates customer data
acquisition and storage capabilities, insight generation (data
mining) capabilities and insight exploitation capabilities and is
used both to support customer strategy development and to
drive “intelligent” customer interaction in marketing, selling
and service activities.
S
Initially prepared in outline it evolves and expands as new ___________________
capabilities are implemented and new customer information ___________________
becomes available. It is important to start with at least an outline
___________________
strategy, as this will help to ensue that all subsequent design and
implementation activities are totally focused on achieving specific ___________________
PE
strategy comprises set of strategic goals that will provide
___________________
initiatives that can be applies to customers in identifiable
___________________
segments to achieve the overall objective of sustained profitable
growth. ___________________
___________________
Typical Elements of a Strategy
___________________
Obtaining high value customers to improve market-shares;
rewarding the best customers; to improve loyalty ranges of
sleeping customers to reduce agitation; stimulation of occasional
customers to bring more frequent contact; cross-selling to frequent
low-value customers to improve share of wallet reduction of cost to
market, sell, and serve to low-value customers; migrate frequent
customer on to lower cost channels. The ability to create intuitively
)U
sound actionable segmentation is important. It is important to
segment customers for a meaningful CRM. An enterprise should
start by examining what data is available or is going to be
available and use common sense to determine the level of
segmentation that will be possible.
Prioritize Initiatives
The next step is to prepare the business case. This will entail
assessing the commercial impact of the customer strategy in terms
of growth of customer base, development of customer relationships,
and reduction of service costs. This should be carried out in a
detailed manner such that the value of different elements can be
evaluated. This will help support the prioritization of development
of initiatives. This prioritization will also allow a phased
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___________________ infrastructure, processes, and an organisation that will finally
support the fully functional capability.
___________________
PE
marketing, for example, depends on the availability of
___________________
discriminatory information on customers. To do well, a good mix of
___________________ demographic, psychograph, geographic, behaviour, and attitudinal
___________________ information maybe required. This could mean implementation of
___________________
new capabilities to strengthen the ability to measure the customer.
In certain situations where customer transactions are infrequent
___________________
or non-descriptive, third party information might be employed,
acquired through affinity partnerships, or purchase of
commercially available data.
S
virtual call centre operations possible; call centres or website ___________________
provide selling opportunities by marketing products that are
___________________
relevant to the individual. An effective CRM program makes
technology a base to be used in an iterative process that considers ___________________
___________________
PE
Assess Package Solutions
___________________
Given the importance of making the right CRM technology choices,
sorting through the endless applications on the market today can ___________________
be intimidating and frustrating. Applications should be sorted by ___________________
the broad view of platforms supported and size of company they fit
___________________
the best. Consideration should also be given to vendor viability in
terms of financial stability and service and support capabilities. No ___________________
Proactive Leadership
At its best, CRM combines the information, systems, policies,
processes, and employees of an enterprise in a unified effort to
identify, attract, and retain profitable customers. Clearly, no single
department can drive the cross-functional process changes
required to achieve a well-defined customer focus. CRM must be
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Check Your Progress
Notes
S
Activity
Choose the appropriate answer:
___________________
Make a slideshow on the
step-by-step process
___________________
of 1. With the use of CRM how many percentage have
implementing CRM.
improvement in their business.
___________________
(a) 37% (b) 31%
___________________
(c) 33% (d) 36%
___________________
PE
___________________
2. Which channels encapsulate all the possible ways of
interacting with customers?
___________________
(a) Customer interaction
___________________
(b) Customer improvement
___________________
___________________
(c) Customer knowledge
(d) None
Implementation
When a firm attempts to implement a CRM package without
knowing how implementations work, it is likely that it will face
problems throughout the project. The statement of work and the
change management processes have to be cleared prior to starting
the installation. The industry thumb rule is that the
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___________________
Pre-implementation
___________________
The timeframe on this one varies from several weeks to several
months, according to the depth of preliminary work a company ___________________
needs to do. For example, in this timeframe, the decision is made ___________________
to go with e-CRM implementation. The criteria for this are those
___________________
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questions the CRM software functionality needs to answer and
___________________
those corporate weaknesses the software and processes need to
address. Additionally, this is the phase where the stakeholders at ___________________
the executive level are identified and engaged. This also is the ___________________
phase where software selection occurs. The market is witnessing
___________________
new CRM choices every day. The selection criteria must be sharp
and also have some reference to help identify the established ___________________
implementations established.
S
___________________ services partner or a systems integrator. If there are changes in
the Statement of Work (SOW), it is the project manger that must
___________________
work out the details with the customer. There should be a change
___________________
management process in place that is approved by both the
___________________ customer and the implementation services company.
___________________
PE
Implementation Leader
___________________
This person is also titled the technical leader. He is responsible for
___________________ technical aspects, directs the system engineers, and is usually
___________________ dedicated to only one project at a time. He tends to be onsite full
___________________
time until the end of the project. His strength is a combination of
personnel skills and technical knowledge. Often he is a CRM
___________________
architect who takes a hands-on role in the project. He assists the
PM in preparing the statement of work. However, he does not
resolve the problems of the project. The project manager’s team
does that.
System Engineers
Their primary role is to do the coding and they can be Java
)U
developers or analyst programmers or any developers. They are
onsite all times, unless otherwise, there is work to do at home. In
many implementations, one has to have the technical and
functional expertise necessary do the work. CRM implementations
are complex. For example, it’s important for the systems engineer
to now how corporate sales processes tend to function. It’s now
time for introductions and assignments for the customer’s team.
First and foremost, the team is the one with the knowledge of how
the company works and is expected to impart that knowledge.
Second, the team needs to know how a CRM works.
When the implementation is done, the partner will probably not
want to stay back and maintain, unless a separate company is
engaged to do so. Therefore, someone has to learn how CRM works
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with the partner PM on changes. This PM is also the one who ___________________
approves the pricing of the changes.
___________________
These employees are the functional experts. They provide input on ___________________
business processes and flow that are enterprise specific. In the
___________________
PE
ideal world, they will be assigned full time to the project and not
___________________
leave it until it is complete. That happens sometimes. The rest of
the time, they are onsite when can be, which doesn’t necessarily ___________________
dovetail with when they should be. That can create serious ___________________
headaches, if not major problems for the implementation’s
___________________
completion in a timely fashion. Here is where some variance might
also be the case. ___________________
Networking Staff
People, who are maintaining and setting up the network and its
software, should ensure that there is no significant downtime or
problems during the implementation period. Actually, they have to
do this all the time. Because a good deal of an implementation
process involves working the bugs out of it, the stress on the
system can be high. The administrators, who have enough stress in
their lives as it is, are under greater pressure during this critical
period.
Integration Professional
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44
Heads of Non-technical Departments
Notes
These heads provide input and approval on issues affecting their
S
___________________ departments. They can make the implementation succeed if the
___________________ implementation partner understands that they are non-technical,
which means patience and explanations are necessary. They can
___________________
make it fail if either they think that they have the technical
___________________
knowledge and try to tell the technical group how to do their jobs
___________________ or if they have insufficient explanation of what is going on. This
PE
___________________ usually leads to misunderstandings and wrong decisions. This is a
very important group of team members who have to do their job
___________________
well.
___________________
It’s important for both teams to come to an understanding as to the
___________________
expectations and the outcomes of the solution as to what the
___________________ system is functionally and technically going to do. For example
both teams must agree that it will allow forecasting in the sales
pipeline that can be managed against the steps of the sales
process. It also means agreeing that it will run under updated
versions of Windows when the company upgrades. As long as the
agreement is there, things run smoothly for both parties.
Information Gathering
)U
Gathering the requirements for a CRM implementation should
take about three to four days. The length of the requirements
gathering can change remarkably, if the scope of the project is
significantly bigger. That can be a quantitative reason; there are a
lot more people to interview.
It can be qualitative, if the project meets the requirement meeting,
which happens with the stakeholders, users, other corporate
decision makers, and the IT staff. In other words, all those who are
going to use the system could be a small team, or a big team. The
in-between number tends to be the implementation team group.
This requires that departments cooperate, since the CRM
implementation is going to affect the interactions of every
appropriate department in the company. Marketing, sales, finance,
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45
z Which screens will be needed to input data?
Notes
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z Which screen will be need to output data?
___________________
z How will information be retrieved from the system?
___________________
z How does the customer want to wok with the system? ___________________
z How many users must the system accommodate and how will ___________________
they connect to it, that is via WAN, LAN, individual, remote
___________________
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users, remote offices, Web, etc.?
___________________
First, the users, unacquainted with what the system can
___________________
technically do and not do, often ask for functionality that is
impossible. CRM application prior to the requirements gathering is ___________________
often useful in narrowing the field of dreams. As the project ___________________
proceeds, the functionality list narrows significantly. Obviously,
___________________
the plan is to include as much as possible to keep the customer
happy, but the technical boundaries and the interactions of the
proposed functionality have a lot to do with the ultimate
restrictions on what gets implemented.
screens, but they are also giving input to the team at all times,
hopefully with a clear understanding of the scope of the statements
of work.
Customer Relationship Management
46
Check Your Progress
Notes
S
Fill in the blanks
___________________
___________________
1. Rapidly advancing technology means .................. ways
in which how business is to be conducted.
___________________
2. The .................. is responsible for all aspects of the
___________________
implementation, including cost control, quality and
___________________ testing, and customer satisfaction.
PE
___________________
___________________ Summary
___________________ Selecting the right CRM solution is not an easy task. Before one
___________________ make final decision, one need to have a clear sense of how much it
is going to cost and how long it is gong to take to implement. That
___________________
means that one has to be assertive enough to ask tough questions.
After all, to make sure the vendors in consideration are responsive
to the needs. Look at the customer list to see if they have a good
track record of serving companies; competitors to the organisation.
The good news is that there are some very good products and
services that help maximize an organization’s potential.
)U
Lesson End Activity
Visit any company of your choice and comfort. Find out the
techniques adopted by the company to implement CRM.
Keywords
Cultural Change: CRM requires a cultural change that aligns a
company, its employees and its systems towards customers and
away from traditional product or process-centric models.
CRM Framework: It maximizes the possibility of CRM
implementation.
Networking Staff: People who are maintaining and setting up the
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1. What are the drawbacks of CRM implementation?
___________________
2. Explain the comparison between the CRM and CMM level. ___________________
PE
4. Examine different steps involved in implementation of a CRM
model. ___________________
___________________
5. Discuss the role of a project manager in CRM implementation.
___________________
6. “Information Gathering is key for successful implementation of
___________________
CRM”. Explain.
___________________
7. A CRM framework maximizes the possibility of CRM
implementation. Discuss.
Further Readings
Books
)U
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw- Hill, 2005.
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
Customer Relationships Management, Wiley, 2003.
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Mining Applications, 2004.
CGI Group Inc. White Paper, Building Competitive Advantages
through Customer Relationship Management. January 2001.
Anderson, Paul and Art Rosenberg. The Executive’s Guide to
Customer Relationship Management. Doyle Publishing Company,
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Houston, 2000.
Web Readings
www.crminfoline.com/crm-articles/implementing-crm.htm
www.crminfoline.com/crm-articles/crm-implementation-
process.htm
Customer Relationship Management
48
en.wikipedia.org/wiki/Customer_relationship_management
Notes
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___________________
www.edynamic.net/home/.../CustomerRelationmanagement. aspx
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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UNIT 4: CRM Projects in Other Disciplines
Unit 4
49
Notes
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CRM Projects in Other Disciplines
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
PE
\ Phases of CRM Projects ___________________
\ Development of Customizations ___________________
\ CRM in Marketing
___________________
\ CRM in Human Resource
___________________
Introduction ___________________
In the early stages of any significant CRM effort, you need to look
for symptoms of business process disconnect and incentive
misalignments across various parts of sales and marketing.
Unifying and automating non-integrated business processes will
only expose or exaggerate contradictions.
)U
Five Phases of CRM Projects
The phases of a CRM projects are as follows:
Phase I: Sales Module Customizations: The product catalogues,
the sales process embedding, the account and contact databases,
and the sales pipeline management criteria, among other things,
are developed.
Phase II: Marketing Module Customizations: They are no
different in technical process than sales module customizations. It
is merely different in what needs to be customized.
Phase III: Service and Support Module Customization:
Includes call centre technology, Computer Telephony Manager,
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Prepare a short report on the
___________________ I, II and III and a third intermediate phase of other CRM modules
phases of CRM projects.
(for example, PRM customization).
___________________
PE
___________________ their generation are critical to corporate success. There are often
problems when information is not appropriately structured or
___________________
appropriately routed – problems that are corporate-life
___________________
threatening. By making sure the appropriate templates are created
___________________ and the right reports are auto routed to the right recipients, the
___________________ danger of incorrect decision-making is reduced dramatically.
Once there are the appropriate sign-offs on the format and the
final proposal document, the next phase is customization.
Development of Customizations
The time length of the customization varies widely, six to ten
weeks being typical, and depends on a substantial number of
)U
factors such as:
z The size of the project, the complexity of the interfaces, the
workflow and the functions.
z The current availability of employees/users to work with the
team, to improve the customizations at a given interaction.
z Technical problems unrelated to the implementation that
affects it. These can be resolved by creating an independent
environment for development, testing and eventually
production.
z Mid-stream workflow and rules change for the customization,
necessitated by changing corporate business. This is
something that can be managed but will affect the timetable
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z The next step is to assign tasks to developers. These ___________________
developers may not be, for example, CRM toolset specialists. ___________________
Rather, they may be Oracle database administrators, front-end
___________________
tools professionals, People Soft and Vantive integration
specialists, and Java developers, whoever is needed to ensure ___________________
PE
z An effective implementation partner will then set up a ___________________
development environment that mirrors the customer site as ___________________
closely as possible. Needless to say, an exact mirror image is
___________________
not possible. There are differences that will have to exist,
simply because the machines used are not identical. ___________________
___________________
z The project manager is responsible for a project plan at this
phase also. This is a checklist of which development and team
members are assigned to what tasks. Based on the hopefully
successful assignment of these personnel to the tasks, status
reports on the state of deliverables can be given to the
customers with in agreed-upon timeframes. Depending on the
formalities of the project these can be phone calls or formally
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written documents with specific information.
z Throughout this customization period, the development team
demonstrates the functionality to the customer and solicits
customer response. It is important that the development team
should solicit the customer terms for a successful CRM project.
z With a clear statement of work, strong change management
procedures should be adopted. There is simply no way that
changes to the original, agreed upon statement of work will
not occur. So the change management process is there to
control both costs and time loss. It can satisfy the customer
without succumbing to the client feature that is often the case
when the client realises how much more powerful and
interesting the application is than they expected. This is
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S
Write an article on the role of
___________________ partner concerning that. It also must include as workflow that
CRM in marketing.
identifies the authority that is empowered to approve the changes
___________________
made and thus add them to the budget.
___________________
z One in every valuable implementation lesson is to “routinize”
___________________
it as much as possible. In the customization phase, writing
___________________ data routines using the CRM toolkit can save days of effort
PE
___________________ and manual entry. The time saved is inestimable and critical.
___________________ z Finally, the data routines are written, the screens developed,
___________________
and the other customizations are done. The final part of this
phase is development team testing, which ensures that the
___________________
basic system works.
___________________
Check Your Progress
Fill in the blanks
1. ................... is a vital function, especially for businesses
that are scattered beyond one office.
2. ................... will then set up a development
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environment that mirrors the customer site as closely
as possible.
3. Throughout the customization period, the ...................
demonstrates the functionality to the customer and
solicits customer response.
CRM in Marketing
Customer relationships are now at the forefront of business.
Breaking all barriers after Liberalisation, Privatisation, and
Globalisation (LPG). Customer Relationship Management (CRM)
has once again gained prominence among management
professional in general and academicians in particular
Relationships are as old as mankind. They have been studied by
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53
It is always interesting to look at history to understand the
Notes
S
evolution of any discipline. Though marketing as a systematic
study of Subject or an activity may be of recent Origin, but the ___________________
practice of marketing is as old as human civilization. The Batter ___________________
System may be a stepping stone for the discipline of marketing
___________________
management, which passed through several stages to arrive at
present form. The development of marketing can be choronologized ___________________
as follows: ___________________
PE
z Marketing of the early stages can be termed as traditional ___________________
marketing which basically refers to the batter system. The ___________________
starting point for the discipline of marketing lies in human
___________________
needs and want. Marketing emerges when people decide to
satisfy needs and want through exchange. ___________________
___________________
z The effect of successful exchange resulted into inventions of
money. Industrial revolution led the seller engages in mass
production, mass distribution and mass promotion of
marketing known as mass marketing epitomized by Henery
Ford.
z Formal marketing started with Psychologists helping
marketers to manipulate customers to their advantage. The
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heart of modern strategic marketing can be described as STP
marketing namely – Segmenting, Targeting, and Positioning.
Then it got established as a discipline with its 4P’s – Product,
Price, Place, and Promotion.
z Then came the value based marketing which emphasized
offering better value to customers money by constantly
improving the quality of products and services offered to
customers.
z Simultaneously, the developments in business -to-business
marketing and services marketing emphasized the need for
developing long-term relationship with customers. The new
paradigm emphasizes the need for the customers. The new
paradigm emphasizes the need for the customer retention
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54
z Another variant of the same is emerging marketing on the
Notes
S
Web leads to one-to-one marketing that emphasizes
___________________
relationship customization at the individual level.
___________________
Model for a Marketing Cycle
___________________
In Figure 4.1 present the model of a marketing cycle. These days
___________________
marketing is moving from being broad based to a one-to-one
___________________ relationship with the customer.
PE
___________________
In the early 90s Smart marketers try to build up long-term
___________________ trusting “Win-win” relationship with customers, distributors,
___________________ dealers and suppliers. With the recent Advent of the era of
Globalization there has been total transformation from sellers
___________________
market to buyers market paved the path for customer relationship
___________________ marketing. Marketers realized that authentic marketing is not the
art of selling what you make but knowing what to make. The
present day marketing concepts rests on four main Pillars, namely
a market focus, customer orientation, coordinated marketing and
profitability. Their focus has shifted towards integrating the three
elements-people, service and marketing, which is know today as
customer service, quality and marketing in a close alignment.
)U
Thanks to government policy on liberalization, privatization and
globalization which led to bring consumerism in India. Today you
name any product in consumer durable, you have more than half a
dozen brands in each category and there is heavy competition in
the field with each company fighting in the market to get a major
share.
Customer relationship management has attracted the expanded
attention of scholars and practitioners. Many scholars with
interest in various sub-disciplines of marketing such as channels,
services marketing, business-to-business marketing, advertising
and so forth are actively engaged in studying and exploring the
conceptual foundations of managing relationship with customers.
In a new age, Marketing aimed at winning customer forever,
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S
giving something special to customers beyond functional utility ___________________
inclusive of both the tangible and intangible attribute, binds a
___________________
consumer with the brand related brands and company itself.
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
56
A Model for Customer Relationship Marketing
Notes
Indian marketers have recorded a high score for greeting the
S
___________________ customers, paying them due respect, attending customers
___________________ promptly, talking in terms favourable to them, informing about the
latest in the field, maintaining competitors activity with
___________________
customers, asking for references from existing customers,
___________________
promotions of benefits of buying from their company, practicing a
___________________ two-way communication, listening and recording the customer
PE
___________________ problem and keeping promises made as post-sales strategy,
exploring the opportunity to meet new customers and maintaining
___________________
relationship with existing customers.
___________________
___________________
___________________
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customer better.
2. Lakme lever employs ‘Computer Touch Screen” to advice
customer regarding use of cosmetics on the basis of the skin
colour satisfaction of the customers beauty consultants are
also there at the point of purchase to help hesitant customers.
UNIT 4: CRM Projects in Other Disciplines
57
3. Pond’s Institute has a customer response centre to answer to
Notes
Activity
S
each & every letter and phone call received calls answered
Write an assignment on the
with empathy and responsibility. ___________________
role and importance of CRM
in Human Resources.
___________________
4. Recently HLL-SURF received “Open customer feed back” on
product defects and suggestion, new product surf Excel was ___________________
lunched on the basis of suggestions given by customers.
___________________
5. In the consumer durable sector, Godrej-GE has a database of ___________________
PE
millions customers, Service personal regularly’. Contact
___________________
customers and enquire about complaints. In order to serve the
customers better the company franchises its service to expand ___________________
___________________
CRM in Human Resource ___________________
Human resources are arguably the most important resources an
organization could have, and having a good way to manage them is
crucial. Hence, the interest of HR is in CRM.
A vital responsibility of any organization lies in managing its own
people. Employees and staff make up the organization, and are
arguably among its most important assets, far greater than any
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financial ones. Hence, it is within any management’s interest to be
able to take care of its employees and ensure that they are not only
productive, but also satisfied and happy. This task falls square on the
shoulders of the human resources department or its equivalent. In
recent years, customer relationship management, a strategy for
dealing with clients and customers, has been used to great effect on
employees, too. The interest of HR in CRM lies in its systematic
approach to managing relationships. The resulting hybrid or offshoot
is usually called ERM or employee relationship management.
Now, of course, CRM and ERM would have similarities, but also
differences, which means that the processes and tools of CRM would
not directly translate to ERM. But in terms of the methodologies
used and the software tools applicable to managing customer
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S
___________________ implementation of effective marketing and promotional campaigns.
Keeping track of new acquisitions can be done for both CRM and
___________________
ERM using similar sets of databases and interfaces.
___________________
Customer and employee retention strategies would also be quite
___________________
alike and may be handled using comparable utilities. These involve
___________________ working with existing contacts and making sure that they are
PE
___________________ satisfied enough to stay with the company. In the case of internal
contacts, incentive and bonus schemes help improve morale, while
___________________
in the case of external contacts; it would be the quality of service
___________________
that is important. Again, the status of existing contacts may be
___________________ kept in a database and ready access provided via effective
___________________ interfaces. This would streamline both internal and external
relationship processes quite a bit.
Human resources should embrace new technologies, especially
such useful and ready-made ones as CRM software tools.
Managing people, whether employees or customers, may seem like
a tricky, complex business, and it is, but having and using the
right tools can help immensely. In essence, objective management
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approaches make use of the judicious choice of metrics and key
performance indicators in order to measure progress and
achievement. Applying this concept to the specific task of dealing
with people both inside and outside the organization gives rise to
the ERM and CRM frameworks, respectively. Based on a sound
business plan detailing the organization’s goals and objectives,
these systems of metrics and careful monitoring are great utilities.
The stake of HR in CRM and related technologies and systems
cannot be understated.
Summary 59
Notes
S
Unifying and automating non-integrated business processes will
___________________
only expose or exaggerate contradictions. If there are changes to be
made, several things must take place prior to that. As mentioned ___________________
earlier, a clear-cut change management process has to be in place ___________________
so that both the contractors and the customer can accept the
___________________
changes.
___________________
PE
Customer relationships are now at the forefront of business.
___________________
Breaking all barriers after Liberalisation, Privatisation, and
Globalisation (LPG). Customer Relationship Management (CRM) ___________________
has once again gained prominence among management ___________________
professional in general and academicians in particular
___________________
Relationships are as old as mankind.
___________________
Indian marketers have recorded a high score for greeting the
customers, paying them due respect, attending customers
promptly, talking in terms favourable to them, informing about the
latest in the field, maintaining competitors activity with
customers, asking for references from existing customers,
promotions of benefits of buying from their company, practicing a
two-way communication, listening and recording the customer
)U
problem and keeping promises made as post-sales strategy,
exploring the opportunity to meet new customers and maintaining
relationship with existing customers.
Keywords
Relationship marketing: It is aimed to create strong, long
lasting, fruitful relationships by developing long-term bonds
through its various instruments of personal connections as a result
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60
Customer Care: It relates to the relationship between a product
Notes
S
or service provider and those people who use or buy its products or
___________________
services.
___________________
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___________________
3. Write a short note on the development of customizations.
___________________
4. Explain the role and importance of CRM in marketing.
___________________
5. Describe the importance of CRM in Human Resource.
___________________
___________________
Further Readings
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw- Hill, 2005.
)U
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
Customer Relationships Management, Wiley, 2003.
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Mining Applications, 2004.
CGI Group Inc. White Paper, Building Competitive Advantages
through Customer Relationship Management, January 2001.
Anderson, Paul and Art Rosenberg. The Executive’s Guide to
Customer Relationship Management. Doyle Publishing Company,
Houston, 2000.
Web Readings
www.crminfoline.com/crm-articles/implementing-crm.htm
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www.crminfoline.com/crm-articles/crm-implementation-
process.htm
en.wikipedia.org/wiki/Customer_relationship_management
www.edynamic.net/home/.../CustomerRelationmanagement. aspx
www.webpronews.com/five-steps-to-a-successful-crm-i... - United
States
UNIT 5: Case Studies
Unit 5
61
Notes
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Case Studies
___________________
___________________
___________________
Objectives
___________________
After analyzing these cases, the student will have an appreciation of the
concept of topics studied in this Block. ___________________
PE
___________________
Case Study 1: The Concorde Saga
___________________
A technical marvel, the Concorde was the only aircraft offering
___________________
commercial supersonic travel to passengers. Designed and built in
the late 1960s and early 1970s, Concorde represented the dream ___________________
of travelling faster than the speed of sound. The Concorde project
was a collaboration between the governments of Britain and ___________________
France and was launched with the expectation of revolutionizing
air travel. In the initial stages, the project generated a lot of
interest and Concorde received purchase orders from 16 major
airlines by the late 1960s. However, as the drawbacks of flying
these aircraft began to come to the fore, especially after the fuel
crisis of the 1970s, most of the airlines backed away. Eventually,
British Airways and Air France were the only airlines operating
Concordes.
)U
In 2003, British Airways and Air France decided to discontinue
Concorde services and retire their fleet to aviation museums
around the world. This decision was taken because of several
problems that the airlines experienced in flying Concordes
including, high noise levels, excessive fuel consumption, the
advancing age of the fleet, safety issues (especially after an Air
France Concorde crashed in 2000) and the declaration of
maintenance partner Airbus that it would not support Concorde
operations after October 2003. On 24th October 2003, the last
Concorde flight landed at Heathrow, drawing to an end an era of
supersonic aviation. The case examines the reasons for Concorde’s
inability to succeed at a commercial level, despite its technical
superiority and discusses the important elements which
determine the success of aircraft.
Issues
z To understand the operation of a one-of-a-kind aircraft, that
was technically superior to any other comparable product of
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its time.
z To examine the relationship between technical excellence and
commercial success and how the presence of the former does
not automatically guarantee the latter.
Contd…
Customer Relationship Management
62
Questions:
Notes
S
1. Analyze the case and write down the case facts.
___________________
2. What do you infer from the case?
___________________ 3. Discuss the related issues.
___________________ Source: A. Sahay & Sharma. Entrepreneurship and New Venture Creation. Excel Books
Publishing. New Delhi.
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
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UNIT 5: Case Studies
63
Case Study 2: Customs Simplification: An International Airline Notes
S
Perspective
___________________
Geoffrey Barrington ___________________
Introduction
___________________
The name of British Airways World Cargo is familiar to many.
According to the last annual industry statistics, British Airways ___________________
World Cargo is the fifth largest scheduled carrier of air cargo in
___________________
PE
the world, an achievement of which we are especially proud, given
the fact that British Airways only operates with passenger- ___________________
carrying aircraft. How do we achieve it? The main reasons, among
others, are: ___________________
z We manage our capacity very closely. ___________________
z We supplement our capacity with key partnerships where
___________________
necessary to meet our customers’ demands through our global
route network, which is our key resource. ___________________
These demands also require us to listen to our customers and to
support them in partnership. We recognize the importance of our
role in the global supply chain.
Background
In the early 1990s, we realized that we had to make significant
changes in the way that we did business if we were to realize the
increasing opportunities that would be available in the future.
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This realization became a vision, and we have spent the last three
years turning that vision into a reality. At the top of the agenda
was a major capital investment of US$400 million in a new hub
facility in London to handle over 800,000 tonnes a year. This
investment has not been restricted to London. We have also
invested across our entire global network to ensure that all our
freight and documents are bar-coded, and we have established
EDI links for all our customers. We are also building a new
90,000-sq. ft. temperature-controlled fresh-produce complex in
London to handle 100,000 tonnes of perishable produce. This will
double our capacity and current revenues of US$72 million a year.
Our vision was not just about facilities, it was about people and
cultures, together with a change in the way we did business and
in the processes and procedures we had relied upon for several
decades. Make no mistake: change is never easy and in a large
organization it presents major challenges. As a business we had
to rise to the challenges. Our shareholders demanded it, our
customers required it, and, equally as important, our staff wanted
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it. We invested over 1998 alone. We have made the transition and
are now starting to realize the benefits. The sheer scope and
speed of these changes are realities of the modern business
climate and in some way, we feel, illustrate the increasing
pressures on trade facilitation. This is not to suggest that the
extent of the change in customs administrations and their
procedures needs to be as great. We realize that the speed of
change will always be faster in the modern business environment
than in regulatory and control regimes. However, given the speed
Contd…
Customer Relationship Management
S
today and very much more streamlined. But beware: our business
___________________ requirements will also have changed by that time. It is a step-
change program that is already accelerating.
___________________
As a scheduled operator, we do, of course, have our own
___________________ difficulties when moving our consumables, aircraft spares, and
support equipment around the globe. We are also very aware of
___________________
the complexities and differences in customs procedures.
___________________ As a carrier primarily we are not directly involved with
PE
commercial cargo clearance and other inward-processing regimes.
___________________
However, we do move goods under bond and operate customs-
___________________ bonded warehouses. Furthermore, as carrier we are held liable
under many customs procedures, especially in the event of
___________________ inadvertent discrepancies. These discrepancies cost us real
money.
___________________
It is not my intention to discuss the reasons behind the
___________________ accelerating growth in world trade, other than to say that
deregulation has positively encouraged air transportation and
expanded it into new areas, not least of which is new entrants
into the market. Despite deregulation, the industry still remains
beset by regulatory control, often in the name of “consumer
interests” or “consumer protection.”
The growth in the trade of goods, however, is increasingly
determined by the efficiency of customs processes. We should not
forget the two fundamental roles of customs: revenue collection
)U
and protection of society. In an address to the UNCTAD World
Automated Systems for Customs Data Management
(ASCYCUDA) meeting in Manila in the spring of 1998, the
Secretary General of WCO referred to the balancing act of today’s
customs administrations, among “Competing interests of revenue
collection, trade facilitation, enforcement of trade instruments
and the increasing demands for social and environmental
protection.”
The reduction or outright removal of trade barriers has turned
more of the focus onto protecting society. In international trade
we recognize that protection does take account of other interests,
such as cultural differences and the need for protection against
transnational crime, especially the traffic in drugs, counterfeit
goods, endangered species, nuclear and biological material, and
money laundering. This protection, however, must not be seen as
substituting one form of control for another, as it would further
complicate and break up trade patterns and flows. The WCO has
some 150 member states, nearly all of which have different sets of
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65
z Issues of corruption and integrity;
Notes
S
z Little or no redress for error;
z Inadequate resources; ___________________
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these deficiencies. Through seminars such as the ASEM Seminar
in February 1999 at the Asian Development Bank in Manila we ___________________
hope to use our influence for change. It is not our intention to tell ___________________
people how to do things, but to support them and to cooperate in
reaching common goals. The Way Forward Customs integrity. We ___________________
look forward to the implementation of the 1993 WCO
Declaration—Arusha Guidelines, which include simple, ___________________
consistent, transparent customs procedures. ___________________
Customs efficiency: To operate efficiently, customs
administrations worldwide will likewise require:
z Modern legislation;
z Service-based culture and service-level standards; and
z Streamlined organization.
Accession to international instruments: More countries
should accede to the instruments that have been developed
)U
internationally to simplify and harmonize customs transactions,
such as those of the WCO:
z Harmonized Code System;
z Valuation Agreement;
Consultation
With our global hub operation based in London, it is essential to
our business that we work as closely as possible with our own
customs administration, as indeed we would with any other
administration, as necessary. The result has been our ability to
develop short-term solutions that facilitate our operations and to
establish practical guidelines on new procedures necessary in an
ever-developing business.
The UK has placed much emphasis on consultation, and UK
Customs has an established and successful Joint Customs
Consultative Committee that brings together customs and trade
on a regular basis. Let me say from personal experience that this
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66 tripartite MOU agreements that are now being signed must not
Notes be understated.
S
As an international operator we are no strangers to the need for
___________________
consultation and lobbying. Where possible, we work through
___________________ industry associations at the national, regional, and international
levels. We are active members of regional associations such as the
___________________ AEA. Its EC Working Group in particular enables us to respond
regularly to and work with the EC, in such activities as the
___________________
current search for real solutions to the issues of transit reform in
___________________ Europe. Globally, we are proactive within IATA, particularly its
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Cargo Facilitation Panel, which is currently developing air
___________________ consignment guidelines. Before closing, may I highlight a growing
concern. There are too many overlapping bodies and organizations
___________________
(WTO, UNECE, UNCTAD, UNCITRAL, IMO, ICAO, EC, APEC,
___________________ NAFTA, ASEAN, WCO, OECD, IMF, and World Bank, to name a
few) seemingly striving to be flag-bearers of facilitation and
___________________ equally as many trade associations wanting to be heard.
___________________ Conclusion
Let me conclude by raising the stakes a little higher. A key reason
for the growth in procedural obstacles is “the lack of political will
among governments to seek comprehensive solutions or to place
implication of procedures sufficiently high on their domestic or
international trade agendas.”
This statement does not come from the private sector but from the
European Commission itself.
As a leading international carrier we are proud of having
)U
provided customs with the highest standards of assistance and
cooperation, but we must now seek to ensure that real facilitation
prizes go to the best compliance performers.
Trade will continue to grow, and the proportion carried by air is
set to increase. Unless there is a coherent plan to modernize
customs procedures worldwide, we must look at customs as
inhibiting this growth. As an international carrier we are not
willing to stand aside and let this happen, and will seek to take
whatever action is appropriate to influence change. Individually
we cannot influence the future growth in trade between Europe
and Asia, but collectively we can facilitate the future. We must
therefore examine every opportunity to simplify and harmonize
procedures.
The demands are growing. We must move forward with firm
resolve. We can form a partnership and that process must begin
right now. Real facilitation is not a question of gains and
concessions but the achievement of gains for all concerned. The
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S
Questions
___________________
1. Analyze the case and interpret it.
___________________
2. Write down the case facts.
___________________
Source: http://www.adb.org/Documents/Conference/Simplifications_of_Customs/part3.pdf
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
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Customer Relationship Management
68
Notes
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___________________
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
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UNIT 6: CRM: A New Mantra in Travel and Tourism
69
Notes
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___________________
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
BLOCK-II
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Detailed Contents Customer Relationship Management
70
Notes
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UNIT 6: CRM: A NEW MANTRA IN TRAVEL AND UNIT 8: CUSTOMER RELATIONSHIP
___________________
TOURISM MEASUREMENT
___________________
z Introduction z Introduction
___________________
z Tourism and CRM z Concept of Customer Relationship
___________________ Measurement
z Why Do CRM Implementations Fail?
___________________ z Objectives for CRM Measurement
PE
UNIT 7: CRM TRENDS IN TOURISM INDUSTRY z Factors making CRM Measurement Complex
___________________
z Introduction z CRM Measurement Frameworks
___________________
z Technology and CRM
___________________ UNIT 9: CRM MEASUREMENT
z Customer Relationship Strategy
IMPLEMENTATION
___________________
z Introduction
___________________
z Implementing CRM Measurement
z Customer Equity
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UNIT 10: CASE STUDIES
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UNIT 6: CRM: A New Mantra in Travel and Tourism
Unit 6
71
Notes
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CRM: A New Mantra in Travel
___________________
___________________
___________________
Objectives ___________________
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After completion of this unit, the students will be aware of the following
___________________
topics:
___________________
\ Tourism and CRM
\ Why Do CRM Implementations Fail? ___________________
___________________
Introduction
CRM provides the organization with the chance to acquire and
retain customer relationships. It serves to convert almost every
customer interaction into the travel and tourism sector. Its diverse
functionality enables employers, customers and employees to
access common information. Millions of tourists or clients are being
)U
contacted daily through phone, e-mail, fax, and face to face
interactions. All these increase the need for an effective and well-
coordinated customer approach.
Customer relationship management (CRM) solutions are just as
useful to companies that operate in the tourism industry as they
are in other client or customer-centric enterprises. The ultimate
goal of CRM is still to deliver best total customer experience to
maintain long-term customer relationships.
S
Write an article on the
___________________ unrecognised travel and tourism industry is indeed a sleeping
relationship between tourism
and___________________
the CRM. giant.
PE
___________________ entered the fray, competing inter alia among themselves as well as
with private agencies, and are promising the very best in terms of
___________________
infrastnicture as well as services. to woo the holidayers.
___________________
With competition hotting up, more and more hotels and travel
___________________
agencies are unleashing attention-grabbing advertisements with
___________________ unique packages—all with a view to enticing the travel-minded
customer to use their facilities and services. Acquiring new
customers while retaining the old ones is the focus of organisations
today. Consequently, Customer Relationship Management (CRM)
is emerging as the core marketing activity for businesses operating
in fiercely competitive environments. Organisations are now
paying more attention to their relationship with existing customers
)U
and stepping up efforts to increase their share of the customer's
purchases. Modern CRM strategy is all about capturing the
customer's heart share more than his mind share by offering a
differentiating value proposition through various innovative ideas.
Since the travel and tourism industry is service-oriented, it has to
improvise on existing mechanisms and come up with innovative
ideas to gain customer loyalty and attract new clientele.
Traditionally, the travel and tourism industry did not lay much
emphasis on CRM. Travel was then believed to be a one-time
affair, Tourists were therefore considered to be ‘one-time’
customers and were taken to be part of a floating population. This
made the industry treat its customers in a casual manner, with the
players not too keen on maintaining or building a long-lasting
relationship with customers, However, with changing lifestyles
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S
whole generation of customers. In order to ensure they do not fall ___________________
into this trap, the travel and tourism industry, be it a small hotel,
___________________
agency, airline or a large hotel chain, are investing heavily in
CRM. ___________________
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critical, especially in the service industry. ___________________
Customer relationship management (CRM) applications enable ___________________
travel and tourism providers to maintain brand value and perform
___________________
more competitively in their dynamic marketplaces. CRM supports
the most demanding sales, marketing, and customer service ___________________
74
z Speed up order to delivery cycles for faster, better customer
Notes
Activity
S
service and more turns.
With the help of internet, find
___________________
out the reasons for the failure z Maximise the lifetime value of a customer.
of CRM implementations.
___________________
z Have the ability to use customer data to drive business
___________________
decisions.
___________________
z Reduce time to market,
___________________
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z Are better equipped to meet future requirements.
___________________
Main aspects of CRM in Hospitality Services are:
___________________
z Know your customer
___________________
___________________
z Customer service
___________________ z Personalisation
z More efficient marketing
z Building customer loyalty.
S
measurable return on investment. And a recent study by Forrester Make a report on the ways to
___________________
avoid the shortcomings of
Research indicates that 57 per cent of the companies surveyed CRM.
___________________
could not justify investment in customer service programmes
because of the difficulty in measuring their impact on profitability. ___________________
The following are the top ten strategies for avoiding common ___________________
PE
z CRM software should be moulded to company’s best practices, ___________________
rather than forcing to use the best practices of the CRM ___________________
vendor.
___________________
z Understand one's own business processes before buying CRM
___________________
software.
___________________
z No CRM vendor excels in all areas.
z Any CRM vendor only provides 20 per cent of the total CRM
solution.
z CRM needs are inherently fluid and will change as
organisations evolve.
)U
z Any CRM project that takes more than 90 days to implement
runs the risk of failure.
z The total cost of ownership over five years must include the
entire CRM strategy.
z Make sure that the CRM vendor is financially stable and can
weather an economic downturn.
z Beware of jumping on to the latest technology bandwagon.
z CRM technology is useless if the employees are unwilling or
untrained to use the CRM product.
76
Summary
Notes
S
The travel and tourism industry can better predict when customers
___________________
will require service and provide proactive, prompt service when
___________________ needed. Another facet of the concept of CRM is identifying new
___________________ customers and providing them with customised services on the
___________________
basis of their preferences and needs.
___________________
PE
Lesson End Activity
___________________
Prepare a presentation on the role of CRM in the services sector
___________________
focussing on the Indian tourism sector. Also give examples to make
___________________
your presentation more attractive.
___________________
___________________ Keywords
Tourism: Various types of companies make money by offering
travellers hospitality services, tours, transportation and other
services and goods on their vacations and trips.
CRM program: It can help companies more effectively turn leads
into sales and establish repeat business.
)U
Customer Relationship Management (CRM): It is emerging as
the core marketing activity for businesses operating in fiercely
competitive environments.
Customer relationship management (CRM) applications:
They enable travel and tourism providers to maintain brand value
and perform more competitively in their dynamic marketplaces.
Further Readings
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
UNIT 6: CRM: A New Mantra in Travel and Tourism
77
Paul Greenberge, CRM – Essential Customer Strategies for the 21st
Notes
S
Century, Tata McGraw Hill, 2005.
___________________
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
Customer Relationships Management, Wiley, 2003. ___________________
___________________
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Mining Applications, 2004. ___________________
PE
through Customer Relationship Management, January 2001. ___________________
78
Notes
S
___________________
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
)U
(c
UNIT 7: CRM Trends in Tourism Industry
Unit 7
79
Notes
S
CRM Trends in Tourism Industry
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
PE
\ Technology and CRM ___________________
\ Customer Relationship Strategy ___________________
\ CRM and Transport Agencies
___________________
\ CRM and Hotel Industries
___________________
\ CRM and Tourism Intermediaries
___________________
Introduction
A customer is a person who buys goods or services for some price.
The nucleus of every business is the customer. The success of an
enterprise depends heavily on customer satisfaction. It is the era of
the customer. Every customer should know his rights and
responsibilities.
)U
The relationship between the customer and the seller is very
important. This relationship should be regular, smooth and
friendly. When there is no cordial relationship between the
customer and the seller, then there will be a great danger for the
survival of the business.
Management is both an art and science. The seller should please
the customer by selling quality products at a reasonable price.
We experience CRM ourselves everyday. Dining at a favourite
restaurant or taking our car for service are examples of interaction
with a business that leaves the customers with an experience. If
the customers recall pleasant or unpleasant memories of these
experiences, think about how those feelings affect their propensity
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80
Technology and CRM
Notes
Activity
S
With the help of internet, find Technology has empowered consumers with the ability to conduct
___________________
out the relationship between business with a variety of alternatives to the traditional face-to-
CRM and Technology.
___________________ face contact.
___________________
The Internet blends computing and communication into a
___________________ platform-independent, globally accessible, and universally usable
___________________ medium. To date, the Internet's impact on business has been
PE
substantial, creating new channels for commerce, driving new
___________________
market models and enabling collaborative business-to-supplier
___________________ relationships.
___________________
Online commerce is maturing rapidly, shaped by changes in
___________________ technology, consumer behaviour, and innovation in business
___________________ models.
The buying pattern of browse by Internet, order by phone, and ship
overnight satisfies the consumer's desire to get the best deal and
ensures that the purchase transaction is correctly handled and
that the wait to receive the benefit is minimised.
The issue is not whether CRM is important for business, but how
best to apply it. CRM can be a personal undertaking of small
)U
business owners and merchants who do a majority of their trade
face-to-face, and on a scale permitting them to know and
understand their customers. Good CRM becomes much more
challenging to maintain as business scales up, and as technological
and behavioural trends put distance and anonymity between the
business manager and their customers.
As its core, CRM is an enterprise-wide mindset, mantra, and set of
business processes and policies that are designed to acquire, retain
and service customers. Broadly speaking, CRM includes the
customer facing business process of marketing, sales and customer
service.
CRM is not a technology. Technology is a CRM-enabler.
Every company's game plan includes what we call the G-SPOT.
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81
Notes
S
___________________
___________________
___________________
___________________
___________________
PE
___________________
Figure 7.1: The CRM G-Spot
___________________
The various components of the CRM G-SPOT are discussed below. ___________________
1. Goals: Every business has clearly defined goals. At the most ___________________
basic level, these include things like profitability, worldwide
___________________
recognition, and high stockholder value.
2. Strategies: In order to achieve your goals, you establish
strategies such as designing innovative products, focusing on
international markets, and establishing long-term
relationships with customers.
3. Plans: Executing strategies requires plans. For example, for
)U
designing innovative products, you might implement a plan of
hiring top product engineers; to focus internationally, you
might develop a public relations plan that targets the
worldwide press; and to establish customer relationships you
might determine to measure customer satisfaction and
behaviour, and to invest in technoiogy, you might decide to
support customer interaction.
4. Objectives: These are the measurable goals of each plan, such
as maintaining a 60 per cent customer retention rate or
lowering product return rates to less than 20 per cent.
5. Tactics: Tactic imply how you achieve the objectives that are
part of the plans to implement the strategies to achieve the
goals (whew!). For example, you might establish a 24/7 call
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82
Check Your Progress
Notes
Activity
S
Write an article on the
___________________ State True or False:
customer relationship
strategy.
___________________
1. CRM is actually a tremendous step forward in creating
a system that can provide a means for retaining
___________________
individual loyalty.
___________________
2. Online commerce is declining rapidly, shaped by
___________________ changes in technology, consumer behaviour, and
PE
___________________ innovation in business models.
___________________ 3. Goals imply how you achieve the objectives that are
___________________ part of the plans to implement the strategies to achieve
the goals
___________________
___________________
Customer Relationship Strategy
The customer relationship strategy (CRS) is supported by two
dimensions of technology, the Customer Intelligence products that
act in support of the overall CI process (indicated with the arrows
on the left in Figure 7.2) and the CRM products (indicated with the
arrows on the right in Figure 7.2).
)U
S
Figure 7.3. ___________________
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
in transport services.
Customer Relationship Management
84
CRM and Hotel Industries
Notes
The tourists stay in various hotels depending upon their
S
___________________ requirements. The services of hotels and restaurants may attract
___________________ customers. When customers are not satisfied with the services of
hotel industries, the customers' visits to hotels will be less. CRM
___________________
plays a major role in the hotel industries also.
___________________
PE
___________________ Tourism intermediaries include tourist guides, transport operators,
shopkeepers, recreational agencies, banks and insurance
___________________
companies. The services of tourism agencies also influence
___________________ customer satisfaction. CRM helps tourism agencies to offer much
___________________ better services to customers.
___________________ The level of satisfaction of customers is decided by the quality of
services rendered by the transport, hotel and tourism agencies.
The focus an customer service has increased exponentially.
Sensitising tourism agencies to customer needs, metrics to track
service levels and customer satisfaction have become derigor.
Summary
(c
S
Collect more information on the merging trends and issues of CRM
___________________
in tourism industry. Make a collage from the information collected.
___________________
Keywords ___________________
___________________
Customer: He is a person who buys goods or services for some
price. ___________________
PE
G-SPOT: This stands for Goals, Strategies, Plans, Objectives, and ___________________
Tactics, ___________________
Objectives: These are the measurable goals of each plan, such as ___________________
maintaining a 60 per cent customer retention rate or lowering
___________________
product return rates to less than 20 per cent.
___________________
Tactics: Tactic imply how you achieve the objectives that are part
of the plans to implement the strategies to achieve the goals.
Further Readings
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw Hill, 2005.
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
Customer Relationships Management, Wiley, 2003.
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86
Anderson, Paul and Art Rosenberg, The Executive’s Guide to
Notes
S
Customer Relationship Management, Doyle Publishing Company,
___________________
Houston, 2000.
___________________
Web Readings
___________________
www.crminfoline.com/crm-articles/crm-financial-services.htm
___________________
en.wikipedia.org/wiki/Customer_relationship_management
___________________
PE
___________________
searchcrm.techtarget.com/definition/CRM
___________________ www.impelcrm.in
___________________ www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
___________________
)U
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UNIT 8: Customer Relationship Measurement
Unit 8
87
Notes
S
Customer Relationship
___________________
___________________
Measurement ___________________
___________________
Objectives ___________________
PE
After completion of this unit, the students will be aware of the following
___________________
topics:
___________________
\ Concept of Customer Relationship Measurement
\ Objectives for CRM Measurement ___________________
Introduction
Comprised of several distinct disciplines and cutting across just
about all business units within most companies, Customer
Relationship Management (CRM) measurement is complex.
Companies use CRM measurements for different purposes; digital
)U
channels provide for new measurement and product/service
distribution options; businesses are fractured internally with
inconsistent communication and often incompatible systems.
One big issue in convincing the top management about allocation
of CRM budget is the lack of proper measurement tools to show the
improvements convincingly. What makes CRM measurement
difficult is that the measurement problem is not confined to just
measuring customer behaviour and mindset. Instead, businesses
need to measure activities that occur inside the company, too. CRM
measurement also sometimes goes beyond measuring those
activities that directly touch the customer (value delivering
capabilities).
(c
S
Write an article on the
___________________ customers.
concept of customer
relationship measurement.
___________________ The concept of CRM is now gaining wide acceptance and is
recognized as a powerful tool for business development and to have
___________________
an edge over the competitors on account of the universal traits of
___________________
human behaviour. People need to have social and interactive
___________________ relationships. So fast moving organizations believe in their
PE
___________________ customers, understand their needs in advance before the
customers give the feedback about their particular requirements
___________________
and design their products matching to such needs.
___________________
According to Cap Gemini Ernst & Young, a leading management
___________________ consulting firm, CRM is defined as “a company’s ability to
___________________ continuously maximize the value of its customer franchise by
effectively allocating scarce resources to specific customers
segments in those areas viewed as having a significant impact on
the profit – impacting behaviours of customers.”
Influencing Decision-making
Companies implement CRM measurement very differently based
on their internal decision making styles. As companies make
decisions about customer strategies, they look to customer
measurement to help influence specific decision makers or the
decision making process or validate initial ideas about how to
manage customer relationships.
Many companies frequently adopt more than one style. The styles
adopted, consciously or not, shape how the company will measure
customer activity. The company’s business model, approach to the
(c
they are also used to inform and guide ongoing daily activities 89
related to customers. This is related to but somewhat different Notes
S
from influencing decision-making. Measuring customer activities ___________________
not only helps companies decide which customer strategies to
___________________
adopt, but also helps front-line employees and managers perform
regular tasks. Often, this is the predominant focus for CRM ___________________
measurement systems. For example, for those businesses with call ___________________
centres, managers frequently run reports from the call centre
___________________
PE
technology systems, such as Automatic Call Distribution (ACD)
___________________
systems, on how well the call centre is performing and if customers
are being serviced at the prescribed level. If managers see ___________________
problems with performance, those problems can be diagnosed and ___________________
resolved.
___________________
Since a company interacts with customers through a variety of
___________________
different business units in a variety of methods, each business unit
measures customers very differently. The way a brand manager
measures its customer-facing activities is very different from the
way the field service staff may measure its customer-facing
activities. It is this different way of “touching the elephant” that
contributes to a company’s inability to deliver on the promise of
CRM systems. Given the diverse nature of these measurement
)U
frameworks, it is not surprising that CRM practitioners are often
skilled in one measurement framework and unaware of the issues,
complexities and importance of the other frameworks.
Specific measures in each of these measurement frameworks can
be focused internally towards company employees and productive
processes that generate and deliver products and services or
externally towards customers and their behaviour. For example, a
call centre frequently measures the cost per call as a measure of
economic productivity. This is an internally focused measure. Call
centres frequently survey customers to determine the level of
customer satisfaction.
When it comes to coordinating customer-facing activities, the level
of interconnectedness within companies and within value chains
(c
S
___________________ these issues and all are heavily dependent on customer insight
capabilities within each company in the value chain to work.
___________________
___________________ When CRM measurement is looked at in this way, one can get the
impression that CRM is too wide of a discipline and a technology
___________________
set since it encompasses nearly every aspect of a company. While
___________________ this is true, that is because companies exist to sell to and serve
PE
___________________ customers and it is natural that a wide set of measurements would
need to be managed. Companies also have to manage all sorts of
___________________
measures and measurement frameworks that customers are
___________________
typically not interested in, such as stock price volatility, bank
___________________ financing interest rates, overall accounts receivables day’s sales
___________________ outstanding and so on. So where does CRM measurement begins
and end? One way to answer that is to say that CRM should
measure those company activities that pertain to or can benefit
specific customers as well as specific customers’ behaviour and
mindset.
91
Check Your Progress
Activity
Notes
S
Choose the appropriate answer:
Prepare a short report on the
___________________
factors making CRM
1. ACD stands for: measurement complex.
___________________
(a) Automatic Customer Detection
___________________
(b) Automatic Call Distribution ___________________
(c) Automatic Call Decision ___________________
PE
(d) None ___________________
(d) None
92
CRM Measurement Frameworks
Notes
S
As discussed earlier, how a company measures its CRM activities
___________________
depends on who is doing the measuring and what activities are
___________________ being measured. Below are the common CRM measurement
___________________ frameworks:
___________________
Brand-building
___________________
The goal in brand building is to carefully manage a company’s
PE
___________________ name, brands, slogans and symbols, otherwise known as brand
___________________ equity. Various models (and criticisms) of brand equity have been
published over the years. The main challenge lies in how to
___________________
quantify this important intangible asset. David Aaker (1991)
___________________
breaks down brand equity into four components as described in
___________________ Table 8.1.
Table 8.1
93
By treating brand value as an asset, investments in brand building
Notes
S
can be measured and more easily compared with other corporate
investments, the value of the brand and the performance of the ___________________
investments can be tracked and the performance of specific brand ___________________
activities can be monitored. Measuring brand value can get
___________________
complex. Boston Consulting Group’s Brand Value Creation (BVC)
approach looks at dozens of variables concerning different aspects ___________________
PE
significant each variable is to the brand’s value (Bixter, et al., ___________________
1999). This approach uses cross correlation analysis, cluster and
___________________
factor analysis and linear regression to build the brand value
model. The authors state that this approach helps companies ___________________
understand what consumers value most and how well brands ___________________
deliver it.
___________________
Davenport and Beck (2001) suggest a different way to think about
company or brand awareness. Their technique, called the Attention
Scape, helps managers understand what kind of attention they are
getting from customers (or employees, suppliers, etc).
Data is collected through survey techniques and plotted along
three scales:
)U
z Front of mind/back of mind attention
z Voluntary/captive attention
z Attractive/aversion attention.
Competitors can be plotted along these axis and companies can
develop strategies to reposition themselves relative to their
competitors’ attention profile.
94 Rust et al. argue for changing the focus from unprofitable products
Notes to unprofitable customers.
S
___________________
With the customer as the primary unit of analysis, the CRM
___________________ literature suggests two frameworks: understanding how customer
___________________ equity links to business value and understanding how customer
behaviour works and is linked to parts of the overall customer
___________________
equity. The first framework is a management framework for
___________________ linking various customer-facing activities in a reasoned way to
PE
___________________ overall customer equity and business success. The second
framework is a marketing research framework that seeks to
___________________
understand how customer behaviour is influenced by a company’s
___________________
customer-facing activities.
___________________
Customer Value Management
___________________
Different approaches exist for measuring customer value. Four
approaches are considered here: customer equity management,
customer value analysis, loyalty monitoring, and customer
satisfaction. While customer equity management, as described by
Rust et al. in 2001 is perhaps the most encompassing of the
approaches, each of these approaches has a history of research and
literature behind it.
)U
Customer Equity Management
Rust et al. identify three main components to customer equity as
describe in Table 8.2.
Table 8.2
Retention equity The customer’s tendency to stick with the brand above and
beyond the customer’s objective and subjective
assessments of the brand. Key components include loyalty,
special recognition, affinity, and community and customer
knowledge-building programs.
UNIT 8: Customer Relationship Measurement
95
Each of these areas of customer equity requires measurement and
Notes
S
the authors identify some preliminary drivers of each area of
equity that can be measured. ___________________
___________________
Customer Value Analysis (CVA)
___________________
Much has been written about Customer Value Analysis (CVA),
___________________
which was devised by Bradley Gale and utilized by Ray
Kordupleski at AT&T. CVA compares price and quality (or value) ___________________
PE
of a product against competitors. The purpose of this analysis is to ___________________
determine how changes in price, value or quality can affect market
___________________
share and as such, this framework provides a linkage between a
company’s customer facing activities with overall corporate ___________________
96
z How do we want to get there?
Notes
S
___________________
z Are we there?
PE
enhance profitable customers and shed unprofitable ones. The
___________________
APQC identifies four basic steps for establishing and monitoring a
___________________
CVM measurement system:
___________________
z Identify strategic priorities in the context of customers and
___________________ products.
___________________ z Conduct qualitative research to get a comprehensive
understanding of the ways customers think about value.
z Conduct surveys that will provide data for analysis so that the
company can determine what from the customer’s perspective
are the 3-4 key benefits of the 10 or 12 benefits for each
product. These surveys need to be specific to customer
segments.
)U
z Monitor the value proposition with a limited subset of
questions.
CVM proponents feel the method addresses limitations within the
customer satisfaction survey approach. According to the APQC,
customer satisfaction scores lack linkage to key internal
performance metrics and may be unrepresentative of how
customers really evaluate product and service purchase decisions.
The customer satisfaction framework is older and widely adopted
in North America while the customer value framework is newer
and being adopted by leading edge companies (Gale, 2002). Gale
positions CVM as the latest evolutionary version of voice-of-the-
customer initiatives with conformance quality as the first followed
by the customer satisfaction and then the customer loyalty
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paradigm.
Loyalty Monitoring
Frederick F. Reichheld’s writings on loyalty (not just customer
loyalty, but employee and shareholder loyalty as well) are widely
cited with the CRM world as a framework for measuring the effect
UNIT 8: Customer Relationship Measurement
S
central notion is that if a company can cause fewer customer ___________________
defections, the long-term effects on company performance would be
___________________
significant. Customer loyalty data, then, serves as a predictor of
financial performance. For example a 5% increase in customer ___________________
retention rate can have between a 30% and 95% impact on ___________________
customer net present value and a similar impact on corporate
___________________
PE
profits (Reichheld, 1996).
___________________
Customer Satisfaction ___________________
For the past several decades, businesses have been determining ___________________
customer satisfaction to help improve their customer-facing ___________________
activities and predict and improve financial performance.
___________________
Customer satisfaction, then, is an antecedent to some form of
loyalty behaviour. Customer satisfaction has been defined as a
“satisfactory post-purchase experience with a product or service
given an existing pre-purchase expectation,” (Vavra, 1997).
Vavra (1997) offers a model for customer satisfaction in which
satisfaction is an antecedent to repurchase behaviour and has
)U
several antecedents as well. The most important antecedent is
prior experience that “serves as a ‘memory bank’ of all the previous
experiences with a product or service.” Several factors can
influence prior experience, such as the customer’s demographic
characteristics, their level of personal expertise, the nature of the
competition, advertising and PR influences, and the evolution of
technology. Along with prior experience, customer desires and
expectations, the perceived product or service performance and
ease of evaluating that performance are all antecedents to a
mental process customers go through to compare what was
expected and what was delivered. This “disconfirmation /
confirmation / affirmation” process, in which expectations are not
met, met or exceeded, can be visualized as a sigmoidal function
(Vavra, 1997).
(c
S
___________________ necessarily try to tie customer behaviour to financial performance
or company responses. Instead, the research simply wants to
___________________
understand customer behaviour better more or less removed from
___________________
specific company goals, objectives or performance. In addition,
___________________ researchers are focusing on new concepts to link to customer
___________________ behavioural loyalty.
PE
___________________
Customer-facing Operations
___________________ Most, if not all or traditional CRM and customer transaction
___________________ software, collect all kinds of basic data regarding customer facing
___________________
activities. These operational CRM systems automate customer
facing activities and in doing so, collect information on employee
___________________
and customer behaviour. For most companies deploying CRM
technology, these are the only kinds of CRM measurements they
make.
Marketing Operations
Software that manages marketing operations lets companies plan,
schedule, execute and track their marketing campaigns. Several
)U
key metrics from the marketing automation function are shown in
Table 8.3.
Table 8.3
This CRM area is perhaps the most mature. Companies have been
deploying sales force automation solutions long before CRM
became a popular buzzword. The rise of Sales Force Automation
(SFA) software parallels that of the portable and laptop computers
UNIT 8: Customer Relationship Measurement
S
performance of individual sales staff members and teams, ___________________
monitoring the sales performance of products, reviewing the
___________________
impact training has on performance, and the cost of sales.
___________________
Service Centre Operations ___________________
With the increased use of phone technology to handle incoming ___________________
PE
phone calls and manage outbound sales calls, companies have long
___________________
housed those resources into a single functional group called the
call centre, service centre or interaction centre. Much has been ___________________
written about call centre and service centre operations, revealing a ___________________
host of measures (Anton, 1997). ___________________
Summary
Comprised of several distinct disciplines and cutting across just
about all business units within most companies, Customer
Relationship Management (CRM) measurement is complex.
Companies use CRM measurements for different purposes; digital
channels provide for new measurement and product/service
distribution options; businesses are fractured internally with
inconsistent communication and often incompatible systems.
Despite this complexity, companies are adopting measurement
systems, or frameworks, that have acceptance in the marketplace.
These frameworks range from the strategic to the operational.
(c
100
Keywords
Notes
S
Brand-building: The goal in brand building is to carefully
___________________
manage a company’s name, brands, slogans and symbols,
___________________ otherwise known as brand equity.
___________________
Customer Value Analysis (CVA): CVA compares price and
___________________ quality (or value) of a product against competitors.
___________________ Call Centre: With the increased use of phone technology to handle
PE
___________________ incoming phone calls and manage outbound sales calls, companies
have long housed those resources into a single functional group
___________________
called the call centre, service centre or interaction centre.
___________________
___________________
Questions for Discussion
___________________
1. Explain the concept of Customer Relationship Measurement.
2. Describe the objectives for CRM measurement.
3. List and explain the factors making CRM measurement
Complex.
4. Discuss the various CRM measurement frameworks.
)U
Further Readings
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw Hill, 2005.
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
Customer Relationships Management, Wiley, 2003.
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Mining Applications, 2004.
CGI Group Inc. White Paper, Building Competitive Advantages
(c
S
___________________
searchcrm.techtarget.com/definition/CRM
___________________
finance.yahoo.com/q?s=CRM - United States
___________________
www.impelcrm.in
___________________
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
___________________
PE
___________________
___________________
___________________
___________________
___________________
)U
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Customer Relationship Management
102
Notes
S
___________________
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
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UNIT 9: CRM Measurement Implementation
Unit 9
103
Notes
S
CRM Measurement
___________________
___________________
Implementation ___________________
___________________
Objectives ___________________
PE
After completion of this unit, the students will be aware of the following
___________________
topics:
___________________
\ Implementing CRM Measurement
\ Attributes of A CRM Measurement Framework ___________________
Introduction
When customer behaviour is fluid due to a dynamic and changing
market, existing tools designed to find significant patterns of
customer behaviour cannot be calibrated on old data or
)U
assumptions. The tools must evolve as the market evolves.
104 the company does receive some benefit. In fact, one could, in
Notes
Activity theory, design a measurement system that measures competing
S
Write an article on the
___________________
implementation of customer CRM programs on operational measures to help the company weed
relationship measurement. out what shouldn’t be done.
___________________
___________________ Key concepts from successful programs can be shared and cross-
pollinated across multiple teams. Proving causal linkages between
___________________
human (customer or employee) behaviour and business success can
___________________ be dispensed with or downplayed. Instead, surviving programs and
PE
___________________ the key concepts behind them, however cross-pollinated they have
become, represent the “causal” linkages “explaining” behaviour or
___________________
“predicting” performance.
___________________
Anecdote rules: The key concepts, which inform new CRM
___________________
programs, are more like memes, units of cultural information that
___________________ successfully spread throughout the company. No one engineers a
comprehensive behavioural model around customers nor does
anyone engineer how customer knowledge is created. Is this a valid
measurement approach?
Perhaps, if speed of adaptation is important, companies may not
have the time to identify the right measures and the right causal
relationships, which may take months or years to develop, as it
)U
sometimes does for balanced scorecard methods (Smith, 2001). Are
causal measurement models better than correlated or non-causal
ones at finding useful patterns? Perhaps, but the real issue is
whether the measurement system is finding the right knowledge in
timely way. While a non-causal CRM measurement system can
detect conditions that provide opportunities quickly, determining
the right business response will require some root cause analysis
for diagnosing and fixing customer problems. Time becomes the
pivotal variable.
All the things that can and should be measured across the
enterprise regarding customers, be they value-creation, value
delivery or customer insight activities, can be compared to that
opaque sea. While the business can cast its net (its measurement
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Investing in identifying causality is a decision that folds within the ___________________
framework offered here and will be influenced by many factors.
___________________
The CRM practitioner that complained that CRM stands for “can’t
really measure” was most likely responding to the cost of ___________________
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How does a business go about consistently measuring that field of ___________________
complexity in a way that will detect new and unseen patterns?
___________________
Most companies assume that this can be engineered in a
predictable way. Some argue that it can’t. At best, a business can ___________________
create an adaptive internal environment that seems best suited for ___________________
detecting and acting upon this field of dynamic complexity. Stacey
___________________
(2000) argues that the mainstream thinking about knowledge
management that says knowledge is stored within the minds of
individuals in tacit form and has value only when extracted as
explicit knowledge, is wrong. For Stacey, knowledge assets lie in
the “pattern of relationships between its members.” Knowledge is
“the act of conversing and new knowledge is created when ways of
talking, and therefore patterns of relationship change.” Customer
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knowledge comes about through interactions between people
within the company.
Thomas et al. (2001) also agree that mainstream thinking about
knowledge management is too simplistic. “Knowledge management
is not just a matter of managing information. It is … deeply social
in nature and must be approached by taking human and social
factors into account,” (Thomas et al., 2001). The authors argue the
most important aspects of a knowledge management system is that
it becomes a knowledge community; a place where people can
encounter and interact with others who discover, use and
manipulate knowledge.
Maxfield & Lane (1997) provide a deeper discussion about the non-
deterministic way that strategy can unfold into business success
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Make a brief report on the
___________________
attributes of a CRM Another way of thinking about this knowledge management debate
measurement framework.
___________________ is to pose a question. For companies that deploy CRM systems,
___________________ which contributed most to the benefits derived from the CRM
system:
___________________
z Establishing strong causal linkages within the measurement
___________________
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model deployed or in use?
___________________
z The use of CRM technology for some efficiency or effectiveness
___________________
gain?
___________________
z The socialization of the measurement framework within the
___________________ culture of the company?
___________________ In extremely fluid market conditions, it seems unlikely that
businesses can identify, in time, key causal linkages in customer
and employee behaviour when all the agents involved are
reinterpreting and redefining how they conceive of products,
services, customers and relationships. When the nouns are fluid,
do the verbs make sense?
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Check Your Progress
State True or False:
1. Customer satisfaction is not a reaction to value
received.
2. Customers consume physical and digital products.
z Field depth
z Field tractability
The term field here is defined as those customer-facing and
customer-impacting activities to be measured that can include
processes within the company, among its suppliers and certainly
UNIT 9: CRM Measurement Implementation
with its customers. Each of these vectors competes with each other 107
for management funding and attention. Field breadth refers to how Notes
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much of the total set of activities needed to be measured are ___________________
actually measured. Are all customer segments, product categories,
___________________
business processes measured? Field depth refers to how granular is
the measurement approach. Systemic? At the customer segment ___________________
level? At the customer level? How far are sub-attributes broken ___________________
down? How frequently is data measured? Field tractability refers
___________________
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to how explainable and provable is the CRM measurement
___________________
framework employed.
___________________
With these attributes in mind, here are the principles companies
should consider for establishing the proper measurement ___________________
framework: ___________________
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Building a Composite Measurement Framework
Notes
Activity
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With the help of internet, If they haven’t done so already, most companies will need to build
___________________
collect information on how to composite CRM measurement frameworks to get the optimal
build composite measurement
___________________
framework. combination of measurement breadth, depth and tractability.
___________________ Measurement frameworks are not a one-size-fits-all proposition.
___________________
They need to be tailored for the company and its conditions. With
the abundance of measurement approaches and lack of a
___________________
comprehensive theory of customer behaviour to guide them,
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___________________ companies will be designing frameworks themselves. Based on the
___________________ issues discussed so far, here is an approach to consider.
___________________ (a) Are current market conditions stable or chaotic with rapid
unpredictable change?
(b) What is the company’s current competitive posture? Is the
company attempting to shape the market significantly,
adapt as a fast follower to the market, or sitting it out for
a while and doing nothing?
(c) What is the balance of focus needed between measuring
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internal capabilities and measuring customer behaviour?
(d) How much of the measurement framework needs to
measure past activity or predict future events?
2. Consider the technology implications:
(a) What technical infrastructure changes are needed to
support the measurement framework?
(b) Can the data needed be collected and combined within this
infrastructure?
(c) What is the ongoing cost of measurement and data
collection?
(d) What are the sampling and refresh rates that will be
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3. Consider the organizational implications:
Notes
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(a) What skills sets are needed to support the measurement
___________________
framework?
___________________
(b) How do motivation and incentive approaches in the
___________________
company need to be altered to encourage successful
measurement? ___________________
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use the measurement framework? ___________________
service.
Within each deployment model, companies can control scope
further by restricting the remaining two vectors (depth and
tractability):
z Controlling the field depth by limiting the how detailed the
measurement approach is.
Customer Relationship Management
110
z Controlling the field tractability by limiting causal research,
Notes
Activity
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Prepare an assignment on the data collection and analysis.
___________________
customer lifetime value and
its calculation. In practice, probably any sequence of deployment is possible. Since
___________________
it is most unlikely that companies, especially large ones, can
___________________ transform themselves completely, iterative implementations of
___________________ new CRM strategies and measurement frameworks will be needed.
In fact, for many companies, “adapt or perish” is the directive.
___________________
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Changing market conditions and customer behaviour and the
___________________ proprietary, non-reproducible relationship companies and brands
___________________ can have with their customers practically insists on iteratively
___________________
implemented, adaptable CRM measurement frameworks.
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and relative. The first is very difficult to calculate; the second, very ___________________
easy to calculate and in many ways more powerful than the first. ___________________
The most difficult part of calculating LTV is deciding what a ___________________
“lifetime” is. Lifetime Value is the value of the customer over the
___________________
Lifecycle (if you don’t know what a Lifecycle is, you really should
read the article on Lifecycles before reading this one). Lifetime ___________________
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Value doesn’t exist without a Lifecycle. We will get into some ___________________
details on calculating Lifetime Value in a moment, but first, a ___________________
clarification.
___________________
The Lifetime Value concept has been horribly abused and
___________________
misunderstood over the last several years. It is not necessary to
figure out an absolute Lifetime Value for a customer or wait “a ___________________
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Let’s say you’re not satisfied with using relative Lifetime value as
Notes
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a proxy for absolute Lifetime Value. You’re a glutton for
___________________
punishment, or your boss wants a hard number. No problem. Here
___________________ are a few issues we need to put on the table when discussing the
___________________ calculation of LTV:
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looking for defected best customers. Look at customers who
___________________ have spent or visited the most with you and then of these, look
___________________ at the ones who haven’t made a purchase or visit in some time
___________________
(6-9 months, for example). In all likelihood, the last purchase
or visit was the end of the Lifecycle when considering best
___________________
customers who have stopped buying or visiting. When best
___________________ customers stop, they’re usually all done. Then look at first
purchase or visit date for these customers, calculate your
Lifetime, and use this length of time as the “standard”
customer Lifetime, realizing the average lifetime is probably
much shorter.
z Frequently, a customer will defect for a few years and then
come back. This is cool, and normal. Their life changed
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somehow and they left, and now they need you again. Most
offline marketers would call a customer who has had zero
activity for over 2 years a defected customer. Online, it’s more
like 6 months for the average customer, unless you are in a
classic seasonal business. If the customer starts up again, they
would be a “new customer”, for marketing and modelling
purposes. They will more likely behave like a new customer
than a current customer. The behaviour will ramp and fall off
all over again, just like it did in their previous Lifecycle with
your business.
That doesn’t mean you can’t use the same customer number,
or combine the old behavior record with the new behavior
record in the customer service shop. In fact, knowing how long
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You decide if it’s a new lifetime or not based on your business.
Notes
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In most cases, from a marketing perspective, and for the
purposes of Lifetime Value, they should be treated as a new ___________________
customer. Otherwise, all your customers will have “infinite” ___________________
lifetimes, and you lose the relevance of the metric.
___________________
z Another challenge to calculating Lifetime Value: usually much
___________________
of the data you need to complete the simple calculation are not
___________________
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available, or can’t be agreed upon by all the players, especially
if you are in a big company. If you don’t know what the ___________________
average unit returned costs you in terms of overhead, you can’t ___________________
do the calculation. If you don’t know what the average number
___________________
of customer service calls per unit shipped is and what the calls
cost, you can’t do the calculation. This is a particularly difficult ___________________
problem for offline retailers, who don’t have a database that ___________________
captures nearly enough relevant data.
Here’s one way approach it if the operational data you need is
unclear. Try to focus on the average unit sold, and break up all the
revenue and cost components that comprise the unit. Once you get
to a profit/unit, just multiply by units sold to a customer over the
“lifetime,” minus overhead and promotional costs, and you get
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LTV.
Average price, cost of goods sold, gross margin should be easy to
find. To get customer service costs, look at how many units you
move annually, and divide by annual customer service cost. Do the
same thing for returns, and so on, until you know the costs/unit
sold of all the elements going into a sale. Don’t forget credit
processing, after sale support, etc. For example: Most models to
calculate CLV apply to the contractual or customer retention
situation. These models make several simplifying assumptions and
often involve the following inputs:
z Churn Rate: The percentage of customers who end their
relationship with a company in a given period. One minus the
churn rate is the retention rate. Most models can be written
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___________________
z Retention Cost: The amount of money a company has to
___________________ spend in a given period to retain an existing customer.
___________________ Retention costs include customer support, billing, promotional
incentives, etc.
___________________
z Period: The unit of time into which a customer relationship is
___________________
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divided for analysis. A year is the most commonly used period.
___________________ Customer lifetime value is a multi-period calculation, usually
___________________ stretching 3-7 years into the future. In practice, analysis
___________________
beyond this point is viewed as too speculative to be reliable.
The number of periods used in the calculation is sometimes
___________________
referred to as the model horizon.
___________________
z Periodic Revenue: The amount of revenue collected from a
customer in the period.
z Profit Margin: Profit as a percentage of revenue. Depending
on circumstances this may be reflected as a percentage of gross
or net profit. For incremental marketing that does not incur
any incremental overhead that would be allocated against
profit, gross profit margins are acceptable.
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Managing Customer Value
After measuring customer value, the next step is to manage
customer value – to make money by creating very high ROI
customer marketing campaigns and site designs. The Drilling
Down book describes how to easily create future value and
likelihood to respond scores for each customer, and provides
detailed instructions on how to use these scores to continuously
improve the profitability of your customers.
costs $50 to acquire (CPNC, or Cost per New Customer), and their
lifetime value is $60, then the customer is judged to be profitable,
and acquisition of additional similar customers is acceptable. For
this reason, the costs involved in the first purchase are typically
not included in LTV, but rather, in the Cost per New Customer
calculation.
UNIT 9: CRM Measurement Implementation
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Customer Equity is the Net Present Value of a customer from the
Make a summarized report on
___________________
perspective of a supplier. It can – and should – also include customer equity.
customer goodwill that is normally not expressed in financial ___________________
terms, e.g. a customer’s level of loyalty and advocacy. The concept ___________________
of customer equity, which unifies customer value management,
___________________
brand management, and relationship/retention management, has
recently emerged from the work of Professors Roland Rust (Univ. ___________________
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of Maryland), Valarie Zeithaml (Univ. of North Carolina) and Kay ___________________
Lemon (Boston College). They view customer equity as the basis ___________________
for a new strategic framework from which to build more powerful,
___________________
customer-centered marketing programs that are financially
accountable and measurable. ___________________
S
___________________ advertising expenditure to the dollar improvement allows the
company to calculate its return on the advertising investment.
___________________
___________________ The customer equity model provides a basis for projecting the ROI
of any strategic investment that improves customer equity whether
___________________
as a function of value, brand or retention equity. It provides a
___________________ catalyst for companies to become truly customer-centric and to
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___________________ make marketing programs more successful and accountable. It’s a
mystery to us why managers seem to spend millions of dollars on
___________________
marketing programs without knowing if their investment produces
___________________
a fair return. One possible explanation, however, is that managers
___________________ simply do not know how to project the return on investment for
___________________ their marketing programs. They have lacked a basic model that
links marketing actions with customer spending actions, and
instead use intuition to make decisions. The customer equity model
has the potential to forge that missing link.
Summary
How companies build and deploy a CRM measurement framework
depends on the planning horizon under consideration, the market
volatility, the company’s overall strategic posture and goals, and
how much of the organization and customer base is impacted by
the CRM solutions considered. In addition, how customer
knowledge is created and utilized for benefit is under continual
debate with different points of view. This unit reviews the key
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Prepare a PowerPoint presentation on the CRM measurement
___________________
implementation.
___________________
Keywords ___________________
___________________
Balanced Scorecard: It is a strategic planning and management
system that is used extensively in business and industry, ___________________
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government, and non-profit organizations worldwide to align ___________________
business activities to the vision and strategy of the organization,
___________________
improve internal and external communications, and monitor
organization performance against strategic goals. ___________________
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Further Readings
Notes
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___________________ Books
___________________ Mohammed H. Peeru and A Sagadevan, Customer Relationship
___________________
Management, Vikas Publishing House, 2004, Delhi.
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William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
___________________
Customer Relationships Management, Wiley, 2003.
___________________
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
___________________
Mining Applications, 2004.
___________________
CGI Group Inc. White Paper, Building Competitive Advantages
___________________ through Customer Relationship Management, January 2001.
Anderson, Paul and Art Rosenberg, The Executive’s Guide to
Customer Relationship Management, Doyle Publishing Company,
Houston, 2000.
Web Readings
en.wikipedia.org/wiki/Customer_relationship_management
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searchcrm.techtarget.com/definition/CRM
finance.yahoo.com/q?s=CRM - United States
www.impelcrm.in
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
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UNIT 10: Case Studies
Unit 10
119
Notes
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Case Studies
___________________
___________________
___________________
Objectives
___________________
After analyzing these cases, the student will have an appreciation of the
concept of topics studied in this Block. ___________________
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___________________
Case Study 1: The Integrated Air Express Industry
___________________
James Goh
___________________
This paper presents the views of the Conference of Asia Pacific
Express Carriers (CAPEC) on: ___________________
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integrated air express industry and will continue to do so, a
___________________ reality which some of the sunset industries still have not come to
grips with.
___________________
The Integrated Air Express Industry
___________________
For those who are not familiar with the integrated air express
___________________ industry, a brief history may be interesting. From its humble
origin in the late 1960s as the international air courier industry,
___________________ the integrated air express business has evolved into competing
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with the traditional airfreight forwarders and, in some countries,
___________________
even directly with the local postal authorities. Integrated air
___________________ express carriers, unlike the traditional airfreight forwarders, offer
door-to-door pickup and delivery, cross-border transportation,
___________________ customs clearance, and delivery service to the entire spectrum of
the commercial world and for almost any commodity.
___________________
Because speed, reliability, and value-added service are the
___________________ hallmarks of an integrated air express carrier, there are size and
value restrictions which vary from country to country. But
generally, the integrated air express industry deals with the
business requirements of the global market and its economic
changes, within the permissible limits of regulatory. The
Integrated Air Express Industry provisions, especially those of
customs. The bulk of what we carry is still lightweight, a mix of
documents and low-value merchandise. However, with the rapid
change in the global market and with economic development, we
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are beginning to see that size, value, and commodity have also
changed to reflect heavier weights with higher value.
How large the market for cross-border integrated air express
business is anybody’s guess. However, the combined revenue of
the four founding members of CAPEC alone was in excess of US$
60 billion in 1998—300 million in units handled and 1.5 million
tons in volume. And annual growth, in volume terms, is 20–45
percent, varying from country to country, a staggering quantity as
far as customs is concerned.
The integrated air express business today is at takeoff time. The
world has become smaller. Time and management techniques
have become a key competitive edge for global customers.
Delivery information has become as important as the delivery of
the goods itself. Players in the industry are grappling with the
challenge to provide product homogeneity and service flexibility
across national and cultural boundaries. And the traditional
segregation of the air transport industry between postal, air
courier, and airfreight forwarders has lost its relevance. For
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UNIT 10: Case Studies
121
Inability of customs to accept and manage change and quickly
adapt procedures to keep up with economic change and Notes
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technological development; and
___________________
Lack of understanding of the integrated air express business.
___________________
The results were:
Frequent, time-consuming, and costly delays at customs and ___________________
ports of entry (for example, consignments could lie in customs
___________________
longer than it took to transport them from one country to
another); ___________________
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High demurrage charges; and
___________________
Costly downtime if plans were late, tenders missed deadlines,
or replacement parts were not available. ___________________
122
In keeping with the demands of the fast-changing global market,
Notes the integrated air express industry needs:
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___________________ Pre-clearance of high- and low-value goods;
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___________________ Sixty minutes’ customs clearance times upon flight arrival
___________________ All that said, it must be emphasized strongly that global trade
facilitation need not be at the expense of customs enforcement
___________________ responsibilities. On the contrary, a strong strategic partnership
between customs administrations and the integrated air express
___________________
industry could further enhance enforcement.
___________________ Managing Risk
Effective risk management is as important to the integrated air
express industry as it is to all customs administrations, and
weighs very heavily in the international operations of the
integrated air express industry, especially in the last couple of
years. Just as customs administrations around the world are
doing their best to manage risk effectively, the integrated air
express industry is trying its very best to manage effectively the
same set of risks.
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I would like to highlight some of the challenges faced by the
integrated air express industry in the management of risk. I
sincerely hope that our common desire to manage risk more
effectively will bring us closer together, with increasingly aligned
objectives to help further our economic growth and development.
Training. CAPEC member companies are spending a big
chunk of our profits to train and upgrade the skills of our
people. This is continuous, as we want our people to be highly
trained and effective in meeting the challenges and changes of
the new global market.
International operating procedures. All our CAPEC member
companies follow high-quality international operating
procedures, very much aligned to world standards. We
continue to keep ourselves updated to keep up with the
demands of the new global market and the changes that have
been forced upon us by rapid economic growth and
development. We are very proud that all our CAPEC member
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UNIT 10: Case Studies
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control of the transportation cycle has many business
objectives aligned to it, of paramount importance is ___________________
minimizing risk.
___________________
Leveraging electronic commerce and the use of information
technology. Along with our investments in a dedicated air ___________________
transportation network, all our CAPEC member companies
are also investing millions of dollars in the development of ___________________
information technology. The new global market, and its very
___________________
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rapid economic growth and development, presents us with
tremendous opportunities for the use of technology in a ___________________
number of important areas:
___________________
Risk management, by providing good and reliable
databases for risk analysis and targeting; ___________________
Faster and possibly more effective global business ___________________
processes;
Efficient recordkeeping; ___________________
124
Support and man-dedicated air-express airport facilities;
Notes
S
Memorandums of Understanding to build trust; and
___________________
Risk management.
___________________ These are but some of the trends noted in our work with both the
WCO and customs administrations within APEC. In general,
___________________
CAPEC hopes that all customs administrations will follow these
___________________ trends. In making these suggestions, CAPEC is in no way
belittling the need for customs to retain control at the border.
___________________ Rather, we wish to assist customs in this undertaking by:
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___________________ Reconciling our need for simplicity with customs need for
information and regulatory integrity;
___________________
Recognizing the sophistication of smugglers and cooperating
___________________ to help curb illicit activities;
Recognizing country imperatives and differences in the
___________________
setting of customs’ mission; and
___________________ Fostering close working relations with the WCO and its
individual member customs administrations.
We have a unique opportunity to move forward with customs. In
conclusion, this opportunity can be summed up as follows:
Customs administrations and integrated air express carriers
are closely linked.
Both want to facilitate trade.
Both are leveraging the use of technology.
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There is a unique opportunity to provide overnight delivery
capability to support rapid economic growth, and customs and
the integrated air express industry can play a substantial role
in helping to make this happen.
Customs and the integrated air express industry have shared
risks and shared responsibility for managing risk.
A forum is needed for CAPEC to interact with WCO and its
member customs administrations to help facilitate change.
Together, we are in a position to take this strategic partnership a
step further. Naturally, allowances would need to be made for
country differences, but a regional charter for the integrated air
express industry and customs could help enhance regional growth
and economic interrelations for the common economic interest.
Questions:
1. Analyze the case and interpret it.
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Source: http://www.adb.org/Documents/Conference/Simplifications_of_Customs/part3.pdf
UNIT 10: Case Studies
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Robert Richardson
___________________
“On behalf of the 260 member air carriers of the International Air
Transport Association (IATA), I would like to focus on a few ___________________
critical issues of concern to the aviation community. For each of
the points discussed below, the industry believes that there are ___________________
reasonable solutions, many of which have already been
___________________
implemented by forward thinking states. In some instances, these
solutions have required changes in national legislation. In others, ___________________
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the solutions have been the result of simple modifications in the
way processes are carried out. However, in every case, the ___________________
solutions have required a greater level of cooperation and trust
between governments and the trade, as well as a shared vision of ___________________
what changes were necessary and how they could best be ___________________
implemented.”
___________________
Introduction
Aviation carries but a small percentage of the total goods ___________________
transported over international borders—only about 1 percent of
movements (net value). That number might initially sound less
than impressive and rather unimportant compared with the
amount of goods carried by other modes of transportation. But it
is the nature of the goods moved by air that makes our industry
so vital to shippers, manufacturers, and even the states for which
those goods are ultimately destined.
Compared with other modes of transport, such as shipping and
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rail, the air industry carries a significantly higher percentage of
high-value and time-critical consignments.
Shippers, and their customers, depend on the speed inherent in
aviation to meet the needs posed by just-in-time inventory
controls, perishable-product movements, and critical-parts
replacement, to name just a few.
Unfortunately, this benefit on which shippers and their customers
depend for their economic well-being is often lost because of
inefficient clearance of goods for release to home use. In too many
cases today, in countries all around the globe, consignments
arriving at their final destination take longer to be released from
customs than the total time spent getting there.
Here we will discuss the main rules and practices that govern the
air transport sector. While these vary from state to state, they can
be distilled down to their basic components for quick presentation.
When moving goods, the air transport sector must:
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documents for varying lengths of time after the goods have been
___________________ moved. Needless to say, this is not an efficient or labor-friendly
process. And it is made worse by the fact that a set of documents
___________________
created for one phase in the process often does not satisfy the
___________________ requirements of subsequent phases, resulting in the need for even
more documents.
___________________
This process is repeated thousands of times each day, and is not
___________________ limited only to movements by air. It is the same process relied
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upon by governments since the days of the sailing ships. It was
___________________ slow and manpower-intensive then, and in today’s environment of
instant electronic communication and ever-shorter delivery
___________________
deadlines, paper-based data exchange and inspection processes
___________________ that do not rely upon risk assessment and selectivity criteria can
bring the cargo industry to its knees.
___________________
The past 30 years have given rise to remarkable developments in
___________________ the aviation industry, the business community, and in the way
states view themselves and the world around them. The world has
changed in so many ways. New opportunities are being discovered
almost daily. Regrettably, however, the methods of moving goods
across international borders have failed to keep pace. What has
always been is not necessarily how things should be today, or in
the future.
It is time that governments and the trade, with an eye to the
needs of the future, undertake the necessary task of reviewing
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existing policies and practices and seek to implement new
methods, using new technologies which will truly facilitate trade,
while at the same time protecting national interests. Specifically,
the air transport sector must act to realize the following
achievable goals.
Paperless Transaction Processing
As described earlier, air carriers today must gather great
quantities of data from shippers, often in electronic format, copy
the data manually onto paper documents, attempt to verify their
accuracy, and then transmit the information to the proper
authorities. The authorities, on the other hand, often do the same
thing in reverse. The entire process is plagued by unavoidable
errors in data input, duplication of effort, waste of critical human
resources for carrier and customs alike, and unnecessary costs for
everyone.
A solution exists and its framework has been developed to realize
the goal of making paperless transactions the norm instead of the
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reduce the time governments need to develop their capability in
this critical area. Many governments have made these choices, ___________________
resulting, we believe, in significant cost reductions for themselves,
the airlines, and the shippers, by making paper-based processes ___________________
less inefficient. Manpower, so scarce in today’s environment of
___________________
shrinking budgets, has been redirected to productive activities
such as enhanced customer service for the industry and ___________________
strengthened enforcement by governments.
___________________
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Harmonized Information Requirements
One of the most difficult and costly aspects of cargo movements is ___________________
the lack of standardization in the data requirements imposed by ___________________
different countries for the movement of goods. Differing
requirements generally require creating separate documents to ___________________
satisfy export and import controls. Additional documentation is
often required to transfer goods at intermediate points. One might ___________________
think that the emergence of trading blocs of nations, such as the
___________________
European Union or NAFTA, would have resulted in harmonized
requirements and a reduction in required documentation, but that
has not been the case. Systems developed within these economic-
based groups continue to be essentially incompatible with one
another because of their varied data elements and formatting
requirements.
The industry believes that these variations in data requirements
increase the risk of errors in data collection and transmission,
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delaying clearance and creating unwarranted financial liability.
Divergent requirements also keep us from exploring ways of
processing outbound and inbound clearances with a single ling.
Obviously, under such systems, trade efficiency is curtailed,
resulting in:
Greater processing demands on shippers, carriers, and
customs
Reduced performance in clearance of goods
Incremental cost increases for all
Pre-arrival Processes or Expedited Clearance upon
Arrival
Lastly, but possibly most critical in any effort to improve trade
efficiency, the industry seeks support for processes that will allow
governments to screen consignments en route, and through risk
assessment and selectivity, expedite the release of low-risk goods
forwarded by known shippers upon arrival.
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For this ultimate goal to be realized, the first two points I have
raised today will, by necessity, have to be adopted. The benefits of
such a program are immediately apparent. By utilizing
technological advances, governments would be able to screen
consignments in advance of arrival and focus their dwindling
inspection resources on those that pose a real threat. The great
majority of goods, as much as 99 percent in some countries, could
be released for home use with minimum formalities, subject, of
course, to periodic, unscheduled checks.
Contd…
Customer Relationship Management
128
Various methods that can expedite the clearance of goods already
Notes exist. Electronic commerce programs can support post-release
S
payment of taxes and duties, which often slows the release of
___________________
goods cleared in the existing manner. Precedents exist for such
___________________ schemes. They are based on the shippers’ performance and entail
adequate financial guarantees and a reliable post-clearance audit
___________________ procedure.
___________________ To further facilitate trade, governments should consider adopting
procedures that would allow release documents to be led
___________________ electronically from locations other than the airport of importation.
PE
Such remote ling procedures would enable shippers and carriers
___________________
to concentrate their cargo documentation experts in national or
___________________ regional centres, and would likely result in increased data
accuracy, reduced costs, and improved service.
___________________
Questions:
___________________ 1. Analyze the case and interpret it.
___________________ 2. Write down the case facts.
Source: http://www.adb.org/Documents/Conference/Simplifications_of_Customs/part3.pdf
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UNIT 11: Customer Loyalty
129
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
BLOCK-III
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Detailed Contents Customer Relationship Management
130
Notes
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UNIT 11: CUSTOMER LOYALTY
___________________ UNIT 13: IMPACT OF RETENTION
z Introduction z Introduction
___________________
z Customer Loyalty z Perceptual Gaps and Retention
___________________
z Relationship Commitment z Meeting Customer Needs and its Impact on
___________________
Retention
z Factors affecting Customer Loyalty
___________________ Customer Satisfaction and Retention
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z
z Attitudinal and Behavioural Components of
___________________
Loyalty z Relationship through Loyalty
Unit 11
131
Notes
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Customer Loyalty
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
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\ Customer loyalty ___________________
\ Relationship commitment ___________________
\ Factors affecting Customer Loyalty
___________________
\ Attitudinal and Behavioural Components of Loyalty
___________________
\ Factors that may Lessen Customer Loyalty
___________________
Introduction
The term customer loyalty refers to a customer’s commitment or
attachment to a brand, store, manufacturer, service provider, or
other entity based on favourable attitudes and behavioural
responses, such as repeat purchases. Two basic perspectives of
loyalty describe brand loyalty as behaviour toward the product and
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customer loyalty as an attitude, or predisposition to behave. The
unwavering positive attitude towards the Cubs baseball team in
the opening example reflects a high degree of customer loyalty.
Customer Loyalty
Building customer loyalty is the basic platform of relationship
formation. In a highly competitive and challenging business
environment, organisations are really blessed if they are fortunate
to have loyal customers in their customer inventory. With the
backup of loyal customers, the organisation could enjoy a number
of advantages. In short, having loyal customers will serve as a
sustainable competitive edge to the organisation concerned in the
present day context. Therefore, organisations should keep
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S
Write an article on customer
___________________ development, following TQM (Total Quality Management),
loyalty and brand loyalty as
behaviour. implementing CRM systems, and also, working out Pipeline
___________________
Management tactics.
___________________
A customer loyalty program is based on a simple premise: as a
___________________
company develops stronger relationships with their best
___________________ customers, those customers will stay with the company longer and
PE
___________________ become more profitable.
___________________
Brand Loyalty as Behaviour
___________________
Early academic research investigated the purchase behaviour of
___________________ customers to identify and measure brand loyalty. This behavioural
___________________ brand loyalty approach explored how consistent customers were in
repurchasing brands. If the customer bought Heinz brand ketchup
every time he or she went to the store, the customer was said to be
brand loyal.
Behavioural brand loyalty is measured by the proportion of
purchase the number of times the most frequently purchased
brand is purchased, divided by the total number of times the
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product category is purchased. While it is possible for a customer
to demonstrate undivided loyalty by purchasing a brand of a
product 100 percent of the time, the behavioural view recognizes
that this is not always the case. Researchers view a brand loyalty
continuum and classify customers from complete undivided loyalty
to complete brand indifference. Customers can also be classified
into different categories based on the sequence of their brand
switching. Figure 11.1 shows five types of behaviour towards the
purchase of brands.
S
loyal to more than one brand. For example, many customers use Make a brief report on brand
___________________
loyalty as a customer’s
more than one shampoo on a regular basis and switch back and
attitude.
___________________
forth between two or three favourites. The behavioural pattern of
indifference represents the customer who see no distinction between ___________________
brands or who could not care less which brand is purchased. ___________________
The term churn rate indicates the rate at which new customers try ___________________
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a product or service and then stop using it. Often it refers to a ___________________
given time rate such as the yearly churn rate. CRM systems may
___________________
allow mathematical model builders with databases containing
extensive purchase histories to use proportion of purchases, ___________________
sequence of purchase, and most recent purchase to predict the ___________________
probability of a consumer purchasing one brand over alternative
___________________
choices. Point of Sale (POS) systems are designed to provide such
inputs for the data warehouse.
S
___________________ brand. An attitude implies a predisposition to purchase suggesting
that an emotional attachment exists. The emotional component of
___________________
loyalty may be most difficult to capture within the data warehouse
___________________
of the organization. When used together, attitude, loyalty, and
___________________ behaviour provide a framework for thinking about customer loyalty
___________________ that would differentiate no loyalty from latent loyalty and inertia.
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___________________ Customers who fail in the no loyalty category have a weak
attitude; the non-loyal customers view all companies or all brands
___________________
in a product category to be similar. Often, price consciousness is
___________________
associated with the lack of loyalty where people will purchase
___________________ whichever brand is on sale. Marketing efforts directed at these
___________________ customers may cost more than they are worth.
Inertial loyalty has also been called spurious loyalty to indicate
that behaviour appears to be “bogus” because there is no strong
attitudinal influence. These customers may exhibit inertia because
they have low-involvement with what they perceive to be
undifferentiated companies, stores, or brands. The behaviour of
these customers can be driven by habit. “My mother used Tide and
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I’ve always used it”. With latent loyalty, customers have strong
attitudes, but repeat purchase is low. Situational factors, such as
preferences of joint-decision makers have a stronger influence than
attitudinal factors. When a teenage girl uses parent’s credit card to
buy a high priced, prestigious perfume, she may be very satisfied
and hold strong positive attitudes. However, when her parents
learn of her behaviour, they may voice their disapproval. Thus, the
social norm about “obeying one’s parents” creates a latent loyalty.
The implied goal is to define loyalty by describing behavioural
patterns that result from attitudinal predispositions that are
modified by situations over time. Customers who exhibit inertia
may be more costly to encourage to switch to a new provider than
are those with no loyalty or behavioural pattern.
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S
Loyal customers high in repeat purchase behaviour and strong in Prepare a draft of an
___________________
attitude are theoretically the most desirable customers. Not only assignment on relationship
commitment.
do they purchase a large amount of the product but they may also ___________________
advocate the product to others. They may enjoy sharing their ___________________
knowledge and experiences with friends and family. Customers of
___________________
Miracle Grow may faithfully tell fellow gardeners and neighbours
how the plant food has made their flowers fast growing and ___________________
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beautiful. ___________________
S
Make a list with examples of
the___________________
factors affecting customer
loyalty. Check Your Progress
___________________
Fill in the blanks:
___________________
1. .................. is measured by the proportion of purchase
___________________
the number of times the most frequently purchased
___________________ brand is purchased, divided by the total number of
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___________________ times the product category is purchased.
___________________ 2. .................. is a post-purchase or post-choice evaluation
___________________ that results from a comparison between those pre-
purchase expectations and actual performance.
___________________
___________________
Factors affecting Customer Loyalty
Since every marketer wants customers, a logical question to ask is
“what affects customer loyalty”. The factors that affect the
customer loyalty are:
z Customer satisfaction
z Emotional bonding
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z Trust
z Choice reduction and habit
z History with the company
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137
Customer Satisfaction
Notes
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People develop belief about what they expect to happen before they
___________________
make a choice. Customer satisfaction is a post-purchase or post-
___________________
choice evaluation that results from a comparison between those
pre-purchase expectations and actual performance. Fulfilment of ___________________
an expectation is confirmation. If there is a disconfirmation ___________________
expectations are not met. Dissatisfied customers may complain,
___________________
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choose never to purchase the transactional experience is thus seen
to result in confirmation or disconfirmation yet for most ___________________
S
___________________ an experience because they get less and less satisfaction from the
old one. A third explanation is that new information changes
___________________
customer expectations about a previously untried offering.
___________________
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___________________ have a positive brand affect, which is an affinity with the brand, or
they have a company attachment, which means they like the
___________________
company. In many circumstances, consumers may identify with
___________________
and become emotionally attached to mental images that a company
___________________ or a brand develops or acquires. For example, many customers
___________________ identify with Polo Ralph Lauren. They identify with the brand
because the brand identifies them and their friends. From a
consumer’s perspective the brand equity associated with Polo leads
to customer loyalty. Brand equity is the value of the brand name
associated with a product or service that goes beyond the
functional aspect alone. For example, many customers feel a
closeness with other people who also use the good or service.
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Some companies know how to connect emotionally with their
customers while others have more difficulty in accomplishing this
level of commitment. CRM must reach beyond the idea of the
rational consumer and strive to establish feeling of closeness,
affection, and trust as true emotional bonding is often based on
trust and respect.
interactions are critical actions that build trust and that may be
short-changed as efforts increase to reduce labour costs by
developing strong IT linkages.
Trust
Thrust the third component of the model, is interrelated with
emotional bonding. Trust exist when one party has confidence that
UNIT 11: Customer Loyalty
he or she can rely on the other exchange partner. Trust can be 139
defined as the willingness of the customer to rely on the Notes
S
organization or brand to perform its stated function. Trust reduces ___________________
uncertainty/risk and is viewed as a carefully thought out process,
___________________
whereas brand affect may be an instantaneous response. In many
situations, trust means a customer believes that the marketer is ___________________
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representative is honest, fair and responsible and that his or her
___________________
word can be relied on. If a delivery date is given the buyer has
confidence that the product will be shipped on time. When there is ___________________
trust in a relationship, all partners believe that none will act ___________________
opportunistically. Marketers, especially the marketers of services,
___________________
establish trust by maintaining open and honest communication
and by keeping the promises they make. ___________________
performance risk or social risk. The customer may think the new
brand will not perform as well as the current brand. The customer
may believe his/her friends will not like the new brand as well.
S
Prepare a summarized report
___________________ image. A positive corporate image – the perception of the
on the attitudinal and
behavioural components of organization as a whole – can have a favourable impact on
___________________
loyalty. customer loyalty, creating habitual responses to the company
___________________
name itself. Wal-Mart, for example, is known for everyday low
___________________ prices while another department store, such as Nordstrom, may be
___________________ known for excellent customer service. Thus, perceptions of the
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company’s historical image can impact customer intentions, loyalty
___________________
and likelihood of buying. The CRM system, however, is usually
___________________ more focused on a customer’s actual purchasing history.
___________________
In many situations, people have a long history with a company.
___________________ There may even be intergenerational influences, i.e. within-family
___________________ transmission of information, beliefs, and resources from one
generation to the next. For example, a customer who, as a child,
saw his or her parents consistently purchases Ford cars might be
expected to accept the parent’s history of suing the brand and
remain loyal to Ford vehicles.
A customer’s initial or regular experience with a product may be
quite positive. Consider a long-time customer of North-western
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Mutual Life Insurance. The customer receives a letter that
explains the company is now giving a superior underwriting price
to non-smokers. The company is not limiting the better pricing to
new customers but will provide it, retroactively, to all
policyholders. The price of the customer’s policy, therefore, is
decreasing with no effort on the customer’s part. This positive
customer experience or unexpected delight is bound to contribute
to consumer loyalty.
Service experience is an important part of a consumer’s history
with a company. A customer who calls the Butterball Turkey
hotline on Thanksgiving Day with a problem and talks to a
customer service representative who patiently listens to the
problem may be eternally grateful to the company. Companies that
create a mutually beneficial dialog to learn what the customer
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habit including perceptions of risk and the history with the 141
organization, contribute to behavioural loyalty. Attitudinal and Notes
S
behavioural loyalty combines to then affect the degree of customer ___________________
commitment and loyalty to products and organizations.
___________________
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understanding the bases of customer loyalty in online
___________________
environments, as well as toward different facets of the
organization or its product. Loyalty is multi-faceted and more than ___________________
a repetition of a behaviour. Table 11.1 shows customers can exhibit ___________________
loyalty to price, brand, company, other customers, a place, or any
___________________
number of other potential options.
___________________
Consider the cell phone. Some customers are loyal to the product
itself. Such people know about different brands, plans, and the
relative costs of each. Others who are not loyal to cell phones seem
to be bewildered by the many plan options and ambivalent to
alternative providers. But when people do express loyalty toward a
certain brand of cell phone, then the company should reinforce its
complementary, or flanker, products such as cell phone covers or
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hands-off connectors.
142
Check Your Progress
Notes
Activity
S
Make a draft of the various Fill in the blanks
___________________
factors that may lessen
customer loyalty.
___________________
1. .................. exist when one party has confidence that he
or she can rely on the other exchange partner.
___________________
2. .................. is multi-faceted and more than a repetition
___________________
of a behaviour.
___________________
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___________________ Factors that may Lessen Customer Loyalty
___________________
If customers perceive that a company has a deficiency in any of the
___________________ factors that positively contribute to customer loyalty, they may be
___________________ less loyal. There are other factors that tend to lessen loyalty as
well.
___________________
Competitive Parity
When the offerings of different organizations are not
differentiated, competitive parity exists. If customers perceive that
brands are identical, perceived risk is low and there is a greater
tendency for brand switching as the likelihood of loyalty toward
the product declines.
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Variety-seeking Behaviour
People who become bored and have a need for variety may engage
in variety-seeking behaviour. People may simply want a new
experience because of the declining benefits associated with repeat
patronage or because they feel energized by the prospect of having
a new experience. Organizations can benefit from variety seeking
behaviour by satisfying the need and creating flanker brands, new
flavours, or other extensions of the basic products.
Low Involvement
A low level of personal relevance or perceived importance of a
product or service to the individual is referred to simply as low
involvement. Low involvement consumers often engage in
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S
receptivity to sales promotion incentives can also be used by ___________________
organizations if they can provide the low cost options.
___________________
If a brand or company has a low share of voice, that is, if a brand’s
___________________
store’s or company’s relative promotional expenditure are low,
customer loyalty may decline. Customers may not know to interact ___________________
with the organization any may not get a clear picture of the ___________________
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community of customers or the target base. ___________________
relationship. ___________________
Summary
There are two basic perspectives on brand loyalty, the behavioural
approach and the attitudinal approach. The behavioural approach
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to brand loyalty investigates how consistent consumers are in their
repurchase if a brand. The attitudinal approach to brand loyalty
considers beliefs, emotional responses, and intensions that from a
predisposition toward the brand that is expressed over time.
The term customer loyalty refers to a customer’s commitment or
attachment to a brand, store, manufacturer, service provider, or
other entity based on favourable attitudes and behavioural
responses, such as repeat purchases.
Keywords
Brand Equity: Brand equity is the value a brand adds to the
product.
Customer Loyalty: Building customer loyalty is the basic
platform of relationship formation.
Customer Relationship Management
144
Attitudinal Brand Loyalty: The attitudinal brand loyalty
Notes
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approach takes the view that loyalty involves mush more than
___________________
repeat purchase behaviour.
___________________
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___________________
3. How does a company develop customer trust?
___________________
4. Explain different types of customer loyalty.
___________________
Web Readings
en.wikipedia.org/wiki/Customer_relationship_management
searchcrm.techtarget.com/definition/CRM
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Unit 12
145
Notes
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Customer Retention
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
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\ Customer Acquisition ___________________
\ Nature and Significance of Customer Retention ___________________
\ Stages of Retention in the Customer Life Cycle
___________________
\ Sequences in Retention Process
___________________
\ Attrition: The Negative Signal of Retention
\ Handling Complaints to Improve Retention ___________________
Introduction
Under the present context of competitive environment, the focus of
the organizations is more on customer retention than simply on
customer acquisition. Customer retention is the process of keeping
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customers in the customer inventory for an unending period by
meeting the needs and exceeding the expectations of those
customers. It is the approach of converting a casual customer into
a committed loyal customer.
Acquisition is a vital stage in building customer relationship.
Certain key issues connected with customer acquisition are dealt
here.
Customer Acquisition
Following are some of the requisites essential for an organisation
to be effective in its acquisition efforts.
Focused Approach
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S
Write an article on customer
___________________ the acquisition process.
acquisition and its process.
___________________ The organisation should have a detailed database containing the
___________________ above classification of the market and related details, which would
help to make the approach of acquisition effective.
___________________
z It is necessary to develop and provide a win-win platform
___________________
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applicable to both the prospective customers and to the
___________________ organisation concerned. This would induce easy customer
___________________ acquisition because of the benefits the customers might
___________________
anticipate.
S
z Customers assume differing roles in various contexts, relating ___________________
to their purchase and consumption environment. Those roles ___________________
include: Initiator, Influencers, Decider, Buyer, and User, and
___________________
so on of the product or service. The efforts towards acquisition
are to be directed in tune with specific role the prospective ___________________
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gather those details in relation to who influences, decides, ___________________
buys, uses, and so on. At times, the same individual would be
___________________
playing all the roles. On occasions, different individuals in a
family or an organisation would play different roles. The ___________________
organisation attempting to acquire customers should have ___________________
total knowledge of these actors ad has to set its approach
___________________
accordingly.
148 The organisation should evolve its customer acquisition policy after
Notes considering the adoption process.
S
___________________
Focus on Prospective Customers
___________________
The options of prospective customers, in terms of various
___________________
components of marketing mix and other related aspects, deserve
___________________
serious attention. The organisation should devote attention to find
___________________ out the options available to customers in terms of product
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___________________ attributes, package, price, channel of distribution, promotion
measures, and so on. There should be regular research on these
___________________
lines, and based on the findings the offerings of the organisations
___________________ are to be tailored so as to match the specific options of the
___________________ prospective customers. This would help to enhance the acquisition
rate.
___________________
Process of Acquisition
Any company embarking on a programme to acquire the customer
should know the stages of consumer product acquisition process
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other things related to exchange, are settled at the exchange stage. 149
Further coordinated effort on either side would lead the customers Notes
S
moving to adoption of the product or service concerned, and that ___________________
completes the acquisition process.
___________________
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z Type of Buying: There are two different types of buying: one, ___________________
the rational and the other, emotional. Rational buying is a
___________________
more systematic buying influenced by reason and logic. On the
___________________
other hand, emotional buying (impulse buying) is influenced
by the emotions of the buyer. It is likely that a customer ___________________
involved in the rational buying would move from one stage to ___________________
another systematically, whereas in emotional buying he may
not do so.
z Type of Product: Acquisition also depends on the type of
product, whether it is convenient shopping of the specialty
product. Accordingly, the significance of each stage of the
acquisition process varies.
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z Type of Customers: Further, the significance depends on the
type of customer, whether the customer is an individual or an
organisation. In contrast to the individual buyer an
organisation may have its own procedure to adopt product, and
the process of acquisition might vary depending on the
organisation’s policy, culture, and the related aspects. Also
acquisition depends on whether the acquisition is a first time
exercise or a repeated one.
z Economic Environment: The economic and environmental
forces focus attention on the market conditions, the operations
of the competing forces, supply and demand conditions,
purchasing power etc. The acquisition process is likely to differ
under conditions of limited availability of a product, with
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150 and so on. The acquisition process is likely to differ as per the
Notes
Activity context of operation concerned.
S
Make a brief report on the
___________________
nature and significance of The above aspects explained have an impact on the acquisition
customer retention.
___________________ process. As such the organisation has to pay attention to these
___________________ aspects, by suitably managing its operations, which in turn leads
to acquisition of more and more customers.
___________________
PE
___________________ State True or False:
___________________ 1. The product adoption by different customers differs
___________________ depending on several connected factors.
151
z Experience shaper
Notes
S
z Winning edge
___________________
z Knowledge provider
___________________
z Spokesperson ___________________
z Driving force ___________________
z Caretaker ___________________
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z Resource provider ___________________
z Partner. ___________________
152
Further it is likely that retained customers may be less-price
Notes
Activity
S
Prepare a chart on the sensitive.
___________________
process of retention of
customers. Considering the above aspects, there appears to be more profit
___________________
potential for the organisation by way of customer retention.
___________________ Customer retention assumes significance in the light of the
___________________ following facts generally reported through revenue analysis of
various organizations, and as quoted by CRM experts Jay Curry
___________________
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and Adam Curry (2000) in their publication, ‘customer marketing
___________________ method’.
___________________
z Top 20 per cent of the customers deliver 80 per cent of the
___________________ revenue.
___________________ z Existing customers contribute up to 90 per cent of the revenue.
___________________ z Top 20 per cent of the customers deliver more then 100 per
cent of profits.
z The bulk of marketing benefit is often spent on people other
than customers.
z 5-30 per cent of all customers have the potential for moving
upward the loyalty ladder.
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z 2 per cent upward migration in the loyalty ladder means 10
per cent more revenue and 50 per cent more profits.
153
z During the acquisition, the focus is on acquiring relationships
Notes
S
whereas at the retention, it is on nurturing the relationship.
___________________
z At the acquisition the focus is on demographic, Psychographic
profiles of the customers, whereas at the retention process the ___________________
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by offer and incentives, at the retention process the customer
___________________
is driven by the type and extent of relationship maintained by
the organisation for furthering the relationship. ___________________
___________________
Stages of Retention in the Customer Life Cycle
The position of retention in the overall life cycle of customer
generally covers the following stages:
Acquisition is a stage in which customers are acquired for an
organization’s business. Customers so acquired would reach a state
of either satisfaction or dissatisfaction. While satisfaction leads to
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retention, dissatisfaction leads to the stage of attrition. A
satisfied customer who joins the retention stage might either
proceed towards loyalty stage or in the event of being dissatisfied
will join the attrition stage. The customer who joins the attrition
stage will proceed to the stage of defection, unless he is satisfied.
If he is satisfied, he would possibly join the retention process.
Those customers in the defection stage may be reacquired, by
means of appropriate marketing programmes designed and
implemented for the purpose of reacquisition. The details about
this are presented under the head “Recovery of Lapsed
Customers.”
The normally expected move of a customer in the customer
lifecycle varies from individual to individual. There are certainly
exceptions to the flow of actions exhibited. For example, even a
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S
With the help of internet, find
___________________
out more about attrition of Sequences in Retention Process
customers.
___________________
An organisation focusing attention on retention may adopt the
___________________
following sequence of actions:
___________________
z Exploring: This step focuses attention on exploring the type
___________________ of customers to be attracted or retention. The choice is based
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___________________ on value of customer’s volume of business as they bring in
regularity of purchase, profit margin and the like.
___________________
155
z Increase in the perceptual differences between customers and
Activity
Notes
S
organisations on various aspects relating to product, service,
Present a summarized report
etc. on
___________________
the methods and
procedures for handling
___________________
z Decrease in the number of active buyers. complaints to improve
retention.
___________________
z Decrease in the extent of interaction.
___________________
z Decrease in the flow of communication. Organisations must
develop an appropriate mechanism to capture, classify, and ___________________
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measure the attrition signals and suitably react to erode ___________________
attrition.
___________________
Complaint Inventory
The organisation must develop an appropriate complaint
inventory, and a proper system must be evolved to measure and
manage complaints that are registered or unregistered, expressed
Customer Relationship Management
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___________________ includes automatic response system, call centres, answer centres
etc. However, organisations should note that the human touch
___________________
involved in handling complaints will help a long way in retention
___________________
of customers.
___________________
Classification of Complaints
___________________
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Complaints may have different levels of impact on customer
___________________
retention. Complaints from this viewpoint may be classified into
___________________ four major heads, which are depicted in Table 12.1.
___________________
Table 12.1: Impacts of Complaints on Retention Process
___________________
Nature of Complaints Impact on Retention
___________________ Expressed and Resolved Customer Retention Chance is High
Expressed but not Resolved Move to the Attrition Stage
Not Expressed but Resolved Chance of Retention is Much Higher
Not Expressed and Not Resolved Customer Becoming a Defector is More
Summary
Customer retention is the key to any organisation’s effectiveness.
Customer centric approach to marketing programme helps retain
customers and win back lost customers. An organisation needs to
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study the needs of the various market segments and design the
marketing programmes tailor made to suit the segments.
Customer anticipates several things from the company in addition
to the product; which the firm has to study well to bridge the gaps
between customer expectations and firm’s delivery.
UNIT 12: Customer Retention
S
Visit any company selling consumer goods. Collect information
___________________
about the measures taken by the company to retain its customers
and the reasons for the attrition of the customers. ___________________
___________________
Keywords ___________________
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organization’s business. ___________________
Customer Retention: It enables the organization to minimize ___________________
expenses in terms of acquisition of new customers.
___________________
FUD: Fear, Uncertainty and Doubts.
___________________
___________________
Questions for Discussion
1. List the CRM decisions of a firm.
2. Examine the Stages of Retention in the Customer Life Cycle.
3. Discuss the challenges in planning and implementing effective
CRM.
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4. Explain the concept of Customer Acquisition.
5. Describe the nature and significance of customer retention.
6. Discuss the stages of retention in the customer life cycle.
7. Explain the sequences in retention process.
8. Write a short note on attrition: the negative signal of
retention.
Further Readings
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
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158
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Notes
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Mining Applications, 2004.
___________________
CGI Group Inc. White Paper, Building Competitive Advantages
___________________
through Customer Relationship Management, January 2001.
___________________
Anderson, Paul and Art Rosenberg, The Executive’s Guide to
___________________ Customer Relationship Management, Doyle Publishing Company,
___________________ Houston, 2000.
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___________________
Web Readings
___________________
en.wikipedia.org/wiki/Customer_relationship_management
___________________
searchcrm.techtarget.com/definition/CRM
___________________
finance.yahoo.com/q?s=CRM - United States
___________________
www.impelcrm.in
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
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UNIT 13: Impact of Retention
Unit 13
159
Notes
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Impact of Retention
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
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\ Perceptual Gaps and Retention ___________________
\ Meeting Customer Needs and its Impact on Retention ___________________
\ Customer Satisfaction and Retention
___________________
\ Relationship through Loyalty
___________________
\ Organisational Change to Match Retention Strategy
___________________
Introduction
For the purpose of customer acquisition an organisation is likely to
focus its attention on various types of customers that a firm come
across in its marketing arena and treat the same as its major
sources for providing input for acquisition: (i) suspects represent
the segment of the market and have the potential to become
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prospective customers; (ii) enquiries are casual wanderers and
proper responses to enquiries are likely to result in customer
acquisition; (iii) lapsed customer is any customer who has
purchased something to fulfil a specific need and has then stopped
buying from an organisation becomes a lapsed customer and he
should be encouraged to become a customer again, by marketing
the organisation’s new offerings to fulfil the customer’s emerging
new needs and so on; (iv) company’s former customers and
competitors’ former and lapsed customers can be acquired with
precise marketing and CRM programme; (v) referrals play a
significant role and provide a strong base for new customer
acquisition. It is likely that fresh customers will rely heavily on
referrals rather that the organisation’s own promotion efforts; and
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160 customer retention. The gaps are likely to take place in the
Notes following ways:
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Activity
___________________
Write an article on the z Perceptual
relationship of perceptual
___________________
gaps and customer retention.
z Promotional
___________________
z Procedural
___________________
z Positional
___________________
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Further, the above can be detailed as:
___________________
z Gap between what the business thinks a customer wants and
___________________
what the customer actually wants.
___________________
z Gap between what the business thinks a customer has bought
___________________
and what the customer has perceived that he has received.
___________________
z Gap between what the business provides and what the
customer actually received.
z Gap between expected service and delivered service.
z Gap between marketing promises and actual delivery.
z Gap between what organisations perceive as suitable method
of distribution and what customers receive.
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z Gap between what the organisation perceives in its positional
strategy and what is reached to the customers.
z Gap between what is communicated by the organisation and
what is understood by the customers.
Wider the gap between the organisations providing the service of
product and the user, lesser is the rate of retention. Organisations
are expected to audit their marketing-related issues on regular
basis and initiate corrective measures to bridge the gap with
regard to understanding customer needs and meeting those needs
effectively.
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focus attention on meeting the needs of the customers. Unmet ___________________
needs of customers drive them from retention towards attrition.
___________________
Needs may be classified under three heads namely: (i) Basic needs,
___________________
which are the basic minimum requirements expected from out of a
product. Fulfilment of this would keep the customers in the stage ___________________
of “just satisfied”; (ii) Articulated needs, these needs are something ___________________
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more than the minimum basic expectations from the product. ___________________
Fulfilment of these needs would give the customers “more
___________________
satisfaction” as compared to the previous level. The customer
would want to fulfil this need in search of value for the money he ___________________
spends; and (iii) Exciting needs, Under this category of need the ___________________
customer wants to fulfil more than his level of expectation, in
___________________
terms of the above two categories.
An organisation focusing on retention has to carefully move from
fulfilling one category of need to the next category of need. If
certain conditions such as very less or no competition, limited
purchasing power, etc., prevail, even fulfilling the basic need would
be more than sufficient to retain customers, whereas under
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conditions of unlimited brand choice and the target customers
having fairly good amount of discretionary income at their
disposal, etc., fulfilment of mere basic needs would not be sufficient
to have customer retention. The organisation should pay attention
to the profile of the target market segment, its changing needs and
make efforts for fulfilling the same, and this would yield better
results in customer retention.
Further, in the process of need fulfilment the customers can be
placed in any of the following divisions:
(a) A customer who has a specific need and that has been fulfilled.
(b) A customer who has a specific need and that has not been
fulfilled.
(c) A customer who does not prefer a need to be fulfilled (at least
(c
162 Cases (c) and (d) are open either for attrition or defection. The
Notes organisation must pay careful attention to the above divisions of
S
___________________ customers and initiate appropriate action to prevent attrition and
provoke retention. The process of managing needs is a most
___________________
significant and challenging aspect as far as retention is concerned.
___________________
This is particularly so in the context of needs that are constantly
___________________ changing and the changes are never ending too.
___________________
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Changing Conditions and Needs
___________________
From the context of changes that are taking place in nature of
___________________ needs, the needs can be classified into several categories. For
___________________ example:
___________________
Based on life status (a) Life-maintaining needs
___________________
(b) Life-enhancing needs
z
conditions to codify the needs.
z Condensing is a further step which focuses on evaluation of
the needs and fits those into the total product concept. This
process is unending and has to be repeated, which is indicated
by the stage of continuity. This process would enable the
UNIT 13: Impact of Retention
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Present an assignment on the
___________________
Check Your Progress relationship between
customer satisfaction and
___________________
Fill in the blanks: retention.
___________________
1. The gaps between product or service providers and
___________________
users must be identified and bridged, which in turn
would lead to a high degree of ................... ___________________
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2. Needs may be classified under three heads namely: ..., ___________________
and................... ___________________
___________________
Customer Satisfaction and Retention ___________________
Satisfaction is a state of mind that occurs when the customer feels ___________________
that his expected requirement is fulfilled by what is offered by the
organisation. The ultimate satisfaction a customer aims for has
four major components, namely:
Product Satisfaction
It covers the tangible core benefits provided by the product. It is
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related to the basic minimum function expected to be performed by
the product.
Peripheral Satisfaction
It is in addition to the core benefit. It adds value to the core
benefits expected. Peripheral satisfaction helps the customer to
enhance his desire for personal attention.
Ambience Satisfaction
It is a blend of tangible and intangible factors which the customer
experiences, in the purchase and consumption process. The
tangible aspects of ambience satisfaction include appearance of
sales point, services available, competitive pricing, and the like.
The intangible aspects include the courtesy extended by sales
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Psychic Satisfaction
It is related to the satisfaction extended in tune with the
individuality of the customer concerned. It depends more on the
personality traits of the customer. A talkative customer would be
Customer Relationship Management
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___________________ expressed doubts are clarified. Psychic satisfaction provides the
customer an arena to educe his anxieties and fear with respect to
___________________
the purchase and use of as product.
___________________
Each one of the above components of satisfaction contributes
___________________
towards total satisfaction, which has direct linkage to customer
___________________ retention. Therefore, it is imperative that the organisation has to
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___________________ carefully monitor the level of satisfaction that their customers are
enjoying, and initiate measures to enhance the level of satisfaction.
___________________
Of course, it should be done on a continuous basis.
___________________
Though there appears to be a direct correlation between
___________________
satisfaction and retention the condition cannot be taken for
___________________ granted by any organisation, because even a satisfied customer can
join the attrition process, when he changes his expectation in
terms of the various components of satisfaction as discussed above.
The levels of satisfaction a customer normally expects can be
booked under any one of the following categories:
1. Expected Satisfaction: It is the “Must be” condition the
customer expects from a product performance; those attributes
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contributing to expected satisfaction must be present. In the
absence of which, any customer will be dissatisfied.
2. Desired Satisfaction: Which is a preferred condition the
customer expects, however the presence or absence of the
attributes contribute to preferred satisfaction would have no
effect on the level of satisfaction.
3. Exciting Satisfaction: Indicates a condition in which the
presence of certain attributes leads to a surprisingly attractive
performance. The presence of these attributes will further add
to the level of satisfaction.
The fact to be noted at this juncture is that the customer, whom an
organisation can retain by rendering expected satisfaction, cannot
continue to be retained when the customer changes his satisfaction
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level from expected to desired level and further from desired level
to exciting level. Therefore organizations must keep on building up
their ability to continuously satisfy their target customers so as to
have customer retention. A suitably designed customer satisfaction
audit would serve the purpose.
UNIT 13: Impact of Retention
165
Added to this, a well-structured customer care programme will go
Activity
Notes
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a long way in gradually furthering the customer satisfaction in
Prepare a summarized report
tune with their expectations. Customer care that exceeds customer ___________________
on the relationship developed
expectation will lead to higher rate of retention. In the absence of through loyalty.
___________________
due customer care, it is likely that the customers will be
___________________
dissatisfied and will be left with three options viz.
___________________
z Rejection
___________________
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z Postponement
___________________
z Substitution
___________________
Any option the customer selects, will lead him only to the attrition
___________________
process. To prevent this, the organisation should design and
___________________
implement a well-designed customer segment specific (if not
customized) customer care-programmes and thereby increase the ___________________
rate of retention.
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___________________
z Developing Barriers to Exit: The organisation should
___________________ carefully evolve barriers to exist, which include:
___________________ Emotional appeal
___________________ Conformation to specification
___________________
Durability
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___________________
Lifetime utility
___________________
Social relationship
___________________
Flexibility
___________________
Added value
___________________
Concessional price schemes
Commitment
Innovative approach
Reducing risk
Avoiding threat
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Holistic care.
In addition to the above there are few organizations that
practice unethical approaches also that include addiction,
bribery, counterfeiting, deception, usury and the like, which
are not recommended in true spirit of business competition.
z Knowledge about Lifestyle and Life Cycle: Lifestyle of the
target customers has to be studied. The lifestyle represents the
activities, interests and opinions of the customers. Knowledge
about the life cycle stage is equally important. Organisation
should match its offerings to the lifestyle ad life cycle stages
and this approach would prevent defection.
z Establish Measurement System: Organisations cannot
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z Customers Specific Approach: The approach to prevent ___________________
defection must be customer category specific. In tune with the ___________________
customer categories contribution towards revenue generation
___________________
of the organisation, and also with specific personality traits of
the customers such as aggrieved customers, annoyed ___________________
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developed. ___________________
z Customer Win-Back Programmes: The organisation must ___________________
introduce reward-based customer win-back programmes.
___________________
Employees involved in customer win back programmes should
be given suitable incentives and every win-back should be ___________________
168
Check Your Progress
Notes
Activity
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Prepare a report on the Fill in the blanks
___________________
organizational change to
match the retention strategy.
___________________
1. Building ...................... is the basic platform of
relationship formation.
___________________
2. A ...................... would be satisfied if all his latent and
___________________
expressed doubts are clarified.
___________________
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___________________ Organisational Change to Match Retention Strategy
___________________
The organisation should constantly improve its status in terms of
___________________ quality, trust, credibility, capability, confidence, and
___________________ communication. This would definitely help in winning back lapsed
customers. In an attempt to obtain ultimate success with regard to
___________________
winning back the lapsed customers, organisations can benchmark
its practices against the best practices available in the industry. To
win the confidence of the lapsed customers, an organisation may
practice experiential marketing the experiences includes strategic,
sensory, physical, virtual experiences, etc., to provide the
confidence of better value to the money.
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The major features of a customer retention centred organisation
are listed below:
z The organisation, in order to achieve success in its attempt of
retention should be a learning organisation, learning from the
view point of customer’s preferences, competitor’s strategies,
technology advantages, social, cultural changes, life style
spending and consumption patterns and the like. A learning
organisation can easily adapt itself to meet the growing
requirements of the customers and thereby continuously fulfil
their changing needs. This would help to retain customers for
a long period. An organisation which has not assumed the
characteristics of a learning organisation may find it difficult
to have customer retention.
The organisation should assume the characteristics of a market
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z
leader rather than being its follower. Those organisations
simply following the business practices and strategies of a
market leader would find it difficult to have retention of
customers. Usually the customers would fall in line with
market leaders more easily than market followers, in view of
the advantages they would gain from those market leaders.
UNIT 13: Impact of Retention
169
z Organisations are expected to be much more innovative in its
Notes
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overall approach. In the context of customers’ needs are
constantly changing, a static approach will not be helpful in ___________________
rendering customer satisfaction. Innovation, in terms of each ___________________
component of marketing mix, relationship-building methods,
___________________
incentives and rewards to customers would be more helpful to
retain customers. ___________________
___________________
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z The organisation must develop an effective customer care
programme. Each customer expects himself to be treated with ___________________
courtesy. The organisation should evolve an appropriate ___________________
customer care programme, which provides personalized care to
___________________
all the customers and would lead towards effective customer
retention. ___________________
___________________
z Organisations must have effective complaint management
systems. The efficiency involved in managing complaints will
have impact on the retention rate. The complaint management
should focus on maximizing satisfaction, while minimizing the
response time. Every customer has a level of acceptable
tolerance time, within which he wants his complaint to be
rectified. Complaints rectified beyond the tolerance limit of the
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customers probably will not help in retention. Here the
organisation should take into account both registered and
latent complaints.
z Organisations should develop the culture of total employee
involvement towards providing total satisfaction to customers.
In today’s context of ever-increasing customer’s expectations,
customers expect their needs to be satisfied in total and not
partially. For the purpose of providing total satisfaction, active
and visible involvement of every employee from top to bottom
in the hierarchy is needed. The organisation should motivate
each employee by impressing upon them the need for their
commitment in rendering total customer satisfaction. This
would obviously help maintaining customer retention.
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170
z Organisations must have the mechanism to track attrition
Notes
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signals as early as possible and suggest suitable remedial
___________________
measures. Attrition factors identified would provide directions
___________________ for improving measured towards customer retention.
___________________ z Organisations should focus attention on former customers and
___________________ lost customers. Some organisations consider former customers
as lost customers but the fact is that all the former customers
___________________
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need not be lost customers. Effective measures are to be put
___________________ forth to convert former customers and lost customers into
___________________ resent customers. This obviously requires a mechanism to find
___________________
out the dissatisfaction scores, attrition factors and related
aspects with regard to the former ad lost customers. And this
___________________
attempt should be o continuous basis.
___________________
z Organisations should practice total quality marketing with
emphasis on internal marketing. Effective internal marketing
practiced would indicate the quality standard of the input
process, output, and other related aspects as viewed by the
organisation’s internal customers. This would enable the
organisation to initiate steps to improve the practice,
procedure, process and performance of people associated with
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external customers. This attempt would obviously contribute
towards customer retention.
z Organisations should encourage all employees towards active
listening to customers’ grievances. For this purpose special
skills maybe imparted by providing focused training. To
encourage active listening, organisation can depend on
assistance of technology and can go for cal centres, answer
centres, 24 hours customer response centres, etc. These
attempts would enable the organisation to sty close to
customers, which in turn would lead customers towards
retention.
z Organisations in addition to regular research should encourage
hands on research on customer related problems and there
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z Organisations should think in terms of customer segment ___________________
specific strategies, which would focus the attention of specific ___________________
requirements of each segment. The customer retention would
___________________
then improve.
___________________
z Organisations should develop effective communication systems
___________________
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with internal customers (employee), intermediate customers
(middlemen), and external customers (end users). Ineffective ___________________
communication will have serious negative impact on customer ___________________
retention.
___________________
z Organisation should empower employees at various levels so as
___________________
to arrive at appropriate actions interns of improving the level
___________________
of customer satisfaction and to archive at corrective measures
where ever necessary.
In this process the retention of customers would enhance.
z Organisation should focus on effective teamwork, with the
objective of customer retention. The team should be highly
motivated ad object oriented viz. the object of increasing
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customer retention.
z Organisation should further emerge into a market – intelligent
enterprise, which deviate from the traditional “We make it –
you take it” model to “You need it – we make it” model. This
approach obviously requires close integration with customers,
understanding about their needs and factors providing them
satisfaction and so on. In this process customer retention
would be obviously taken care.
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Summary
Notes
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Some of the grand strategies that are available to a firm in the
___________________
process of implementing an effective CRM includes but not limited
___________________ to: (a) total quality marketing; (b) regular research; (c) effective
___________________ teamwork; (d) empowering the employees; and (e) designing
___________________
segment specific strategies.
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place to constantly monitor trends in customer moments and
___________________
competitor moves to match and revise the strategies for effective
___________________ CRM process.
___________________
Keywords
Basic needs: These are the basic minimum requirements expected
from out of a product.
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Articulated needs: These needs are something more than the
minimum basic expectations from the product.
Exciting needs: Under this category of need the customer wants
to fulfil more than his level of expectation, in terms of the above
two categories.
Codifying: It means specification of attributes and other
conditions to codify the needs.
Capturing of needs: It is concerned with understanding the
differing needs of the customers and from their own perceptual
viewpoint.
173
4. Write a note on meeting customer needs and its impact on
Notes
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retention.
___________________
5. What do you understand by relationship through loyalty?
___________________
6. Discuss about organisational change to match retention
___________________
strategy.
___________________
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___________________
Books
___________________
Mohammed H. Peeru and A Sagadevan, Customer Relationship
___________________
Management, Vikas Publishing House, 2004, Delhi.
___________________
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw Hill, 2005. ___________________
Web Readings
en.wikipedia.org/wiki/Customer_relationship_management
searchcrm.techtarget.com/definition/CRM
finance.yahoo.com/q?s=CRM - United States
www.impelcrm.in
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
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Customer Relationship Management
174
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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UNIT 14: Service and Complaint Management
Unit 14
175
Notes
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Service and Complaint
___________________
___________________
Management ___________________
___________________
Objectives ___________________
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After completion of this unit, the students will be aware of the following
___________________
topics:
___________________
\ Handling Customer Complaints
\ Complaint Analysis and Resolution ___________________
___________________
Introduction
It is hard to imagine a customer transaction not vulnerable to
problems and complaints, be it buying groceries, connecting to
cable service, purchasing a car or having a home repair done. Nor
is it hard to see why businesses benefit from making concerted
efforts to prevent and respond to customer complaints.
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The companies attract and keep customers when they follow
customer service standards and policies that prevent problems
from arising, and are honest, fair and responsive when things go
wrong. Customer Complaint Management (CCM) encompasses
techniques, processes and systems that lessen the chance of
customers having problems and allow businesses to respond fairly,
efficiently and effectively when complaints arise.
176
z Better understanding of customers’ needs
Notes
Activity
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Write an article on the need
___________________
z Greater customer loyalty
and importance of handling
customer complaints.
___________________ z More customers through word of mouth advertising from
satisfied clients
___________________
z Less time and money spent attracting customers
___________________
___________________
z Improved business reputation
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___________________ z A healthier bottom line.
___________________ Remember you could be pushing profits out of the door if you do
not have an effective complaints handling system.
___________________
___________________
Handle complaints effectively by:
177
z Complaints are reviewed regularly to identify any ongoing Activity
Notes
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issues.
Make a brief report on the
___________________
various types of customer
z Reports are made to senior management about complaints. complaints.
___________________
Customer Complaint Form ___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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Customer Relationship Management
178
Check Your Progress
Notes
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Choose the appropriate answer:
___________________
___________________
1. CCM stands for:
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___________________ (d) None
___________________ 2. An effective complaints handling system is essential
___________________ to your business for:
179
Delivery Error: With online shopping on the rise, delivery errors
Notes
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increase. Upset customers may complain to the company, but the
company may use an independent shipper, complicating complaint ___________________
resolution. ___________________
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polite even when dealing with angry customers.
___________________
Categories of Customer Complaints
___________________
At least five types of complainers can be identified. Each type is
___________________
motivated by different beliefs, attitudes, and needs. Consider the
following definitions of the types of complainers, how one might ___________________
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Present a draft of an
___________________
assignment on analysis and Response: Remain unfailingly objective. Use accurate
resolution.
___________________ quantified data to backup your response. Be sure the
___________________ adjustment is in keeping with what the organization would
normally do under the circumstances. Consider asking “What
___________________
can I do to make things right?” after the first “not good
___________________ enough.”
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___________________ (e) The Chronic Complainer Customer: Is never satisfied;
___________________ there is always something wrong. This customer’s mission is to
___________________
whine. Yet, he is your customer, and as frustrating as this
customer can be, he cannot be dismissed.
___________________
Response: Extraordinary patience is required. One must
___________________
listen carefully and completely and never let one’s anger get
aroused. A sympathetic ear, a sincere apology, and an honest
effort to correct the situation are likely to be the most
productive. Unlike the Rip-Off Customer, most Chronic
Complainer Customers will accept and appreciate your efforts
to make things right. This customer wants an apology and
appreciates it when you listen. Tends to be a good customer (in
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spite of his constant complaining) and will tell others about
your positive response to his complaints.
181
Service providers employ all sorts of strategies to avoid customer
Notes
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turnover. Smart organizations know that it is not enough to have
the lowest price or the best technology – there always seems to be a ___________________
competitor who can do it better or cheaper. There are no ___________________
guarantees, but one of the best customer retention strategies is to
___________________
provide superior customer service. And that means listening to
your customers. ___________________
___________________
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How well do you listen and respond to complaints from your
customers? We all aim to be customer focused ... we claim to be ___________________
customer focused ... but we need to become More Customer ___________________
Focused.
___________________
Although listening and responding is necessary, it’s not good
___________________
enough. Too often, a response is reactionary and you can easily
___________________
find yourself reacting over and over again to the same complaint
(sometimes this is called “firefighting”). We need to listen and
protect. That means listening to the voice of the customer and
making process improvements based on that feedback so that the
same complaints don’t recur.
A complaint is any measure of dissatisfaction with your product or
service, even if it’s unfair, untrue, or painful to hear! Complaints
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may be about:
z Service Content, Delivery or Quality
z Response time
z Personnel
z Documentation
z Requests
z Billing
z Communication
z Follow up.
To increase the visibility of complaints, you should:
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___________________ which receiving customer complaints are considered negative
an interruption to doing business. But in the Customer
___________________
Complaint Resolution Process, the more complaints you log,
___________________
the better! This is one of the biggest cultural issues for
___________________ organizations to overcome.
___________________ z Record Complaints: Create complaint categories that make
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___________________ sense for your organization. For example, data that tells you
that you had 123 complaints about adoptions last month tells
___________________
you nothing. The 123 complaints need to be broken down into
___________________
categories so that you can get to a root cause analysis.
___________________
If you only respond to complaints without correcting the root cause,
___________________ you’re spinning your wheels and you’ll find yourself fighting fires
instead of putting them out for good. You can identify root because
if you collect, categorize, and analyze complaints. As a result,
process improvements will be complaint-driven and thus should be
high-priority.
This is a customer complaint resolution process that anyone can
implement:
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Focus on the Customer: If you can’t immediately solve the
problem, respond to the customer and identify an “owner” who will
be responsible for final resolution. Complete the communications
loop with customer. If you’ve referred the complaint to others,
make sure there’s closure. If you’ve left the customer hanging
without a response, you’ve become part of the problem.
Focus on the Complaint: Collect all complaints from all external
customers and categorize them in a way that allows you to analyze
data to see trends, patterns, concentrations, tendencies, etc.
Focus on Process Improvement: Use the database of complaints
to define processes that are important from the customer’s
perspective and to improve the most critical ones. Based on
analysis of the database, make appropriate investments to prevent
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Check Your Progress
Activity
Notes
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Fill in the blanks: Consider a company having
___________________
an online complaint handling
1. ................... occurs when the customer stops buying or system. Find out the
___________________
using the services. advantages of having such a
system.
___________________
2. ................... represents complaints
___________________
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___________________
The key advantages of online complaint-handling system are:
___________________
z Enhanced effectiveness and saved time and money: The
___________________
use of ODR technology in complaint-handling processes can be
an important tool to assist complainants as, more often than ___________________
not, they have no insight into their legal rights when they ___________________
come into conflict with a supplier or with governmental
institutions. Because of this, some clients give up defending
their rights, whereas others hold on to their conflict – some of
them irresponsibly and always at relatively high costs – when
they opt for legal proceedings.
z Streamlined back-office functions and automated
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routine tasks: Online complaint-handling technology
facilitates taking the time and money that are not spent on
routine tasks and applying it to primary tasks or cases where
the specialty of complaint-handling services’ representatives is
needed more.
z Increased participation through a setting that is
perceived as safe and neutral: Technology (coming across
as more “neutral”) facilitates more-structured communications
and provides a secure neutral environment for claimants to
engage and tell their side of the story, stimulating constructive
dialog rather than argument and fostering a problem-solving
attitude.
z A comfortable and safe environment: Many claimants feel
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___________________
z Increased focus on conflict prevention: At an early stage,
___________________ stakeholders are given the opportunity to assess the legitimacy
___________________ of the claim or case, explore underlying interests and evaluate
both the preferred as well as second-best outcomes: As the
___________________
ABA Taskforce Report (2002) concluded: “effective complaints
___________________ handling is more important than effective third-party dispute
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___________________ resolution”.
___________________
___________________
Complaint Handling – An Advantage for Businesses
___________________ For many businesses, the holiday season provides a windfall of
customers and profits, and in some cases accounts for a substantial
___________________
portion of annual operating income. With seasonal customers
comes an increase in complaints, and the simple fact is that some
businesses drive profits right back out the door because they do not
have an effective complaint handling system.
Industry estimates say that generally businesses receive
complaints from only about five percent of dissatisfied customers.
About 95 percent of customers simply will not complain, but more
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importantly, about 90 percent of this group will never use the
business again. Equally alarming for businesses is that typical
dissatisfied customers will mention the problem to about eight
family, friends and acquaintances.
“Businesses operating in tough markets with small margins are
constantly searching for points of competitive advantage and
effective complaint handling can be a key differentiator”. “A
complaint offers a superb opportunity to transform an unhappy
customer into a loyal customer, who may even help you win new
business by word-of-mouth advertising.”
The most common factors affecting consumer’s trust in businesses
were principally service-related – the exact space where a well-
managed complaint handling system can provide an edge over
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Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
Figure 14.1
S
___________________
z Responding: Any response should be clear, appropriate and
___________________ specific to the customer’s complaint. Avoid form letters and
___________________ technical jargon. Explaining a decision can preserve a
customer’s goodwill, even if a different result was desired.
___________________
z Following-up: Contact the customer following your response
___________________
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to verify whether or not the matter has been resolved
___________________ satisfactorily. If the customer is unhappy, you can refer the
___________________ matter for third party dispute resolution.
___________________ Reasons Why a Company is Least Trusted (All Consumers Who
___________________ Named A Least Trusted Company) n=527. (see Figure 14.2)
___________________
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Figure 14.2
187
Check Your Progress
Notes
S
Fill in the blanks:
___________________
1. Industry estimates say that generally businesses
___________________
receive complaints from only about ....................... of
dissatisfied customers. ___________________
___________________
2. ................... is a value-added service that is
appreciated, remembered and talked about by ___________________
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consumers. ___________________
___________________
Summary
___________________
As part of their efforts to decrease the likelihood of consumer ___________________
problems arising, and to respond effectively when complaints and
___________________
difficulties do occur, businesses employ a wide range of Consumer
Complaints Management (CCM) techniques. In addition to
addressing the immediate problems of individual consumers, firms
may develop Consumer Complaints Management initiatives in
response to competitive pressures, to obtain feedback on how to
improve products and services, and to reduce the likelihood of
government having to intervene to solve a problem. Consumer
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Complaints Management initiatives are applied by businesses, and
are not required by law.
Keywords
Follow-up: Contact the customer following your response to verify
whether or not the matter has been resolved satisfactorily.
Complaint Handling: Effective complaint handling is a value-
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Meek Customer: This customer is the one who generally will not
Notes
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complain.
___________________
___________________
Questions for Discussion
___________________
1. What do you mean by handling customer complaints?
___________________
2. Describe the advantages of complaint handling.
___________________
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3. Explain the process of complaint analysis and resolution.
___________________
4. Discuss the customer complaint management initiatives.
___________________
___________________
Further Readings
___________________
___________________ Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw Hill, 2005.
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
Customer Relationships Management, Wiley, 2003.
)U
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Mining Applications, 2004.
CGI Group Inc. White Paper, Building Competitive Advantages
through Customer Relationship Management, January 2001.
Anderson, Paul and Art Rosenberg, The Executive’s Guide to
Customer Relationship Management, Doyle Publishing Company,
Houston, 2000.
Web Readings
en.wikipedia.org/wiki/Customer_relationship_management
searchcrm.techtarget.com/definition/CRM
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Notes
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Case Studies
___________________
___________________
___________________
Objectives
___________________
After analyzing these cases, the student will have an appreciation of the
concept of topics studied in this Block. ___________________
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___________________
Case Study 1: GAIL opens LNG Trading Desk in Singapore
___________________
To source natural gas for meeting domestic demand, GAIL (India)
___________________
Ltd opened a liquefied natural gas (LNG) trading desk in
Singapore on Wednesday. The company would be operating in ___________________
Singapore through its subsidiary, GAIL Global (Singapore) Pte
Ltd. ___________________
GAIL will get first cargo from this desk within this financial year,
sources said. India’s natural gas production is currently at about
120 mmscmd as compared to the demand of around 189 mmscmd.
The country is already importing 46.3 mmscmd gas as LNG. Even
after these imports, the total availability of 164 mmscmd is short
of the current demand of 189 mmscmd.
Mr B.C. Tripathi, Chairman and Managing Director, GAIL said,
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“the primary purpose of the trading desk is to source natural gas
for the Indian market and trading in LNG, petrochemicals and
related products.”
The company would undertake purchase and sale of LNG cargoes
on spot and short-term basis for trading. So far, GAIL, through
the Singapore arm, has made investments in China, Egypt and
other countries and would be pursuing opportunities for further
investment in different countries.
“Singapore, an ideal geographical location, between LNG demand
centres in North East Asia, particularly in Japan, South Korea,
China and India as well as LNG supply sources in South East
Asia, West Asia and Australia, offers a good locational
advantage,” Mr. Tripathi said.
Scouting for Contracts
With the drop in output from Reliance Industries Ltd-operated
KG-D6 gas fields, the country’s dependence on imported gas has
increased. GAIL has been looking for long- and short-term
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Contd…
Customer Relationship Management
190 mmscmd from RIL’s East Coast fields. The remaining 32 mmscmd
Notes is imported gas.
S
Within India, GAIL owns and operates a network of over 8,700
___________________
km of natural gas high pressure trunk pipeline with a capacity to
___________________ carry 64 billion cubic metre across the country. GAIL is at present
implementing over 5,000 km of new pipelines at an estimated
___________________ investment of nearly $6 billion.
___________________ Once commissioned, the capacity is expected to increase to over
110 billion cubic metre, by 2013-14 and would connect markets in
___________________ Southern and Eastern parts of India. GAIL would be looking for
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importing gas for its proposed LNG facility on East Coast of India
___________________
either directly or through its affiliates.
___________________ A petrochemical is the second largest business segment and a
major growth driver for GAIL. In order to diversify its
___________________
petrochemical product portfolio and actively involved in
___________________ petrochemical trading activities at an international level, GAIL
plans to undertake petrochemicals trading from Singapore.
___________________
Questions:
1. Analyze the case and interpret it.
2. Write down the case facts.
3. Find out reasons behind why GAIL opens LNG trading desk
in Singapore?
Source: http://www.thehindubusinessline.com
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191
Case Study 2: “Touchy-Feely” Research: Psyching Out
Notes
Consumers
S
___________________
Consumers often don’t know or can’t describe just why they act as
they do. Thus, motivation researchers use a variety of probing ___________________
techniques to uncover underlying emotions and attitudes toward
___________________
brands and buying situations. These sometimes bizarre
techniques range from free association and inkblot interpretation ___________________
tests to having consumers form daydreams and fantasies about
brands or buying situations. One writer offers the following ___________________
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tongue-in-cheek summary of a motivation research session:
___________________
“Good morning, ladies and gentlemen. We’ve called you here
today for a little consumer research. Now, lie down on the couch, ___________________
toss your inhibitions out the window, and let’s try a little free
association. First, think about brands as if they were your friends. ___________________
Imagine you could talk to your TV dinner. What would he say? ___________________
And what would you say to him? Now, think of your shampoo as
an animal. Go on, don’t be shy. Would it be a panda or a lion? A ___________________
snake or a wooly worm? For our final exercise, let’s all sit up and
pull out our magic markers. Draw a picture of a typical cake-mix
user. Would she wear an apron or a negligee? A business suit or a
can-can dress?
Such projective techniques seem pretty goofy. But more and more,
marketers are using such touchy-feely approaches to dig deeply
into consumer psyches and develop better marketing strategies.
For example, Shell Oil used motivation research in an attempt to
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uncover the real reasons behind a decade-long sales slump.
The manager of corporate advertising for Shell oil, Sixtus
Oeschle, was at his wits’ end. For months, he and his team of
researchers had pumped the consumer psyche. For months, they’d
come up empty. “We tried psychographic memory triggers,” he
recalls. “We tried dream therapy.” All to no avail. At one point,
respondents were even given mounds of wet clay and urged to
mould figures that expressed their inner feelings about Shell.
It was time, Oeschle decided, to try something radical. To craft a
more potent appeal for its brand of gasoline, Shell would have to
go deeper – much deeper. Oeschle called in a consumer researcher
who specializes in focus groups conducted under hypnosis. The
results, Oeschle says, wowed even the sceptics. “I’ve got to tell
you, it was fascinating, fascinating stuff,” he says. After dimming
the lights, the researcher took respondents back, back-back all the
way to their infancy. “He just kept taking them back and back,”
Oeschle says, “until … he’s saying, ‘Tell me about your first
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her why”, Oeschle recalls. “And she said, ‘I don’t know, I guess I
___________________ just feel good about Texaco.’ Well, this was the little three-and-a-
half-year-old in the back of her daddy’s car speaking.
___________________
Shell is now designing new marketing approaches base on the
___________________ insights gleaned from the groups of mesmerized motorists. Where
Shell had gone wrong, it seems, was in reasoning that, since
___________________
people don’t start buying gas until at least age 16, there was no
___________________ need to target the tiniest consumers, “They weren’t even on
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Shell’s radar,” Oeschle laments. “It dawned on us…that we’d
___________________ better figure out how to favourably impact people from an early
age.”
___________________
Similarly, Daimler Chrysler used a dose of deep motivation
___________________ research to create a successful new concept car.
___________________ A few years back, Daimler Chrysler set out to find the next, “wow
car,” the “segment buster” that would reach across age and
___________________ income lines, into the subconscious. That meant doing more than
the usual focus group research. So Daimler Chrysler hired
psychologist Clothaire Rapaille to probe consumers’ innermost
feelings. The underlying premise: The products we buy mean
something; they form part of a greater whole. “The more we learn
about American culture, the more we see how our vehicles fit into
our psyche – the more we see how it is that we fit into the overall
scheme of living,” says David Bostwick, director of market
research at Daimler Chrysler.
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Rather than convening traditional focus groups, Rapaille used a
method known as “archetype research”. He had participants lie on
soft mats, listen to mood music, and free-associate in the dark.
According to Bostwick, this re-creates the same brain activity you
have when you first wake up from a dream. “It’s a very special
brain activity”, he says. “It allows us to actually access some of
those unconscious thoughts.”
When the lights came back up, Rapaille had learned that
Americans are entrepreneurial, individualistic, freedom loving,
and inventive – but also juvenile and self-indulgent. More
important, he discovered that many suffered nostalgia pangs. In
these complex and often unsettling times, car buyers yearned for
the good old days – for a time when things seemed simpler and
more secure, and when people felt good about themselves. “What
that said to us is that people are looking for something that offers
protection on the outside, and comfort on the inside,” says
Bostwick. “We communicated that to our design team.”
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their heads in the first place…. The vehicle takes you back, but
not to a particular time in the century. It just takes you back to a ___________________
time you felt cool.”
___________________
Some marketers dismiss such motivation research as mumbo
jumbo. However, like Shell and Daimler Chrysler, many ___________________
companies are now delving into the murky depths of the
consumer unconscious. “Such tactics have been worshipfully ___________________
embraced by even the no-nonsense, jut-jawed captains of
___________________
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industry,” claims an analyst. “At companies like Kraft, Coca-cola,
Proctor & Gamble, and Daimler Chrysler, the most sought- after ___________________
consultants hail not from (traditional consulting firms like
McKinsey.) They come from brand consultancies with names like ___________________
Archetype discoveries, Psychologics and Semiotic solutions.”
___________________
Questions
___________________
1. Analyze the case and interpret it.
2. Write down the case facts. ___________________
Source: http://www.adb.org/Documents/Conference/Simplifications_of_Customs/part3.pdf
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194
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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UNIT 16: Consumer Complaints Management Initiatives
195
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
BLOCK-IV
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Detailed Contents Customer Relationship Management
196
Notes
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UNIT 16: CONSUMER COMPLAINTS
___________________ UNIT 18: e-CRM
MANAGEMENT INITIATIVES
z Introduction
___________________
z Introduction
z Advent of e-Commerce
___________________
z Customer Complaints Management Initiatives
z Definition of e-CRM
___________________
z Service as a Business
z Scope of e-CRM
___________________
Service Challenges
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z
z CRM vs e-CRM
___________________
UNIT 17: SERVICE CHARACTERISTICS z Challenges in e-CRM
___________________
z Introduction z Web Experience
___________________
z Intangibility
UNIT 19: PORTALS AND OTHER FIELDS IN e-CRM
___________________
z Perishability
z Introduction
___________________
z Variability
z e-CRM and Portals
z Modules in CRM
Unit 16
197
Notes
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Consumer Complaints
___________________
___________________
___________________
Objectives ___________________
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After completion of this unit, the students will be aware of the following
___________________
topics:
___________________
\ Customer Complaints Management Initiatives
\ Service as a Business ___________________
___________________
Introduction
Businesses know that customers expect prompt, courteous
attention and accurate information when conducting a transaction.
They want the goods and services they buy to be of acceptable
quality, and for the merchant to act quickly and appropriately
when problems arise.
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Customer Complaints Management Initiatives
Customer Complaint Management (CCM) initiatives are
mechanisms, approaches and techniques merchants use to increase
customer satisfaction with their products and services. These
initiatives attempt to anticipate and prevent problems and
complaints from arising, promptly and appropriately address
complaints through internal processes, and, when internal
complaints-handling processes prove insufficient, resolve disputes
fairly, effectively and efficiently through external private dispute
resolution approaches. Below, we explore these three aspects of
Customer Compliant Management individually, and conclude by
noting that some initiatives take a comprehensive approach to
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z Developed and implemented by individual firms or industry
Notes
Activity
S
associations, governments, or customer or standards
Prepare a brief report on
___________________
customer complaints organizations.
management initiatives.
___________________
z Applicable to a single store or company, several firms or
___________________ organizations, an entire sector or many sectors.
___________________ z Usually initiated in response to, or anticipation of, customer or
___________________ competitive pressures, the real or perceived threat of
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government action, or a combination of these
___________________
others, and may have the added benefit of reducing the 199
pressure for new laws or regulations. Notes
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z Significant customer feedback can be used to devise better ___________________
products and services. ___________________
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with government agencies and regulatory bodies.
___________________
For governments, the use of Customer Complaint Management
___________________
initiatives by firms can have several advantages.
___________________
z Public policy objectives can be furthered through non-
___________________
regulatory means.
___________________
z They may complement or expand traditional regulatory
regimes.
z They can go beyond the minimum standards and criteria set in
law.
z The need for government intervention may be decreased.
Standards and criteria may be set or adjusted more quickly
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z
and less expensively than by using laws and regulations.
S
___________________ of merchants in other sectors and jurisdictions.
___________________ Have all the people and organizations that could be involved or
___________________ affected by the Consumer Complaints Management initiative been
identified, and have their interests or concerns been taken into
___________________
account? For example, the views of a cross-section of upper
___________________ management and rank and file officials within affected
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___________________ organizations, representatives of consumer organizations, and
government officials should all be taken into consideration.
___________________
Clearly, the range of identified individuals will depend on the
___________________
initiative in question. A single pizza delivery company may not
___________________ need to directly involve anyone outside the organization when
___________________ developing a “30 minutes or free” delivery policy, but it would be
wise to identify and articulate the interests of the drivers (e.g. the
delivery policy should not put drivers at risk).
S
Consumer Complaints Management proponents may wish to ___________________
explore the feasibility of inviting a government representative to ___________________
participate in the working group, since relevant government
___________________
agencies and departments can provide important expertise and
advice. Even when they do not agree to participate as working ___________________
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should be consulted early on in the development of the Consumer ___________________
Complaints Management initiative.
___________________
To ensure that the full range of concerns is heard, it is very useful
___________________
to invite knowledgeable consumer group representatives to
participate in the working group. Consumer groups can provide a ___________________
202
z The views of relevant government agencies on the initiative.
Notes
S
___________________
z The track record of the Consumer Complaints Management
proponent for similar initiatives.
___________________
z Whether there is commitment from the organization’s leaders.
___________________
z The openness and accessibility of the decision-making process.
___________________
___________________
z The roles and responsibilities of all working group
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participants.
___________________
___________________ Step Four: Prepare Preliminary Draft and Explore Appropriate Structures
___________________ In preparing a preliminary draft of the initiative, working group
___________________ members will likely identify who (people, organizations and new
institutional structures) will be responsible for which aspects of
___________________
implementation. For example, certain employees may perform key
new functions, and a new agency or management structure may be
created to help with implementation. Several of the Consumer
Complaints Management initiatives discussed in Part One of this
Guide are housed in separate non-profit bodies dedicated
specifically to complaints management or dispute resolution (e.g.
the Canadian Banking Ombudsman, Advertising Standards
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Canada’s national and regional consumer response councils, and
the Cable Television Standards Council). The advantage of such
new structures is greater perceived and real independence from
other aspects of the organization’s activities. The credibility of
complaints handling and dispute resolution decisions is likely to
increase when decision makers are seen to be at arm’s length from
the organization’s other activities and officials.
In other situations, ad hoc use of neutral third-party mediators or
arbitrators may be sufficient. In such situations, there needs to be
criteria for assessing the expertise of the third parties. Creation of
new structures and use of new parties to help with complaints
handling may involve considerable expense, which should be
factored into design considerations from the outset.
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For industry-wide initiatives, once the working group has agreed
Notes
S
to a draft, it should invite, using a public announcement in
appropriate media, comments from anyone interested, allowing a ___________________
reasonable time for comments to be returned. Direct solicitation of ___________________
comments from known interested parties is also advised. A
___________________
consultation plan can be useful. It should include roles for high-
profile officials with good communications skills to explain the ___________________
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feedback. Typically, this feedback would go to the working group, ___________________
which would then discuss how and to what extent the final draft
___________________
would reflect the comments.
___________________
Step Six: Announce and Publicize the Initiative ___________________
As mentioned earlier, a Consumer Complaints Management ___________________
initiative that is not adequately publicized has little chance of
succeeding. Participating merchants (including managers and
employees), consumers and governments all need to know what the
initiative is and how it affects them. A good communications plan
is important. It should identify who must be made aware of the
Consumer Complaints Management initiative, who should receive
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a copy of its terms, and how the individuals and groups will be
reached. The communications activities might include an
awareness campaign addressing such matters as the use of a logo,
publicity endeavours such as advertising and speeches, pamphlets,
and a notice that firms and organizations can display on their
premises. There must be adequate funding to ensure that these
communications activities are properly carried out.
204
z Phased-in Implementation: There may be value in
Notes
S
implementing the initiative in phases. For example, a program
___________________
might operate only in certain jurisdictions at first, or apply
___________________ only to certain types of transactions. Alternatively, the
___________________ program could initially operate on a “pilot” (limited term)
basis. The advantage of the phased-in approach is that it
___________________
allows administrators to test the viability and practicality of a
___________________ program, and make appropriate adjustments before unveiling
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___________________ a full and comprehensive initiative.
205
Check Your Progress
Activity
Notes
S
Fill in the blanks:
Write an article on services as
___________________
1. ................... initiatives are mechanisms, approaches a business.
___________________
and techniques merchants use to increase customer
satisfaction with their products and services. ___________________
___________________
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Service as a Business ___________________
A service business entails selling a product that does not exist ___________________
until the customer pays for it. Because it is “intangible,” marketing
___________________
a service business is an entirely different ballgame from marketing
a product. Know the strategies for marketing a service business. ___________________
___________________
Marketing a service business is not the same as marketing a
product. When marketing a retail good, you are selling a product
that is tangible – an item that can be seen, handled and used.
Consumers can gain information and evaluate the product based
on what they see.
In a service business, you are marketing yourself – your expertise
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and capabilities, your reliability, and commitment to excellent
service. Your service technically does not exist until the customer
pays for it. Service is not a tangible good, so what you are selling is
the promise to deliver what you set out to deliver. Your marketing
efforts will have to focus on communicating that promise to your
clientele.
Mass marketing strategies do not work well with a service
business. You are constrained by the amount of clients you can
service well. To please your clients, you can focus only on a select
number of accounts or customers to sustain your business. If you
decide to get as much clients as possible, there is risk that you will
spread yourself too thin that the quality of your work eventually
suffers.
A solo home-based web designer, for example, cannot mass market
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Selling a service is more difficult than selling a tangible product.
Notes
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Consumers are much less certain when they are buying a service,
___________________
since what they are buying is merely a promise that someone will
___________________ do something for them in a way that will satisfy their expectations.
___________________ The following promotional tools in marketing a service business:
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bringing in new clients. People tend to view recommendations
___________________ from those who have previously used the service as highly
___________________ credible, and are more inclined to use the recommended
___________________
service. Referrals, however, do not always come easily. Most
often, you have to ask for it. If one of your clients seem
___________________
satisfied with your service, request him or her to refer your
___________________ business to their friends or acquaintances who may benefit
from your service. To reinforce your request, you may give
them promotional materials such as business cards or
brochures that they may share with others. Other
entrepreneurs even make it a point to reward those who refer
a client to them. It may not be money (some professions frown
on the practice of giving money for referrals), but a simple note
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or a small act of thoughtfulness to show your clients that you
appreciate their effort to spread the word about your business.
z Client Relations: The authors define client relations as
“consistent courtesy + common sense + professional dignity =
effective client relations.” Clients will patronize your service
repeatedly – if they are satisfied. It is therefore important to
cultivate your existing client base and bond with them. Your
beauty salon may not have the latest hairstyling techniques,
but if you treat your customers well, you’d have a greater
chance of seeing them back to your shop again. More than a
product-based business, you need to practice excellent
customer service every second that you deal with a client. Your
business depends on it.
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z Direct Mail: A good way to promote your business is to send ___________________
letters or brochures to your target market. The key to success ___________________
in direct mail is to reach out to the right people. An accountant
___________________
I know watches out for the listings of new businesses in the
Washington DC area published by a local business journal. He ___________________
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his services. The business he generates from his mailings more ___________________
than compensate for the yearly subscription to the publication.
___________________
Service industries can be classified by the type of user and thus
___________________
there are three types of end-users:
___________________
Individual Consumer as an End-user ___________________
Business-to-business End-users
This implies that one business or a firm from one industry will
seek services from another business or another company from
another industry. This has connotations of industrial marketing –
abhorring mass media, more personal selling, high involvement,
with decision making units and decision making processes
different from those for individual consumers.
Industrial End-users
These end-users of services are plants and factories. They might
require very unique services that are highly technical.
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Service Challenges
Notes
Activity
S
Present a draft of an Some common challenges of services are:
___________________
assignment on service
challenges. z Clients can’t see or touch services before they purchase
___________________
them: This makes services difficult to conceptualize and
___________________
evaluate from the client perspective, creating increased
___________________ uncertainty and perception of risk. From the firm’s
___________________ perspective, service intangibility can make services difficult to
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promote, control quality, and set price.
___________________
z Services are often produced and consumed
___________________
simultaneously: This creates special challenges in service
___________________
quality management that product companies do not even
___________________ consider. Products are tested before they go out the door. If a
___________________ product has quality problems while in production, the
company can fix them and customers are none the wiser.
Service production happens with the customer present,
creating a very different and challenging dynamic.
z Trust is necessary: Some level of trust in the service
organization and its people must be established before clients
will engage services. This is as important, sometimes more
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important, than the service offerings and their value
proposition.
z Competition is often not who you think: Competition for
product companies are other product companies. Competition
for service companies are often the clients themselves. Sure,
sometimes you find yourself in a competitive shootout (some
firms more than others), but often the client is asking ‘should
we engage this service at all’ and ‘if so, should we just do it in-
house’.
z Brand extends beyond marketing: Brand in service
businesses is about who you are as much as what you say
about yourself. And internal brand management and
communications can be equally as vital to marketing success
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z Service deliverers often do the selling: Many product ___________________
companies have dedicated sales forces. For services, the selling ___________________
is often split between sales, marketing, professional, and
___________________
management staff.
___________________
z Marketing and sales lose momentum: Most product
___________________
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companies have dedicated marketers and sellers. They market
and sell continuously, regardless of the revenue levels they ___________________
generate. In many services companies the marketers and ___________________
sellers also must manage and deliver. This can often lead to
___________________
the Services Revenue Rollercoaster-wide swings between
revenue and work overflow, and revenue and work drought. ___________________
___________________
z Passion is necessary, yet elusive: The more passion, spirit,
hustle, and desire your staff brings to the organization every
day, the more revenue and success you will have. The
correlation between staff passion and financial success is
direct and measurable (as is the correlation between lack-of-
passion and organizational failure). Yet institutionalizing
passion, while necessary, is agonizingly elusive.
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Check Your Progress
Fill in the blanks:
1. ................... happens with the customer present,
creating a very different and challenging dynamic.
2. ................... in service businesses is about who you are
as much as what you say about yourself.
3. ................... swings between revenue and work
overflow, and revenue and work drought.
Summary
Customer Complaint Management (CCM) initiatives are
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___________________ Customer Compliant Management individually, and conclude by
noting that some initiatives take a comprehensive approach to
___________________
Customer Compliant Management.
___________________
___________________
Lesson End Activity
___________________
PE
Prepare a PowerPoint presentation on consumer complaint
___________________ management initiatives.
___________________
___________________ Keywords
___________________ Voluntary: It means not expressly required by law
___________________
Service business: It entails selling a product that does not exist
until the customer pays for it.
Referrals: The recommendation of a satisfied client or a
professional colleague is often the most effective way of bringing in
new clients.
Further Readings
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw Hill, 2005.
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Anderson, Paul and Art Rosenberg, The Executive’s Guide to
Notes
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Customer Relationship Management, Doyle Publishing Company,
Houston, 2000. ___________________
___________________
Web Readings
___________________
en.wikipedia.org/wiki/Customer_relationship_management
___________________
searchcrm.techtarget.com/definition/CRM
___________________
PE
finance.yahoo.com/q?s=CRM - United States
___________________
www.impelcrm.in
___________________
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/ ___________________
___________________
___________________
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Customer Relationship Management
212
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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UNIT 17: Service Characteristics
Unit 17
213
Notes
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Service Characteristics
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
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\ Intangibility ___________________
\ Perishability ___________________
\ Variability
___________________
___________________
Introduction
___________________
Service provision is often an economic activity where the buyer
does not generally, except by exclusive contract, obtain
exclusive ownership of the thing purchased. The benefits of such a
service, if priced, are held to be self-evident in the buyer's
willingness to pay for it. Public services are those services for
which society (nation state, fiscal union, regional) as a whole pays
for through taxes and other means.
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Intangibility
A customer cannot see, touch, or feel the service product. There is
also no scope for the customer to make impulse purchase decisions
as triggered by visual images and the touch-and-feel factor – which
are not anyway possible in intangible service offers. The consumer
cannot measure either its features or its quality. There is no
concept of ownership, possession or acquisition for the customer
after the service transaction.
These are the ways in which intangibility can be overcome:
1. Visualization: The marketer should find ways and means to
help the customer visualize the transaction process and the
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S
Write an article on the
___________________ In this way, the marketer can build a bridge, and expect the
intangibility of services.
association to rub off positively on the service offer, morphing
___________________
the endorser’s personality on it. The consumer makes the
___________________
analogy, believes the service delivery promise, and gets some
___________________ idea of its character. This makes it easier to build a
___________________ relationship with customers.
PE
___________________ 3. Physical Representation: The intangibility factor in a
service offer forces a marketer to go for tangible
___________________
representations symbolizing the existence and character of
___________________
service industries. The tangibles help in making the offer
___________________ believable. Some of the ways in which this can be used are:
___________________ (a) Uniforms: This has been in use by many service
organizations over a long period of time effectively. They
not only convey uniformity, discipline and conformity but
also professionalism. They also improve visibility for the
service organization. Hospitals, the church, the army,
police, airlines and shipping firms have seen the uniform’s
utility very early on.
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(b) Colours: This is used in servicescapes like interiors,
stationery, glow signs, buildings, etc. The corporate
colours are a part of their logo and other corporate
communication tools. Colour communicates uniquely and
softly sells the firm’s viewpoint.
(c) Logos and mascots: This is not unique to service firms but
has been effectively used by them to overcome
intangibility. Logos, derived from the Greek word logos,
implied “word”. Kings used it in their royal seals and
English Lords and other nobility used them in their family
crests. Service firms have sought to convey their mission
and vision through them. Most schools, colleges and
universities have them to convey their core values,
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S
prepare to be awarded certification from National Association Make a brief report on the
___________________
of Accredition (NAAC), National Board of Accredition (NBA), perishability feature of
services.
___________________
etc. Annual reports, profit and loss statements, balance sheets,
etc., all are examples of such positioning documentations. ___________________
___________________
Check Your Progress
___________________
PE
Choose the appropriate answer:
___________________
1. BPO stands for:
___________________
(a) Business Process Outsourcing
___________________
(b) Business Program Operation
___________________
(c) Business Program Outsourcing ___________________
(d) None
2. NAAC stands for:
(a) Numerical Association of Accredition
(b) National Association of Accredition
(c) National Association of Accounts
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(d) National Association of Accountability
Perishability
The perishability factor prevents a service marketer from storing
his offers. This robs him of the privilege of delayed sales. The
service marketer suffers from lost opportunities. But there are
ways and means to overcome the perishability factor:
Over-marketing
A service marketer targets for more customers than he has the
capacity to serve. In this way, if there are drop-outs and
cancellations, the actual number of customers is the same as
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servicing capacity. Then the service marketer does not suffer from
any opportunity loss. But the flip side with over-marketing is the
possibility of extreme dissatisfaction amongst those customers who
have been the target for over-marketing but are being denied
services. Obviously, no good service marketer worth his salt would
like to be in the position of having customers on the doorstep and
turning them down. So the trick is to do over-marketing with lots
Customer Relationship Management
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___________________ beforehand too many conditions.
___________________
Managing Demand
___________________
With no scope for delayed sales or stocking of inventory, it is all the
___________________ more imperative for a service marketer to manage demand.
___________________ Accurate demand management would aid estimation and
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forecasting which would in turn help avoid perishability. At the
___________________
risk of sounding pompous, one can safely say that marketing is all
___________________ about demand identification, measurement and management.
___________________
Nine different types of demand have been identified. The service
___________________ marketer has to understand and adopt them in his marketing to
___________________ avoid perishability. They are:
1. Rising Demand: This occurs when the service offer is in the
growth stage of the product life cycle, customers are aware of
the service category and service brand, and the rate of
adoption is increasing in geometric progression with more
first-time buyers trying the service offer and customers
making repeat purchases. The service marketer not only
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should recognize this trend but also measure the rate of rise of
demand. This information would enable him to cater to the
rising demand by appropriately increasing capacity of service –
facilities, service personnel, etc. – and avoid lost opportunities.
But the marketer should also be warned that success begets
imitators and to ward off the competition it would require
expenditures in promotions and discounts. This would severely
hit the service marketer’s bottom line and he should be
prepared for the next service product development.
Cellphone service: The marketer should not only recognize that
there is a rising demand for cellphones, across all sections,
especially youth, but also the rate of growth of demand.
He will thus be prepared with his expansion plans of more
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delivery, etc. Falling demand for video parlour services due to 217
the popularity of satellite broadcasting TV channels is another Notes
S
case of technology changing the pattern of demand for services. ___________________
Declining popularity of pool parlours, once the rage in Mumbai ___________________
and other metros, may be ascribed to the fact that multiplexes,
___________________
shopping malls and beer pubs were seen as better place to
hang out, by both sexes of the affluent, hedonistic metropolitan ___________________
youth. ___________________
PE
Whatever be the reasons, the service marketer should identify ___________________
the declining demand, measure the rate of decline, analyse the ___________________
causes, bring forth innovative marketing programmes to arrest
___________________
the trend or else if the service category itself is on the decline,
get out of the market and cut losses. ___________________
___________________
3. Demand: The market may not be having a need of a
particular service offer because of various demographic, socio-
economic and sometimes geo-demographic factors. The service
marketer has a choice: either create demand for the service by
finding out the needs, wants and desires of the market or do
not enter the market.
People in certain localities may not be interested in home
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delivery as they dislike strangers coming into their homes,
especially when the men folk are not at home. Even courier
services are badly hit due to this social factor. Thus, modern
retailing or non-store retailing may not take off in that place.
There may not be any demand for English or foreign language
courses in rural Rajasthan. Similarly, there really may not be
any demand for counselling centres in rural India or Western
Union money transfer facilities in an area where there is no
migration of people – no reason to either send or receive
money. Correct reading of the demand will prevent marketers
from wrong investments.
4. Full Demand: In this situation, the service marketer will find
that the demand is equal to supply. It is an ideal situation for
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the firm but danger lurks when a new entrant brings out his
offer. Then either the market has to increase consumption or
else the players battle it out amongst themselves fighting for
the same pie. Normally price wars are inevitable, margins fall
and the viability of the service firms comes into question. Only
the fittest tend to survive; mergers and acquisitions become
Customer Relationship Management
218 the norm or else the weaker players face closure and
Notes bankruptcy.
S
___________________
5. Overfull Demand: This takes place when demand far
___________________ outstrips supply, and the service marketer is not able to
___________________ handle the demand. This implies that there are either fewer
capable players or entry barriers and regulation against free
___________________
market enterprise. Either way, the service marketer cannot be
___________________ complacent and has to be prepared for de-marketing his
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___________________ service. If not, disillusionment may set in and negative
feelings might creep into the customer’s mind.
___________________
___________________
6. Negative Demand: This is a kind of anti-demand. Customers
would do anything to avoid consuming a particular service.
___________________
This could be because they might fear bodily harm,
___________________ irreversibility in the consumption, high risk, etc. They would
sometimes pay to avoid the consumption/experience of the
service offer. Cosmetic surgery – With increasing media
reports of the harmful effects of cosmetic surgery and beauty
treatments, there might be a negative demand by the target
market for the service. Similarly, there are people who have a
phobia against inoculation and would do anything to avoid it.
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The service marketer has to communicate the reversibility in
the purchase to his target market. Otherwise they tend to be
price sensitive.
7. Latent Demand: This is a demand that lies deep inside a
consumer unquenched, as no service offer exists to satisfy it.
The consumer may not be able to accurately articulate his
demand and features of the offer and therefore may not be able
to voice his desire. But when such a service does come in the
market as an offer, he grabs it.
8. Seasonal or Irregular Demand: Demand for certain
services fluctuates with seasons or is irregular. Sometimes
there is regularity in their irregularity (seasonal). Some
seasons there would be peak demand, while in others there
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service or goods become unwholesome, without any nutrition, ___________________
resembling junk food.
___________________
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not in a position to deliver only because he is neither prepared nor
___________________
ready – due to supply bottlenecks. They range from goods to
personnel: ___________________
services that are highly tangible like retailing, car rentals, ___________________
restaurants, tourism, hotels, pubs, etc. If certain merchandise
___________________
is not available when a customer asks for it (stockout), he is
free to go to another retailer. Thus, the service marketer
forever loses that revenue. To retain the customer, the retailer
might offer rainchecks (a promise to stock the SKU especially
for the customer whenever he comes next – which is an
expensive proposition anyway).
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Souvenir sellers may lose customers because they may not
have the particular merchandise; similar would be the
dilemma of a pub manager if he doesn’t stock certain brands
asked for. If a car rental company like Wheels-Rent-A-Car
doesn’t have a four-wheel-drive in their pool when asked for by
an adventure tourist, he might lose the customer.
z Systems and Processes: Supply problems occur here when
the systems and processes of service delivery fail and the
provider is not able to offer the service as he is entirely
dependent on them.
With the 9/11 terrorist attack in New York, and the
destruction of World Trade Centre, many BPOs and banks
based in USA could not continue their service. It was with
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220
A retail store has peak-time crowds during evenings and slack
Notes
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times in the afternoons. The dilemma for the retailer is how many
___________________
employees to have: if their number is as per the peak time crowds,
___________________ then there might not be much work for them during the slack
___________________ times and the retailer ends up having higher operating costs. On
the other hand, if the retailer has employees sufficient to cater to
___________________
the afternoon and morning shoppers, then they might be
___________________ overwhelmed by the peak time rush. This might greatly affect the
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___________________ service encounter, inconvenience the shoppers, result in long
queues and, in effect, have unpleasant experiences. The staff would
___________________
soon be de-motivated and the impatient shoppers might change
___________________
stores.
___________________
The store could then manage the personnel supply problem with
___________________ part-time employees during peak time demand. Esselworld, the
theme park pioneer, takes in students as temporary employees or
trainees on internship during their summer holidays.
Peak-hour Essential Services: A retail bank during peak hours
might shut down a few non-urgent desks/counters and concentrate
only on essential services. Thus, during heavy withdrawals (old-
timers in PSU banks, before the advent of ATMs, would recall with
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shudder the first ten days of the month in their branches as ‘salary
days’ – where people crowded for the withdrawal of their salary),
certain non-essential areas like the enquiry counter, dispatch etc.,
might be temporarily shut down to man extra counters in the
savings and current accounts withdrawals and cash section.
In this way, service firms can manage to find ways and means to
address its unique characteristic of perishabilty and not losing
business during the time of service transactions.
Include the Customer in your Process: This is a novel way to
beat perishability due to the supply problem of personnel. The
customer is made to be a partner and a part of the service delivery.
Executive buffet lunch is a classic example of a high quality service
offer delivered with minimal staff support. Whatever be the crowd,
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Variability 221
Activity
Notes
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Variability conveys to the customer an element of inconsistency Prepare a draft on variability
___________________
and non-standardisation in the service offer and service delivery. characteristic of service.
The customer’s service encounters are different every time. The ___________________
same service product is never delivered in the same way to the ___________________
same customer across two different time periods; a customer
___________________
perceives the service transaction as having a different quality
when delivered from two different places – or even on two different ___________________
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occasions at the same service outlet. By its very nature, it can ___________________
never be an identical, repeatable experience every time – only an ___________________
approximation thereof. This is so unlike goods, where the customer
___________________
is convinced that the product that he buys is the same –
irrespective of where he has purchased it and whom he has ___________________
purchased from. Some of the ways this can be overcome are: ___________________
Summary
Services have become an integral part of any economy’s
infrastructure and have become indispensable to urban life.
Services marketing is marketing based on relationship and value.
It may be used to market a service or a product. Marketing a
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222
Keywords
Notes
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Service Marketing: Marketing based on simple relationship and
___________________
value.
___________________
Logos and mascots: This is not unique to service firms but has
___________________
been effectively used by them to overcome intangibility.
___________________
Perishability: It prevents a service marketer from storing his
___________________ offers.
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___________________
Over-marketing: A service marketer targets for more customers
___________________ than he has the capacity to serve.
___________________ Zero Demand: The market may not be having a need of a
___________________ particular service offer because of various demographic, socio-
economic and sometimes geo-demographic factors.
___________________
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw Hill, 2005.
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
Customer Relationships Management, Wiley, 2003.
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Mining Applications, 2004.
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___________________
searchcrm.techtarget.com/definition/CRM
___________________
finance.yahoo.com/q?s=CRM - United States
___________________
www.impelcrm.in
___________________
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
___________________
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___________________
___________________
___________________
___________________
___________________
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224
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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UNIT 18: e-CRM
Unit 18
225
Notes
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e-CRM
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
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\ Advent of e-Commerce ___________________
\ Definition of e-CRM ___________________
\ Scope of e-CRM
___________________
\ CRM vs e-CRM
___________________
\ Challenges in e-CRM
\ Web Experience ___________________
Introduction
Electronic Commerce (e-Commerce or EC) is the exchange of
business information using electronic formats, including Electronic
Data Interchange (EDI) Electronic Mail (e-mail), Electronic
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Bulletin Boards (EBBs) and Electronic Funds Transfer (EFT). e-
Commerce Technologies are designed to replace traditional paper-
based workflow with faster, more efficient and reliable
communications between computers. To conduct business in the
current environment using e-Commerce technologies requires that
a business have access to a computer and a modem.
e-Commerce is what happens when one combines the broad reach
of the Internet with the vast resources of traditional information
technology systems. It uses the Web to bring together customers,
vendors, and suppliers in ways never before possible; e-commerce
is here and presents abundant opportunities. Companies around
the world already buy and sell over the Internet. They connect
with customers, suppliers and each other. They do business on the
WEB, and consequently, they do more business. There are
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226 and some type of network e.g. a direct connection or the Internet.
Notes
Activity This includes business-to-business transactions, online retail, and
S
Write an article on the advent
___________________
of e-commerce. the digitalization of the financial industry. Some experts and
leading Net Entrepreneurs even argue that electronic commerce
___________________
includes all the steps that occur in any business cycle, such as
___________________
placing ads, completing invoices, and providing customer support.
___________________ The term “e-Commerce”, often used interchangeably with IBM’s
___________________ coined term “e-Business,” covers a lot of ground and refers to all
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these areas.
___________________
___________________
Advent of e-Commerce
___________________
E-commerce actually began in the 1970s when larger corporations
___________________
started creating private networks to share information with
___________________ business partners and suppliers. This process, called Electronic
Data Interchange (EDI), transmitted standardized data that
streamlined the procurement process between businesses, so that
paperwork and human intervention were nearly eliminated. EDI is
still in place, and is so effective at reducing costs and improving
efficiency that an estimated 95 per cent of Fortune 1,000
companies use it.
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Today, electronic commerce increasingly refers to business
conducted over the Internet. EDI, for example, is being brought to
the Internet and allowing companies to save money by eliminating
the old system’s expensive private networks and by expanding
reach to include more businesses on the supply chain. Other
business-to-business transactions are simply moving to the web
without using the standardized forms required by EDI.
More recently, brand names like Barnes and Noble, the Gap, and
Wal-Mart and Indian companies like BPB publications and rediff
on the net have set up shops on the Net, and many experts believe
that these and other brand names will be able to establish long-
lasting presence on the Web. Today, all a person needs is a
computer, a browser, and Internet access, and he or she can buy
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flowers, airline tickets, and even a car. The past 3 years have seen
a rise in the number of companies’ embracing e-CRM technologies
and the Internet in India. Most e-CRM sites have been targeted
towards the NRIs with gift delivery services, books, audio and
videocassettes, etc., Major Indian portal sites have also shifted
towards e-commerce instead of depending on advertising revenue.
The web communities built around these portal sites with content
UNIT 18: e-CRM
have been effectively targeted to sell everything from event and 227
movie tickets the grocery and computers. Notes
S
Indian businesses trying to get into e-Commerce maybe frustrated, ___________________
since in India RBI does allow credit card information to be taken ___________________
over the Internet without a legally binding signature. The Indian
___________________
government now recognizes digital signature for customer
verification over the Internet. ___________________
___________________
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Definition of e-CRM ___________________
228 perspectives, with lucid time lines. The team must peruse and
Notes
Activity analyze the current business situation in view of future goals,
S
Make a brief report on the
___________________
scope of e-CRM. examine the existing systems, workflow and processes in customer
management and develop a roadmap for the e-CRM solution to
___________________
apply relevant strategies for achieving its goals.
___________________
PE
___________________ 1. EFT stands for:
___________________ (a) Electronic Fund Transfer
___________________ (b) Electronic Foreign Transfer
___________________ (c) Electrical Fund Transfer
___________________
(d) None...................
2. EBB stands for:
(a) Electronic Base Board
(b) Electronic Bulletin Board
(c) Electrical Bulletin Board
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(d) None...................
Scope of e-CRM
The scope of e-CRM encompasses:
z Sales: Supports key functions such as contact management,
opportunity management, forecasting and 360-degree view of
all customer accounts and interactions. Automate and organize
sales force activities for focused selling and closing.
z Marketing: Detailed schedules and tasks, maintaining
contact lists and activity logs, automation association with
leads, accounts or contacts, managing product and resource
information, marketing alerts, etc.
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z Partner Management: Tracks and analyses sales made by
Notes
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partners and track contacts associated with dealers,
distributors and other channel partners; ___________________
___________________
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CRM vs e-CRM
___________________
e-CRM is not just customer service, self-service web applications,
___________________
sales force automation tools or the analysis of customers’
purchasing behaviours on the internet. ___________________
___________________
e-CRM is all of these initiatives working together to enable an
organization to more effectively respond to its customers’ needs ___________________
and to market to them on a one-to-one basis.
e-CRM is integration between the traditional CRM and e-Business
application. This small ‘e’ should be a gigantic ‘E’ because this
technology, when properly used, can have a significant impact on
industries and the structure of businesses. Essentially, the ‘e’
enables an organization to extend its infrastructure to customers
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and partners in ways that offer new opportunities to learn
customer needs, add value, gain new economies, reach new
customers, and do all of this in real time. e-CRM is all about
strategy and therefore requires the direction and engagement of
senior management to be successful. Senior management must
have a broad understanding of the capabilities of these
technologies and then translate them into specific opportunities
that leverage competitive advantage.
e-CRM is different from traditional concept of customer service.
For example, the traditional customer service concept works as
follows:
z Customer has a problem with a product or service late in the
evening.
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z Customer has to wait till company offices open the next day.
He is upset because he cannot resolve the problem
immediately.
z Next day when he contacts the company, the Customer Service
Representative assists the customer in resolving the
complaint. Sometimes resolution of complaint can take days,
Customer Relationship Management
S
___________________ problem. Customer is not happy.
___________________ On the other hand, e-CRM is proactive and provides easily
___________________ accessible data for real time decision-making. e-CRM would tackle
the above situation as follows:
___________________
z Customer has a problem with a product or service late in the
___________________
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evening.
___________________
z Customer does not have to wait till morning to have his
___________________
problem resolved. He visits company’s website for assistance
___________________ and checks the Frequently Asked Questions (FAQs). He is able
___________________ to resolve his problem. Customer is happy.
231
In the Internet a company should care customers online and
Notes
S
provide a unified customer communication at various customer
touch points; live service and email support. To ensure that the ___________________
website is customer’s preferred place a business must provide ___________________
effective customer service.
___________________
z Knowledge of Warehousing: Capturing customer
___________________
information is the key to managing customer relationship.
___________________
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Software that can consolidate customer information into a
single database would provide your business with important ___________________
analysis for customer tracking and analysis. ___________________
S
Prepare an assignment on the
___________________
challenges in e-CRM. Check Your Progress
___________________
Fill in the blanks:
___________________
1. e-CRM is integration between the traditional CRM
___________________
and .................
___________________
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2. ................... is different from traditional concept of
___________________
customer service.
___________________
S
for smaller sites and mom-and-pop shops to attract customers, ___________________
thereby forcing them to compete with the big firms. On the
___________________
upside, nearly all experts believe that overall e-commerce will
increase exponentially in coming years. Business to business ___________________
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include financial services, travel, entertainment and groceries.
___________________
And for those considering opening a virtual storefront,
forthcoming technology and standards agreements will make it ___________________
easier to create a site, to protect it against payment fraud, and ___________________
to share information with suppliers and business partners.
___________________
___________________
Web Experience
It is a complex set of relationships between the Web surfer and the
person(s) at the other end of the Internet line, the Internet being
the channel that the parties use to communicate with each other.
The relationship between the parties and the interactions between
them are very different from other forms of interaction. For
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example, how often one decides to e-mail a friend rather than call
him? The thought behind it is that, easier to send one e-mail than
to give him a call upon him. The total time was about the inputs of
typing and sending the e-mail. A phone call, would probably have
taken two minutes, or about five minutes cluing the response.
Additionally there are no distractions in the discussion. The
subject matter written is the subject matter referred to. No more,
no less. The interaction is there without the interaction being
actually there. No baggage, no emotion, and no complicated
thought process. It is what it is meant to be-and it doesn’t save a
bit of time. It just seems that way because one has more individual
control over the process. A customer is well informed about what
he wants and also can get additional information of his/her interest
and the salesman’s job becomes easier if well prepared on the sales
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___________________ nature makes innovation necessary to make sure that the
identification, derivation, and interaction work towards the benefit
___________________
of both the customer and the company.
___________________
e-CRM’s value comes from giving a customer a “total experience”
___________________
on the Web. Traditional CRM channels can not do that because
___________________ they are based on applications that may not be effective in giving
PE
___________________ the customer direct access to the interfaces functionally.
Ordinarily, CRM provides sets of tools, which while possibly Web-
___________________
enabled, are not designed from the ground up for the Web. It is
___________________
more for the corporate department or the interfaces and
___________________ functionality. Ordinarily, the individual employee does this
___________________ customer ground-up creation or redevelopment so that all
functions, external and internal, is entirely web based. For
example, personalization tools are more appropriate to Web
customer experiences. Personalization tools have little value if
used in a purely client/server environment. However, this doesn’t
guarantee that even CRM is entirely wonderful.
frustrated. Also, if the basis for the content being served to the
customer does not consider all the data gathered for the business,
the customer is likely to be served in that way. Therefore, it is
imperative that e-CRM be installed in conjunction with traditional
CRM and that the two function together. Otherwise, the result of
e-CRM might actually prove negative.
UNIT 18: e-CRM
235
Designing e-CRM Notes
S
Some CRM companies have Web-enabled their existing application ___________________
and called it “Internet ready”. Others have redesigned it from the
___________________
bottom so that it is referred to as a Web application, rather than a
client/server application that can be viewed on the Web. These are ___________________
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technology to fulfil the promise of making the desired customer
___________________
activity possible, the invisible technical details really matter. For
example, if one wants to have an application that is optimized for ___________________
Internet security activity, it uses HTML that is, accessible from ___________________
either desktop or palm, or even laptop. It can be accessed securely
___________________
using Internet security protocols that are reachable via TCP/IP
and so on. ___________________
Application Servers
Application servers drive the pure Internet CRM applications. The
applications servers that are often found in three-tier
architectures, which are not created just for the Internet
client/server architecture, which is, in fact, why the three-tired
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approach was fashioned. But they are the best contemporary
architecture for the Internet. The application servers provide pre-
constructed Web pages to a Web server that delivers them to the
users through their queries.
Web Browser
This model preserves the fundamental value of the Internet as a
communication medium, and provides a common platform for
independent access to data anytime and anywhere. There is no
program or application code that needs to reside on the user’s PC;
therefore, users gain immediate access to the application with the
right URL with security authorization. It’s just like using Web
browser to view any other Web page; click on the right link and one
can see the information. Peoplesoft/Vntive CRM 8.0 is a good
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236 the look, feel, and usages paradigm. It is not “Windows 98 on the
Notes Web”.
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___________________
Here is where the key difference lies. No client software is
___________________ installed with pure Internet applications, the browser is the client.
___________________ The architecture is as multi-tier, server-centric model, featuring
separation of presentation, business logic, and data management
___________________
functionality. If one is not familiar with Internet – centric
___________________ application and interface and opens Microsoft Word 2000, it’s just
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___________________ a routine thing. There is nothing interesting or special about it.
But if one is loading Internet Explorer 5.5 and onto the Web, one
___________________
thinks about the fact that one is loading up the Internet
___________________
connection. It is not part of the desktop. With Internet-centric
___________________ applications, the browser is no different than the Word 2000
___________________ interface. It is just part of the landscape, not like walking. This
works particularly well when using a broadband Internet
connection such as T1 or T3 line, cable modem, or DSL that allows
to be up and run the Internet 24 hour a days, seven days a week
with a ground-up e-CRM application, it is as universal as the
desktop is from wherever one is connected.
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anywhere and anytime is true because all functions are ___________________
transparent and accessible. When you load and unload applets
___________________
each time you need a specific function, you feel less in control of
your Internet CRM destiny. ___________________
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facing) and impact the customer, there is a back-end to the from ___________________
office. In other words, to put up the “event” in e-CRM, the
___________________
development tools for the Web have to be used. Such tools as Java,
Enterprise Java Beans (EJB), Perl, and CGI are the ground work ___________________
for the “webfication” of CRM. ___________________
___________________
Check Your Progress
Fill in the blanks:
1. ................... used to establish identity is based upon an
object called digital certificate.
2. ................... drive the pure Internet CRM applications.
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Summary
The e-CRM, i.e., CRM online implies an additional means of
communication and level of interaction with the customer where
there is as real difference in the technology and its architecture,
which allows for ease of self-service to the customer. A proactive
organisation with the intention to incorporate e-CRM should
develop appropriate: (a) business objectives; (b) Assess its current
“sophistication” along the e-CRM continuum in terms of process
and technology; and (c) Define business processes and changes
needed to support its goals.
238
Notes Keywords
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___________________
e-CRM: e-CRM is integration between the traditional CRM and e-
___________________ business application.
___________________ Web Browser: This model preserves the fundamental value of the
___________________ Internet as a communication medium, and provides a common
platform for independent access to data anytime and anywhere.
___________________
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___________________
Questions for Discussion
___________________
1. Explain the concept of e-CRM and analyze the essentials of
___________________
building an e-CRM.
___________________
2. What are the objectives of e-CRM? Examine the CRM process.
___________________
3. What are the essential features of an effective e-CRM?
4. “The CRM applications are a convergence of functional
components, advanced technologies, and channels”. Discuss
the modules of e-CRM.
5. What are the strategic objectives of CRM marketing
applications?
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Further Readings
Books
Mohammed H. Peeru and A Sagadevan, Customer Relationship
Management, Vikas Publishing House, 2004, Delhi.
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
Century, Tata McGraw Hill, 2005.
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
Customer Relationships Management, Wiley, 2003.
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Mining Applications, 2004.
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Web Readings Notes
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en.wikipedia.org/wiki/Customer_relationship_management ___________________
searchcrm.techtarget.com/definition/CRM ___________________
www.impelcrm.in ___________________
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/ ___________________
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___________________
___________________
___________________
___________________
___________________
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Customer Relationship Management
240
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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UNIT 19: Portals and other Fields in e-CRM
Unit 19
241
Notes
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Portals and other Fields in e-CRM
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
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\ e-CRM and Portals ___________________
\ Modules in CRM ___________________
\ Basic Requirements of e-CRM
___________________
\ Three Dimensions in e-CRM
___________________
\ Key e-CRM Features
\ ERP and CRM ___________________
Introduction
With the emergence of the Internet, enterprise portals took on a
whole different meaning. They have now become the gateways to
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entire Web-based communities and customer activity.
242 through the use of their portals and massively, by letting a portal
Notes
Activity user access multiple portals, increasing the selections of good,
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Write an article on e-CRM
___________________ services, information and portals. One has to decide the benefits to
and portals.
an organisation.
___________________
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___________________ access to customer data, but becomes a knowledge base that is
tailored to the needs of each different audience, with Web content,
___________________
third-party applications, reference materials, and detailed
___________________
customer information. Portals thus contain anything within or
___________________ outside of the enterprise that customer-facing groups can utilise, to
___________________ enhance their understanding of a customer’s experience and needs.
Several things are important for a highly successful CRM portal
strategy; the system should be the architect around the customer,
instead of around specific job functions. By putting the customer at
the applications core, no matter who is viewing, using or sharing
the information, companies are assured a sample customer
interaction process.
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Deploying a CRM portal solution only in one department or one
business unit will not yield the same results as an enterprises-wide
solution, which gives every front-office employee access to the
critical customer data and knowledge base.
A thin-client or Web-based portal system saves millions of dollars
in time, employee turnover, and other costs by greatly reducing
system implementation and management time. While there is still
a need for client/server technology, and onyx still supports it, the
future is on the Web where installations, upgrades, and expansions
can be managed from one location, on one server, and all end users
need to gain access is a browser. Different audiences require
different views and different types of information, making it
absolutely necessary to provide the right content and structure to
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each.
Modules in CRM
The CRM applications are a convergence of functional components,
advanced technologies, and channels. Functional components
include: (i) sales application; (ii) marketing automation; and (iii)
UNIT 19: Portals and other Fields in e-CRM
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channels are described below: ___________________
z Sales Applications: The cornerstone of CRM is SFA (Sales ___________________
Force Automation). The thrust of SFA is automating the
___________________
fundamental activities of sales professionals, both internally
and in the field. Common applications include: ___________________
___________________
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Calendar and scheduling
___________________
Contact and account management
___________________
Incentives calculates
___________________
Opportunity and pipeline management
___________________
Sales forecasting
___________________
Proposal generation and management
Pricing
Territory assignment and management
Expense reporting.
Sales configuration applications go hand in hand with SFA
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applications, which allow application users, to assemble
product components into finished goods. Rules are
programmed into configuration applications and are
abstracted from the user. Sales configurations are suitable for
Web because users need not have a technical background to
assemble products. Unassisted web sales capabilities enable
customers to select and purchase products or services via the
Web.
z Marketing Applications: They form the newest breed of
applications in the CRM space. These applications complement
SFA applications and provide certain capabilities unique to
marketing. Common applications include the following:
Web-based/traditional marketing campaign planning,
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244
A marketing encyclopaedia (a repository of product,
Notes
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pricing and competitive information)
___________________
Lead tracking, distribution and management
___________________
Marketing applications primarily aim to empower
___________________
marketing professionals by providing a comprehensive
___________________ framework for the design, execution and evaluation of
___________________ marketing campaigns and other related activities. For
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example, a successful marketing campaign typically
___________________
generates a qualified sales lead that needs to be
___________________
distributed to sales professionals who need to act upon
___________________ them. Thus, marketing automation and SFA automation
___________________ are complementary. It is essential to realise that SFA and
marketing applications play different role in the customer
___________________
fulfilment life cycle.
z Customer Service and Support Applications: These
applications have gained a major importance for effective
customer retention and in many cases profitability depends on
providing superior service. These applications are typically
deployed through a call centre environment or over the Web
for self-service, and allow organisations to support the unique
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requirements of their customers with greater speed, accuracy
and efficiency.
Common applications include:
Customer care
Incident, defect, and order tracking
Field service
Problem and solution database
Repair scheduling and dispatching
Service agreements and contracts
Service request management
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245
Check Your Progress
Notes
Activity
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True or False:
Make a short report on the
___________________
1. CSS applications are helping organisations make a basic requirements of e-CRM.
___________________
transition from cost centres to profit centres.
___________________
2. ERP attempts to bridge the gap between the SCM and
CRM. ___________________
___________________
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Basic Requirements of e-CRM ___________________
Enterprise
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Through e-CRM, a company gains the means to touch and shape a
customer’s experience across the entire organisation, reaching beyond
just the bounds of marketing to sales, services, and corner offices –
whose occupants need to understand and assess customer behaviour.
An e-CRM strategy relies heavily o the construction and maintenance
of as data warehouse that provides a consolidated, detailed view of
individual customer behaviour and communication history.
Empowerment
In this new age, e-CRM strategies must be structured to
accommodate consumers who now have the power to decide when
and how to communicate with the company and through which
channel, which ability to opt for or out of. Consumers decide which
firms earn the privilege to “talk” with them. In light of this new
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Economics
Too many companies execute communication strategies with little-
effort or ability to understand the economics of customer
Customer Relationship Management
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___________________ resources and efforts of individuals shall provide the greatest
return on customer communication initiatives.
___________________
___________________ Assessment
___________________ Understanding customer economics relies on a company’s ability to
___________________ attribute customer behaviour to marketing programs. A company
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should evaluate customer interactions along with various customer
___________________
touch-point-channels and compare anticipated ROI against actual
___________________ returns, through customer analytical reporting. Evaluation of
___________________ results allows companies to continuously refine and improve efforts
___________________
to optimize relationships between companies and their customers.
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e-CRM must address customer optimization in three dimensions Prepare a draft of an
___________________
viz.: assignment on the
dimensions of e-CRM.
___________________
z Acquisition getting (increasing number of new customers)
___________________
z Expansion (increasing profitability by encouraging customers
to purchase more products and services) ___________________
___________________
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z Retention (increasing the amount of time of customers stay).
___________________
While acquisition and retention are fairly well understood,
customer profitability through expansion requires some scrutiny. ___________________
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___________________
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___________________
technology and it will reduce the technology gap as well as
refining your business process.
___________________
z Data warehouse driven: In an e-CRM solution, the data
___________________
warehouse or customer data mart contains a consolidated and
___________________ comprehensive view of the customer. The warehouse provides
___________________ the broadest possible profile of the customer. This is needed to
determine an appropriate course of action the most effective
offer to make, and the best channel to deliver pertinent
message.
z A multi-channel view: Organisations today have different
methods of interacting with customers. For example, a bank
might use one application to support its Website; another to
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support its call centre; another to support e-mail; another to
support sales, another to support ATMs; and yet another to
support direct mail and telemarketing. These applications
rarely connect to each other thus precluding the sharing of
information between channels and preventing meaningful
cross-channel connections for a customer. For example, a call
centre agent may be careless to a complaint that a customer
registered that day through e-mail. Nor would the agent be
aware of customer behaviour on the Website.
z Measurement driven: Today, many companies spend
millions of dollars communicating with customers, but spend
little time and effort determining the effectiveness of those
campaigns. e-CRM provides the means to measure
communications efforts.
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249
Check Your Progress
Activity
Notes
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Fill in the blanks: Make a presentation on the
___________________
relationship between ERP
1. e-CRM provides the means to measure ................... and___________________
CRM.
2. ...................enables companies to target their customer
___________________
investments in an optimal fashion across all channels.
___________________
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ERP implementation is an expensive and long drawn affair that ___________________
requires the best efforts of the most competent team drawn from ___________________
the middle and senior management of the company. Typical team
___________________
size is 60 to 70 from within the company and an equal number
from the implementation partner. Substantial time of top ___________________
250
SCM and CRM
Notes
Activity
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With the help of internet,
SCM (Supply Chain Management) allows organizations to
___________________
collect more information on efficiently manage their entire supply chain from purchasing to
SCM and CRM.
___________________ distribution and logistics. I think that the main focus of SCM is on
___________________ purchasing or transactional data, or internal data. SCM and ERP
___________________
are often different systems in many organizations, which make it
difficult to “Connect Demand with Supply” as Michael Schrage’s
___________________
article discusses. The difficulty will play an important role for
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___________________ technology managers as the two systems can have contrasting
___________________ objectives. Schrage offers an example of this:
overall running the supply chain. A business can obtain major cost
savings by acting upon information from CRM systems.
A streamlined supply chain is the key to reaching out to the right
consumer at the right time and CRM offers inputs on providing the
customers with the right product mix and targeting them with
appropriate marketing. A backward integration of processes taking
UNIT 19: Portals and other Fields in e-CRM
into account the information obtained from CRM can help a 251
business better allocate its resources be they in manufacturing, Notes
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processing, marketing, or sales. Apportioning of raw materials to ___________________
machines and machines to a given product can be done more
___________________
accurately if market demands are known; it also leads to a
reduction of inventory stocks, JIT production, and a lean supply ___________________
chain that responds to demands quickly. All this not only helps cut ___________________
costs but also acquire a competitive advantage for a business that
___________________
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can take the lead in offering a better buying experience and service
___________________
level that competitors may not be able to offer.
___________________
An efficient and responsive supply chain can have a huge positive
impact on store product segmentation and effective customer ___________________
targeting. Integration between CRM and SCM improves ___________________
communication between the store and the manufacturing. For
___________________
retail businesses such integration can imply a lot of benefits such
as better distribution to retail outlets over various geographic
locations; feedback to suppliers, distributors, transporters, etc. The
use of BI for predicting performance at individual stores that can
be aggregated to obtain a holistic picture of the supply chain is
relevant to the entire exercise. Businesses can ensure the
availability of quick-moving items and reduce the likelihood of
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losing customers.
A wider view of the happenings at the retail level can also help to
take ad hoc decisions when pressed for time. Marketing and sales
can coordinate more fruitfully with the supply chain to move or
divert goods to given locations during peak seasons or for
promotional purposes. Viewing data pulled from marketing, sales,
supply chain, finance etc on a single dashboard can enable
management as well as store managers to take profitable decisions
on cross-selling and up-selling across different channels.
252
2. SCM stands for:
Notes
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___________________
(a) Supply Chain Marketing
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___________________
Summary
___________________ As a good CRM portal aggregates all relevant customer
information within a single application or desktop in a format that
___________________
is customized and personalized for the department or individual
___________________
interacting with the data. An ideal portal doesn’t just provide
___________________ access to customer data, but becomes a knowledge base that is
tailored to the needs of each different audience, with Web content,
third-party applications, reference materials, and detailed
customer information. Portals thus contain anything within or
outside of the enterprise that customer-facing groups can utilise, to
enhance their understanding of a customer’s experience and needs.
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Lesson End Activity
Find out an example of a company having portals for its customers
as well as employees. Make a report of the features of the
company’s portal.
Keywords
Portal: It is a gateway to an array of services to an optimal
community.
Customer Service and Support Applications: These
applications have gained a major importance for effective customer
retention and in many cases profitability depends on providing
superior service.
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1. Discuss the designing of CRM marketing organization.
___________________
2. Explain the interdependence of CRM and e-CRM. ___________________
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must possess certain key characteristics”. Discuss. ___________________
___________________
Further Readings ___________________
Books ___________________
Web Readings
en.wikipedia.org/wiki/Customer_relationship_management
searchcrm.techtarget.com/definition/CRM
finance.yahoo.com/q?s=CRM - United States
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www.impelcrm.in
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
Customer Relationship Management
254
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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UNIT 20: Case Studies
Unit 20
255
Notes
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Case Studies
___________________
___________________
___________________
Objectives
___________________
After analyzing these cases, the student will have an appreciation of the
concept of topics studied in this Block. ___________________
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___________________
Case Study 1: Mould for all Seasons
___________________
Moderna created the market for Moulded Plastic furniture.
___________________
Though the product benefits are strong, lack of brand
differentiation has harmed its one-time dominance. ___________________
—By Mona Rai
___________________
In the late 70s, Blowplast Ltd (1994-95 turnover: ` 218 crore), the
maker of V.l.P. luggage, began exploring the viability of launching
moulded plastic chairs in India. The furniture market had never
seen synthetic products before, and the consumer was just
beginning to experiment with materials other than wood. Cane
and steel furniture was entering houses already, and some
companies were even examining the prospect of marketing
products made of fibre glass.
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For Mumbai-based Blowplast, the investment involved in
installing its factories with capacity to make moulded furniture
was marginal, since it could use the same machines being used for
its V.l.P. moulded luggage.
Convinced of the saleability of the product, the company launched
plastic chairs in 1981 under the brand Moderna (‘style’ in Italian,
but conveys ‘modern’ to the domestic consumer).
The product’s seat (which is attached to a metal frame on which it
stands) is a single-piece shell moulded into a shape designed for
the user’s comfort. Its principal input, polypropylene copolymer, is
claimed to be among the lightest, toughest and most resilient
polymers in commercial use. It can be sterilized at temperatures
up to 80 degree Celsius and can withstand extreme temperatures.
The material is acid and alkaline resistant, and can be cleaned
with any household detergent solution. All this ensures that the
chair may be moved easily, and that the seat doesn’t lose its
shape, colour or strength even when put to rough use.
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Tough Start
The first three models received lukewarm response from the
market. Sales in the first year were a paltry ` 20 lakh. Clearly,
plenty of hard work lay ahead.
Priced at ` 150 a piece, Moderna was one-third the price of the
cheapest wooden chair available then. But that along didn’t work;
the buyer had to be convinced of the functional benefits.
Contd…
Customer Relationship Management
256
For distribution, Blowplast tried to use its existing dealer
Notes network for moulded luggage, but to its dismay, dealers were not
S
enthused by the product idea.
___________________
Market research found that the consumer had a mental block
___________________ against plastic chairs, which were seen as a cheap alternative to
___________________
wooden furniture. Moreover, plastic was considered too weak to
replace sturdy wooden chairs, and the bright colours too gaudy to
___________________ fit into conventionally furnished rooms.
___________________ Breakthrough
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On a weak footing in the home segment, the company decided to
___________________ go for institutional sales—using an army of salesmen—and press
___________________ forth the chair’s durability and ease of maintenance in the sales
pitch.
___________________
Moderna has the merit of being light and thus easy to move
___________________ around— which makes it convenient to clean floors and change
seating arrangements. Whenever one wants to keep a certain
___________________ number of chairs out of sight, they can easily be stacked one atop
the other in a corner.
The IX Asian Games hosted by Delhi gave Blowplast its first bulk
order -25,000 chairs for the Indira Gandhi indoor stadium. This
gave the chairs immense visibility, and a boost to the company’s
morale. Next, the company began selling its chairs for assorted
applications, as ideal seating at restaurants, clubs, swimming
pools, gardens, balconies and verandas.
Salesmen went around with attractive catalogues, and direct
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mailers were sent to schools, colleges and other frequent
organizers of functions. The product’s bright colours were turned
into an advantage. Offered in sunny lemons, flaming reds and
oranges, and vivid blues, the chairs could brighten up rooms. For
audience seating, Moderna was especially convenient, since, it
allowed the use of colour schemes to demarcate groups and rows.
It was important not to let the consumer’s perception restrict the
product to just a few areas such as stadium, halls or restaurants.
The advertising positioned Moderna as a sturdy, multi-purpose
chair. Orders began pouring in from various quarters, and the
product found itself installed at hotels, shops, airport lobbies and
hospitals. In 1982-83, Moderna recorded sales of ` 40 lakh, double
the previous year’s figure. Things were looking up.
End of Solitude
Me-toos started appearing right from 1984. First came Nilkamal
Plastics with its Stylo range of moulded furniture. However it
didn’t dent Moderna just yet.
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257
The field force was sent out to target architects and interior
decorators, who have a big say in what kind of seating ought to be Notes
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used in different settings. As plastic chairs caught on (for public
seating, mainly), the company decided to include tables, stools ___________________
and even push trolleys under Moderna’s range of moulded ___________________
furniture. They were launched in 1985, but did little to stir the
market. Non-chair products still made up less than 5 per cent of ___________________
Moderna’s sales.
___________________
Monobloc Arrives
___________________
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In 1987, the company launched a new type of all plastic chairs.
Named Moderna Monobloc, the product was available in various ___________________
colours and ergonomic designs (that is, those claiming to meet
scientifically derived conditions for seating comfort). Touted as ___________________
the ‘anywhere chair’ and priced at ` 350 a unit, Monobloc banked
on its aesthetic superiority to the older product for success. ___________________
Within a year of launch, the product’s contribution to brand sales ___________________
had risen to about 25 per cent.
The original chair, in the meanwhile, began offering customized ___________________
variants (with frames and attachments-made locally by dealers-
for special needs). A chair with a special arm for a writing tablet,
for example, was designed for classrooms.
The Inputs Rise
In 1987-88, prices of plastic began shooting up as part of a global
phenomenon. That, combined with a sharp excise duty hike (from
7.5 to 15 per cent) helped spring prices up greatly. A Monobloc
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chair was now as expensive as ` 500; Moderna’s original moulded
chair rose from ` 175 to over ` 220 in a matter of just a few
months.
The average order quantity being high, the moulded furniture
buyer is price sensitive. The market slumped. Blowplast turned
its attention to the home buyer, and directed its energy towards
marketing Monobloc. Print ads in 15 languages-showing how
Moderna could brighten up the seating arrangement both inside
and outside the house-were put out. Plus, markets in smaller
towns were explored for the first time since launch.
In 1991, Bombay-based Supreme Industries also entered the fray.
By manufacturing its products in Pondicherry, a zone which
enjoys tax concessions, the company kept its prices low. According
to market sources, Supreme is doing well in the south and has
managed to push the western market into a three way fight
(between Moderna, Nilkamal and itself).
More Newcomers
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The shock of the price rise didn’t last too long. In 1993, the price
of plastic went down. Though it never quite returned to its pre-
stock level, it granted Blowplast relief. The market began picking
up again, with an annuals growth rate scaling 25 per cent. No
least because Moderna dropped its prices (to roughly what they
are today) in 1993-94. Monobloc went down in about ` 400 a piece,
while the regular chair fell to ` 200 or so. Moderna recorded sales
of ` 22 crore in a market estimated at ` 60 crore that year.
Contd…
Customer Relationship Management
258
Meanwhile, Moderna’s rivals had grown more aggressive. Earlier,
Notes they were merely cloning its designs and selling their products at
S
prices roughly 25 per cent lower than the leader’s. In recent years,
___________________
however, they have begun battling Moderna even on the design
___________________ innovation aspect. Here Moderna has lost its advantage, which
thrusts the brand into a bitterly competitive field with more or
___________________ less a parity product.
___________________ In 1994-95, the market witnessed a fresh flurry of entrants –
Bombay based Cello and Udaipur-based Peacock being the
___________________ prominent ones among them. Supreme is reported to be forging
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ahead, too.
___________________
Although aggregate figures are still to come in, there is evidence
___________________ that last year the market grew far faster than did Moderna,
which claims sales of ` 30 crore. Moderna is retaliating by
___________________
speeding up its launch of new designs. Realizing new potential in
___________________ the market, the company has launched creatively designed baby
chairs, priced at ` 150 a piece and available at toy shops (in
___________________ addition to regular Moderna dealers).
The Survival Plan
The company has decided not restrict itself to plastic. In 1994,
Blowplast tied-up with a German furniture maker, Klober, and
entered the market for office furniture with cushioned chairs on
steel frames. The same year saw another tie-up with Canada-
based Element Corp for element systems (lightweight panel
furniture supported by aluminium grids).
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The idea is to use distribution synergy to emerge as a broad-port-
folio marketer of furniture made of non-conventional materials.
There are several need gaps in the market, feels Blowplast, which
it must fill before the competition does.
Questions:
1. Analyze the case and interpret it.
2. Write down the case facts.
3. What is meant by distribution synergy?
259
Case Study 2: Jewels from the Ground
Notes
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Having decided to concentrate on niche product categories, ___________________
Satnam Overseas is diversifying into high-growth areas such as
convenience foods and beverages ___________________
—Pritika Arora ___________________
You can be competitive only if you have a manufacturing base and
competitive globally only if you have the best machinery. This is ___________________
the guiding principle of Satnam Overseas Ltd. (SOL; 1995-96 ___________________
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turnover: ` 256 crore), set up in 1976 by brothers Jugal Kishore,
Satnam and Garnam Arora. The inception of the company was ___________________
the direct result of the decanalisation of basmati rice exports by
the Indian government. At that time the company had just one ___________________
rice mill in Amritsar. The trio shifted base to Delhi in 1984 when ___________________
the Punjab problem got aggravated.
Since then, SOL has been using technology to market what is ___________________
essentially a primary sector product at margins few have thought ___________________
possible. By the mid-1980s, SOL was exporting its Super
Kohinoor basmati rice brand to the US and West Asia, markets
with large numbers of people from the Indian subcontinent. The
paddy was sourced from mandis (local markets where farmers
and traders meet) in the three basmati-growing states – Haryana,
Punjab and Uttar Pradesh.
The company turned India-wards in a big way in 1984-85. “Unless
a company has a strong domestic presence, the export venture
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won’t do well,” believes Gurnam Arora, Joint managing director.
In the company’s experience, foreign buyers almost always
wanted to know how well the brand was doing in India. High
domestic sales are seen as a mark of credibility.
In 1986-87, SOL set up a rice processing unit in Delhi, with hitech
machines for sorting, grading, polishing and packaging. The
system first sorts out grain by colour, throwing alien matter out.
Then, it grades the rice by length (the longest grain commands
the highest price). Next, it polishes the grain. And finally, it uses
‘from-fill-seal’ machines to seal measured quantities into nitrogen
flushed, polyline-laminated packages (for greater hygiene and
longer shelf-life). The investment in plant and machinery was
around ` 3 crore back then.
Then came another hitech facility in 1988-89, this time at
Murthal in Haryana. The basmati grown in this state is superior
to that grown elsewhere, says SOL. The mere setting up of a
manufacturing base, found SOL, was not nearly enough in a
market already crowded with regional basmati players. The
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260
For all, the Kohinoor needed a strong brand image. “For a
Notes commodity like rice, you can’t do much except create attractive
S
packaging,” says V. M. Kaul, former general manager, marketing
___________________
(he’s just left the company). Thus, Super Kohinoor’s consumer
___________________ packs-designed in part by Forefront—not only had transparent
windows, they looked brighter than anything else available in
___________________ India. The window allowed the finicky and cautious Indian
housewife to examine the grain before picking it up.
___________________
In all 817 and other popular brands were not making an effort to
___________________ create brand awareness,” says Arora. SOL, on the other hand, had
PE
asked its agency, forefront, to create consumer pull. One ad film
___________________
showed some Arabs buying Super Kohinoor basmati rice in
___________________ exchange for gold sovereigns.
The efforts paid off, and domestic sales of Super Kohinoor started
___________________
rising. Further gains came when SOL deployed separate market
___________________ antlers for different regions. In a pioneering effort, it delved into
the consumer’s rice-buying habits and sensitivities in different
___________________ parts of the country. This helped it decide what grain to sell
where, in what quantity and during which reason.
Among dozens of other things, the company found that the typical
Gujarati tends to hoard a year’s requirement of rice as soon as
kharif harvest season ends by early November. But the rest of the
country prefers to buy hardened old rice, so the marketer must
store the grain 6-12 months before putting it on shop shelves.
Says Kaul, “The older the rice is, the better it is because it has
excess moisture when it is new and so doesn’t cook well”. In
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Madhya Pradesh, the company sells broken basmati because
that’s how it is preferred there.
The brand was able to command a premium comfortably, and as
the perceived value has risen, so has the stage. Today, it delivers
a consistent set of benefits to consumers who value it. One kg of
Super Kohinoor basmati rice currently retails for ` 55, about ` 20
higher than unbranded basmati.
The 1990s saw Indian basmati exports boom. “The export market
started attracting a lot of companies, large and small, who wanted
to profit from the boom. Since there were so many players,
suddenly, the company couldn’t absorb all the growth,” says Kaul.
This led to the realization that the company could not depend on
just one product to achieve its ambitions. So SOL decided to
stretch into markets where its competence could give it a
premium place.
The company had already established a rapport with distributors,
and Kohinoor was well regarded in many upmarket households.
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Contd…
UNIT 20: Case Studies
S
commodities, despite the fact that there is significant variation in
actual quality. So, says Arora, “We’re competing with grocer who ___________________
has no overheads, and people feel that dal is, after all dal. We are
waiting for other companies to come in and give us some ___________________
competition – only then can we expand the market.” But that
___________________
might take some time for, as Kaul says, “pulses have become a
speculative commodity. Prices fall and rise every day and so it is a ___________________
very risky business. We are still learning the dals business.”
___________________
PE
An offering would be defying the first principle of branding
consistency in value – if the retail price went up and down too ___________________
often. In fact, the inability to tame price fluctuations has been the
bane of many the marketer trying to sell branded commodities. In ___________________
basmati, things are under control. The open market prices
___________________
fluctuate between ` 800 and ` 1,400 per quintal every collection
season. But SOL operates on the assumption that the costs ___________________
balance out in the end. Also, it has ensured that it adds enough
value through its refining and packaging to reduce the effect of ___________________
raw material prices on the final price (over ` 5,000 per quintal).
Long-term trends aren’t easy to plot for pulses, and since there
are so many varieties and so few codes on quality standards,
reliable information on what’s available where is sparse. Also,
smaller production volumes mean that much lower a chance for
things to get evened out across the country. India’s total
production of dals is 12 million tonnes, a small figure in contrast
to rice, which stood at 88 million tonnes in 1995-96 (around 10
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million tonnes sold through ration shops).
Nonetheless, SOL claims that it processes 50 tonnes (assorted
varieties) of pulses every day at its Delhi plant. Most of it is
exported to the UK, Sri Lanka, Dubai, Kuwait, Canada and
Japan.
Last year, the company’s R&D department started a project to
develop branded, packaged, ready to-cook pulao. The outcome was
Rice & Spice, launched domestically in mid-1996 in single-meal
packs. Like Maggi, the contents can simply be emptied into
boiling water for a quick meal of garnished rice. According to
Arora, the brand is doing well. “Though it was conceived for
international markets, our distributors in India thought Rice &
Spice would do well here too, considering that so many women
had started working and convenience was the buzz word.
Moreover, this product is very well differentiated because it is the
only pre-mixed pulao in the market that uses basmati. “Priced at
` 22.50 for a 125-gm pouch, Rice & Spice offers eight variants.
(c
262 of the Indian revenues from basmati (the export market is placed
Notes roughly at ` 1,500 crore, and the domestic, at ` 500 crore).
S
Since the company gets almost three-quarters of its revenues in
___________________
foreign exchange (1995-96 exports turnover: ` 185 crore), its tax
___________________ liability is rather low. According to Arora, the company’s strength
lies in the fact that it sells “international class products, and only
___________________ those that we can control the quality of”. In India, the company
has 65 distributors and 200 stockists who supply SOL’s products
___________________
to about one lakh retail outlets. Distribution is geared to cater
___________________ mainly to A class cities’ four metros and eight mini-metros. But
PE
overall, the distribution enfolds around 350-400 towns and cities
___________________ in its sweep.
___________________ Surprisingly, the company is not as strong in the North as one
would imagine it to be. Says Arora, “Kohinoor’s strong markets
___________________ are the states where basmati is not grown. The largest-buying
state is Gujarat, while the best city for the brand is Mumbai.”
___________________
Though the company claims it is the domestic market leader in
___________________ basmati rice, rival Lal Qilla is No 1 in terms of consumer
perception, at least in Delhi and Chennai. This, despite company
having been the top exporter of basmati rice from India for the
last five years.
The company’s domestic ambitions have taken a new turn in
recent months. And now that the government has lifted some old
regulations on rice milling (Union Budget 1997-98, competition is
likely to come trooping in some of it’s from big companies. Pepsi
Foods is testing waters with Season’s Harvest, and Brooke Bond
)U
Lipton has an export brand of rice called Indus Valley which may
enter the domestic arena. DCW, marketer of Captain Cook wheat
flour, is also rumoured to be considering an entry into the field of
branded rice. All of these are rich companies, and this business is
notorious for how much capital needs to be tied up in year-round
inventories. SOL, for example, has invested a total of ` 12 crore in
plant and machinery so far, and its working capital requirements
have been very high. And it wants to be India’s largest agro-foods
company some day.
Tall order? Perhaps, but the company is busy drawing up plans to
enter assorted markets for convenience foods.
The company’s latest foray has been in the market for beverages.
It is currently test-marketing Viceroy tea bags in Delhi. Available
in two varieties, Assam (` 56 for 100 tea bags and ` 15 for 25) and
Darjeeling (` 70 for 100 tea bags and ` 20 for 25), the tea is
claimed to have attracted the right kind of attention. Its present
agency, Anthem (the account shifted in 1992-93), has devised a
press campaign for Viceroy to target the upmarket consumer
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Contd…
UNIT 20: Case Studies
263
Questions:
Notes
S
1. Analyze the case and interpret it.
2. Write down the case facts. ___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
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Customer Relationship Management
264
Notes
S
___________________
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
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UNIT 21: Sales Force Automation
265
Notes
S
___________________
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
BLOCK-V
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Detailed Contents Customer Relationship Management
266
Notes
S
UNIT 21: SALES FORCE AUTOMATION
___________________ UNIT 23: BPR and CRM
z Introduction z Introduction
___________________
z Concept of Sales Force Automation z Business Process Reengineering
___________________
z Benefits of Sales Force Automation Software z Implications of Business Process Reengineering
___________________
z Experience CRM Success z Understanding Business Processes
___________________
PE
z Sales Force Automation Solution – An Overview
___________________ UNIT 24: CREATING CUSTOMER-FOCUSED
ORGANISATION
UNIT 22: CRM IN B2B AND B2C MARKETS
___________________
z Introduction
z Introduction
___________________
z Quality as an Organizational Culture
z B2C CRM
___________________
z Quality Practices in Six Sigma
z Difference between CRM in B2B and CRM in
___________________
B2C Markets z Growth through Customer Satisfaction
Unit 21
267
Notes
S
Sales Force Automation
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
PE
\ Meaning and features of sales force automation ___________________
\ Advantages and disadvantages of SFA ___________________
\ Overview of SFA
___________________
___________________
Introduction
___________________
Any sales team in a company today, has to deal with various
constraints. They need to continuously be in touch with their office,
for updates on availability, prices and schemes for the products
they sell. While this external reliance is a bottleneck, even the
information obtained is not always accurate. Sales Force
Automation enables a highly mobile sales force to increase
productivity on the field, react faster to customer requirements
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and access and update sales related information anytime,
anywhere.
SFA is often used interchangeably with CRM; however, CRM does
not necessarily imply automation of sales tasks.
268
Sales force automation helps by making all business actions
Notes
Activity
S
pertaining to sales, automatic. These actions include:
Write an article on Sales
___________________
Force Automation. z Keeping a track of orders.
___________________
z Meting out of orders.
___________________
z Contact management.
___________________
___________________
z Sharing sales information and statistics.
PE
___________________ z Screening and control of inventory.
269
z Complete Sales Solutions for Executives and Employees:
Notes
Activity
S
Sales force automation software can help executives to define
and set individual sales goals, share sales and advertising .With the help of internet,
___________________
collect more information on
information, analyze results and reports, and predict future Sales Force Automation. Give
___________________
5 examples of the companies
courses.
using the SFA.
___________________
Sales employees can benefit as the solutions make it easy for
___________________
them to obtain leads, supervise their databases, set reminders
___________________
PE
for schedules and appointments, and save numerous notes,
orders, and applications. ___________________
270
z Rather than write-out sales orders, reports, activity reports,
Notes
S
and/or call sheets, sales people can fill-in prepared e-forms.
___________________
This saves time.
___________________
z Rather than printing out reports and taking them to the sales
___________________ manager, sales people can use the company intranet to
___________________ transmit the information. This saves time.
PE
sales-prospect lists, and sales-support information, they will
___________________
have access to the information when they need it. This could
___________________
be useful in the field when answering prospects’ questions and
___________________ objections.
___________________ z The additional tools could help improve sales staff morale if
___________________ they reduce the amount of record keeping and/or increase the
rate of closing. This could contribute to a virtuous spiral of
beneficial and cumulative effects.
z These sales force systems can be used as an effective and
efficient training device. They provide sales staff with product
information and sales technique training without them having
to waste time at seminars.
)U
z Better communication and co-operation between sales
personnel facilitates successful team selling.
z More and better qualified sales leads could be automatically
generated by the software.
z This technology increases the sales person’s ratio of selling
time to non-selling time. Non-selling time includes activities
like report writing, travel time, internal meetings, training,
and seminars.
z The sales manager, rather than gathering all the call sheets
from various sales people and tabulating the results, will have
the results automatically presented in easy to understand
tables, charts, or graphs. This saves time for the manager.
z Activity reports, information requests, orders booked, and
other sales information will be sent to the sales manager more
UNIT 21: Sales Force Automation
S
authorizations. This gives management more hands-on control ___________________
of the sales process if they wish to use it.
___________________
z The sales manager can configure the system so as to
___________________
automatically analyze the information using sophisticated
statistical techniques, and present the results in a user- ___________________
friendly way. This gives the sales manager information that is ___________________
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more useful in: ___________________
Providing current and useful sales support materials to ___________________
their sales staff \
___________________
Providing marketing research data: demographic,
___________________
psychographic, behavioural, product acceptance, product
___________________
problems, detecting trends
Providing market research data: industry dynamics, new
competitors, new products from competitors, new
promotional campaigns from competitors, macro-
environmental scanning, detecting trends
Co-ordinate with other parts of the firm, particularly
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marketing, production, and finance
Identifying your most profitable customers, and your
problem customers
Tracking the productivity of their sales force by combining
a number of performance measures such as: revenue per
sales person, revenue per territory, margin by customer
segment, margin by customer, number of calls per day,
time spent per contact, revenue per call, cost per call,
entertainment cost per call, ratio of orders to calls,
revenue as a percentage of sales quota, number of new
customers per period, number of lost customers per period,
cost of customer acquisition as a percentage of expected
lifetime value of customer, percentage of goods returned,
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272
Advantages to the Marketing Manager
Notes
S
___________________ It is also claimed to be useful for the marketing manager. It gives
the marketing manager information that is useful in:
___________________
z Understanding the economic structure of your industry
___________________
___________________
z Identifying segments within your market
PE
___________________ z Identifying your best customers in place
Strategic Advantages
(c
S
sales revenue, and it can increase market share. ___________________
z Field sales staff will send their information more frequently. ___________________
Typically information will be sent to management after every
___________________
sales call (rather than once a week). This provides
management with current information, information that they ___________________
PE
response time will be greatly reduced. The company will ___________________
become more alert and more agile.
___________________
z These systems could increase customer satisfaction if they are
___________________
used with wisdom. If the information obtained and analyzed
with the system is used to create a product that matches or ___________________
exceeds customer expectations, and the sales staff uses the ___________________
system to service customers more expertly and diligently, then
customers should be satisfied with the company. This will
provide a competitive advantage because customer satisfaction
leads to increased customer loyalty, reduced customer
acquisition costs, reduced price elasticity of demand, and
increased profit margins.
)U
Disadvantages
Detractors claim that sales force management systems are:
z Difficult to work with – need for training
z Require additional work inputting data
z Dehumanize a process that should be personal
z Require continuous maintenance, information updating, and
system upgrading
z Costly
z Difficult to integrate with other management information
systems.
(c
274
Experience CRM Success
Notes
Activity
S
Make a report on the Sales Force Automation (SFA) application gives businesses the
___________________
experience of CRM success.
upper hand with their sales data. Comprehensive and easy to
___________________ customize, the solution empowers companies to manage people and
___________________ processes more effectively, so reps can close more deals. With SFA,
___________________
reps spend more time selling and less time on administration.
PE
___________________
z Point-and-click customization for SFA that fits the way you
___________________ sell
___________________ z Real-time analytics empower your business to make better
___________________ decisions
Trusted by Executives
Executives need accurate information so they can evaluate their
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275
Features of SFA
Notes
S
z Sales Management
___________________
Lead Management ___________________
Opportunity Management ___________________
Account and Contact Management ___________________
PE
Approvals and Workflow ___________________
___________________
z Analytics and Forecasting
___________________
Reports and Dashboards
Customizable Forecasting
Data Quality Management
z Sales Information
Product Catalogue
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Document Management
Contract Management
Email Templates
Asset Management
z Desktop and Mobile
Mobile CRM Solutions
Microsoft Outlook Edition
Word and Excel Integration
z Customization and Integration
z AppExchange Applications
(c
Other Features
Alerts: Messaging facility allows sales representative to receive
from as well as send alerts to central server.
Personal Information Management: These sets of applications
allow sales representatives to manage information on leaves,
travel, expenses and salary from the personal devices.
Customer Relationship Management
276
Sales Force Automation Solution – An Overview
Notes
Activity
S
Write an essay on the SFA The SFA gives the sales team the ability to access and manage
___________________
solution. critical sales information using a PDA device. Synchronisation
___________________ provides a simple method of sharing data and merging new and
___________________ updated information between offline users and the Mobile Server.
___________________ The architecture is segmented into two main sub systems. They
___________________ are:
PE
___________________ 1. Mobile Server: The Mobile Server is the key sub system of the
entire solution. This server interfaces with Central Server and
___________________
(Oracle, or any) database at the Mobile Server. It manages the
___________________
Sales Representatives PDA and the requests from the PDA.
___________________ An administrative module helps in user authentication,
___________________ transaction monitoring and synchronisation. The server, based
on settings, hosts all the synchronisation logic.
2. Client Application: The client application is hosted in the
Sales Representative’s PDA device and has the ability to view
appointments, create orders, search for customer details and
item details and synchronise with the Mobile Server using
GPRS.
)U
Functional Features of SFA
The SFA client has the following features. The sample screen
layout for each of the features is also provided.
(c
S
___________________
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
Figure 21.2
Figure 21.3
Customer Relationship Management
278
3. Customer Management: This facilitates creation and
Notes
viewing of customer information like contact information or
S
___________________ customer history. (see Figure 21.4)
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
Figure 21.4
Figure 21.5
UNIT 21: Sales Force Automation
279
Notes
S
___________________
___________________
___________________
___________________
___________________
PE
___________________
Figure 21.6
___________________
5. Delivery Instructions: The Sales Representative can enter a
Delivery Instruction if required and save the order. If they ___________________
Summary
Sales force automation refers to automating all the actions related
to sales of an organization or business. This is a coordination of
applications that chiefly centre on scheduling and contact
Customer Relationship Management
S
___________________ inventory and products and other related information and can be a
part of a bigger program of customer relationship management.
___________________
Sales force automation helps by making all business actions
___________________
pertaining to sales, automatic.
___________________
PE
___________________ Make a detailed report on the use and concept of Sales Force
___________________ Automation. Add sufficient examples in your report.
___________________
___________________ Keywords
___________________ Sales Force Automation: It refers to automating all the actions
related to sales of an organization or business.
Sales Force Automation (SFA) Software: It is a type of
program that automates business tasks such as inventory control,
sales processing, and tracking of customer interactions, as well as
analyzing sales forecasts and performance.
Mobile Server: It is the key sub system of the entire sales force
)U
automation system.
Client Application: The client application is hosted in the Sales
Representative’s PDA device and has the ability to view
appointments, create orders, search for customer details and item
details and synchronise with the Mobile Server using GPRS.
automation.
4. Describe the benefits of sales force automation softwares.
UNIT 21: Sales Force Automation
S
Books ___________________
Mohammed H. Peeru and A Sagadevan, Customer Relationship ___________________
Management, Vikas Publishing House, 2004, Delhi.
___________________
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
___________________
Century, Tata McGraw Hill, 2005.
___________________
PE
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
___________________
Customer Relationships Management, Wiley, 2003.
___________________
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Mining Applications, 2004. ___________________
___________________
CGI Group Inc. White Paper, Building Competitive Advantages
through Customer Relationship Management, January 2001. ___________________
Web Readings
en.wikipedia.org/wiki/Customer_relationship_management
)U
searchcrm.techtarget.com/definition/CRM
finance.yahoo.com/q?s=CRM - United States
www.impelcrm.in
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
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Customer Relationship Management
282
Notes
S
___________________
___________________
___________________
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
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UNIT 22: CRM in B2B and B2C Markets
Unit 22
283
Notes
S
CRM in B2B and B2C Markets
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
PE
\ B2B CRM ___________________
\ CRM in B2B and B2C markets ___________________
\ Implementation of CRM in B2B market
___________________
___________________
Introduction
___________________
During the last few years, the topic of Customer Relationship
Management (CRM) has emerged as one of the most important
areas in marketing and in the overall management of the firm.
Numerous articles have been published that point to the
importance of maintaining long-term relationships with customers
in Business-to-business (B2B) markets. When the careers advisor
says “go into marketing, young man”, few picture Business-to-
)U
business (B2B) marketing. B2B marketers have always felt
themselves to be the poor relations of their Business-to-consumer
(B2C) cousins. And nowhere more so than in CRM. This is
particularly ironic considering that CRM started in the late 1980s
as B2B relationship marketing; the investment in personal
relationship a vital ingredient in what used to be known as
‘industrial marketing’.
Customer Relationship Management (CRM) and Business-to-
business (B2B) are essential to the success of modern business.
Although they are two different modules, they share many
similarities. The integration of CRM and B2B will benefit all related
parties in business processes, including sales, marketing, customer
service, and information support. While B2C firms have come to
(c
284 information about their existing clients and provide products and
Notes
Activity services that they value as well as attract new clients. The process
S
Write an article on B2C CRM.
___________________ of identifying and predicting the needs of the marketplace means
they need to leverage databases and systems for relevant business
___________________
information, collect new information, analyse it and act on it to
___________________
enhance productivity and increase profitability. And that’s all
___________________ about the customer.
___________________
PE
___________________ B2C CRM
___________________ B2C CRM is quite tightly coupled with e-commerce, as the internet
___________________
is the most efficient way to reach customers. Hence, a stand-alone
CRM system that is de-coupled from your webstore is pretty
___________________
useless (and unfortunately for B2C customers, most CRM
___________________ applications today treat your website as an afterthought). From a
functionality standpoint, the emphasis tends to be around the
marketing automation (keyword tracking, e-mail marketing) and
customer service management, rather than sales force automation.
With the development of computer technology and network
communications technology, e-commerce has a rapid development
on a global scale. B2C e-commerce as a new shopping channel,
)U
because it has characteristics of providing sufficient information,
breaking time and space boundaries, low-cost and real time, has
rapid development. As a channel for transactions, B2C e-commerce
also needs to be supported by appropriate Customer Relationship
Management (CRM).
So e-commerce companies need to do customer segmentation based
on their value, and then take appropriate customer relationship
management strategy. The long tail, as the basis of a new business
model, emphasizes the value of sporadic demand and small
customers. In this paper we propose a new customer value model
in the new economic environment based on the long tail and then
offer corresponding customer relationship management strategies.
In B2C markets, the nature of a seller-customer relationship
(c
S
Customer Relationship Management is a seductive marketing ___________________
strategy. However, research suggests that many of the programs ___________________
used to implement CRM should not be expected to make significant
___________________
changes in customer purchasing patterns—especially for FMCG
brands. Given this prognosis, why do so many such programs exist ___________________
and why are more being started? There are three complementary ___________________
PE
answers to this question, namely:
___________________
z CRM seems to be a logical extension of the current customer- ___________________
focus logic of marketing. For this reason, it has intuitive
___________________
appeal to many marketers.
___________________
z A number of big, high-profile companies have launched such
schemes – hence, many managers perceive that there is a risk ___________________
of being left behind. “Often a direct competitor has a CRM
program – hence, a similar scheme is needed as a
countermeasure. At best, each of these reasons is only an
indicator of the potential success of a CRM program. From a
manager’s point of view, the crucial question is how to achieve
the best return from their marketing budget. The
)U
recommendations here are:
First, start with a good description of the characteristics of
the market – both customers and competitors.
From this basis, select the appropriate broad marketing
objective, such as avoiding a price war or gaining share of
market or share of customer.
Then, explore the cost effectiveness of how various
marketing tactics will achieve this broad objective. For
example, would money be best spent increasing the
salience of the brand or the loyalty of current customers?
Consider how competitors may respond to each initiative.
Finally, determine the best way to collect information to
(c
S
___________________ obtaining long-term commitment with suppliers and distributors is
emphasized (Iyer 2003). In B2C markets, micro-segmentation and
___________________
specific targeting are stressed along with an emphasis on various
___________________
monetary and non-monetary value creation approaches. Further,
___________________ the different approaches to CRM in B2B versus B2C markets are
___________________ driven by the assumed (and, often real) differences between the
PE
nature of these markets, the types of buyer-seller relationships
___________________
that are sought, and degree to which the overall relationship is
___________________ guided by a long-term contract.
___________________
It is also recognized that CRM is a process, and as such can be
___________________ understood either in terms of distinct phases of the relationships or
___________________ in terms of the strategic steps that need to be undertaken to
achieve relationship objectives (Heide 1994; Winer 2001). The
process can be summarized to include four stages of the buyer-
seller relationship: identification of relationship partners;
development of the relationship; maintenance of the relationship;
and re-evaluation of the relationship or its termination. The
strategic steps, on the other hand, may include: customer/segment
identification; customer targeting; relationship marketing and
)U
management; and, the evaluation of the relationship and firm
performance. B2B researchers prefer to understand CRM in terms
of its process stages, while B2C researchers frequently
conceptualize CRM in terms of its strategic activities. As such, the
focus in B2B relationships appears to be centered around the
development of long-term relationships through building trust and
commitment among the exchange partners. On other hand, a
central role is given to the development of loyal customers in B2C
relationships.
(a) Back-to-Back
(b) Back-to-Business
(c) Business-to-Business
(d) None
Contd…
UNIT 22: CRM in B2B and B2C Markets
287
2. SCM stands for:
Activity
Notes
S
(a) Supply Chain Management Make a report on the
___________________
difference between CRM in
(b) Source Content Management B2B___________________
and CRM in B2C
markets.
(c) Supply Chain Manager ___________________
(d) None ___________________
___________________
PE
Difference between CRM in B2B and CRM in B2C
___________________
Markets
___________________
From a technology point of view, it’s not so much what’s different ___________________
as how the technology is applied. “B2B, B2C and the dreaded
___________________
B2B2C – essentially there is not a difference,” argues David
Arrowsmith, strategy manager for customer intelligence at SAS ___________________
UK. “To work effectively the goal is to use the knowledge that is
available to get relevant marketing messages to the customer.”
The point is reiterated by Jason Nash, CRM product manager for
Microsoft Dynamics CRM. “Contrary to the common belief that
there are many differences between B2B and B2C customer
relationship management systems, they are in fact similar in many
)U
ways,” he argues. “The approach to relationship management is
largely the same; from the purpose of relationship tracking, to
system features and requirements. Indeed, the majority of CRM
systems currently on the market work in both B2B and B2C
environments, the key difference lies in how they are deployed.”
Specifically, the differences are of complexity and degree, which
doesn’t negate B2C marketing techniques in B2B, it just means
they have to be adapted. B2B marketing characteristics and its
related issues include:
z Greater relationship investment is needed at every
interaction. “How do we market to senior managers with huge
time constraints and gatekeepers?”
(c
288 “How do we find out who supplies who in the market, and the
Notes level of relationship? Who do we partner or outsource with for
S
___________________ enhanced capabilities?”
___________________ z There are more complex channels – often through
___________________ intermediaries and in alliance with others – but fewer direct
retail outlets. “How do we generate leads for customer
___________________
acquisition in hi-tech markets?”
___________________
PE
z A more complex buying ‘unit’ exists, with purchasing processes
___________________ and political agendas, plus the addition of professional
___________________ procurement to ensure profitability. It is a myth, however, that
___________________
the Decision Making Unit (DMU) is less emotionally driven,
even with procurement in tow. The ultimate ‘correct’ decision
___________________
is frequently based on the quality of interaction, however
___________________ complex the scoring criteria – people buy people. “How do we
bring ourselves to the attention of decision-makers, users and
influencers? How do we market to procurement?”
z It is often a much longer buying process, making acquisition
more expensive. “How do we follow through a two year
decision making process?”
Pricing is often based on relationship value. “How should we
)U
z
construct risk and reward contracts?”
z Service is an integral part of the proposition, because of the
greater degree of interdependence. “How do we deliver to each
decision influencer the right compelling service at exactly the
right time?”
z From the very start, the relationship is lubricated by the
transfer of and collaboration in knowledge – hence a greater
use of techniques such as white papers. B2B product
development is often driven by technical progress rather than
fashion and trends as in B2C. For the business customer a
deeper knowledge of the supplier and their skills reduces risk
and so has value. “How do we build strategic relationships
with our customers?”
(c
S
seminars?” ___________________
But it is important to bear in mind that at the end of the day while ___________________
there are many differences between B2C and B2B, there is one key
___________________
similarity which is that organisations are selling to people, who
have some basic needs and requirements that need to be fulfilled ___________________
PE
cycle there are likely to be far more interested parties whose needs ___________________
and requirements have to be addressed. Who is the main target
___________________
market for any CRM activity? Is it procurement or legal or finance
or marketing or who? B2B marketers need to run integrated ___________________
campaigns that are created with customer and channel insight in ___________________
order to target the people with the most influence.
___________________
“The B2C customer tends to be a person, making decisions for him
or herself whereas a B2B customer tends to be a company,
represented by a person making decisions for that company (aka
an account),” notes Salesforce.com marketing director Clarence So.
“In CRM technology terms, the B2C customer is typically called a
‘contact’ while the B2B customer an ‘account’. This distinction has
)U
very significant implications for your process and technology. For
example a B2C CRM technology tends to store lots of contacts and
lots of little transactions to support say a lifetime relationship,
with millions of wealthy individuals, that bank with Merrill
Lynch.”
In a B2B environment it is necessary to have a database that can
handle concepts such as accounts – which will be companies – and
contacts (employees). In most B2B environments there are
multiple constituents involved in the buying process so the CRM
system needs to be able to establish permanent relationships
between a single company and multiple employees.
“A B2B CRM technology tends to be account-centric such as a
lifetime relationship, with ADP or Cisco’s worldwide service or
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290
Multiple Sales Processes
Notes
S
In a B2B environment there are also likely to be multiple sales
___________________
processes that could be active within a single account at the same
___________________ time, being managed by multiple sales people or sales teams. The
___________________ CRM system needs to be set up in such a way to allow for multiple
___________________
sales processes to be related to a single account or company while
also enabling sales people to share visibility into relevant customer
___________________
information.
PE
___________________
Specific types of information need to be collected that are not
___________________ relevant in the B2C environment such as the company website, the
___________________ management hierarchy, who is the assistant of the buyer and what
___________________
is his/her contact information, etc. The CRM system should be able
to store information about the industry of the prospect firm as well
___________________
as information on topics such as credit ranking, market
capitalisation and so on.
It’s also important to remember that B2B decision making will
take longer that B2C – you don’t do an impulse buy on a corporate
payroll system, for example, or an outsourcing provider. B2B
customers are also likely to be more risk averse, with a few notable
exceptions. As such they will have preconceptions of who to buy
)U
from and what to buy from them? You don’t get sacked for buying
from IBM, remember B2C customers are far more likely to want
risk and excitement in their purchasing decisions; B2B customers
want to know they’ll still have a job in six months’ time.
and Contacts.
3. Virtually every CRM system is built on relational data
base technology which makes it easy to establish the
....................
4. .................... is moving beyond traditional trade shows
or customer conferences.
UNIT 22: CRM in B2B and B2C Markets
S
Whether the company is selling in a B2B or B2C market, Write an assignment on
___________________
implementation could be as simple as signing up for a web based, implementation of CRM in
B2B.
vendor hosted solution. If the CRM solution is going to be deployed ___________________
on premise (owned and operated by the company vs. hosted by the ___________________
vendor) then there could be a multitude of implementation issues.
___________________
But most will not be related to whether the company is in a B2B or
B2C market; they will be related to the installation, customization, ___________________
PE
and deployment of the product, and training of the sales and ___________________
marketing staff. ___________________
The primary differences related to the market (B2B vs. B2C) are ___________________
the type of information collected in the CRM system and the
___________________
functional requirements, not so much the implementation.
___________________
In a B2B environment it is necessary to have a data base structure
that provides for the concepts of Accounts (companies) and
Contacts (employees). In most B2B environments there are
multiple constituents involved in the buying process so the CRM
system needs to be able to establish permanent relationships
between a single company and multiple employees. Often in the
B2B environment there are also multiple sales processes that could
)U
be active within a single account at the same time, perhaps being
managed by multiple sales people or sales teams. In this case the
CRM system needs to be set up in such a way to allow for multiple
sales processes to be related to a single account or company and
have the ability to either allow or disallow sales people and/or sales
teams to share visibility into the relevant customer information. In
the B2B market, it is also important for the data base to be able to
establish relationships between the main HQ account and
subsidiaries. Specific types of information need to be collected that
are not relevant in the B2C environment such as the company
website, the management hierarchy (who reports to whom), who is
the assistant of the buyer and what is his/her contact information,
etc. The CRM should be able to store information about the
(c
292
CRM Techniques for B2B Marketers
Notes
Activity
S
Prepare a chart for your The techniques are as follows:
___________________
display board on the CRM
techniques for B2B
___________________
marketers.
Internet and Digital Communications
___________________ E-mail – particularly newsletters and offers – and the internet are
___________________ key methods of both B2B customer communication and knowledge
sharing, greatly reducing costs of traditional print media and
___________________
telemarketing. But digital communication also offers new
PE
___________________ communication techniques that personalise content and encourage
___________________ interaction at different stages of the customer journey. These
include:
___________________
Intranet/Extranet Channels
53 percent of UK companies now use extranets with suppliers.
These help enormously to build engagement and knowledge
sharing between the employees of the customer, partner and
supplier organisations. They both create a customised service for
key accounts, and reduce relationship building costs for lower
(c
value customers.
Account Management
There are 10 reasons why companies adopt Key Account
Management (KAM) practices. If you have business clients, at
least one of these will apply to you. For KAM is the suppliers’
counterbalance to professional procurement.
UNIT 22: CRM in B2B and B2C Markets
293
Key account management is a simple concept; a sensible approach
Notes
S
to complex customers. In fact, CRM started life in the early 1990’s
as better business to business account management; (before 1to1 ___________________
Marketing became book of the year in 1993). Yet, still too few do it ___________________
really well – Syngenat, IBM and some major airlines stand out
___________________
from the crowd – whilst others have tried it, returned to traditional
selling, then revived KAM again in a game of yo-yo. ___________________
___________________
PE
For KAM is the antidote to growing buyer clout achieved through
professional procurement, supply chain networks and company ___________________
mergers. If suppliers are not to become sellers of commodity priced ___________________
goods, they need relationship management and KAM practices to
___________________
even up the balance and provide greater value. But this is not see-
saw on the supply curve; it’s a fundamental change in the nature of ___________________
tenders
Valuable Opportunities
5. Global clients want a uniform approach especially from
complex suppliers
Customer Relationship Management
294
6. Asset advantages from stable, known longer term
Notes
S
relationships
___________________
7. Ability to influence client lifetime value, especially through
___________________
solutions
___________________
8. More precise innovation through co-creation with clients
___________________
9. Greater market understanding and adaptiveness
___________________
PE
10. Reduced costs and increased value through better resource
___________________
allocation.
___________________
___________________
Integration of Sales, Marketing and Service into Customer
Lifecycle Management
___________________
Cisco has just overcome one of the biggest hurdles in B2B
___________________ marketing – the integration of sales and marketing through virtual
teams and joint targets. Led by market segment managers, sales
teams know exactly which types of customers are important and
what sort of mix is required and why. They can then manage how
much time, effort and resources to spend in attaining plans. Both
sides of the divide have been educated in each others world and in
business.
)U
Creating Partners
Collaboration between companies is good; it can widen margins,
extend market reach and fend off competition. All are possible. But
approached in the half hearted manner companies, spurred on by
the gleam of new collaboration technology, can easily end in
divorce and brand damage.
S
marketing should definitely not be downplayed, that is still a Prepare a brief report on the
___________________
pretty fair assessment of the journey that B2B marketing is importance of implementing
CRM in B2B market.
___________________
currently making.
___________________
Check Your Progress ___________________
State True or False:
___________________
PE
1. The basic idea behind CRM is that if a seller can ___________________
create a strong and trusting relationship with its
___________________
buyers.
___________________
2. Customer Relationship Management is not a
seductive marketing strategy. ___________________
___________________
296
At the same time that CRM has emerged as a major trend in the
Notes
S
business world, companies have also increased their ability to
___________________
organize, store, process, and analyze data from their own internal
___________________ business activities as well as from external sources. Improved
___________________ computer technologies, combined with more powerful software,
provided by companies who specialize in CRM applications, have
___________________
resulted in an ability to use data in ways never before possible in
___________________ developing competitive strategies. This data-processing capacity
PE
___________________ has fuelled the CRM movement (Crosby and Johnson, 2000).
___________________
Check Your Progress
___________________
State True or False:
___________________
1. The B2C customer tends to be a person, making
___________________ decisions for him or herself.
2. In B2C environment, there is generally a much longer
sales cycle.
Summary
B2B organisations also need to adopt CRM strategic initiatives to
)U
prosper or survive. They must analyse information about their
existing clients and provide products and services that they value
as well as attract new clients. During the last few years, the topic
of Customer Relationship Management (CRM) has emerged as one
of the most important areas in marketing and in the overall
management of the firm. Numerous articles have been published
that point to the importance of maintaining long-term
relationships with customers in business-to-business (B2B)
markets. From a technology point of view, it’s not so much what’s
different as how the technology is applied. B2B, B2C and the
dreaded B2B2C – essentially there is no difference. Specifically,
the differences are of complexity and degree, which doesn’t negate
B2C marketing techniques in B2B, it just means they have to be
adapted.
(c
S
Contacts (employees). In most B2B environments there are ___________________
multiple constituents involved in the buying process so the CRM
___________________
system needs to be able to establish permanent relationships
between a single company and multiple employees. ___________________
___________________
PE
Make a presentation on the implementation of CRM techniques in ___________________
B2B and B2C markets. ___________________
___________________
Keywords
___________________
Business-to-business (B2B): It is a term commonly used to ___________________
describe electronic commerce transactions between businesses, as
opposed to those between businesses and other groups, such as
business and individual consumers (B2C) or business and
government (B2G).
Business-to-consumer (B2C): It describes activities of
e-businesses serving end consumers with products and/or services.
)U
Customer Relationship Management (CRM): It refers to the
holistic approach an organization can take to manage their
relationships with customers, including policies related to contact
with customers, collecting, storing and analyzing customer
information and the technologies needed to perform these tasks.
298
Notes Further Readings
S
___________________
Books
___________________
Mohammed H. Peeru and A Sagadevan, Customer Relationship
___________________
Management, Vikas Publishing House, 2004, Delhi.
___________________
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
___________________ Century, Tata McGraw Hill, 2005.
PE
___________________
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
___________________ Customer Relationships Management, Wiley, 2003.
___________________ Alex Berson, Stephen Smith, Kurt Thearling, Building Data
___________________ Mining Applications, 2004.
Web Readings
)U
en.wikipedia.org/wiki/Customer_relationship_management
searchcrm.techtarget.com/definition/CRM
finance.yahoo.com/q?s=CRM - United States
www.impelcrm.in
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
(c
UNIT 23: BPR and CRM
Unit 23
299
Notes
S
BPR and CRM
___________________
___________________
___________________
Objectives
___________________
After completion of this unit, the students will be aware of the following
topics: ___________________
PE
\ Concept of business process reengineering ___________________
\ Implication of business process reengineering ___________________
\ Business process management
___________________
\ Quality as an organizational culture
___________________
Introduction ___________________
300
BPR is a method of improving the operation and therefore the
Notes
Activity
S
Make a brief report on the outputs of organizations. Generally the topic of BPR involves
___________________
business process discovering how business processes currently operate, how to
reengineering.
___________________ redesign these processes to eliminate the wasted or redundant
___________________ effort, improve efficiency, and how to implement the process
changes in order to gain competitiveness.
___________________
The purpose of BPR is to find new ways to organize tasks, organize
___________________
people and redesign information technology so that the processes
PE
___________________ support the organization’s goals. It means analyzing and altering
___________________ the business processes of the organization as a whole.
S
Undoubtedly, Michael Hammer has garnered most of the BPR Write an article on the
implications of business
___________________
press because of the radical rhetoric with which he communicates. process reengineering.
However, the ideas expressed by Hammer (and later Hammer and ___________________
Champy) are similar to the new business process redesign concepts ___________________
of Davenport and Short. They agree that the processes should be
___________________
transformed holistically rather than by fixing bottlenecks in small
increments. Furthermore, they agree on the essential role IT ___________________
PE
should play in business process transformation. Most importantly, ___________________
their ideas point to a formulation of the process enterprise that is ___________________
different from the functional hierarchical organization with which
___________________
corporations had been aligned. In their writings, the founders of
BPR have repeatedly demonstrated the poor coordination of ___________________
functional organizations and the superiority of process ___________________
organizations in coordination and in achieving performance gains.
In its most radical form, the process enterprise is one that
eliminates functional structure in favour of an exclusive process-
based structure. The more realistic approach for becoming a
process enterprise is to have a matrix structure of process-
hierarchy and functional-hierarchy. Table 23.1 illustrates the
)U
differences between process organization and functional
organization.
302
As illustrated above, process enterprise holds the promise of being
Notes
S
more responsive to market requirements, and it is suited for
___________________
companies that offer differentiated products/services rather than
___________________ competing on cost alone. However, organizational realignment by
___________________ itself does not result in improvements. Organizational realignment
has to be accompanied by change in management practices and
___________________
mindsets. A 1996 Harvard Business Review article by Ann
___________________ Majchrzak and Qianwei Wang of University of Southern California
PE
___________________ presents data supporting this viewpoint. A process is “a structured,
measured set of activities designed to produce a specified output
___________________
for a particular customer or market.
___________________
In their study, the cycle times of 86 printed circuit board
___________________
assembling departments at electronic companies were analyzed.
___________________ These departments performed the same manufacturing processes
at large and small electronics companies. They labelled 31 of the
86 departments as process-complete, meaning these departments
perform manufacturing processes, support tasks, and customer
interfacing. The rest are traditional functional departments that
do not perform most activities outside of the manufacturing
processes. To the authors’ surprise, they discovered process-
)U
complete departments did not have faster cycle times than
functional departments. After more analysis, they found process-
complete departments had faster cycle times when management
practices were put in place to foster collective responsibility. These
practices include jobs with overlapping tasks, group-based
rewards, open workspaces, and collaborative work procedures.
Analysis of the data, after taking into account these management
practices, revealed that process-complete departments that
implemented these practices achieve cycle times as much as 7.4
times faster than process-complete departments that have not
implemented these practices. Furthermore, process-complete
departments that operated on traditional functional mindsets have
cycle times as much as 3.5 times longer than functional
departments. Organizational restructuring alone does not
(c
303
What are the effects of BPR on corporate performance? Several
Notes
S
success stories have been widely publicized. Ford was able to
reduce 75 percent of its staff in its accounting department, Mutual ___________________
Benefit Life achieved 60 percent productivity improvement in its ___________________
insurance applications department, Hewlett-Packard improved on-
___________________
time delivery performance by 150 percent in its purchasing
department, and American Express was able to reduce average ___________________
PE
Hammer’s own admission, 50 percent to 70 percent of business ___________________
process reengineering projects failed. In addition to Hammer’s own
___________________
assessment of the failure rate, one study indicated that only 16
percent of corporate executives were fully satisfied with their BPR ___________________
implementations. ___________________
S
Prepare an assignment on
___________________ implementations. These results correlate to the contention that
understanding business
processes. change management and the human side of implementations are
___________________
more important than the solutions themselves.
___________________
Early BPR results led to the formulation of a new generation of
___________________
BPR rhetoric from its founders. This revisionist BPR thinking
___________________ increasingly focuses on the cultural context of the organization.
PE
___________________ The founders no longer stress the radical approach that was in the
original BPR thinking. The new rhetoric of BPR emphasizes the
___________________
importance of people and the change management aspects of
___________________
implementation. Instead of dramatic and wide ranging process
___________________ changes, revised BPR thinking calls for a holistic approach to
___________________ reengineering that involves business processes, technology, and
social system issues (including culture). Revisionist BPR thinking
looks to redesign critical business processes that will confer the
most value through targeted changes to organization, processes,
technology, and culture. The aim is no longer to change the
organization’s entire culture but only to target those aspects of
culture that are critical to the success of reengineering
implementation. An illustration of this is the case of instituting
)U
multi-skilled jobs and job rotations in a culture that values
specialized trade skills. A blanket enforcement of this change will
undoubtedly engender widespread resistance.
S
method proposed by Porter and Millar (1985). ___________________
Processes are generally identified in terms of beginning and end ___________________
points, interfaces, and organization units involved, particularly the
___________________
customer unit. High Impact processes should have process owners.
Examples of processes include: developing a new product; ordering ___________________
PE
paying an insurance claim; etc. ___________________
Processes may be defined based on three dimensions (Davenport & ___________________
Short 1990):
___________________
z Entities: Processes take place between organizational entities.
___________________
They could be Interorganizational (e.g. EDI), Interfunctional
___________________
or Interpersonal (e.g. CSCW).
z Objects: Processes result in manipulation of objects. These
objects could be Physical or Informational.
z Activities: Processes could involve two types of activities:
Managerial (e.g., develop a budget) and Operational (e.g., fill a
customer order).
)U
Concept of BPR
Business Process Reengineering (BPR) is a more radical approach
to improvement than Total Quality Management (TQM). Instead of
tweaking the existing system in a series of incremental
improvements, in process reengineering a business process is
diagrammed in detail, questioned, and then completely redesigned
to eliminate unnecessary steps, to reduce opportunities for errors,
and to reduce costs. A business process is any series of steps that
are followed to carry out some task in a business. For example, the
steps followed by your bank when you deposit a check are a
business process. While process reengineering is similar in some
respect to TQM, its proponents view it as a more sweeping
approach to change. One difference is that while TQM emphasizes
(c
S
___________________ activities. For example moving large batches of work in process
from one work station to another is a non value added activity. To
___________________
some degree Just-in-Time (JIT) involve process reengineering as
___________________
does Total Quality Management (TQM). These management
___________________ approaches often overlap.
___________________ Process reengineering has been used by many companies to deal
PE
___________________ with a wide variety of problem. For example, the EMI Records
Group was having difficulty filling orders for its most popular CDs.
___________________
Retailers and recording stars were rebelling – it took the company
___________________
as much as 20 days to deliver a big order for a hit CD, and then
___________________ nearly 20% of the order would be missing. Small, incremental
___________________ improvements would not have been adequate, so the company
reengineered its entire distribution process with dramatic effects
on on-time delivery and order fill rates. Reynolds & Reynolds Co. of
Dayton, Ohio, produces business forms. Filling an order of a
customer used to take 90 separate steps. By reengineering, the
number of steps was slashed to 20 and time required to fill an
order was cut from three weeks to one week. Massachusetts
General Hospital is even using process reengineering to
)U
standardize and improve surgical procedure.
Definition of BPR
BPR was first introduced in a research program at MIT
(Massachusetts Institute of Technology) in the early nineties. The
term was used in the description of Davenport and Short’s 1990
research project. They found out that the implementation of
modern information technology in organizations means not only
automation of managerial and production tasks but that it also has
a direct effect on the quality of the work done. Davenport (1993),
one of the fathers of BPR describes ‘business process redesign’ as:
“The analysis and design of workflows and processes within and
between organizations. Business activities should be viewed as
(c
S
is regarded as one of the starting points of BPR. The following is ___________________
their definition of BPR:
___________________
“Reengineering is the fundamental rethinking and radical redesign
___________________
of business processes. to achieve dramatic improvements in
critical, contemporary measures of performance, such as cost, ___________________
PE
___________________
Need of BPR
___________________
The need for businesses to improve the way they operate by
increasing the efficiency and effectiveness of their business ___________________
Methodology
PricewaterhouseCoopers’ approach to process reengineering
assignments is underpinned by our Process Improvement Through
Benefits Management (PITBM) methodology.
In our approach, project success is achieved through benefits
(c
308 planned benefits from the change project are neither realised nor
Notes measured.
S
___________________
The PITBM methodology has a whole lifecycle approach to
___________________ obtaining beneficial returns on change and process improvement
___________________ project investments by ensuring that the benefits realisation
processes become an integral part of the organisational activities
___________________
that remain in place after project completion. Benefits
___________________ management addressed in this way is a business process and a
PE
___________________ management philosophy and not just a technique for investment
justification.
___________________
___________________
Benefits realisation management is enabled through:
S
more advanced approach to process reengineering. ___________________
PE
contribution of the industrial engineering discipline in which
___________________
methods such as process analysis, activity costing and value-added
measurement have been around for about 50 years. Earl (1994) ___________________
also discusses the contribution of a number of fields, including the ___________________
operations management domain (e.g. Juran, 1964), sociotechnical
___________________
systems thinking (Leavitt, 1964) and systems analysis. However,
BPR is now coming to the fore in a different business environment. ___________________
310
Check Your Progress
Notes
S
Choose the suitable answer:
___________________
___________________
1. TQM stands for:
PE
___________________ (d) None
___________________ 2. JIT stands for:
___________________ (a) Just in Time
___________________
(b) Just in Temperature
___________________
(c) Just in Temporary
(d) None
3. PITBM stands for:
(a) Process Important Through Benefits Management
(b) Process Improvement Through Benefits
)U
Management
(c) Process Improvement Through Basic
Management
(d) None
Summary
In this unit, you learnt about business process reengineering.
Business Process Reengineering (BPR) began as a private sector
technique to help organizations fundamentally rethink how they
do their work in order to dramatically improve customer service,
cut operational costs, and become world-class competitors. A key
stimulus for reengineering has been the continuing development
and deployment of sophisticated information systems and
(c
S
Make a presentation on the relationship between BPR and CRM.
___________________
To enhance your presentation, add suitable examples with pictures
to your slides. ___________________
___________________
Keywords ___________________
PE
approach to improving business activity and creating automated ___________________
applications that is supported by a group of new process modellers,
___________________
application generators, application interface engines, and
performance monitoring software. ___________________
Further Readings
Books
(c
312
William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
Notes
S
Customer Relationships Management, Wiley, 2003.
___________________
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
___________________
Mining Applications, 2004.
___________________
CGI Group Inc. White Paper, Building Competitive Advantages
___________________ through Customer Relationship Management, January 2001.
___________________
Anderson, Paul and Art Rosenberg, The Executive’s Guide to
PE
___________________ Customer Relationship Management, Doyle Publishing Company,
___________________ Houston, 2000.
Unit 24
313
Notes
S
Creating Customer-focused
___________________
___________________
Organisation ___________________
___________________
Objectives ___________________
PE
After completion of this unit, the students will be aware of the following
___________________
topics:
___________________
\ Quality as an Organizational Culture
\ Quality Practices in Six Sigma ___________________
___________________
Introduction
Businesses are feeling the pressures of a constantly changing
marketplace and are experiencing difficulties differentiating their
products or services in the intensified competition of this
environment. Many companies have lost focus of the reason for
their existence in this turbulent environment. Gone are the days of
)U
the seller's market, so many companies enjoyed in the decades
past. It is important to remember that the fundamental purpose of
a business is to make money and survive. It can not do this unless
it has a customer focus throughout the entire organization.
Customer Focus is about getting all employees to look at their job
through the eyes of the customer. Customer Focus involves
continually listening to the voice of your customers, obtaining their
input and feedback and using this information to make changes
which add value to your products and services. Customer Focus is
about adding value at all levels of your organization
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Write an article on quality as
___________________ service development that relies on statistical methods and the
an organizational culture.
scientific method to make dramatic reductions in customer defined
___________________
defect rates.”
___________________
The Six Sigma successes in major companies including GE,
___________________
Honeywell, Sony, Caterpillar, and Johnson Controls, promote the
___________________ adoption of Six Sigma in industry. Nevertheless, as a
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___________________ comprehensive quality program, Six Sigma implementation is a
complicated process which requires substantial changes in the way
___________________
that companies operate and involves many problematic issues.
___________________
Organizational culture has been recognized as one major factor or
___________________ challenge to the Six Sigma implementation.
___________________ Organizational culture is viewed as the pattern of values, beliefs,
and assumptions shared by members in an organization, which are
perceived by the organization as the valid, correct way to perceive
and solve problems. These shared values, beliefs, and assumptions
in the organization bind its employees together and become the
manner or strategies through which the organization achieves its
goals In the context of quality management, the values and beliefs
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underlying an organization’s culture are able to shape its
philosophy and policies of managing business, which in turn
influence the development of the organization’s quality
management practices. It has been argued that for an organization
to realize the value of implementing quality practices, it must have
a culture that is capable of fully supporting their implementation.
The role that culture plays in influencing an organization’s level of
quality management practices has received much attention in the
literature. There have been a number of studies that attempted to
identify the cultural characteristics conducive to quality
management implementation. However, a majority of prior studies
treated quality management as a uni-dimensional construct. As
Prajogo and McDermott (2005) found, the studies that examined
quality management as a single construct usually focused on the
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management – is to use the entire capacity of workers and to Make a brief report on the
___________________
quality practices in Six Sigma.
encourage employee commitment to organizational continuous
___________________
improvement efforts. Workforce management emphasizes the
organizational and people side of quality management and uses a ___________________
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the use of effective communications to create an awareness of
___________________
organizational goals. Another typical quality practice – process
management – is concerned with using statistical and scientific ___________________
techniques to reduce process variation, which represents the ___________________
methodological and technical side of quality management.
___________________
Considering the different features of the quality practices, it is
___________________
very possible that cultural characteristics that support a certain
type of quality practice differ from those cultural characteristics
that support other types of quality practices. However, there are
relatively few studies that examine the different effect of cultural
characteristics on different quality practices. Several studies that
appeared recently are the exceptions in the quality management
literature, for example, compare a unitarist model of quality
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management (i.e., that considers quality management as a single
construct) with a pluralist model which considers quality
management with its multidimensional elements. Based on the
data drawn from 194 Australian companies, they find that the
pluralist model better describes the relationship between culture
and quality management, which indicates that different cultures
are associated with different elements of quality management.
Empirical research examining implementation of Six Sigma
relative to culture is particularly sparse in today’s literature. The
purpose of this study is to add an understanding of the effect of
organizational culture on Six Sigma by empirically investigating
the relationship between culture and quality practices associated
with Six Sigma implementation in US manufacturing companies.
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___________________ should be the operationalizable construct to be examined because
quality practices are the observable components of the quality
___________________
program, through which manager’s work to achieve continuous
___________________
improvements. In comparison, principles are too general for
___________________ empirical research and techniques are too detailed to obtain
___________________ reliable results (e.g., one quality practice may be implemented by
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various optional techniques).
___________________
The key practices are as follows:
___________________
Customer Relationship
To achieve quality, it is critical to understand what customers
want and to provide products or services that meet their needs and
expectations. Factors important to customers’ perception of quality
are taken into consideration when companies select, design, and
execute a Six Sigma improvement project. A formal evaluation
system of customer requirements is needed as a platform for
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___________________
Supplier Relationship
___________________
Suppliers’ involvement in Six Sigma helps to provide a high quality
of products and services to the ultimate customers. Companies put ___________________
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quality, including those related to their suppliers. A supplier
___________________
selection system is set up based on quality considerations and
whether suppliers are wiling to cooperate, which helps to establish ___________________
a long-term working relationship between the company and a ___________________
small number of its suppliers. In addition, Six Sigma encourages
___________________
companies to engage their suppliers at the early stage of
improvement projects, i.e., Early Supplier Involvement (ESI). ESI ___________________
Workforce Management
The Six Sigma implementation needs a competent and supportive
workforce who is willing to participate in the organization-wide
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improvement efforts. In Six Sigma, management policies are taken
to strengthen job security, to motivate employees to speak out with
ideas, and to provide employees technical and psychological
supports. For example, a policy that links employees’ performance
in Six Sigma projects with their compensation and promotion
motivates them to participate in and contribute to Six Sigma. Also,
continual education and training to management and employees
assist companies to develop knowledge and skills of its employees
for effective quality improvement. It is important that companies
manage the workforce in conjunction with a Six Sigma green and
black belt system, which is a role structure unique to Six Sigma, in
the areas of employee deployment and training.
Quality Information
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318 Sigma is connected with the metrics used in Six Sigma. Six Sigma
Notes emphasizes linking quality improvement with bottom-line benefits
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___________________ and thus the metrics incorporate bottom-line performance
measures with the measures of quality defects. To provide
___________________
appropriate data for evaluating those metrics, the content of
___________________
quality information must include both operational and financial
___________________ data.
___________________
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Product/Service Design
___________________
To achieve improved quality, it is important to design products for
___________________ manufacturability and design quality into products and services.
___________________ Cross-functional teams, consisting of design, manufacturing, and
___________________
marketing functions, are formed to reduce the number of parts per
product, to standardize the parts, and to focus on improving
___________________
manufacturing processes. Moreover, Six Sigma applies Design for
Six Sigma (DFSS) in the design process. A feature of DFSS is to
use a structured, standardized product development procedure,
e.g., Plan-Identify-Design-Optimize-Verify (PIDOV). Also, DFSS
emphasizes satisfying customer needs with a product/service
design that utilizes materials, technologies, and manufacturing
processes that are also financially beneficial for the organization. A
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comprehensive set of tools are used in DFSS, such as phase-gate
project reviews, benchmarking, measurement system analysis,
voice of the customer, Quality Function Deployment (QFD), Pugh
concept selection technique, design failure modes and effects
analysis, and so forth.
Process Management
Six Sigma emphasizes reducing the variability of the processes
that manufacture products and deliver services. Process
management means ongoing improvement to manufacturing,
transactional, and/or service processes to satisfy customers’ needs
and expectations by using preventive maintenance, workplace
organization, and use of line-stop capability. Six Sigma emphasizes
conducting process improvement as projects. Companies work on
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Check Your Progress
Notes
Activity
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Fill in the blanks
Prepare a draft of an
___________________
1. ................... is the newest quality management program assignment on strategies of
business success.
___________________
which helps companies increase both customer
satisfaction and financial benefits. ___________________
___________________
2. ................... characteristics can be translated into
metrics which are then used to define the goal of a ___________________
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project, to monitor its progress, and to evaluate its ___________________
outcomes.
___________________
___________________
Growth through Customer Satisfaction
___________________
There are two strategies of business success and these are:
___________________
z Employee satisfaction
z Customer satisfaction
Productivity of corporate resources including people, money and
machinery in all aspects of business operations ranging from
research and development, manufacturing ad operations, to sales
and services depends on how employees and customers feel about
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the business.
Selecting the right employees, motivating them correctly, and
rewarding them handsomely for their hard work becomes
extremely important in the early hard work of a company’s life
cycle. In the process the company begins to be driven by its
employees and internal operations and forgets that you also need
satisfied customers to succeed in their business.
Furthermore, as business grows, so does its bureaucratic structure,
which further isolates the company from its customers. Indeed, it
is not uncommon for the company’s employees and procedures to
feel that the customer s a bloody nuisance, who refuses to go along
with their sales forecasts, who has the audacity to criticize and
complain, and who wants to change them to suit his requirements.
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Thus, when business grows and the company reaches the maturity
stage of its life cycle, it is common to find satisfied employees but
dissatisfied customers. Smart management, therefore, must focus
on the external world of customers and their needs in addition to
the internal world of employees and their operations. It must
realize that the company now depends much more on its customers
Customer Relationship Management
320 and not the other way around that customers have other choice,
Notes and that customers are both technically sophisticated and
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___________________ financially capable to produce products and services rather than
buy them from anyone in the market place.
___________________
___________________ Unless the company is willing to reorient its people and reorganize
its operations to be customer driven, excellence in R&D,
___________________
manufacturing, and marketing are unable to stop decline in
___________________ market share, corporate growth and business profitability. It is not
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___________________ a question of doing it right; it is a question of doing the right thing.
Furthermore, it doesn’t matter whether you are a big company or a
___________________
small company, market leader or a niche player. Nor does it matter
___________________
whether you are in agriculture, chemical, consumer electronics,
___________________ automobile, financial services, health care or telecommunications.
___________________ Lack of customer focus, especially at the maturity stage of the life
cycle, creates a significant negative impact on the company’s
profits and growth performance.
And once you start losing profits, growth and market share, you
also lose employee confidence, morale and productivity. Ultimately,
excellent employees start to leave the company resulting in
employee dissatisfaction. In other words, employee satisfaction
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also depends on customer satisfaction.
We discuss six major competitive advantages a company gain
through customer satisfaction. All of them contribute positively
toward the dual financial objectives of profits and growth.
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321
z Economy if sale through lower cost of doing repeat business.
Notes
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z Higher prices commanded through differentiation.
___________________
z Protection from satisfied customer’s in a crisis situation.
___________________
Similarly, a company’s growth objectives are attained by the other ___________________
three competitive advantages:
___________________
z Product diversification growth through one-stop shopping.
___________________
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z New market growth by word of mouth.
___________________
z New product development through lead users. ___________________
Summary
Strong customer focus is the glue that holds successful
organizations together. It is the fuel for an improved bottom line.
Customer Focus is a process that will require the commitment and
dedication of every employee in the organization.
Businesses that neglect creating a true customer focus will feel the
unnecessary high costs of poor service through the active word of
mouth of dissatisfied customers and increasingly expensive
advertising and marketing to attract new customers. Short-term
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Lesson End Activity
Notes
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With the help of internet, collect more information and pictures on
___________________
Six Sigma and its quality practices. Make a collage for your display
___________________ board from the information collected.
___________________
___________________ Keywords
___________________ Customer Focus: It involves continually listening to the voice of
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___________________ your customers, obtaining their input and feedback and using this
information to make changes which add value to your products and
___________________
services.
___________________
Six Sigma: It is defined as “an organized and systematic method
___________________
for strategic process improvement and new product and service
___________________ development that relies on statistical methods and the scientific
method to make dramatic reductions in customer defined defect
rates.
Organizational culture: It is viewed as the pattern of values,
beliefs, and assumptions shared by members in an organization,
which are perceived by the organization as the valid, correct way to
perceive and solve problems.
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Process management: It means ongoing improvement to
manufacturing, transactional, and/or service processes to satisfy
customers’ needs and expectations by using preventive
maintenance, workplace organization, and use of line-stop
capability.
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Books ___________________
Mohammed H. Peeru and A Sagadevan, Customer Relationship ___________________
Management, Vikas Publishing House, 2004, Delhi.
___________________
Paul Greenberge, CRM-Essential Customer Strategies for the 21st
___________________
Century, Tata McGraw Hill, 2005.
___________________
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William, G. Zikmund, Raymund McLeod Jr., Faye W. Gilbert,
___________________
Customer Relationships Management, Wiley, 2003.
___________________
Alex Berson, Stephen Smith, Kurt Thearling, Building Data
Mining Applications, 2004. ___________________
___________________
CGI Group Inc. White Paper, Building Competitive Advantages
through Customer Relationship Management, January 2001. ___________________
Web Readings
www.rewardlicious.com/PDFs/3_differentiators.pdf
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www.isb.edu/cee/BuildingaCustomer.Shtml
searchcrm.techtarget.com/definition/CRM
finance.yahoo.com/q?s=CRM - United States
www.impelcrm.in
www.thesocialcmo.com/blog/.../definition-of-social-crm—explained/
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Customer Relationship Management
324
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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UNIT 25: Case Studies
Unit 25
325
Notes
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Case Studies
___________________
___________________
___________________
Objectives
___________________
After analyzing these cases, the student will have an appreciation of the
concept of topics studied in this Block. ___________________
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___________________
Case Study 1: Identifying Customers and Meeting their needs
– An Argos Case Study ___________________
___________________
Introduction
Marketing is about making sure that a business is providing the ___________________
goods and services that customers want. It involves identifying ___________________
and anticipating what consumers want today and will want in the
future. The marketing department then plays an important role
in taking these goods and services to market through all the
channels the business sells through. This case study focuses on
the way in which Argos makes sure that it meets the needs of its
customers.
Argos was founded in 1973 and is now the UK's leading general
merchandise retailer with sales of over £3.3 billion. Argos is
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owned by GUS plc and is part of the Argos Retail Group with over
580 stores in the UK and Republic of Ireland, as well as
distribution centres, call centres and its head office in Milton
Keynes, employing over 23,000 people in total. Approximately
98% of the UK population live within 10 miles of an Argos store.
In the modern world of retailing consumers can have their needs
met in a variety of ways such as High Street shopping, out of
town shopping centres, and by direct delivery from Internet
orders. Competition among retailers is increasingly getting tough.
Differentiation is therefore the key to developing a compelling
competitive advantage and winning loyal customers.
Differentiation is the process of making your business stand out
from rivals - making it different and better.
Marketers at Argos therefore are continually concerned with
addressing the questions:
z Who are our customers? (Argos needs to find out as much as
possible about its customers in order to meet their needs.)
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326
Since it first started, Argos has established a very strong, trusted
Notes brand focused on value, choice and convenience. It is the UK's
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number one retailer for toys and small electrical appliances; it has
___________________
a major presence in many other markets including DIY and
___________________ gardening, consumer electronics and furniture and a significant
market share in jewellery (being No. 1 in terms of volume) and
___________________ sports equipment.
___________________ Consumers are offered a multi-channel approach to shopping.
Argos publishes two catalogues a year, the spring/summer edition
___________________ in January and the autumn/winter catalogue in July.
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___________________ Mission Statement
looks the same. However, when you peel off the skin you find that 327
it is made up of a number of segments, each of which exists within Notes
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the whole. The segments in an orange are more or less identical,
but in markets, by contrast, they are different in terms of size and ___________________
character.
___________________
A segment, therefore, is a group of consumers who share common
characteristics that are different from other groups. Different ___________________
segments may require different versions of the product, they may
pay different prices and they may buy the product in different ___________________
places.
___________________
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The most common way of segmenting a market is by
demographics. Demography is the study of population. ___________________
Demographic segmentation recognises that different sections of ___________________
the population have different buying patterns and preferences to
others. For example, there is a difference in taste and spending ___________________
patterns between the old and the young, between men and
women, according to locality etc. ___________________
Argos tested out demographic approaches but found that this was ___________________
not a very accurate basis for segmentation. A much more helpful
basis has proved to be the frequency of visitors (i.e. the number of
times customers visit the website, or visit stores).
A distinction is often made in business between the internal and
external customers of an organisation. The external customers of
a retailing business are the shoppers who want to be served in an
efficient and friendly way. Internal customers are fellow
employees that we work alongside in a place of work. If we treat
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them as customers then we help them to serve external customers
well.
The Argos way of working is built on a belief that the external
customer is the most important customer. Argos people are a
team of colleagues who work together to meet customers needs.
Questions:
1. What was the mission statement of Argos and how did it plan
to meet the customer needs?
2. Write a short note on the customers and segmentation of
Argos.
3. Find out the strategy that would be suitable for the company?
Source:http://businesscasestudies.co.uk/argos/identifying-customers-and-meeting-their-
needs/customers-and-segmentation.html#axzz2LE2k3dYf
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Customer Relationship Management
328
Case Study 2: Building Sound Customer Relationships – A
Notes Royal & SunAlliance Case Study
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___________________
Introduction
___________________ Customer service is the whole activity of identifying customer
___________________
needs, satisfying them fully and keeping them satisfied. In service
industries in particular, customer service is best achieved through
___________________ relationship management, which involves building firm,
enduring, business relationships with customers.
___________________
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Royal & SunAlliance is one of the world’s major insurers, with
___________________ operations in around 50 countries it carries out business in over
130 countries. The company looks to meet the needs of the
___________________ brokers with which it deals and who are its direct customers. This
case study shows how the company has successfully developed
___________________
relationship management with its brokers using an approach
___________________ called ‘Energy’.
Like many other industries, the insurance industry operates in a
___________________
dynamic global environment. Individual insurance businesses
face high levels of competition from rivals which use latest
technologies to update the way they operate continually.
Insurance companies also face the uncertainty of an inter-
dependent world in which change can be dramatic and
unexpected, as evidenced by the terrible events of September 11th
2001. The terrorist attacks have had massive knock-on effects not
only in terms of human suffering but also in the form of a multi-
billion pound insurance clearing up operation.
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Like other service industries, insurance companies are faced by
consumers whose requirements are becoming increasingly
sophisticated and whose willingness to switch to another supplier
is on the increase. To compete successfully and thrive in this
environment, companies must be forward thinking in their
approach to customers and in applying new techniques.
This case study shows how Royal & SunAlliance has applied
successful customer segmentation and relationship management
to achieve successful partnerships with its key customers.
Segmentation
Customer segmentation is the process of gathering information
about customers, identifying distinct segments of the overall
market and then developing approaches to meet the needs of
these segments.
Relationship management is the process of developing one-to-one
relationships with customers. In a market in which products are
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hard at their technical and claims service. This approach wins 329
clients and also helps to retain them. Notes
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Royal & SunAlliance believes that in the long term the number of
brokers will reduce. The winners of the future will be brokers who ___________________
currently run successful businesses and who demonstrate vision, ___________________
adaptability and innovation. Qualitative research carried out has
shown that these brokers need support from insurers who are ___________________
prepared to put the same amount of energy into the relationship
to enable them to achieve their goals. Using this information, ___________________
Royal & SunAlliance introduced a proposition for key independent
___________________
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brokers that brought them service and resources to support them
in winning, retaining and servicing clients. This proposition was ___________________
called ‘Energy’.
___________________
Responding to the Research Evidence
In order to deliver a solution that would meet customer needs, ___________________
Royal & SunAlliance consulted a sample of its top 200 ___________________
independent brokers. The results of this research revealed the key
elements that brokers were looking for in a partner: ___________________
z Relationships at all levels with individuals who are
empowered to make decisions
z A proposition exclusive to themselves
z Financial support to aid their strategic goals.
The proposition required that Royal & SunAlliance should change
its focus. Instead of conducting business on a highly product
based, transactional and price focussed level, the Energy
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proposition required Royal & SunAlliance to change its approach
and instead sell solutions giving added value, focusing on
promoting long term relationships. The aim was to follow through
a specific process to help brokers to achieve their aims by:
z Analysing and understanding key customers’ business plans
z Analysing and understanding the organisation’s total
relationship with these customers
z Joint planning with key customers
z Giving a total relationship, incorporating all sectors of Royal
& SunAlliance including commercial, Life and Personal lines.
Having established these aims, it was then possible to start to
build strategic partnerships with key customers and a long-term
mutual outlook that enables both parties to achieve their goals.
Choosing the Brokers
A vital part of building on the Royal & SunAlliance brand was to
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choose the brokers best suited for joint development of the Energy
proposition. Because selling insurance is so competitive, it was
essential to focus on working with high quality brokers who had a
positive attitude to business and innovation as well as clear long
term goals. Royal & SunAlliance chose to work with independent
brokers who could demonstrate a loyal customer base.
z A strong service ethic
z A desire for a long term strategic partnership
Contd…
Customer Relationship Management
330
z Promising future prospects.
Notes
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The Nature of Strategic Partnership
___________________
Strategic partnerships are long term, exclusive partnerships
___________________ between Royal & SunAlliance and key brokers using the Energy
proposition. They are designed to secure the future success of all
___________________ partners and are based on:
___________________ z A shared vision of the future
z Common goals
___________________
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z Clear understanding and commitment from everyone involved
___________________
z Mutual benefits
___________________ z Innovation and integrated solutions.
___________________ The partnership is not about offering special discount on price but
about allowing brokers to gain advantages by using other benefits
___________________ and resources to win and secure long term customers.
___________________ Why Energy?
The name Energy was chosen because it symbolises the values
and behaviours of Royal & SunAlliance people and broker
partners. Having selected 150 broker partners, the objective was
to help them to grow their businesses and by doing so to increase
Royal & SunAlliance’s share of that business. The emphasis was
on customer service levels as well as providing additional first
class value-added benefits. Energy works because those operating
it:
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z Understand each customer’s unique needs
z Plan and achieve mutual goals
z Provide the tools, resources and service to achieve goals.
Because no two brokers are identical, the Energy proposition is
designed to provide a unique match to each Energy Broker. A
‘relationship manager’ looks after each Energy Broker to aid the
understanding and analysis of the customer’s needs and goals. A
joint development plan is then agreed which highlights what
Royal & SunAlliance needs to deliver to support the relationship.
Every plan is unique. Service levels are mutually agreed and form
the basis of delivery. Previously, the relationship with customers
had been focused through one individual whose responsibility was
for the management of a broker account, and almost all
communication, negotiations, and contact was transacted through
that one person, despite the backup of sound underwriting and
claims teams.
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Benefits
___________________
Energy provides a number of important benefits to key customers.
Services include: ___________________
z Training either on-line or in-house ___________________
z Marketing support
___________________
z Knowledge sharing e.g. It and finance
___________________
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z Use of Royal & SunAlliance facilities
z Advice lines e.g. Legal, financial, health and safety and stress ___________________
counselling ___________________
z Financial assistance.
___________________
Energy participants have already gained from these additional
benefits. For example, joint marketing combined with sales ___________________
training has led to increases in new business for Royal &
___________________
SunAlliance as well as the broker.
E-Technology
E-Technology has been a major driver for change in service
industries. Royal & SunAlliance therefore, created a web-site
dedicated to Energy brokers. It is password protected and each
broker has an individual user ID in order to gain access. The
website includes on-line training materials, risk management
guidance, a technical library, details of consultancy available,
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terms of business agreements and links to other useful Royal &
SunAlliance sites. There is also a facility for sharing of
information between Energy brokers. The site is regularly
updated and will soon provide the facility to access claim details
on-line.
Questions
1. Analyze the case and interpret it.
2. Write down the case facts.
Source:http://businesscasestudies.co.uk/royal-sunalliance/building-sound-customer-
relationships/monitoring-success.html#axzz2LE2k3dYf
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332
Notes
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___________________
___________________
___________________
___________________
___________________
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___________________
___________________
___________________
___________________
___________________
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Glossary
Glossary
333
Notes
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___________________
Acquisition: It is a stage in which customers are acquired for an ___________________
organization’s business. It means increasing number of new customers.
___________________
Articulated needs: These needs are something more than the minimum
___________________
basic expectations from the product.
___________________
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Attitudinal Brand Loyalty: The attitudinal brand loyalty approach
takes the view that loyalty involves mush more than repeat purchase ___________________
behaviour. ___________________
Basic needs: These are the basic minimum requirements expected from
out of a product.
Brand Equity: Brand equity is the value a brand adds to the product.
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Brand-building: The goal in brand building is to carefully manage a
company’s name, brands, slogans and symbols, otherwise known as brand
equity.
environments.
334
Business-to-consumer (B2C): It describes activities of
Notes
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e-businesses serving end consumers with products and/or services.
___________________
Call Centre: With the increased use of phone technology to handle
___________________ incoming phone calls and manage outbound sales calls, companies have
___________________ long housed those resources into a single functional group called the call
centre, service centre or interaction centre.
___________________
Capturing of needs: It is concerned with understanding the differing
___________________
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needs of the customers and from their own perceptual viewpoint.
___________________
Client Application: The client application is hosted in the Sales
___________________ Representative’s PDA device and has the ability to view appointments,
___________________ create orders, search for customer details and item details and
synchronise with the Mobile Server using GPRS.
___________________
CLTV: It is a reflection of the possible future business a company can
___________________
expect from a loyal customer.
CRM program: It can help companies more effectively turn leads into
sales and establish repeat business.
perspective of a supplier.
335
Customer Knowledge: It refers to understanding your customers, their
Notes
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needs, wants and aims is essential if a business is to align its processes,
products and services to build real customer relationships. ___________________
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more competitively in their dynamic marketplaces.
___________________
Customer Relationship Management (CRM): It is a model for
managing a company’s interactions with current and future customers. It ___________________
is emerging as the core marketing activity for businesses operating in
___________________
fiercely competitive environments. It refers to the holistic approach an
organization can take to manage their relationships with customers, ___________________
Customer Value Analysis (CVA): CVA compares price and quality (or
value) of a product against competitors.
Exciting needs: Under this category of need the customer wants to fulfil
more than his level of expectation, in terms of the above two categories.
Customer Relationship Management
336
Expansion: It means increasing profitability by encouraging customers
Notes
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to purchase more products and service.
___________________
Follow-up: Contact the customer following your response to verify
___________________ whether or not the matter has been resolved satisfactorily.
___________________ FUD: Fear, Uncertainty and Doubts.
___________________ G-SPOT: This stands for Goals, Strategies, Plans, Objectives, and
___________________ Tactics,
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___________________ High-Roller Customer: This customer is the one who expects the
absolute best and is willing to pay for it.
___________________
Lifetime Customer Value: It is a reflection of the possible future
___________________
business a company can expect from a loyal customer.
___________________
Logos and mascots: This is not unique to service firms but has been
___________________
effectively used by them to overcome intangibility.
Mobile Server: It is the key sub system of the entire sales force
automation system.
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Process management: It means ongoing improvement to
Notes
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manufacturing, transactional, and/or service processes to satisfy
customers’ needs and expectations by using preventive maintenance, ___________________
workplace organization, and use of line-stop capability.
___________________
Reengineering: It is the fundamental rethinking and radical redesign of
___________________
business processes to achieve dramatic improvements in critical,
contemporary measures of performance, such as cost, quality, service, and ___________________
speed. ___________________
PE
Referrals: The recommendation of a satisfied client or a professional ___________________
colleague is often the most effective way of bringing in new clients.
___________________
Relationship marketing: It is aimed to create strong, long lasting,
___________________
fruitful relationships by developing long-term bonds through its various
instruments of personal connections as a result customer start ___________________
identifying, associating themselves with the product, prefer and accept ___________________
company’s product and service over competitor’s offerings, buys again,
and recommend others to buy.
Service business: It entails selling a product that does not exist until the
customer pays for it.
Tactics: Tactic imply how you achieve the objectives that are part of the
plans to implement the strategies to achieve the goals.
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338
Web Browser: This model preserves the fundamental value of the
Notes
S
Internet as a communication medium, and provides a common platform
___________________ for independent access to data anytime and anywhere.
___________________ Zero Demand: The market may not be having a need of a particular
___________________ service offer because of various demographic, socio-economic and
sometimes geo-demographic factors.
___________________
___________________
PE
___________________
___________________
___________________
___________________
___________________
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